UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-21624
Allianz Variable Insurance Products Fund of Funds Trust
(Exact name of registrant as specified in charter)
5701 Golden Hills Drive, Minneapolis, MN 55416-1297
(Address of principal executive offices) (Zip code)
Citi Fund Services Ohio, Inc., 4400 Easton Commons, Suite 200, Columbus, OH 43219-8000
(Name and address of agent for service)
Registrant’s telephone number, including area code:800-624-0197
Date of fiscal year end: December 31
Date of reporting period: June 30, 2019
Item 1. | Reports to Stockholders. |
AZL® Balanced Index Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 10 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL Balanced Index Strategy Fund
(Unaudited)
As a shareholder of the AZL Balanced Index Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL Balanced Index Strategy Fund | $ | 1,000.00 | $ | 1,110.80 | $ | 0.42 | 0.08 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL Balanced Index Strategy Fund | $ | 1,000.00 | $ | 1,024.40 | $ | 0.40 | 0.08 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Fixed Income Funds | 49.9 | % | |||
Domestic Equity Funds | 37.6 | ||||
International Equity Funds | 12.6 | ||||
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Total Investment Securities | 100.1 | ||||
Net other assets (liabilities) | (0.1 | ) | |||
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Net Assets | 100.0 | % | |||
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1
AZL Balanced Index Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (100.1%): | ||||||||
Domestic Equity Funds (37.6%): | ||||||||
1,350,328 | AZL Mid Cap Index Fund, Class 2 | $ | 30,193,329 | |||||
6,052,552 | AZL S&P 500 Index Fund, Class 2 | 104,588,097 | ||||||
1,154,454 | AZL Small Cap Stock Index Fund, Class 2 | 15,943,006 | ||||||
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150,724,432 | ||||||||
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Fixed Income Funds (49.9%): | ||||||||
17,809,112 | AZL Enhanced Bond Index Fund | 199,818,232 | ||||||
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International Equity Funds (12.6%): | ||||||||
3,099,390 | AZL International Index Fund, Class 2 | 50,334,091 | ||||||
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Total Affiliated Investment Companies (Cost $301,368,408) | 400,876,755 | |||||||
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Total Investment Securities | 400,876,755 | |||||||
Net other assets (liabilities) — (0.1)% | (408,606 | ) | ||||||
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Net Assets — 100.0% | $ | 400,468,149 | ||||||
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Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
2
AZL Balanced Index Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 301,368,408 | |||
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Investments in affiliates, at value | $ | 400,876,755 | |||
Interest and dividends receivable | 16 | ||||
Receivable for affiliated investments sold | 179,587 | ||||
Prepaid expenses | 3,172 | ||||
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Total Assets | 401,059,530 | ||||
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Liabilities: | |||||
Cash overdraft | 179,587 | ||||
Payable for capital shares redeemed | 377,086 | ||||
Manager fees payable | 16,304 | ||||
Administration fees payable | 4,648 | ||||
Custodian fees payable | 1,281 | ||||
Administrative and compliance services fees payable | 756 | ||||
Transfer agent fees payable | 863 | ||||
Trustee fees payable | 466 | ||||
Other accrued liabilities | 10,390 | ||||
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Total Liabilities | 591,381 | ||||
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Net Assets | $ | 400,468,149 | |||
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Net Assets Consist of: | |||||
Paid in capital | $ | 276,947,716 | |||
Total distributable earnings | 123,520,433 | ||||
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Net Assets | $ | 400,468,149 | |||
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Shares of beneficial interest (unlimited number of shares authorized, no par value) | 24,205,979 | ||||
Net Asset Value (offering and redemption price per share) | $ | 16.54 | |||
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For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Dividends from non-affiliates | $ | 222 | |||
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Total Investment Income | 222 | ||||
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Expenses: | |||||
Manager fees | 99,077 | ||||
Administration fees | 30,507 | ||||
Custodian fees | 3,961 | ||||
Administrative and compliance services fees | 3,446 | ||||
Transfer agent fees | 2,780 | ||||
Trustee fees | 10,899 | ||||
Professional fees | 9,073 | ||||
Shareholder reports | 5,317 | ||||
Other expenses | 3,137 | ||||
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Total expenses | 168,197 | ||||
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Net Investment Income/(Loss) | (167,975 | ) | |||
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Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | 3,387,463 | ||||
Net realized gains/(losses) on securities | 151 | ||||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 38,671,693 | ||||
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Net realized and Change in net unrealized gains/losses on investments | 42,059,307 | ||||
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Change in Net Assets Resulting From Operations | $ | 41,891,332 | |||
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See accompanying notes to the financial statements.
3
AZL Balanced Index Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (167,975 | ) | $ | 7,720,384 | |||||
Net realized gains/(losses) on investments | 3,387,614 | 14,710,890 | ||||||||
Change in unrealized appreciation/depreciation on investments | 38,671,693 | (40,203,778 | ) | |||||||
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Change in net assets resulting from operations | 41,891,332 | (17,772,504 | ) | |||||||
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Distributions to Shareholders: | ||||||||||
Distributions | — | (19,383,356 | ) | |||||||
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Change in net assets resulting from distributions to shareholders | — | (19,383,356 | ) | |||||||
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Capital Transactions: | ||||||||||
Proceeds from shares issued | 4,499,058 | 8,361,288 | ||||||||
Proceeds from dividends reinvested | — | 19,383,356 | ||||||||
Value of shares redeemed | (32,110,835 | ) | (52,781,680 | ) | ||||||
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Change in net assets resulting from capital transactions | (27,611,777 | ) | (25,037,036 | ) | ||||||
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Change in net assets | 14,279,555 | (62,192,896 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 386,188,594 | 448,381,490 | ||||||||
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End of period | $ | 400,468,149 | $ | 386,188,594 | ||||||
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Share Transactions: | ||||||||||
Shares issued | 284,438 | 526,619 | ||||||||
Dividends reinvested | — | 1,252,155 | ||||||||
Shares redeemed | (2,017,251 | ) | (3,282,281 | ) | ||||||
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Change in shares | (1,732,813 | ) | (1,503,507 | ) | ||||||
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See accompanying notes to the financial statements.
4
AZL Balanced Index Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 14.89 | $ | 16.34 | $ | 15.75 | $ | 15.44 | $ | 15.91 | $ | 15.40 | ||||||||||||||||||
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Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | (0.01 | )(a) | 0.31 | 0.15 | 0.30 | 0.34 | 0.16 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.66 | (0.99 | ) | 1.62 | 0.73 | (0.34 | ) | 0.78 | ||||||||||||||||||||||
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Total from Investment Activities | 1.65 | (0.68 | ) | 1.77 | 1.03 | — | (b) | 0.94 | ||||||||||||||||||||||
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Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.16 | ) | (0.38 | ) | (0.43 | ) | (0.17 | ) | (0.23 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.61 | ) | (0.80 | ) | (0.29 | ) | (0.30 | ) | (0.20 | ) | |||||||||||||||||||
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Total Dividends | — | (0.77 | ) | (1.18 | ) | (0.72 | ) | (0.47 | ) | (0.43 | ) | |||||||||||||||||||
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Net Asset Value, End of Period | $ | 16.54 | $ | 14.89 | $ | 16.34 | $ | 15.75 | $ | 15.44 | $ | 15.91 | ||||||||||||||||||
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Total Return(c) | 11.08 | %(d) | (4.36 | )% | 11.50 | % | 6.75 | % | 0.01 | % | 6.11 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 400,468 | $ | 386,189 | $ | 448,381 | $ | 438,300 | $ | 432,536 | $ | 438,651 | ||||||||||||||||||
Net Investment Income/(Loss)(e) | (0.08 | )% | 1.82 | % | 0.78 | % | 1.83 | % | 2.14 | % | 1.02 | % | ||||||||||||||||||
Expenses Before Reductions*(e)(f) | 0.08 | % | 0.08 | % | 0.08 | % | 0.08 | % | 0.08 | % | 0.08 | % | ||||||||||||||||||
Expenses Net of Reductions*(e) | 0.08 | % | 0.08 | % | 0.08 | % | 0.08 | % | 0.08 | % | 0.08 | % | ||||||||||||||||||
Portfolio Turnover Rate | 1 | %(d) | 5 | % | 6 | % | 12 | % | 11 | % | 9 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Calculated using the average shares method. |
(b) | Represents less than $0.005. |
(c) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(d) | Not annualized for periods less than one year. |
(e) | Annualized for periods less than one year. |
(f) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL Balanced Index Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in
6
AZL Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL Balanced Index Strategy Fund | 0.05 | % | 0.20 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 201,992,298 | $ | 1,794,802 | $ | (15,557,292 | ) | $ | (32,610 | ) | $ | 11,621,034 | $ | 199,818,232 | 17,809,112 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 47,746,626 | — | (3,970,314 | ) | 334,481 | 6,223,298 | 50,334,091 | 3,099,390 | — | — | |||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 26,638,665 | 131,807 | (1,283,561 | ) | 29,915 | 4,676,503 | 30,193,329 | 1,350,328 | — | — | |||||||||||||||||||||||||||||||||||
AZL S&P 500 Index Fund, Class 2 | 96,443,706 | 1,498,062 | (10,689,788 | ) | 3,053,309 | 14,282,808 | 104,588,097 | 6,052,552 | — | — | |||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 13,778,376 | 490,981 | (196,769 | ) | 2,368 | 1,868,050 | 15,943,006 | 1,154,454 | — | — | |||||||||||||||||||||||||||||||||||
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$ | 386,599,671 | $ | 3,915,652 | $ | (31,697,724 | ) | $ | 3,387,463 | $ | 38,671,693 | $ | 400,876,755 | 29,465,836 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $2,744 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
7
AZL Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Companies | $ | 400,876,755 | $ | — | $ | 400,876,755 | |||||||||
|
|
|
|
|
| ||||||||||
Total Investments | $ | 400,876,755 | $ | — | $ | 400,876,755 | |||||||||
|
|
|
|
|
|
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Balanced Index Strategy Fund | $ | 3,915,652 | $ | 31,697,724 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default. During the year ended June 30, 2019, the Fund did not directly invest in derivatives.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $302,718,794. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 98,157,961 | ||
Unrealized (depreciation) | — | |||
|
| |||
Net unrealized appreciation/(depreciation) | $ | 98,157,961 | ||
|
|
8
AZL Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Balanced Index Strategy Fund | $ | 3,957,710 | $ | 15,425,646 | $ | 19,383,356 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL Balanced Index Strategy Fund | $ | 8,970,214 | $ | 13,325,504 | $ | — | $ | 59,333,383 | $ | 81,629,101 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 90% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
9
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Fund of Funds Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
10
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® DFA Multi-Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 10 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL DFA Multi-Strategy Fund
(Unaudited)
As a shareholder of the AZL DFA Multi-Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL DFA Multi-Strategy Fund | $ | 1,000.00 | $ | 1,103.90 | $ | 0.42 | 0.08 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL DFA Multi-Strategy Fund | $ | 1,000.00 | $ | 1,024.40 | $ | 0.40 | 0.08 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Domestic Equity Funds | 48.2 | % | |||
Fixed Income Funds | 39.7 | ||||
International Equity Funds | 12.1 | ||||
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| ||||
Total Investment Securities | 100.0 | ||||
Net other assets (liabilities) | — | † | |||
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| ||||
Net Assets | 100.0 | % | |||
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|
† | Represents less than 0.05%. |
1
AZL DFA Multi-Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (100.0%): | ||||||||
Domestic Equity Funds (48.2%): | ||||||||
28,833,603 | AZL DFA U.S. Core Equity Fund | $ | 383,775,255 | |||||
8,662,913 | AZL DFA U.S. Small Cap Fund | 100,749,679 | ||||||
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| |||||||
484,524,934 | ||||||||
|
| |||||||
Fixed Income Funds (39.7%): | ||||||||
38,543,699 | AZL DFA Five-Year Global Fixed Income Fund | 398,541,846 | ||||||
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| |||||||
International Equity Funds (12.1%): | ||||||||
11,720,530 | AZL DFA International Core Equity Fund | 121,073,070 | ||||||
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| |||||||
Total Affiliated Investment Companies (Cost $880,497,355) | 1,004,139,850 | |||||||
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| |||||||
Total Investment Securities (Cost $880,497,355) — 100.0%(a) | 1,004,139,850 | |||||||
Net other assets (liabilities) — 0.0%† | (454,655 | ) | ||||||
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| |||||||
Net Assets — 100.0% | $ | 1,003,685,195 | ||||||
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|
Percentages indicated are based on net assets as of June 30, 2019.
† | Represents less than 0.05%. |
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
2
AZL DFA Multi-Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 880,497,355 | |||
|
| ||||
Investments in affiliates, at value | $ | 1,004,139,850 | |||
Receivable for affiliated investments sold | 348,945 | ||||
Prepaid expenses | 7,519 | ||||
|
| ||||
Total Assets | 1,004,496,314 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 348,945 | ||||
Payable for capital shares redeemed | 380,394 | ||||
Manager fees payable | 40,849 | ||||
Administration fees payable | 5,438 | ||||
Custodian fees payable | 2,443 | ||||
Administrative and compliance services fees payable | 2,083 | ||||
Transfer agent fees payable | 1,051 | ||||
Trustee fees payable | 1,309 | ||||
Other accrued liabilities | 28,607 | ||||
|
| ||||
Total Liabilities | 811,119 | ||||
|
| ||||
Net Assets | $ | 1,003,685,195 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 823,342,223 | |||
Total distributable earnings | 180,342,972 | ||||
|
| ||||
Net Assets | $ | 1,003,685,195 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 70,013,919 | ||||
Net Asset Value (offering and redemption price per share) | $ | 14.34 | |||
|
|
For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Dividends from non-affiliates | $ | 33 | |||
|
| ||||
Total Investment Income | 33 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 250,647 | ||||
Administration fees | 33,761 | ||||
Custodian fees | 7,064 | ||||
Administrative and compliance services fees | 8,966 | ||||
Transfer agent fees | 3,109 | ||||
Trustee fees | 28,366 | ||||
Professional fees | 23,541 | ||||
Shareholder reports | 13,087 | ||||
Other expenses | 8,710 | ||||
|
| ||||
Total expenses | 377,251 | ||||
|
| ||||
Net Investment Income/(Loss) | (377,218 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | 8,048,504 | ||||
Net realized gains/(losses) on securities | 81 | ||||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 91,485,771 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 99,534,356 | ||||
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| ||||
Change in Net Assets Resulting From Operations | $ | 99,157,138 | |||
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|
See accompanying notes to the financial statements.
3
AZL DFA Multi-Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (377,218 | ) | $ | 9,422,112 | |||||
Net realized gains/(losses) on investments | 8,048,585 | 39,975,403 | ||||||||
Change in unrealized appreciation/depreciation on investments | 91,485,771 | (109,331,866 | ) | |||||||
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| |||||||
Change in net assets resulting from operations | 99,157,138 | (59,934,351 | ) | |||||||
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| |||||||
Distributions to Shareholders: | ||||||||||
Distributions | — | (28,987,454 | ) | |||||||
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| |||||||
Change in net assets resulting from distributions to shareholders | — | (28,987,454 | ) | |||||||
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| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 992,955 | 3,711,811 | ||||||||
Proceeds from dividends reinvested | — | 28,987,454 | ||||||||
Value of shares redeemed | (68,598,463 | ) | (175,840,406 | ) | ||||||
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| |||||||
Change in net assets resulting from capital transactions | (67,605,508 | ) | (143,141,141 | ) | ||||||
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| |||||||
Change in net assets | 31,551,630 | (232,062,946 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 972,133,565 | 1,204,196,511 | ||||||||
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| |||||||
End of period | $ | 1,003,685,195 | $ | 972,133,565 | ||||||
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| |||||||
Share Transactions: | ||||||||||
Shares issued | 72,748 | 263,773 | ||||||||
Dividends reinvested | — | 2,094,469 | ||||||||
Shares redeemed | (4,911,247 | ) | (12,361,568 | ) | ||||||
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| |||||||
Change in shares | (4,838,499 | ) | (10,003,326 | ) | ||||||
|
|
|
|
See accompanying notes to the financial statements.
4
AZL DFA Multi-Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.99 | $ | 14.19 | $ | 12.69 | $ | 18.08 | $ | 18.71 | $ | 17.86 | ||||||||||||||||||
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| |||||||||||||||||||
Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | (0.01 | )(a) | 0.15 | 0.15 | 0.10 | 0.01 | 0.20 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.36 | (0.97 | ) | 1.46 | 1.32 | (0.14 | ) | 0.96 | ||||||||||||||||||||||
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|
| |||||||||||||||||||
Total from Investment Activities | 1.35 | (0.82 | ) | 1.61 | 1.42 | (0.13 | ) | 1.16 | ||||||||||||||||||||||
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| |||||||||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.17 | ) | (0.11 | ) | — | (0.24 | ) | (0.22 | ) | ||||||||||||||||||||
Net Realized Gains | — | (0.21 | ) | — | (6.81 | ) | (0.26 | ) | (0.09 | ) | ||||||||||||||||||||
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| |||||||||||||||||||
Total Dividends | — | (0.38 | ) | (0.11 | ) | (6.81 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||
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|
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| |||||||||||||||||||
Net Asset Value, End of Period | $ | 14.34 | $ | 12.99 | $ | 14.19 | $ | 12.69 | $ | 18.08 | $ | 18.71 | ||||||||||||||||||
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| |||||||||||||||||||
Total Return(b) | 10.39 | %(c) | (5.91 | )% | 12.69 | % | 9.32 | % | (0.67 | )% | 6.53 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 1,003,685 | $ | 972,134 | $ | 1,204,197 | $ | 1,194,169 | $ | 1,257,794 | $ | 1,439,548 | ||||||||||||||||||
Net Investment Income/(Loss)(d) | (0.08 | )% | 0.84 | % | 1.02 | % | 0.75 | % | (0.07 | )% | 1.09 | % | ||||||||||||||||||
Expenses Before Reductions*(d)(e) | 0.08 | % | 0.07 | % | 0.07 | % | 0.07 | % | 0.07 | % | 0.07 | % | ||||||||||||||||||
Expenses Net of Reductions*(d) | 0.08 | % | 0.07 | % | 0.07 | % | 0.07 | % | 0.07 | % | 0.07 | % | ||||||||||||||||||
Portfolio Turnover Rate | — | (c) | 7 | % | 2 | % | 2 | % | 114 | %(f) | 7 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Calculated using the average shares method. |
(b) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(c) | Not annualized for periods less than one year. |
(d) | Annualized for periods less than one year. |
(e) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(f) | Effective April 27, 2015, the investment strategy of the Fund changed. Costs of purchases and proceeds from sales of portfolio securities associated with the changes in investment strategy contributed to higher portfolio turnover rate for the period ended December 31, 2015 as compared to prior years. |
See accompanying notes to the financial statements.
5
AZL DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL DFA Multi-Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in
6
AZL DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL DFA Multi-Strategy Fund | 0.05 | % | 0.20 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 412,833,477.00 | $ | — | $ | (25,416,709 | ) | $ | 482,448.00 | $ | 10,642,630.00 | $ | 398,541,846.00 | 38,543,699 | $ | — | $ | — | |||||||||||||||||||||||||||
AZL DFA International Core Equity Fund | 111,040,289 | 518,680 | (4,139,813 | ) | 28,242 | 13,625,672 | 121,073,070 | 11,720,530 | — | — | |||||||||||||||||||||||||||||||||||
AZL DFA U.S. Core Equity Fund | 357,414,103 | 254,161 | (35,762,139 | ) | 7,441,936 | 54,427,194 | 383,775,255 | 28,833,603 | — | — | |||||||||||||||||||||||||||||||||||
AZL DFA U.S. Small Cap Fund | 90,842,403 | 10,557 | (2,989,434 | ) | 95,878 | 12,790,275 | 100,749,679 | 8,662,913 | — | — | |||||||||||||||||||||||||||||||||||
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$ | 972,130,272 | $ | 783,398 | $ | (68,308,095 | ) | $ | 8,048,504 | $ | 91,485,771 | $ | 1,004,139,850 | 87,760,745 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $6,958 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
7
AZL DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Companies | $ | 1,004,139,850 | $ | — | $ | 1,004,139,850 | |||||||||
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Total Investments | $ | 1,004,139,850 | $ | — | $ | 1,004,139,850 | |||||||||
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5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL DFA Multi-Strategy Fund | $ | 783,398 | $ | 68,308,095 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $880,841,842. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 123,298,008 | ||
Unrealized (depreciation) | — | |||
|
| |||
Net unrealized appreciation/(depreciation) | $ | 123,298,008 | ||
|
|
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term Capital Gains | Total Distributions(a) | |||||||||||||
AZL DFA Multi-Strategy Fund | $ | 13,032,287 | $ | 15,955,167 | $ | 28,987,454 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
8
AZL DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL DFA Multi-Strategy Fund | $ | 10,447,503 | $ | 38,926,094 | $ | — | $ | 31,812,237 | $ | 81,185,834 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 90% of the Fund. As of June 30, 2019, the Fund had a controlling interest (in excess of 50%) in the AZL DFA Five-Year Global Fixed Income Fund, AZL DFA U.S. Core Equity Fund, and AZL DFA U.S. Small Cap Fund, which are affiliated with the Manager.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
9
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Fund of Funds Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
10
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP Balanced Index Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP Balanced Index Strategy Fund
(Unaudited)
As a shareholder of the AZL MVP Balanced Index Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL MVP Balanced Index Strategy Fund | $ | 1,000.00 | $ | 1,108.30 | $ | 0.73 | 0.14 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Balanced Index Strategy Fund | $ | 1,000.00 | $ | 1,024.10 | $ | 0.70 | 0.14 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Fixed Income Funds | 47.4 | % | |||
Domestic Equity Funds | 35.1 | ||||
International Equity Funds | 12.5 | ||||
Money Markets | — | † | |||
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Total Investment Securities | 95.0 | ||||
Net other assets (liabilities) | 5.0 | ||||
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Net Assets | 100.0 | % | |||
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† | Represents less than 0.05% |
1
AZL MVP Balanced Index Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.0%): | ||||||||
Domestic Equity Funds (35.1%): | ||||||||
1,111,326 | AZL Mid Cap Index Fund, Class 2 | $ | 24,849,243 | |||||
4,432,693 | AZL S&P 500 Index Fund, Class 2 | 76,596,942 | ||||||
968,212 | AZL Small Cap Stock Index Fund, Class 2 | 13,371,007 | ||||||
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114,817,192 | ||||||||
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Fixed Income Funds (47.4%): | ||||||||
13,801,877 | AZL Enhanced Bond Index Fund | 154,857,058 | ||||||
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International Equity Funds (12.5%): | ||||||||
2,523,354 | AZL International Index Fund, Class 2 | 40,979,270 | ||||||
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Total Affiliated Investment Companies (Cost $270,321,396) | 310,653,520 | |||||||
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Money Markets (0.0%)†: | ||||||||
19,189 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.10%(a) | 19,189 | ||||||
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Total Money Markets (Cost $19,189) | 19,189 | |||||||
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Total Investment Securities (Cost $270,340,585) — 95.0%(b) | 310,672,709 | |||||||
Net other assets (liabilities) — 5.0% | 16,335,069 | |||||||
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Net Assets — 100.0% | $ | 327,007,778 | ||||||
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Percentages indicated are based on net assets as of June 30, 2019.
† | Represents less than 0.05%. |
(a) | The rate represents the effective yield at June 30, 2019. |
(b) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $16,320,870 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 55 | $ | 8,096,550 | $ | 159,753 | ||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 63 | 8,062,034 | 169,845 | ||||||||||||
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$ | 329,598 | |||||||||||||||
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See accompanying notes to the financial statements.
2
AZL MVP Balanced Index Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in non-affiliates, at cost | $ | 19,189 | |||
Investments in affiliates, at cost | 270,321,396 | ||||
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| ||||
Investments in non-affiliates, at value | $ | 19,189 | |||
Investments in affiliates, at value | 310,653,520 | ||||
Segregated cash for collateral for futures contracts | 16,320,870 | ||||
Interest and dividends receivable | 24,276 | ||||
Receivable for capital shares issued | 58,252 | ||||
Prepaid expenses | 2,442 | ||||
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Total Assets | 327,078,549 | ||||
|
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Liabilities: | |||||
Payable for affiliated investments purchased | 19,189 | ||||
Payable for capital shares redeemed | 8,789 | ||||
Manager fees payable | 26,461 | ||||
Administration fees payable | 4,653 | ||||
Custodian fees payable | 966 | ||||
Administrative and compliance services fees payable | 630 | ||||
Transfer agent fees payable | 857 | ||||
Trustee fees payable | 421 | ||||
Other accrued liabilities | 8,805 | ||||
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Total Liabilities | 70,771 | ||||
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Net Assets | $ | 327,007,778 | |||
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Net Assets Consist of: | |||||
Paid in capital | $ | 275,753,918 | |||
Total distributable earnings | 51,253,860 | ||||
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Net Assets | $ | 327,007,778 | |||
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Shares of beneficial interest (unlimited number of shares authorized, no par value) | 23,843,771 | ||||
Net Asset Value (offering and redemption price per share) | $ | 13.71 | |||
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For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Interest | $ | 164,087 | |||
Dividends from non-affiliates | 752 | ||||
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Total Investment Income | 164,839 | ||||
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Expenses: | |||||
Manager fees | 157,646 | ||||
Administration fees | 30,063 | ||||
Custodian fees | 2,975 | ||||
Administrative and compliance services fees | 2,754 | ||||
Transfer agent fees | 2,734 | ||||
Trustee fees | 8,661 | ||||
Professional fees | 7,259 | ||||
Shareholder reports | 4,653 | ||||
Other expenses | 2,486 | ||||
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Total expenses | 219,231 | ||||
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Net Investment Income/(Loss) | (54,392 | ) | |||
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Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | 57,418 | ||||
Net realized gains/(losses) on futures contracts | 1,036,935 | ||||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 31,195,912 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 178,078 | ||||
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Net realized and Change in net unrealized gains/losses on investments | 32,468,343 | ||||
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Change in Net Assets Resulting From Operations | $ | 32,413,951 | |||
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See accompanying notes to the financial statements.
3
AZL MVP Balanced Index Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (54,392 | ) | $ | 5,735,880 | |||||
Net realized gains/(losses) on investments | 1,094,353 | 6,581,658 | ||||||||
Change in unrealized appreciation/depreciation on investments | 31,373,990 | (26,340,799 | ) | |||||||
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Change in net assets resulting from operations | 32,413,951 | (14,023,261 | ) | |||||||
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Distributions to Shareholders: | ||||||||||
Distributions | — | (10,275,883 | ) | |||||||
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Change in net assets resulting from distributions to shareholders | — | (10,275,883 | ) | |||||||
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Capital Transactions: | ||||||||||
Proceeds from shares issued | 9,743,264 | 21,031,895 | ||||||||
Proceeds from dividends reinvested | — | 10,275,883 | ||||||||
Value of shares redeemed | (17,083,293 | ) | (27,305,408 | ) | ||||||
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Change in net assets resulting from capital transactions | (7,340,029 | ) | 4,002,370 | |||||||
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| |||||||
Change in net assets | 25,073,922 | (20,296,774 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 301,933,856 | 322,230,630 | ||||||||
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End of period | $ | 327,007,778 | $ | 301,933,856 | ||||||
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Share Transactions: | ||||||||||
Shares issued | 734,669 | 1,574,251 | ||||||||
Dividends reinvested | — | 798,437 | ||||||||
Shares redeemed | (1,294,490 | ) | (2,053,669 | ) | ||||||
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| |||||||
Change in shares | (559,821 | ) | 319,019 | |||||||
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|
|
See accompanying notes to the financial statements.
4
AZL MVP Balanced Index Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.37 | $ | 13.38 | $ | 12.74 | $ | 12.30 | $ | 12.56 | $ | 12.03 | ||||||||||||||||||
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Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | — | (a),(b) | 0.24 | 0.11 | 0.17 | 0.22 | 0.08 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.34 | (0.82 | ) | 1.32 | 0.64 | (0.25 | ) | 0.65 | ||||||||||||||||||||||
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| |||||||||||||||||||
Total from Investment Activities | 1.34 | (0.58 | ) | 1.43 | 0.81 | (0.03 | ) | 0.73 | ||||||||||||||||||||||
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Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.11 | ) | (0.26 | ) | (0.28 | ) | (0.10 | ) | (0.12 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.32 | ) | (0.53 | ) | (0.09 | ) | (0.13 | ) | (0.08 | ) | |||||||||||||||||||
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Total Dividends | — | (0.43 | ) | (0.79 | ) | (0.37 | ) | (0.23 | ) | (0.20 | ) | |||||||||||||||||||
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Net Asset Value, End of Period | $ | 13.71 | $ | 12.37 | $ | 13.38 | $ | 12.74 | $ | 12.30 | $ | 12.56 | ||||||||||||||||||
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Total Return(c) | 10.83 | %(d) | (4.44 | )% | 11.40 | % | 6.61 | % | (0.22 | )% | 6.09 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 327,008 | $ | 301,934 | $ | 322,231 | $ | 312,745 | $ | 255,129 | $ | 208,618 | ||||||||||||||||||
Net Investment Income/(Loss)(e) | (0.03 | )% | 1.79 | % | 0.72 | % | 1.69 | % | 2.08 | % | 0.97 | % | ||||||||||||||||||
Expenses Before Reductions*(e)(f) | 0.14 | % | 0.13 | % | 0.13 | % | 0.14 | % | 0.14 | % | 0.15 | % | ||||||||||||||||||
Expenses Net of Reductions*(e) | 0.14 | % | 0.13 | % | 0.13 | % | 0.14 | % | 0.14 | % | 0.15 | % | ||||||||||||||||||
Portfolio Turnover Rate | 2 | %(d) | 7 | % | 9 | % | 11 | % | 5 | % | 6 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Represents less than $0.005. |
(b) | Calculated using the average shares method. |
(c) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(d) | Not annualized for periods less than one year. |
(e) | Annualized for periods less than one year. |
(f) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL MVP Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP Balanced Index Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts was $15.8 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 159,753 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 169,845 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk |
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Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | 695,806 | $ | 182,786 | |||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 341,129 | (4,708 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP Balanced Index Strategy Fund | 0.10 | % | 0.20 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
7
AZL MVP Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 152,834,757 | $ | 3,433,400 | $ | (10,255,007 | ) | $ | (266,454 | ) | $ | 9,110,362 | $ | 154,857,058 | 13,801,877 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 36,279,424 | 302,308 | (681,615 | ) | (8,183 | ) | 5,087,336 | 40,979,270 | 2,523,354 | — | — | ||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 20,365,050 | 1,307,416 | (458,321 | ) | 11,848 | 3,623,250 | 24,849,243 | 1,111,326 | — | — | |||||||||||||||||||||||||||||||||||
AZL S&P 500 Index Fund, Class 2 | 67,239,890 | 768,308 | (3,670,883 | ) | 317,864 | 11,941,763 | 76,596,942 | 4,432,693 | — | — | |||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 10,431,439 | 1,668,711 | (164,687 | ) | 2,343 | 1,433,201 | 13,371,007 | 968,212 | — | — | |||||||||||||||||||||||||||||||||||
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$ | 287,150,560 | $ | 7,480,143 | $ | (15,230,513 | ) | $ | 57,418 | $ | 31,195,912 | $ | 310,653,520 | 22,837,462 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $2,170was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
8
AZL MVP Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 310,653,520 | $ | — | $ | 310,653,520 | |||||||||
Money Markets | 19,189 | — | 19,189 | ||||||||||||
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Total Investment Securities | 310,672,709 | — | 310,672,709 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 329,598 | — | 329,598 | ||||||||||||
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Total Investments | $ | 311,002,307 | $ | — | $ | 311,002,307 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP Balanced Index Strategy Fund | $ | 7,480,143 | $ | 15,230,513 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $273,178,212. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 37,494,497 | ||
Unrealized (depreciation) | — | |||
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Net unrealized appreciation/(depreciation) | $ | 37,494,497 | ||
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As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP Balanced Index Strategy Fund | $ | 3,233,566 | $ | 7,042,317 | $ | 10,275,883 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
9
AZL MVP Balanced Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Capital Gains | Accumulated Capital and | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP Balanced Index Strategy Fund | $ | 6,684,897 | $ | 5,804,805 | $ | — | $ | 6,382,015 | $ | 18,871,717 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP BlackRock Global Strategy Plus Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP BlackRock Global Strategy Plus Fund
(Unaudited)
As a shareholder of the AZL MVP BlackRock Global Strategy Plus Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP BlackRock Global Strategy Plus Fund | $ | 1,000.00 | $ | 1,102.40 | $ | 3.60 | 0.69 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP BlackRock Global Strategy Plus Fund | $ | 1,000.00 | $ | 1,021.37 | $ | 3.46 | 0.69 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Consolidated Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Common Stocks | 28.8 | % | |||
Fixed Income Funds | 27.4 | ||||
International Equity Funds | 17.6 | ||||
U.S. Treasury Obligations | 12.7 | ||||
Foreign Bonds | 4.0 | ||||
Corporate Bonds | 2.6 | ||||
Securities Held as Collateral for Securities on Loan | 0.7 | ||||
Yankee Dollars | 0.7 | ||||
Preferred Stocks | 0.4 | ||||
Money Markets | 0.2 | ||||
Purchased Options | 0.1 | ||||
Bank Loans | 0.1 | ||||
Private Placements | 0.1 | ||||
Convertible Bonds | — | † | |||
Convertible Preferred Stocks | — | † | |||
Purchased Interest Rate Cap | — | † | |||
Purchased Currency Options | — | † | |||
Purchased Swaptions | — | † | |||
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Total Investment Securities | 95.4 | ||||
Net other assets (liabilities) | 4.6 | ||||
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Net Assets | 100.0 | % | |||
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Consolidated Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
United States | 77.7 | % | |||
Japan | 5.2 | ||||
France | 2.1 | ||||
Germany | 1.8 | ||||
United Kingdom | 1.4 | ||||
Canada | 0.9 | ||||
Netherlands | 0.8 | ||||
China | 0.7 | ||||
Taiwan, Province Of China | 0.7 | ||||
Switzerland | 0.6 | ||||
All other countries | 3.7 | ||||
|
| ||||
Total Investment Securities | 95.4 | ||||
Net other assets (liabilities) | 4.6 | ||||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
1
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Common Stocks (28.8%): | ||||||||
Aerospace & Defense (1.0%): | ||||||||
186 | Boeing Co. (The)(a) | $ | 67,706 | |||||
402 | Dassault Aviation SA(a) | 578,782 | ||||||
186 | Lockheed Martin Corp.(a) | 67,618 | ||||||
122 | Northrop Grumman Corp.(a) | 39,419 | ||||||
17,264 | Raytheon Co.(a) | 3,001,865 | ||||||
5,514 | Rolls-Royce Holdings plc(a) | 58,992 | ||||||
11,815 | Safran SA(a) | 1,730,817 | ||||||
16,221 | United Technologies Corp.(a) | 2,111,974 | ||||||
|
| |||||||
7,657,173 | ||||||||
|
| |||||||
Air Freight & Logistics (0.0%†): | ||||||||
2,390 | C.H. Robinson Worldwide, Inc.^(a) | 201,596 | ||||||
340 | United Parcel Service, Inc., Class B(a) | 35,112 | ||||||
400 | Yamato Holdings Co., Ltd.(a) | 8,150 | ||||||
|
| |||||||
244,858 | ||||||||
|
| |||||||
Airlines (0.4%): | ||||||||
38,394 | Azul SA, ADR*^(a) | 1,283,895 | ||||||
483 | Delta Air Lines, Inc.(a) | 27,410 | ||||||
53,800 | Japan Airlines Co., Ltd.(a) | 1,721,363 | ||||||
551 | United Continental Holdings, Inc.*(a) | 48,240 | ||||||
|
| |||||||
3,080,908 | ||||||||
|
| |||||||
Auto Components (0.4%): | ||||||||
26,300 | Denso Corp.(a) | 1,108,773 | ||||||
2,500 | Exedy Corp.(a) | 52,502 | ||||||
20,200 | Koito Manufacturing Co., Ltd.(a) | 1,081,345 | ||||||
141 | Lear Corp.(a) | 19,637 | ||||||
724 | Magna Internationl, Inc.(a) | 36,029 | ||||||
2,300 | Stanley Electric Co., Ltd.(a) | 56,711 | ||||||
19,200 | Toyota Industries Corp.(a) | 1,059,479 | ||||||
|
| |||||||
3,414,476 | ||||||||
|
| |||||||
Automobiles (0.5%): | ||||||||
1,419 | Fiat Chrysler Automobiles NV(a) | 19,739 | ||||||
988 | Ford Motor Co.(a) | 10,107 | ||||||
62,200 | Fuji Heavy Industries, Ltd.(a) | 1,515,572 | ||||||
1,534 | General Motors Co.(a) | 59,105 | ||||||
3,928 | Hero MotoCorp, Ltd.(a) | 146,916 | ||||||
3,871 | Maruti Suzuki India, Ltd.(a) | 366,497 | ||||||
2,300 | Mitsubishi Motors Corp.(a) | 11,052 | ||||||
686 | Renault SA^(a) | 43,233 | ||||||
37,900 | Suzuki Motor Corp.(a) | 1,784,166 | ||||||
|
| |||||||
3,956,387 | ||||||||
|
| |||||||
Banks (1.7%): | ||||||||
108,935 | ABN AMRO Group NV(a) | 2,330,343 | ||||||
23,000 | Agricultural Bank of China, Ltd., Class A(a) | 9,613 | ||||||
220 | Banco Bilbao Vizcaya Argentaria SA(a) | 1,230 | ||||||
872 | Banco do Brasil SA(a) | 12,251 | ||||||
573 | Banco Santander Brasil SA(a) | 6,785 | ||||||
3,282 | Bank of America Corp.(a) | 95,178 | ||||||
7,000 | Bank of China, Ltd.(a) | 2,951 | ||||||
326 | Bank of Montreal(a) | 24,628 | ||||||
149 | BB&T Corp.(a) | 7,320 | ||||||
29,000 | China Citic Bank Co., Ltd.(a) | 16,531 | ||||||
11,000 | China Construction Bank(a) | 9,453 | ||||||
14,743 | Citigroup, Inc.(a) | 1,032,452 | ||||||
6,656 | Criteria Caixacorp SA(a) | 19,056 | ||||||
1,416 | Fifth Third Bancorp(a) | 39,506 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
826 | Hana Financial Holdings Group, Inc.(a) | $ | 26,776 | |||||
152,246 | HSBC Holdings plc(a) | 1,269,946 | ||||||
68,000 | Industrial & Commercial Bank of China, Ltd, Class H(a) | 49,511 | ||||||
1,329 | Industrial Bank of Korea (IBK)(a) | 16,185 | ||||||
38,541 | JPMorgan Chase & Co.(a) | 4,308,885 | ||||||
360 | KB Financial Group, Inc.(a) | 14,268 | ||||||
119 | KeyCorp(a) | 2,112 | ||||||
50 | M&T Bank Corp.(a) | 8,504 | ||||||
10,600 | Mitsubishi UFJ Financial Group, Inc.(a) | 50,681 | ||||||
75,900 | PT Bank Central Asia Tbk(a) | 161,213 | ||||||
1,341 | Shinhan Financial Group Co., Ltd.(a) | 52,163 | ||||||
485 | Societe Generale(a) | 12,269 | ||||||
100 | Sumitomo Mitsui Financial Group, Inc.(a) | 3,541 | ||||||
23,495 | SunTrust Banks, Inc.(a) | 1,476,661 | ||||||
4,971 | U.S. Bancorp(a) | 260,480 | ||||||
1,803 | Unicredit SpA(a) | 22,190 | ||||||
8,100 | United Overseas Bank, Ltd.(a) | 156,537 | ||||||
43,200 | Wells Fargo & Co.(a) | 2,044,224 | ||||||
|
| |||||||
13,543,443 | ||||||||
|
| |||||||
Beverages (0.1%†): | ||||||||
1,035 | Ambev SA Com Npv(a) | 4,823 | ||||||
506 | Carlsberg A/S, Class B(a) | 67,116 | ||||||
4,000 | China Resources Enterprises, Ltd.(a) | 18,933 | ||||||
3,297 | Compania Cervecerias Unidas SA, ADR(a) | 93,140 | ||||||
788 | Diageo plc(a) | 33,928 | ||||||
469 | Monster Beverage Corp.*(a) | 29,936 | ||||||
2,130 | PepsiCo, Inc.(a) | 279,307 | ||||||
65,100 | Thai Beverage PCL(a) | 39,970 | ||||||
500 | Tsingtao Brewery Co, Ltd., Class A(a) | 3,642 | ||||||
4,000 | Tsingtao Brewery Co., Ltd., Class H(a) | 25,366 | ||||||
300 | Wuliangye Yibin Co., Ltd., Class A(a) | 5,159 | ||||||
|
| |||||||
601,320 | ||||||||
|
| |||||||
Biotechnology (0.3%): | ||||||||
3,724 | AbbVie, Inc.(a) | 270,809 | ||||||
319 | Amgen, Inc.(a) | 58,785 | ||||||
2,641 | Biogen Idec, Inc.*(a) | 617,651 | ||||||
31 | CSL, Ltd.(a) | 4,689 | ||||||
22,445 | Gilead Sciences, Inc.(a) | 1,516,384 | ||||||
3 | Regeneron Pharmaceuticals, Inc.*(a) | 939 | ||||||
63 | Vertex Pharmaceuticals, Inc.*(a) | 11,553 | ||||||
|
| |||||||
2,480,810 | ||||||||
|
| |||||||
Building Products (0.2%): | ||||||||
100 | Asahi Glass Co., Ltd.(a) | 3,466 | ||||||
943 | ASSA Abloy AB, Class B(a) | 21,358 | ||||||
5,863 | Compagnie de Saint-Gobain SA^(a) | 229,115 | ||||||
5,200 | Daikin Industries, Ltd.(a) | 680,721 | ||||||
1,823 | Fortune Brands Home & Security, Inc.^(a) | 104,148 | ||||||
4,887 | Masco Corp.(a) | 191,766 | ||||||
5,400 | Nichias Corp.(a) | 97,418 | ||||||
|
| |||||||
1,327,992 | ||||||||
|
| |||||||
Capital Markets (0.3%): | ||||||||
708 | Ameriprise Financial, Inc.(a) | 102,773 | ||||||
100 | B3 SA- Brasil Bolsa Balcao(a) | 976 | ||||||
194 | Bank of New York Mellon Corp. (The)(a) | 8,565 | ||||||
24,066 | Charles Schwab Corp. (The)(a) | 967,213 | ||||||
2,000 | Citic Securities Co., Ltd., Class A(a) | 4,176 |
See accompanying notes to the consolidated financial statements.
2
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
277 | Deutsche Boerse AG(a) | $ | 39,173 | |||||
381 | Goldman Sachs Group, Inc. (The)(a) | 77,953 | ||||||
1,600 | Guotai Junan Securities Co., Ltd.*(a) | 2,857 | ||||||
22,457 | Morgan Stanley(a) | 983,841 | ||||||
|
| |||||||
2,187,527 | ||||||||
|
| |||||||
Chemicals (0.8%): | ||||||||
12,499 | Air Products & Chemicals, Inc.(a) | 2,829,398 | ||||||
290 | Akzo Nobel NV(a) | 27,251 | ||||||
12,600 | Daicel Chemical Industries, Ltd.(a) | 112,304 | ||||||
8,052 | Dow, Inc.(a) | 397,044 | ||||||
8,052 | DuPont de Nemours, Inc.(a) | 604,464 | ||||||
554 | Evonik Industries AG(a) | 16,129 | ||||||
31,000 | Formosa Chemicals & Fibre Corp.(a) | 102,918 | ||||||
33,000 | Formosa Plastics Corp.(a) | 121,768 | ||||||
893 | Huntsman Corp.(a) | 18,253 | ||||||
5,400 | Kuraray Co., Ltd.^(a) | 64,669 | ||||||
483 | LG Chem, Ltd.(a) | 148,754 | ||||||
41,000 | Nan Ya Plastics Corp.(a) | 103,847 | ||||||
377 | Nutrien, Ltd.(a) | 20,169 | ||||||
67,900 | PTT Global Chemical Public Co., Ltd.(a) | 141,770 | ||||||
16,400 | Shin-Etsu Chemical Co., Ltd.(a) | 1,531,457 | ||||||
60,000 | Sinopec Shanghai Petrochemical Co., Ltd., Class H(a) | 23,838 | ||||||
3,100 | Sumitomo Chemical Co., Ltd.(a) | 14,426 | ||||||
13,400 | Toagosei Co., Ltd.(a) | 141,237 | ||||||
|
| |||||||
6,419,696 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.1%): | ||||||||
3,229 | Country Garden Services Holdings Co., Ltd.(a) | 7,440 | ||||||
14,420 | IAA, Inc.*(a) | 559,207 | ||||||
14,420 | KAR Auction Services, Inc.(a) | 360,500 | ||||||
245 | Waste Management, Inc.(a) | 28,266 | ||||||
|
| |||||||
955,413 | ||||||||
|
| |||||||
Communications Equipment (0.0%†): | ||||||||
4,500 | BYD Electronic International Co., Ltd.(a) | 6,450 | ||||||
2,286 | Cisco Systems, Inc.(a) | 125,113 | ||||||
6,428 | Nokia OYJ(a) | 31,935 | ||||||
1,110 | Telefonaktiebolaget LM Ericsson, Class B(a) | 10,539 | ||||||
|
| |||||||
174,037 | ||||||||
|
| |||||||
Construction & Engineering (0.1%): | ||||||||
1,310 | Eiffage SA(a) | 129,480 | ||||||
13,600 | Kinden Corp.(a) | 209,535 | ||||||
1,900 | Kyudenko Corp.(a) | 57,463 | ||||||
3,500 | Maeda Road Construction Co., Ltd.(a) | 73,821 | ||||||
3,200 | Nippo Corp.(a) | 63,180 | ||||||
4,100 | Okumura Corp.(a) | 125,570 | ||||||
6,500 | Sinopec Engineering Group Co., Ltd.(a) | 5,517 | ||||||
17,700 | Toda Corp.(a) | 98,192 | ||||||
|
| |||||||
762,758 | ||||||||
|
| |||||||
Construction Materials (0.0%†): | ||||||||
1,600 | Anhui Conch Cement Co., Ltd., Class A(a) | 9,692 | ||||||
4,500 | Anhui Conch Cement Co., Ltd., Class H(a) | 28,228 | ||||||
30,000 | China Resources Cement Holdings, Ltd.(a) | 28,991 | ||||||
74 | LafargeHolcim, Ltd., Registered Shares(a) | 3,616 | ||||||
9,600 | Siam Cement PCL(a) | 147,765 | ||||||
|
| |||||||
218,292 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Consumer Finance (0.0%†): | ||||||||
694 | Ally Financial, Inc.(a) | $ | 21,507 | |||||
301 | Capital One Financial Corp.(a) | 27,313 | ||||||
490 | Discover Financial Services(a) | 38,018 | ||||||
53 | Synchrony Financial(a) | 1,838 | ||||||
|
| |||||||
88,676 | ||||||||
|
| |||||||
Containers & Packaging (0.0%†): | ||||||||
226 | Packaging Corp. of America(a) | 21,542 | ||||||
|
| |||||||
Distributors (0.0%†): | ||||||||
3,500 | Canon Marketing Japan, Inc.(a) | 76,589 | ||||||
|
| |||||||
Diversified Consumer Services (0.0%†): | ||||||||
36 | New Oriental Education & Technology Group, Inc., ADR*(a) | 3,477 | ||||||
|
| |||||||
Diversified Financial Services (0.1%): | ||||||||
1,898 | Berkshire Hathaway, Inc., Class B*(a) | 404,597 | ||||||
114,000 | Fubon Financial Holdings Co., Ltd.(a) | 168,495 | ||||||
|
| |||||||
573,092 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.8%): | ||||||||
125 | AT&T, Inc.(a) | 4,189 | ||||||
52,873 | Cellnex Telecom SAU(a) | 1,956,762 | ||||||
223,000 | Chunghwa Telecom Co., Ltd.(a) | 811,608 | ||||||
528 | France Telecom SA(a) | 8,322 | ||||||
84,000 | HKT Trust & HKT, Ltd.(a) | 133,376 | ||||||
3,400 | Nippon Telegraph & Telephone Corp.(a) | 158,472 | ||||||
50,100 | Singapore Telecommunications, Ltd.(a) | 129,863 | ||||||
544,119 | Telecom Italia SpA*(a) | 297,030 | ||||||
31,510 | Telecom Italia SpA^(a) | 16,338 | ||||||
561 | Telefonica SA(a) | 4,606 | ||||||
45,330 | Verizon Communications, Inc.(a) | 2,589,703 | ||||||
|
| |||||||
6,110,269 | ||||||||
|
| |||||||
Electric Utilities (0.6%): | ||||||||
5,334 | CEZ(a) | 128,906 | ||||||
20,000 | CK Infrastructure Holdings, Ltd.(a) | 162,946 | ||||||
13,000 | CLP Holdings, Ltd.(a) | 143,238 | ||||||
49 | Electricite de France(a) | 618 | ||||||
181,523 | Enel SpA(a) | 1,268,014 | ||||||
4,688 | Exelon Corp.(a) | 224,743 | ||||||
8,000 | Hongkong Electric Holdings, Ltd.(a) | 57,521 | ||||||
11,633 | NextEra Energy, Inc.(a) | 2,383,137 | ||||||
358 | Xcel Energy, Inc.(a) | 21,297 | ||||||
|
| |||||||
4,390,420 | ||||||||
|
| |||||||
Electrical Equipment (0.4%): | ||||||||
388 | Eaton Corp. plc(a) | 32,313 | ||||||
37,638 | Emerson Electric Co.(a) | 2,511,208 | ||||||
6,000 | GS Yuasa Corp.(a) | 116,641 | ||||||
3,400 | Mabuchi Motor Co., Ltd.^(a) | 116,648 | ||||||
140 | Rockwell Automation, Inc.(a) | 22,936 | ||||||
|
| |||||||
2,799,746 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.3%): | ||||||||
2,108 | ALPS Electric Co., Ltd.(a) | 35,470 | ||||||
2,163 | Corning, Inc.(a) | 71,876 | ||||||
1,800 | Hitachi, Ltd.(a) | 66,163 | ||||||
63,320 | Hon Hai Precision Industry Co., Ltd.(a) | 158,028 | ||||||
6,200 | Japan Aviation Electronics Industry, Ltd.(a) | 91,339 | ||||||
200 | Keyence Corp.(a) | 122,925 |
See accompanying notes to the consolidated financial statements.
3
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
39,300 | Murata Manufacturing Co., Ltd.(a) | $ | 1,772,619 | |||||
17 | Samsung Electro-Mechanics Co., Ltd., Series L(a) | 1,443 | ||||||
|
| |||||||
2,319,863 | ||||||||
|
| |||||||
Energy Equipment & Services (0.0%†): | ||||||||
239 | Halliburton Co.(a) | 5,435 | ||||||
492 | Helmerich & Payne, Inc.^(a) | 24,905 | ||||||
3,984 | Schlumberger, Ltd.(a) | 158,324 | ||||||
|
| |||||||
188,664 | ||||||||
|
| |||||||
Entertainment (0.0%†): | ||||||||
320 | Ncsoft Corp.(a) | 132,208 | ||||||
291 | Tencent Music Entertainment Group, ADR*^(a) | 4,362 | ||||||
1,029 | Vivendi Universal SA(a) | 28,354 | ||||||
373 | Walt Disney Co. (The)(a) | 52,086 | ||||||
|
| |||||||
217,010 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.5%): | ||||||||
977 | American Tower Corp.(a) | 199,748 | ||||||
115 | Boston Properties, Inc.(a) | 14,835 | ||||||
2,556 | Equinix, Inc.(a) | 1,288,966 | ||||||
14,344 | Equity Residential Property Trust(a) | 1,088,996 | ||||||
11,000 | Link REIT (The)(a) | 135,305 | ||||||
180 | Macquarie Goodman Group(a) | 1,902 | ||||||
5,789 | Unibail-Rodamco-Westfield^(a) | 867,069 | ||||||
4,229 | Welltower, Inc.(a) | 344,790 | ||||||
9,113 | Weyerhaeuser Co.(a) | 240,036 | ||||||
|
| |||||||
4,181,647 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%†): | ||||||||
600 | AEON Co., Ltd.(a) | 10,323 | ||||||
175 | Costco Wholesale Corp.(a) | 46,246 | ||||||
7,032 | Jeronimo Martins SGPS SA(a) | 113,214 | ||||||
1,849 | Kroger Co. (The)(a) | 40,142 | ||||||
2,400 | Seven & I Holdings Co., Ltd.(a) | 81,360 | ||||||
354 | Sysco Corp.(a) | 25,035 | ||||||
1,356 | Wal-Mart Stores, Inc.(a) | 149,824 | ||||||
|
| |||||||
466,144 | ||||||||
|
| |||||||
Food Products (1.1%): | ||||||||
77,200 | Ajinomoto Co., Inc.(a) | 1,340,816 | ||||||
41,358 | Danone SA(a) | 3,506,670 | ||||||
1,406 | JBS SA(a) | 7,771 | ||||||
100 | Meiji Holdings Co., Ltd.(a) | 7,152 | ||||||
3,443 | Mondelez International, Inc., Class A(a) | 185,578 | ||||||
6 | Nestle India, Ltd.(a) | 1,037 | ||||||
33,734 | Nestle SA, Registered Shares(a) | 3,493,870 | ||||||
8,000 | Tingyi (Caymen Is) Holding Corp.(a) | 13,350 | ||||||
67,000 | Uni-President Enterprises Corp.(a) | 178,396 | ||||||
183,000 | Want Want China Holdings, Ltd.(a) | 148,395 | ||||||
6,500 | WH Group, Ltd.(a) | 6,618 | ||||||
|
| |||||||
8,889,653 | ||||||||
|
| |||||||
Gas Utilities (0.2%): | ||||||||
3,500 | Beijing Enterprises Holdings, Ltd.(a) | 17,798 | ||||||
2,000 | China Resources Gas Group, Ltd.(a) | 9,915 | ||||||
49,100 | Tokyo Gas Co., Ltd.(a) | 1,155,395 | ||||||
|
| |||||||
1,183,108 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.7%): | ||||||||
2,337 | Abbott Laboratories(a) | 196,542 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
202 | Alcon, Inc.*(a) | $ | 12,498 | |||||
1,864 | Baxter International, Inc.(a) | 152,662 | ||||||
160 | Edwards Lifesciences Corp.*(a) | 29,558 | ||||||
3,080 | EssilorLuxottica SA(a) | 402,507 | ||||||
17,900 | HOYA Corp.(a) | 1,375,144 | ||||||
56 | Intuitive Surgical, Inc.*(a) | 29,375 | ||||||
61,540 | Koninklijke Philips Electronics NV(a) | 2,672,362 | ||||||
866 | Medtronic plc(a) | 84,340 | ||||||
38,800 | Olympus Co., Ltd.(a) | 432,579 | ||||||
987 | Stryker Corp.(a) | 202,907 | ||||||
|
| |||||||
5,590,474 | ||||||||
|
| |||||||
Health Care Providers & Services (1.6%): | ||||||||
3,900 | Alfresa Holdings Corp.(a) | 96,516 | ||||||
11,717 | Anthem, Inc.(a) | 3,306,654 | ||||||
675 | Cardinal Health, Inc.(a) | 31,793 | ||||||
354 | Centene Corp.*(a) | 18,564 | ||||||
16,732 | CVS Health Corp.(a) | 911,727 | ||||||
19,877 | DaVita, Inc.*(a) | 1,118,280 | ||||||
27,525 | Fresenius SE & Co. KGaA(a) | 1,490,819 | ||||||
7,647 | HCA Healthcare, Inc.(a) | 1,033,645 | ||||||
71 | Humana, Inc.(a) | 18,836 | ||||||
411 | McKesson Corp.(a) | 55,234 | ||||||
4,600 | Medipal Holdings Corp.(a) | 101,760 | ||||||
24,213 | NMC Health plc^(a) | 738,829 | ||||||
74,487 | Notre Dame Intermedica Participacoes SA(a) | 782,256 | ||||||
1,800 | Suzuken Co., Ltd.(a) | 105,811 | ||||||
9,731 | UnitedHealth Group, Inc.(a) | 2,374,461 | ||||||
|
| |||||||
12,185,185 | ||||||||
|
| |||||||
Health Care Technology (0.0%†): | ||||||||
17 | Cerner Corp.(a) | 1,246 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.3%): | ||||||||
761 | Carnival Corp., Class A^(a) | 35,425 | ||||||
36,000 | Genting Singapore, Ltd.(a) | 24,498 | ||||||
249 | McDonald’s Corp.(a) | 51,707 | ||||||
408 | Royal Caribbean Cruises, Ltd.(a) | 49,454 | ||||||
400 | Sands China, Ltd.(a) | 1,918 | ||||||
13,079 | Sodexo SA(a) | 1,528,566 | ||||||
985 | Starbucks Corp.(a) | 82,573 | ||||||
662 | Wyndham Worldwide Corp.(a) | 29,062 | ||||||
3,898 | Yum China Holdings, Inc.(a) | 180,087 | ||||||
642 | Yum! Brands, Inc.(a) | 71,050 | ||||||
|
| |||||||
2,054,340 | ||||||||
|
| |||||||
Household Durables (0.1%†): | ||||||||
3,138 | Berkeley Group Holdings plc (The)(a) | 148,797 | ||||||
1,434 | Coway Co., Ltd.(a) | 96,169 | ||||||
831 | LG Electronics, Inc.(a) | 57,154 | ||||||
1,300 | Sony Corp.(a) | 67,933 | ||||||
|
| |||||||
370,053 | ||||||||
|
| |||||||
Household Products (0.4%): | ||||||||
37,730 | Colgate-Palmolive Co.(a) | 2,704,109 | ||||||
1,386 | Procter & Gamble Co. (The)(a) | 151,975 | ||||||
|
| |||||||
2,856,084 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.0%†): | ||||||||
1,736 | AES Corp. (The)(a) | 29,095 | ||||||
27,000 | Cgn Power Co., Ltd., Class H(a) | 7,435 |
See accompanying notes to the consolidated financial statements.
4
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Independent Power and Renewable Electricity Producers, continued | ||||||||
6,000 | China Longyuan Power Group Corp.(a) | $ | 3,855 | |||||
4,000 | China Resources Power Holdings Co.(a) | 5,835 | ||||||
100 | Engie Brasil Energia SA(a) | 1,132 | ||||||
330 | NRG Energy, Inc.(a) | 11,590 | ||||||
7,853 | Vistra Energy Corp.*(a) | 177,792 | ||||||
|
| |||||||
236,734 | ||||||||
|
| |||||||
Industrial Conglomerates (0.3%): | ||||||||
11,000 | Citic, Ltd.(a) | 15,826 | ||||||
39,500 | Fosun International, Ltd.(a) | 52,541 | ||||||
2,256 | General Electric Co.(a) | 23,688 | ||||||
455 | Honeywell International, Inc.(a) | 79,438 | ||||||
3,700 | Jardine Matheson Holdings, Ltd.(a) | 233,199 | ||||||
16,177 | Siemens AG, Registered Shares(a) | 1,922,371 | ||||||
500 | Toshiba Corp.(a) | 15,579 | ||||||
|
| |||||||
2,342,642 | ||||||||
|
| |||||||
Insurance (0.6%): | ||||||||
199 | AEGON NV(a) | 991 | ||||||
79 | Allstate Corp. (The)(a) | 8,034 | ||||||
94,000 | Cathay Financial Holding Co., Ltd.(a) | 129,740 | ||||||
6,959 | Chubb, Ltd.(a) | 1,024,991 | ||||||
15 | Fairfax Financial Holdings, Ltd.(a) | 7,363 | ||||||
3,806 | Hartford Financial Services Group, Inc. (The)(a) | 212,070 | ||||||
24,505 | Marsh & McLennan Cos., Inc.(a) | 2,444,373 | ||||||
1,394 | MetLife, Inc.(a) | 69,240 | ||||||
15 | Muenchener Rueckversicherungs-Gesellschaft AG(a) | 3,764 | ||||||
600 | NKSJ Holdings, Inc.(a) | 23,224 | ||||||
12,631 | Old Mutual, Ltd.(a) | 19,045 | ||||||
599 | Progressive Corp. (The)(a) | 47,878 | ||||||
315 | Prudential Financial, Inc.(a) | 31,815 | ||||||
286 | Reinsurance Group of America, Inc.(a) | 44,625 | ||||||
128 | Swiss Re AG(a) | 13,019 | ||||||
1,600 | T&D Holdings, Inc.(a) | 17,453 | ||||||
1,336 | Travelers Cos., Inc. (The)(a) | 199,759 | ||||||
|
| |||||||
4,297,384 | ||||||||
|
| |||||||
Interactive Media & Services (1.3%): | ||||||||
70 | Alphabet, Inc., Class A*(a) | 75,796 | ||||||
5,886 | Alphabet, Inc., Class C*(a) | 6,362,236 | ||||||
171 | Baidu, Inc., ADR*(a) | 20,068 | ||||||
6,820 | Facebook, Inc., Class A*(a) | 1,316,260 | ||||||
53,200 | Tencent Holdings, Ltd.(a) | 2,406,887 | ||||||
74 | Twitter, Inc.*(a) | 2,583 | ||||||
8,800 | Yahoo! Japan Corp.(a) | 25,870 | ||||||
|
| |||||||
10,209,700 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.9%): | ||||||||
13,473 | Alibaba Group Holding, Ltd., ADR*(a) | 2,282,999 | ||||||
1,827 | Amazon.com, Inc.*(a) | 3,459,662 | ||||||
15 | Booking Holdings, Inc.*(a) | 28,121 | ||||||
1,350 | eBay, Inc.(a) | 53,325 | ||||||
634 | Expedia, Inc.(a) | 84,341 | ||||||
842 | JD.com, Inc., ADR*(a) | 25,504 | ||||||
49,600 | Start Today Co., Ltd.(a) | 930,966 | ||||||
|
| |||||||
6,864,918 | ||||||||
|
| |||||||
IT Services (0.4%): | ||||||||
416 | Accenture plc, Class C(a) | 76,864 | ||||||
27 | Adyen NV*(a) | 20,843 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services, continued | ||||||||
1,279 | DXC Technology Co.(a) | $ | 70,537 | |||||
544 | Fidelity National Information Services, Inc.(a) | 66,738 | ||||||
8,035 | FleetCor Technologies, Inc.*(a) | 2,256,629 | ||||||
1,200 | Global Payments, Inc.(a) | 192,156 | ||||||
1,660 | HCL Technologies, Ltd.(a) | 25,609 | ||||||
1,482 | Infosys, Ltd.(a) | 15,772 | ||||||
574 | International Business Machines Corp.(a) | 79,155 | ||||||
919 | MasterCard, Inc., Class A(a) | 243,103 | ||||||
416 | PayPal Holdings, Inc.*(a) | 47,615 | ||||||
53 | Samsung SDS Co., Ltd.(a) | 9,867 | ||||||
21 | Tata Consultancy Services, Ltd.(a) | 678 | ||||||
287 | VeriSign, Inc.*(a) | 60,029 | ||||||
1,509 | Visa, Inc., Class A(a) | 261,887 | ||||||
514 | Wipro, Ltd.(a) | 2,091 | ||||||
|
| |||||||
3,429,573 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.2%): | ||||||||
13,752 | Agilent Technologies, Inc.(a) | 1,026,862 | ||||||
77 | Illumina, Inc.*(a) | 28,348 | ||||||
518 | Thermo Fisher Scientific, Inc.(a) | 152,126 | ||||||
|
| |||||||
1,207,336 | ||||||||
|
| |||||||
Machinery (0.4%): | ||||||||
560 | Atlas Copco AB(a) | 16,074 | ||||||
561 | Atlas Copco AB, Class A(a) | 17,941 | ||||||
412 | Caterpillar, Inc.(a) | 56,151 | ||||||
177 | Cummins, Inc.(a) | 30,327 | ||||||
14,016 | Dover Corp.(a) | 1,404,404 | ||||||
6,400 | Hino Motors, Ltd.(a) | 53,978 | ||||||
12,143 | Knorr-Bremse AG(a) | 1,352,009 | ||||||
600 | Mitsubishi Heavy Industries, Ltd.(a) | 26,159 | ||||||
1,815 | Sandvik AB(a) | 33,363 | ||||||
5,300 | Sany Heavy Industry Co., Ltd.(a) | 10,112 | ||||||
76 | Stanley Black & Decker, Inc.(a) | 10,990 | ||||||
1,000 | Weichai Power Co., Ltd., Class H(a) | 1,693 | ||||||
|
| |||||||
3,013,201 | ||||||||
|
| |||||||
Marine (0.0%†): | ||||||||
1 | A.P. Moeller — Maersk A/S, Class A(a) | 1,162 | ||||||
|
| |||||||
Media (1.3%): | ||||||||
6,326 | Charter Communications, Inc., Class A*(a) | 2,499,909 | ||||||
18,306 | Clear Channel Outdoor Holdings, Inc.*(a) | 86,404 | ||||||
85,076 | Comcast Corp., Class A(a)(b) | 3,597,013 | ||||||
2,820 | Grupo Televisa SAB(a) | 4,769 | ||||||
15,329 | I-Cable Communications, Ltd.*(a) | 194 | ||||||
914 | iHeartMedia, Inc., Class A*(a) | 13,756 | ||||||
2,332 | Liberty Broadband Corp., Class A*(a) | 239,823 | ||||||
10,433 | Liberty Broadband Corp., Class C*(a) | 1,087,327 | ||||||
55 | Liberty Global plc, Series C*(a) | 1,459 | ||||||
29,840 | Liberty Global plc, Class A*(a) | 805,382 | ||||||
8,362 | Liberty SiriusXM Group, Class A*(a) | 316,167 | ||||||
14,011 | Liberty SiriusXM Group, Class C*(a) | 532,138 | ||||||
9 | MultiChoice Group, Ltd.*(a) | 86 | ||||||
7,800 | Nippon Television Holdings, Inc.(a) | 115,770 | ||||||
1,359 | Omnicom Group, Inc.^(a) | 111,370 | ||||||
978 | Publicis Groupe SA(a) | 51,626 | ||||||
75,025 | RAI Way SpA(a) | 448,618 | ||||||
5,600 | TV Asahi Holdings Corp.(a) | 90,557 | ||||||
|
| |||||||
10,002,368 | ||||||||
|
|
See accompanying notes to the consolidated financial statements.
5
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining (0.5%): | ||||||||
8,263 | Barrick Gold Corp.(a) | $ | 130,439 | |||||
19,500 | China Hongqiao Group, Ltd.(a) | 13,713 | ||||||
2,100 | DOWA Mining Co.(a) | 67,631 | ||||||
3,504 | Eregli Demir ve Celik Fabrikalari T.A.S.(a) | 4,772 | ||||||
19,110 | Glencore International plc(a) | 66,484 | ||||||
400 | JFE Holdings, Inc.(a) | 5,889 | ||||||
27 | Kumba Iron Ore, Ltd.(a) | 960 | ||||||
36,027 | Newcrest Mining, Ltd.(a) | 809,556 | ||||||
33,298 | Newmont Mining Corp.(a) | 1,280,974 | ||||||
689 | POSCO(a) | 145,882 | ||||||
168 | Rio Tinto, Ltd.(a) | 12,256 | ||||||
4,090 | South32, Ltd.(a) | 9,139 | ||||||
714 | Southern Copper Corp.(a) | 27,739 | ||||||
248 | Teck Cominco, Ltd., Class B(a) | 5,724 | ||||||
18,200 | Tokyo Steel Manufacturing Co., Ltd.(a) | 137,847 | ||||||
249 | Vedanta, Ltd.(a) | 629 | ||||||
30,254 | Wheaton Precious Metals Corp.(a) | 731,742 | ||||||
2,700 | Yamato Kogyo Co., Ltd.(a) | 78,916 | ||||||
42,000 | Zijin Mining Group Co., Ltd.(a) | 17,073 | ||||||
|
| |||||||
3,547,365 | ||||||||
|
| |||||||
Multiline Retail (0.3%): | ||||||||
18,286 | Dollar Tree, Inc.*(a) | 1,963,733 | ||||||
4,229 | Target Corp.(a) | 366,274 | ||||||
|
| |||||||
2,330,007 | ||||||||
|
| |||||||
Multi-Utilities (0.1%): | ||||||||
4,600 | AGL Energy, Ltd.(a) | 64,650 | ||||||
707 | CenterPoint Energy, Inc.(a) | 20,241 | ||||||
538 | Engie Group(a) | 8,168 | ||||||
6,765 | Sempra Energy^(a) | 929,782 | ||||||
|
| |||||||
1,022,841 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.8%): | ||||||||
1,047 | Chevron Corp.(a) | 130,289 | ||||||
17,500 | China Petroleum & Chemical Corp., Class A(a) | 13,982 | ||||||
78,000 | China Petroleum & Chemical Corp., Class H(a) | 53,119 | ||||||
11,500 | China Shenhua Energy Co., Ltd.(a) | 24,031 | ||||||
23,000 | CNOOC, Ltd.(a) | 39,572 | ||||||
46,285 | Coal India, Ltd.(a) | 170,403 | ||||||
565 | ConocoPhillips Co.(a) | 34,465 | ||||||
1,728 | Devon Energy Corp.(a) | 49,283 | ||||||
50,679 | Enbridge, Inc.(a) | 1,830,699 | ||||||
1,874 | ENI SpA(a) | 31,034 | ||||||
26,035 | Exxon Mobil Corp.(a) | 1,995,062 | ||||||
941 | Fieldwood Energy LLC*(a)(c) | 28,230 | ||||||
3,485 | Fieldwood Energy LLC*(a)(c) | 104,550 | ||||||
24,000 | Formosa Petrochemical Corp.(a) | 85,527 | ||||||
2,775 | Hindustan Petroleum Corp., Ltd.(a) | 11,637 | ||||||
898 | Imperial Oil, Ltd.(a) | 24,867 | ||||||
9,201 | Marathon Petroleum Corp.(a) | 514,152 | ||||||
301 | Occidental Petroleum Corp.(a) | 15,134 | ||||||
43,210 | Oil & Natural Gas Corp., Ltd.(a) | 105,020 | ||||||
35,636 | ONEOK, Inc.(a) | 2,452,113 | ||||||
10,000 | PetroChina Co., Ltd., Class H(a) | 5,502 | ||||||
566 | Phillips 66(a) | 52,944 | ||||||
91,747 | Reliance Industries, Ltd.*(a) | 1,665,721 | ||||||
19,707 | Royal Dutch Shell plc, Class A, ADR(a) | 1,282,334 | ||||||
75,871 | Royal Dutch Shell plc, Class A(a) | 2,469,965 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
1,479 | Royal Dutch Shell plc, Class A(a) | $ | 48,420 | |||||
1,163 | Royal Dutch Shell plc, Class B(a) | 37,928 | ||||||
20,651 | Snam SpA(a) | 102,714 | ||||||
1,104 | S-Oil Corp.(a) | 80,022 | ||||||
138 | Statoil ASA(a) | 2,735 | ||||||
49,044 | Suncor Energy, Inc.(a) | 1,530,050 | ||||||
38,975 | TC Energy Corp.(a) | 1,932,378 | ||||||
47,500 | Thai Oil Public Co., Ltd.(a) | 103,081 | ||||||
554 | Total SA, ADR(a) | 30,908 | ||||||
21,095 | Total SA(a) | 1,179,980 | ||||||
434 | Valero Energy Corp.(a) | 37,155 | ||||||
115,630 | Williams Cos., Inc. (The)(a) | 3,242,264 | ||||||
14,000 | Yanzhou Coal Mining Co.(a) | 13,100 | ||||||
769 | YPF Sociedad Anonima, ADR(a) | 14,003 | ||||||
|
| |||||||
21,544,373 | ||||||||
|
| |||||||
Paper & Forest Products (0.0%†): | ||||||||
386,370 | Quintis Pty, Ltd.*(a)(c)(d) | 301,025 | ||||||
|
| |||||||
Personal Products (0.0%†): | ||||||||
10 | Estee Lauder Co., Inc. (The), Class A(a) | 1,831 | ||||||
100 | Shiseido Co., Ltd.(a) | 7,554 | ||||||
|
| |||||||
9,385 | ||||||||
|
| |||||||
Pharmaceuticals (1.4%): | ||||||||
397 | Allergan plc(a) | 66,470 | ||||||
1,071 | Aspen Pharmacare Holdings, Ltd.(a) | 7,643 | ||||||
86,100 | Astellas Pharma, Inc.(a) | 1,229,519 | ||||||
73 | AstraZeneca plc(a) | 5,958 | ||||||
12,692 | Bayer AG, Registered Shares(a) | 881,347 | ||||||
1,608 | Bristol-Myers Squibb Co.(a) | 72,923 | ||||||
500 | China Resources Pharmaceutical(a) | 565 | ||||||
57 | Eli Lilly & Co.(a) | 6,315 | ||||||
1,824 | GlaxoSmithKline plc(a) | 36,505 | ||||||
1,117 | Gw Pharmaceuticals, ADR*(a) | 192,560 | ||||||
23,086 | Johnson & Johnson Co.(a) | 3,215,418 | ||||||
400 | Kyowa Hakko Kogyo Co., Ltd.(a) | 7,210 | ||||||
16,193 | Merck & Co., Inc.(a) | 1,357,783 | ||||||
677 | Mylan NV*(a) | 12,890 | ||||||
7,237 | Novo Nordisk A/S, Class B(a) | 369,267 | ||||||
1,700 | Ono Pharmaceutical Co., Ltd.(a) | 30,533 | ||||||
900 | Otsuka Holdings Co., Ltd.(a) | 29,418 | ||||||
59,984 | Pfizer, Inc.(a) | 2,598,507 | ||||||
13 | Roche Holding AG(a) | 3,659 | ||||||
4,276 | Sanofi-Aventis SA(a) | 369,815 | ||||||
200 | Shionogi & Co., Ltd.(a) | 11,550 | ||||||
327 | Zoetis, Inc.(a) | 37,111 | ||||||
|
| |||||||
10,542,966 | ||||||||
|
| |||||||
Professional Services (0.0%†): | ||||||||
88 | Reed Elsevier plc(a) | 2,138 | ||||||
7 | SGS SA, Registered Shares(a) | 17,843 | ||||||
968 | Thomson Reuters Corp.(a) | 62,454 | ||||||
|
| |||||||
82,435 | ||||||||
|
| |||||||
Real Estate Management & Development (0.6%): | ||||||||
12,000 | Agile Property Holdings, Ltd.(a) | 16,091 | ||||||
581,600 | CapitaLand, Ltd.(a) | 1,518,247 | ||||||
500 | CK Asset Holdings, Ltd.(a) | 3,903 | ||||||
5,000 | Country Garden Holdings Co., Ltd.(a) | 7,574 |
See accompanying notes to the consolidated financial statements.
6
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
600 | Daiwa House Industry Co., Ltd.(a) | $ | 17,525 | |||||
81,000 | Hang Lung Properties, Ltd.(a) | 192,865 | ||||||
7,100 | Hongkong Land Holdings, Ltd.(a) | 45,798 | ||||||
11,000 | Hysan Development Co., Ltd.(a) | 56,856 | ||||||
2,000 | Logan Property Holdings Co., Ltd.(a) | 3,244 | ||||||
10,900 | Mitsubishi Estate Co., Ltd.(a) | 203,366 | ||||||
24,000 | Sino Land Co., Ltd.(a) | 40,137 | ||||||
106,166 | Sun Hung Kai Properties, Ltd.(a) | 1,803,021 | ||||||
10,000 | Swire Pacific, Ltd., Class A(a) | 123,047 | ||||||
3,236 | Vonovia SE(a) | 154,505 | ||||||
15,000 | Wharf Real Estate Investment Co., Ltd.(a) | 105,381 | ||||||
|
| |||||||
4,291,560 | ||||||||
|
| |||||||
Road & Rail (0.3%): | ||||||||
547 | Canadian National Railway Co.(a) | 50,631 | ||||||
153 | Canadian Pacific Railway, Ltd., Class 1(a) | 36,039 | ||||||
70,800 | ComfortDelGro Corp., Ltd.(a) | 139,254 | ||||||
1,558 | CSX Corp.(a) | 120,542 | ||||||
800 | Daqin Railway Co., Ltd., Class A(a) | 943 | ||||||
21,100 | East Japan Railway Co.(a) | 1,976,298 | ||||||
291 | Norfolk Southern Corp.(a) | 58,005 | ||||||
4,700 | Seino Holdings Co., Ltd.(a) | 62,730 | ||||||
445 | Union Pacific Corp.(a) | 75,254 | ||||||
|
| |||||||
2,519,696 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.6%): | ||||||||
185 | ASML Holding NV(a) | 38,667 | ||||||
1,000 | Globalwafers Co., Ltd.(a) | 10,169 | ||||||
2,108 | Intel Corp.(a) | 100,910 | ||||||
355 | KLA-Tencor Corp.(a) | 41,961 | ||||||
45 | Lam Research Corp.(a) | 8,453 | ||||||
1,000 | MediaTek, Inc.(a) | 10,141 | ||||||
542 | Micron Technology, Inc.*(a) | 20,916 | ||||||
695 | NXP Semiconductors NV(a) | 67,839 | ||||||
15,460 | QUALCOMM, Inc.(a) | 1,176,042 | ||||||
7,400 | ROHM Co., Ltd.(a) | 499,665 | ||||||
313,000 | Taiwan Semiconductor Manufacturing Co., Ltd.(a) | 2,387,999 | ||||||
586 | Texas Instruments, Inc.(a) | 67,249 | ||||||
352 | Xilinx, Inc.(a) | 41,508 | ||||||
|
| |||||||
4,471,519 | ||||||||
|
| |||||||
Software (1.5%): | ||||||||
367 | Adobe Systems, Inc.*(a) | 108,137 | ||||||
290 | Autodesk, Inc.*(a) | 47,241 | ||||||
37,812 | Cloudera, Inc.*(a) | 198,891 | ||||||
50,269 | Dropbox, Inc., Class A*(a) | 1,259,238 | ||||||
508 | Intuit, Inc.(a) | 132,756 | ||||||
44,215 | Microsoft Corp.(a) | 5,923,041 | ||||||
14,944 | Oracle Corp.(a) | 851,360 | ||||||
204 | SAP AG(a) | 28,035 | ||||||
55 | ServiceNow, Inc.*(a) | 15,101 | ||||||
68,532 | Uber Technologies 6mo Lock Up*(a)(c) | 3,062,852 | ||||||
513 | VMware, Inc., Class A(a) | 85,779 | ||||||
|
| |||||||
11,712,431 | ||||||||
|
| |||||||
Specialty Retail (0.4%): | ||||||||
7 | AutoZone, Inc.*(a) | 7,696 | ||||||
286 | Home Depot, Inc. (The)(a) | 59,479 | ||||||
301,236 | Kingfisher plc(a) | 822,772 | ||||||
11,705 | Lowe’s Cos., Inc.(a) | 1,181,152 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
5,107 | Petrobras Distribuidora SA(a) | $ | 33,255 | |||||
417 | Ross Stores, Inc.(a) | 41,333 | ||||||
700 | Shimamura Co., Ltd.(a) | 52,390 | ||||||
12,325 | TJX Cos., Inc. (The)(a) | 651,746 | ||||||
|
| |||||||
2,849,823 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.6%): | ||||||||
24,324 | Apple, Inc.(a) | 4,814,207 | ||||||
3,395 | Hewlett Packard Enterprise Co.(a) | 50,755 | ||||||
224 | HP, Inc.(a) | 4,657 | ||||||
10,000 | Lenovo Group, Ltd.(a) | 7,755 | ||||||
200 | Samsung Electronics Co., Ltd.(a) | 8,156 | ||||||
426 | Western Digital Corp.^(a) | 20,256 | ||||||
|
| |||||||
4,905,786 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.0%†): | ||||||||
171 | Adidas AG(a) | 52,778 | ||||||
1,021 | Compagnie Financiere Richemont SA(a) | 86,692 | ||||||
112 | Kering(a) | 66,236 | ||||||
920 | Nike, Inc., Class B(a) | 77,234 | ||||||
|
| |||||||
282,940 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.2%): | ||||||||
40,140 | Housing Development Finance Corp., Ltd.(a) | 1,274,861 | ||||||
|
| |||||||
Tobacco (0.4%): | ||||||||
37,253 | Altria Group, Inc.(a) | 1,763,929 | ||||||
10,188 | KT&G Corp.(a) | 869,690 | ||||||
8,252 | Philip Morris International, Inc.(a) | 648,030 | ||||||
|
| |||||||
3,281,649 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.1%): | ||||||||
14,818 | Ferguson plc(a) | 1,056,001 | ||||||
700 | Mitsui & Co., Ltd.(a) | 11,419 | ||||||
|
| |||||||
1,067,420 | ||||||||
|
| |||||||
Transportation Infrastructure (0.0%†): | ||||||||
10,000 | Beijing Capital International Airport Co., Ltd.(a) | 8,757 | ||||||
3,400 | Kamigumi Co., Ltd.(a) | 80,614 | ||||||
28,200 | Malaysia Airports Holdings Berhad(a) | 58,348 | ||||||
14,000 | Zhejiang Expressway Co., Ltd.(a) | 14,756 | ||||||
|
| |||||||
162,475 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.5%): | ||||||||
25,800 | Advanced Information Service plc(a) | 183,413 | ||||||
56,785 | America Movil SAB de C.V., Series L(a) | 41,339 | ||||||
4,500 | China Mobile, Ltd.(a) | 40,962 | ||||||
137,000 | Far EasTone Telecommunications Co., Ltd.(a) | 345,429 | ||||||
77,500 | Intouch Holdings Public Co., Ltd.(a) | 158,589 | ||||||
6,300 | KDDI Corp.(a) | 160,524 | ||||||
300 | NTT DoCoMo, Inc.(a) | 7,003 | ||||||
294 | Rogers Communications, Inc.(a) | 15,740 | ||||||
542 | SK Telecom Co., Ltd.(a) | 121,624 | ||||||
104,000 | Taiwan Mobile Co., Ltd.(a) | 409,936 | ||||||
563 | Turkcell Iletisim Hizmetleri AS(a) | 1,246 | ||||||
1,261,716 | Vodafone Group plc(a) | 2,069,199 | ||||||
|
| |||||||
3,555,004 | ||||||||
|
| |||||||
Total Common Stocks (Cost $193,159,698) | 222,952,951 | |||||||
|
|
See accompanying notes to the consolidated financial statements.
7
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Preferred Stocks (0.4%): | ||||||||
Aerospace & Defense (0.0%†): | ||||||||
176,080 | Rolls-Royce Holdings plc, 7/1/19(a) | $ | 224 | |||||
|
| |||||||
Banks (0.1%): | ||||||||
12,486 | Citigroup Capital XIII, Series A, 8.14%, 7/26/19^(a) | 344,488 | ||||||
25,470 | Itau Unibanco Holding SA, Series S, 3.97%, 1/3/20(a) | 240,550 | ||||||
75,000 | USB Capital IX, 3.62%, 10/29/49(US0003M+102bps), Callable 8/5/19 @ 100(a) | 61,500 | ||||||
|
| |||||||
646,538 | ||||||||
|
| |||||||
Chemicals (0.0%†): | ||||||||
979 | Braskem SA, Class A, 3.98%, 5/2/18*(a) | 8,932 | ||||||
|
| |||||||
Consumer Finance (0.0%†): | ||||||||
13,543 | GMAC Capital Trust I, Series 2, 8.02%, 8/13/19(a) | 353,879 | ||||||
|
| |||||||
Health Care Providers & Services (0.0%†): | ||||||||
143,925 | Grand Rounds, Inc., Series C*(a)(c)(d) | 368,448 | ||||||
|
| |||||||
Household Products (0.2%): | ||||||||
11,619 | Henkel AG & Co. KGaA, 1.89%, 4/3/20(a) | 1,136,884 | ||||||
|
| |||||||
Software (0.1%): | ||||||||
116,157 | Palantir Technologies, Inc., Series I*(a)(c)(d) | 756,181 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.0%†): | ||||||||
258 | Samsung Electronics Co., Ltd., 2.78%, 9/27/19(a) | 8,545 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $3,170,552) | 3,279,631 | |||||||
|
| |||||||
Convertible Preferred Stock (0.0%†): | ||||||||
Banks (0.0%†): | ||||||||
116 | Wells Fargo & Co., Series L, Class A, 5.50%, 5/30/19(a) | 158,247 | ||||||
|
| |||||||
Total Convertible Preferred Stock (Cost $126,440) | 158,247 | |||||||
|
| |||||||
Private Placements (0.1%): | ||||||||
Household Durables (0.0%†): | ||||||||
23,389 | Jawbone, 0.00%*(a)(c)(d) | — | ||||||
|
| |||||||
Internet Software & Services (0.1%): | ||||||||
5,547 | Lookout, Inc., 0.00%*(a)(c)(d) | 3,550 | ||||||
63,925 | Lookout, Inc. Preferred Shares, Series F, 0.00%*(a)(c)(d) | 453,868 | ||||||
|
| |||||||
Total Private Placements (Cost $793,586) | 457,418 | |||||||
|
| |||||||
Convertible Bonds (0.0%†): | ||||||||
Food Products (0.0%†): | ||||||||
$ | 400,000 | REI Agro, Ltd., Registered Shares, 5.50%, 11/13/14(a)(c)(e) | — | |||||
|
| |||||||
Real Estate Management & Development (0.0%†): | ||||||||
250,000 | CapitaLand, Ltd., 1.95%, 10/17/23+(a)(f) | 184,816 | ||||||
|
| |||||||
Total Convertible Bonds (Cost $575,688) | 184,816 | |||||||
|
| |||||||
Bank Loans (0.1%): | ||||||||
Hotels, Restaurants & Leisure (0.1%): | ||||||||
350,314 | Hilton Worldwide Finance LLC, 3.33% (US LIBOR+175 bps), 10/25/23(a) | 350,314 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.0%†): | ||||||||
111,961 | Fieldwood Energy LLC, 0.00% (US LIBOR+525 bps), 4/11/22(a) | 103,459 | ||||||
151,147 | Fieldwood Energy LLC, 0.00% (US LIBOR+725 bps), 4/11/23(a) | 125,452 | ||||||
|
| |||||||
228,911 | ||||||||
|
| |||||||
Total Bank Loans (Cost $605,365) | 579,225 | |||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds (2.6%): | ||||||||
Aerospace & Defense (0.1%): | ||||||||
$ | 681,000 | TransDigm, Inc., 6.25%, 3/15/26, Callable 3/15/22 @ 103.13(a)(f) | $ | 714,199 | ||||
|
| |||||||
Banks (0.7%): | ||||||||
265,000 | Bank of America Corp., 3.30%, 1/11/23, MTN(a) | 273,173 | ||||||
586,000 | Bank of America Corp., 4.13%, 1/22/24, MTN(a) | 625,756 | ||||||
141,000 | Bank of America Corp., 4.00%, 1/22/25, MTN(a) | 148,160 | ||||||
455,000 | Citigroup, Inc., 3.35% (US0003M+90 bps), 4/24/25, Callable 4/24/24 @ 100^(a) | 467,252 | ||||||
241,000 | Citigroup, Inc., Series Q, 5.95% (US0003M+410 bps), Callable 8/15/20 @ 100(a) | 246,724 | ||||||
595,000 | Citigroup, Inc., Series O, 5.87% (US0003M+406 bps), Callable 3/27/20 @ 100(a) | 600,206 | ||||||
353,000 | JPMorgan Chase & Co., 4.02% (US0003M+100 bps), 12/5/24, Callable 12/5/23 @ 100(a) | 374,431 | ||||||
108,000 | SunTrust Banks, Inc., 4.00%, 5/1/25, Callable 3/1/25 @ 100(a) | 115,339 | ||||||
53,000 | Wells Fargo & Co., 3.07%, 1/24/23, Callable 1/24/22 @ 100(a) | 53,797 | ||||||
170,000 | Wells Fargo & Co., 3.75%, 1/24/24, Callable 12/24/23 @ 100, MTN(a) | 178,614 | ||||||
898,000 | Wells Fargo & Co., 3.20% (US0003M+117 bps), 6/17/27, Callable 6/17/26 @ 100, MTN(a) | 908,745 | ||||||
370,000 | Wells Fargo Bank NA, 3.55%, 8/14/23, Callable 7/14/23 @ 100(a) | 385,718 | ||||||
|
| |||||||
4,377,915 | ||||||||
|
| |||||||
Biotechnology (0.1%): | ||||||||
265,000 | Gilead Sciences, Inc., 3.25%, 9/1/22, Callable 7/1/22 @ 100(a) | 272,237 | ||||||
293,000 | Gilead Sciences, Inc., 3.70%, 4/1/24, Callable 1/1/24 @ 100(a) | 309,473 | ||||||
|
| |||||||
581,710 | ||||||||
|
| |||||||
Capital Markets (0.2%): | ||||||||
265,000 | Goldman Sachs Group, Inc., 2.91% (US0003M+105 bps), 6/5/23, Callable 6/5/22 @ 100(a) | 267,820 | ||||||
281,000 | Goldman Sachs Group, Inc., Series M, 5.38% (US0003M+392 bps), Callable 5/10/20 @ 100(a) | 281,351 | ||||||
360,000 | Morgan Stanley, Series F, 3.88%, 4/29/24(a) | 381,461 | ||||||
198,000 | Morgan Stanley, Series H, 5.45% (US0003M+361 bps), Callable 10/15/19 @ 100(a) | 197,010 | ||||||
309,000 | The Goldman Sachs Group, Inc., 3.63%, 2/20/24, Callable 1/20/24 @ 100(a) | 322,067 | ||||||
|
| |||||||
1,449,709 | ||||||||
|
| |||||||
Consumer Finance (0.1%): | ||||||||
567,000 | American Express Co., 3.70%, 8/3/23, Callable 7/3/23 @ 100(a) | 595,557 | ||||||
177,000 | American Express Co., Series C, 4.90% (US0003M+329 bps), Callable 3/15/20 @ 100(a) | 174,826 | ||||||
135,000 | Capital One Finance Corp., 3.30%, 10/30/24, Callable 9/30/24 @ 100(a) | 138,492 | ||||||
190,000 | Capital One Financial Corp., 3.20%, 1/30/23, Callable 12/30/22 @ 100(a) | 194,817 | ||||||
|
| |||||||
1,103,692 | ||||||||
|
|
See accompanying notes to the consolidated financial statements.
8
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Diversified Financial Services (0.0%†): | ||||||||
$ | 220,000 | BP Capital Markets America, Inc., 3.79%, 2/6/24, Callable 1/6/24 @ 100(a) | $ | 232,581 | ||||
|
| |||||||
Diversified Telecommunication (0.0%†): | ||||||||
294,000 | Verizon Communications, Inc., 3.50%, 11/1/24, Callable 8/1/24 @ 100(a) | 309,082 | ||||||
|
| |||||||
Diversified Telecommunication Services (0.0%†): | ||||||||
48,000 | Hughes Satellite Systems Corp., 7.63%, 6/15/21(a) | 51,480 | ||||||
|
| |||||||
Electric Utilities (0.1%): | ||||||||
245,000 | NextEra Energy Capital Holdings, Inc., 2.90%, 4/1/22(a) | 248,853 | ||||||
236,000 | Vistra Operations Co. LLC, 5.63%, 2/15/27, Callable 2/15/22 @ 102.81^(a)(f) | 250,160 | ||||||
|
| |||||||
499,013 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.0%†): | ||||||||
54,000 | AvalonBay Communities, Inc., 3.50%, 11/15/24, Callable 8/15/24 @ 100(a) | 56,623 | ||||||
|
| |||||||
Food & Staples Retailing (0.0%†): | ||||||||
270,000 | Walgreen Co., 3.10%, 9/15/22(a) | 274,542 | ||||||
|
| |||||||
Health Care Equipment & Supplies (0.1%): | ||||||||
364,000 | Becton Dickinson & Co., 2.89%, 6/6/22, Callable 5/6/22 @ 100(a) | 369,072 | ||||||
120,000 | Becton Dickinson & Co., 3.36%, 6/6/24, Callable 4/6/24 @ 100(a) | 123,930 | ||||||
257,000 | Becton, Dickinson & Co., 3.13%, 11/8/21(a) | 260,634 | ||||||
|
| |||||||
753,636 | ||||||||
|
| |||||||
Health Care Providers & Services (0.2%): | ||||||||
813,000 | CVS Health Corp., 3.70%, 3/9/23, Callable 2/9/23 @ 100(a) | 839,319 | ||||||
359,000 | Halfmoon Parent, Inc., 3.40%, 9/17/21(a)(f) | 365,937 | ||||||
306,000 | Halfmoon Parent, Inc., 3.75%, 7/15/23, Callable 6/15/23 @ 100(a)(f) | 318,397 | ||||||
62,000 | UnitedHealth Group, Inc., 3.70%, 12/15/25(a) | 66,078 | ||||||
|
| |||||||
1,589,731 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.1%): | ||||||||
164,000 | McDonald’s Corp., 3.35%, 4/1/23, Callable 3/1/23 @ 100, MTN^(a) | 170,191 | ||||||
265,000 | Starbucks Corp., 3.10%, 3/1/23, Callable 2/1/23 @ 100(a) | 271,420 | ||||||
|
| |||||||
441,611 | ||||||||
|
| |||||||
Insurance (0.1%): | ||||||||
63,000 | Aon Corp., 4.50%, 12/15/28, Callable 9/15/28 @ 100(a) | 69,317 | ||||||
152,000 | Marsh & McLennan Cos., Inc., 3.88%, 3/15/24, Callable 2/15/24 @ 100(a) | 161,109 | ||||||
63,000 | Marsh & McLennan Cos., Inc., 4.38%, 3/15/29, Callable 12/15/28 @ 100(a) | 69,297 | ||||||
151,000 | Prudential Financial, Inc., 5.87% (US0003M+418 bps), 9/15/42, Callable 9/15/22 @ 100(a) | 160,892 | ||||||
100,000 | Prudential Financial, Inc., 5.62% (US0003M+392 bps), 6/15/43, Callable 6/15/23 @ 100(a) | 105,625 | ||||||
|
| |||||||
566,240 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
IT Services (0.2%): | ||||||||
$ | 933,000 | Fiserv, Inc., 2.75%, 7/1/24, Callable 6/1/24 @ 100(a) | $ | 940,496 | ||||
573,000 | International Business Machines Corp., 3.00%, 5/15/24^(a) | 588,631 | ||||||
|
| |||||||
1,529,127 | ||||||||
|
| |||||||
Media (0.2%): | ||||||||
258,000 | Charter Communications Operating LLC/Capital, 4.46%, 7/23/22, Callable 5/23/22 @ 100(a) | 270,931 | ||||||
524,000 | Comcast Corp., 3.70%, 4/15/24, Callable 3/15/24 @ 100(a) | 556,244 | ||||||
224,798 | iHeartCommunications, Inc., 6.38%, 5/1/26, Callable 5/1/22 @ 103.19^(a) | 238,567 | ||||||
79,777 | iHeartCommunications, Inc., 8.38%, 5/1/27, Callable 5/1/22 @ 104.19^(a) | 83,566 | ||||||
200,000 | NBCUniversal Enterprise, Inc., 5.25%, Callable 3/19/21 @ 100(a)(f) | 205,179 | ||||||
|
| |||||||
1,354,487 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.1%): | ||||||||
66,000 | El Paso Pipeline Partners Operating Co. LLC, 4.30%, 5/1/24, Callable 2/1/24 @ 100(a) | 70,133 | ||||||
84,000 | Energy Transfer Partners LP, 4.05%, 3/15/25, Callable 12/15/24 @ 100(a) | 87,392 | ||||||
363,000 | Enterprise Products Operating LLC, 3.35%, 3/15/23, Callable 12/15/22 @ 100(a) | 373,104 | ||||||
85,000 | Enterprise Products Operating LLC, 3.90%, 2/15/24, Callable 11/15/23 @ 100^(a) | 89,910 | ||||||
83,000 | Enterprise Products Operating LLC, 3.75%, 2/15/25, Callable 11/15/24 @ 100(a) | 87,573 | ||||||
69,000 | Kinder Morgan Energy Partners LP, 4.15%, 2/1/24, Callable 11/1/23 @ 100(a) | 72,713 | ||||||
217,000 | Williams Companies, Inc., 3.70%, 1/15/23, Callable 10/15/22 @ 100(a) | 223,863 | ||||||
126,000 | Williams Companies, Inc., 4.55%, 6/24/24, Callable 3/24/24 @ 100^(a) | 135,548 | ||||||
|
| |||||||
1,140,236 | ||||||||
|
| |||||||
Pharmaceuticals (0.0%†): | ||||||||
133,000 | Forest Laboratories, Inc., 5.00%, 12/15/21, Callable 9/16/21 @ 100(a)(f) | 139,554 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.1%): | ||||||||
448,000 | Broadcom, Inc., 3.13%, 4/15/21(a)(f) | 450,822 | ||||||
133,000 | Qualcomm, Inc., 2.60%, 1/30/23, Callable 12/30/22 @ 100(a) | 133,421 | ||||||
345,000 | Qualcomm, Inc., 2.90%, 5/20/24, Callable 3/20/24 @ 100(a) | 349,773 | ||||||
|
| |||||||
934,016 | ||||||||
|
| |||||||
Specialty Retail (0.0%†): | ||||||||
202,000 | Home Depot, Inc. (The), 2.95%, 6/15/29, Callable 3/15/29 @ 100(a) | 206,503 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.1%): | ||||||||
462,000 | Apple, Inc., 3.35%, 2/9/27, Callable 11/9/26 @ 100(a) | 485,377 |
See accompanying notes to the consolidated financial statements.
9
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Technology Hardware, Storage & Peripherals, continued | ||||||||
$ | 450,000 | Apple, Inc., 3.20%, 5/11/27, Callable 2/11/27 @ 100(a) | $ | 469,382 | ||||
|
| |||||||
954,759 | ||||||||
|
| |||||||
Tobacco (0.1%): | ||||||||
75,000 | Altria Group, Inc., 3.49%, 2/14/22, Callable 1/14/22 @ 100^(a) | 76,995 | ||||||
151,000 | Altria Group, Inc., 3.80%, 2/14/24, Callable 1/14/24 @ 100^(a) | 157,333 | ||||||
593,000 | Altria Group, Inc., 4.40%, 2/14/26, Callable 12/14/25 @ 100(a) | 633,760 | ||||||
109,000 | Philip Morris International, Inc., 3.60%, 11/15/23(a) | 113,707 | ||||||
|
| |||||||
981,795 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $19,663,854) | 20,242,241 | |||||||
|
| |||||||
Foreign Bonds (4.0%): | ||||||||
Banks (0.1%): | ||||||||
230,000 | Lloyds TSB Bank plc, Series E, 13.00% (GUKG5+1,340bps), Callable 1/22/29 @ 126+(a) | 503,752 | ||||||
|
| |||||||
Sovereign Bond (3.9%): | ||||||||
1,129,000 | Australian Government, 3.00%, 3/21/47+(a)(f) | 975,249 | ||||||
5,592,893 | Bundesrepublik Deutschland Bundesanleihe, 0.25%, 2/15/29+(a)(f) | 6,715,782 | ||||||
887,000 | Canadian Government, 0.75%, 3/1/21+(a) | 668,935 | ||||||
2,983,323 | French Republic Government Bond OAT, 0.50%, 5/25/29+(a)(f) | 3,560,683 | ||||||
1,104,326 | French Republic Government Bond OAT, 1.25%, 5/25/34+(a)(f) | 1,415,465 | ||||||
1,989,000 | Italy Buoni Poliennali Del Tesoro, 3.00%, 8/1/29+(a)(f) | 2,451,739 | ||||||
207,050,000 | Japan Treasury Discount Bill, Series 822, 0.00%, 7/1/19+(a)(g) | 1,920,692 | ||||||
385,100,000 | Japan Treasury Discount Bill, Series 829, 0.00%, 8/5/19+(a)(g) | 3,572,864 | ||||||
642,400,000 | Japan Treasury Discount Bill, Series 831, 0.00%, 8/13/19+(a)(g) | 5,960,061 | ||||||
259,350,000 | Japan Treasury Discount Bill, Series 834, 0.00%, 8/26/19+(a)(g) | 2,406,284 | ||||||
210,000 | Republic of Argentina, 3.38%, 1/15/23+(a) | 185,301 | ||||||
100,000 | Republic of Argentina, 5.25%, 1/15/28+(a) | 81,855 | ||||||
235,890 | Republic of Argentina, 7.82%, 12/31/33+(a) | 223,588 | ||||||
|
| |||||||
30,138,498 | ||||||||
|
| |||||||
Total Foreign Bonds (Cost $30,168,347) | 30,642,250 | |||||||
|
| |||||||
Yankee Dollars (0.7%): | ||||||||
Banks (0.4%): | ||||||||
282,000 | HSBC Holdings plc, 3.26% (US0003M+106 bps), 3/13/23, Callable 3/13/22 @ 100(a) | 286,793 | ||||||
414,000 | HSBC Holdings plc, 6.38% (USISDA05+371 bps), Callable 9/17/24 @ 100^(a) | 429,007 | ||||||
200,000 | HSBC Holdings PLC, 3.80% (US0003M+121 bps), 3/11/25, Callable 3/11/24 @ 100(a) | 207,537 | ||||||
410,000 | ING Groep NV, 4.10%, 10/2/23(a) | 433,115 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Banks, continued | ||||||||
$ | 200,000 | ING Groep NV, 6.00% (USSW5+445 bps), Callable 4/16/20 @ 100(a) | $ | 202,000 | ||||
112,000 | Mitsubishi UFJ Financial Group, Inc., 3.78%, 3/2/25(a) | 118,188 | ||||||
737,000 | Sumitomo Mitsui Financial Group, Inc., 3.94%, 10/16/23(a) | 778,643 | ||||||
|
| |||||||
2,455,283 | ||||||||
|
| |||||||
Capital Markets (0.0%†): | ||||||||
207,000 | UBS Group AG, 4.13%, 9/24/25(a)(f) | 220,779 | ||||||
|
| |||||||
Diversified Financial Services (0.0%†): | ||||||||
80,000 | Intelsat Jackson Holdings SA, 8.00%, 2/15/24, Callable 8/5/19 @ 104(a)(f) | 83,400 | ||||||
|
| |||||||
Food Products (0.0%†): | ||||||||
208,000 | Danone SA, 2.59%, 11/2/23, Callable 9/2/23 @ 100(a)(f) | 209,004 | ||||||
|
| |||||||
Interactive Media & Services (0.0%†): | ||||||||
220,000 | Baidu, Inc., 4.38%, 5/14/24, Callable 4/14/24 @ 100(a) | 233,022 | ||||||
|
| |||||||
Paper & Forest Products (0.1%): | ||||||||
41,361 | Quintis Pty, Ltd., 7.50%, 10/1/26, Callable 10/1/21 @ 105.63(a)(c)(d) | 41,361 | ||||||
730,672 | Quintis Pty, Ltd., 0.00%, 10/1/28, Callable 8/5/19 @ 90(a)(c)(d) | 730,672 | ||||||
|
| |||||||
772,033 | ||||||||
|
| |||||||
Pharmaceuticals (0.0%†): | ||||||||
258,000 | Actavis Funding SCS, 3.45%, 3/15/22, Callable 1/15/22 @ 100(a) | 263,230 | ||||||
205,000 | Takeda Pharmaceutical Co., Ltd., 3.80%, 11/26/20(a)(f) | 208,598 | ||||||
|
| |||||||
471,828 | ||||||||
|
| |||||||
Road & Rail (0.0%†): | ||||||||
517,099 | Inversiones Alsacia SA, 8.00%, 12/31/18(a)(c)(e) | 12,927 | ||||||
|
| |||||||
Sovereign Bond (0.2%): | ||||||||
635,000 | Republic of Argentina, 6.88%, 1/26/27(a) | 503,238 | ||||||
626,000 | Republic of Argentina, 5.88%, 1/11/28(a) | 471,848 | ||||||
|
| |||||||
975,086 | ||||||||
|
| |||||||
Total Yankee Dollars (Cost $5,751,295) | 5,433,362 | |||||||
|
| |||||||
U.S. Treasury Obligations (12.7%): | ||||||||
U.S. Treasury Bills (0.7%) | ||||||||
1,000,000 | 1.93%, 7/18/19(a)(g) | 999,037 | ||||||
4,000,000 | 1.96%, 8/1/19(a)(g) | 3,993,042 | ||||||
1,000,000 | 2.07%, 8/29/19(a)(g) | 996,567 | ||||||
|
| |||||||
5,988,646 | ||||||||
|
| |||||||
U.S. Treasury Inflation Index Notes (1.1%) | ||||||||
1,689,600 | 0.63%, 4/15/23(a) | 1,758,376 | ||||||
7,103,600 | 0.50%, 4/15/24(a) | 7,285,373 | ||||||
|
| |||||||
9,043,749 | ||||||||
|
| |||||||
U.S. Treasury Notes (10.9%) | ||||||||
3,680,000 | 1.50%, 11/30/19(h) | 3,670,800 |
See accompanying notes to the consolidated financial statements.
10
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
U.S. Treasury Obligations, continued | ||||||||
U.S. Treasury Notes, continued | ||||||||
$ | 2,080,700 | 2.25%, 4/30/24(a) | $ | 2,127,841 | ||||
26,361,800 | 2.00%, 5/31/24(a) | 26,674,846 | ||||||
5,901,400 | 3.00%, 10/31/25(a)(b) | 6,307,121 | ||||||
1,862,600 | 2.88%, 11/30/25(a) | 1,978,139 | ||||||
11,628,700 | 2.63%, 1/31/26(a)(b) | 12,181,063 | ||||||
29,163,700 | 2.38%, 5/15/29(b)(h) | 30,138,862 | ||||||
|
| |||||||
83,078,672 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $96,362,677) | 98,111,067 | |||||||
|
| |||||||
Purchased Options (0.1%): | ||||||||
Total Purchased Options (Cost $1,965,663) | 1,621,656 | |||||||
|
| |||||||
Purchased Currency Options (0.0%†): | ||||||||
Total Purchased Currency Options (Cost $208,190) | 82,187 | |||||||
|
| |||||||
Purchased Swaptions (0.0%†): | ||||||||
Total Purchased Swaptions (Cost $87,311) | 85,872 | |||||||
|
| |||||||
Purchased Interest Rate Cap (0.0%†): | ||||||||
Total Purchased Interest Rate Cap (Cost $120,131) | 139,929 | |||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Securities Held as Collateral for Securities on Loan (0.7%): | ||||||||
$ | 5,624,955 | BlackRock Liquidity FedFund, Institutional Shares (i) | $ | 5,624,955 | ||||
|
| |||||||
| Total Securities Held as Collateral for Securities on Loan | 5,624,955 | ||||||
|
| |||||||
Affiliated Investment Companies (45.0%): | ||||||||
Fixed Income Funds (27.4%): | ||||||||
18,868,694 | AZL Enhanced Bond Index Fund | 211,706,744 | ||||||
International Equity Funds (17.6%): | ||||||||
11,638,115 | AZL MSCI Global Equity Index Fund | 136,398,711 | ||||||
|
| |||||||
Total Affiliated Investment Companies (Cost $309,833,068) | 348,105,455 | |||||||
|
| |||||||
Money Markets (0.2%): | ||||||||
1,784,007 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.10%(g) | 1,784,007 | ||||||
|
| |||||||
Total Money Markets (Cost $1,784,007) | 1,784,007 | |||||||
|
| |||||||
Total Investment Securities (Cost $670,000,827) — 95.4%(j) | 739,485,269 | |||||||
Net other assets (liabilities) — 4.6% | 34,833,570 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 774,318,839 | ||||||
|
|
Percentages indicated are based on net assets as of June 30, 2019.
ADR—American Depositary Receipt
GUKG5—UK Govt Bonds 5 Year Note Generic Bid Yield
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
US0003M—3 Month US Dollar LIBOR
USISDA05—5 Year ICE Swap Rate
USSW5—USD 5 Year Swap Rate
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of June 30, 2019. The total value of securities on loan as of June 30, 2019 was $5,462,274. |
+ | The principal amount is disclosed in local currency and the fair value is disclosed in U.S. Dollars. |
† | Represents less than 0.05%. |
(a) | These securities are held by the AZL BlackRock Global Allocation Fund (the “VIP Subsidiary”). |
(b) | All or a portion of this security has been pledged as collateral for open derivative positions. |
(c) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. The sub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of June 30, 2019, these securities represent 0.76% of the net assets of the fund. |
(d) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of June 30, 2019. The total of all such securities represent 0.34% of the net assets of the fund. |
(e) | Defaulted bond. |
(f) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. The sub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(g) | The rate represents the effective yield at June 30, 2019. |
(h) | All or a portion of these securities are held by the AZL Cayman Global Allocation Fund I, Ltd. (the “Subsidiary”). |
(i) | Purchased with cash collateral held from securities lending. The value of the collateral could include collateral held for securities that were sold on or before June 30, 2019. |
(j) | See Federal Tax Information listed in the Notes to the Consolidated Financial Statements. |
Amounts shown as “—�� are either $0 or rounds to less than $1.
See accompanying notes to the consolidated financial statements.
11
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
The following represents the concentrations by country of risk (based on the domicile of the security issuer) relative to the total fair value of investments as of June 30, 2019:
Country | Percentage | |||
Argentina | 0.3 | % | ||
Australia | 0.4 | % | ||
Bermuda | — | %† | ||
Brazil | 0.3 | % | ||
Canada | 1.0 | % | ||
Cayman Islands | — | %† | ||
Chile | — | %† | ||
China | 0.7 | % | ||
Czech Republic | — | %† | ||
Denmark | 0.1 | % | ||
European Community | — | %† | ||
Finland | — | %† | ||
France | 2.2 | % | ||
Germany | 1.9 | % | ||
Hong Kong | 0.4 | % | ||
India | 0.5 | % | ||
Indonesia | — | %† | ||
Ireland (Republic of) | — | %† | ||
Italy | 0.6 | % | ||
Japan | 5.4 | % | ||
Jersey | — | %† |
Country | Percentage | |||
Liberia | — | %† | ||
Luxembourg | — | %† | ||
Malaysia | — | %† | ||
Mexico | — | %† | ||
Netherlands | 0.8 | % | ||
Norway | — | %† | ||
Panama | — | %† | ||
Portugal | — | %† | ||
Republic of Korea (South) | 0.2 | % | ||
Singapore | 0.3 | % | ||
South Africa | — | %† | ||
Spain | 0.3 | % | ||
Sweden | — | %† | ||
Switzerland | 0.6 | % | ||
Taiwan, Province Of China | 0.7 | % | ||
Thailand | 0.1 | % | ||
Turkey | — | %† | ||
United Arab Emirates | 0.1 | % | ||
United Kingdom | 1.5 | % | ||
United States | 81.6 | % | ||
|
| |||
100.0 | % | |||
|
|
† | Represents less than 0.05%. |
Securities Sold Short (0.0%†):(a)
At June 30, 2019, the Fund’s securities sold short were as follows:
Security Description | Shares | Proceeds Received | Fair Value | |||||||||
Common Stocks | ||||||||||||
Semiconductors & Semiconductor Equipment | ||||||||||||
SUMCO Corp. | (20,000 | ) | $ | (309,987 | ) | $ | (239,491 | ) |
Futures Contracts
Cash of $38,683,896 has been segregated to cover margin requirements for the following open exchange traded futures contracts as June 30, 2019:
Short Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
DJ EURO STOXX 50 September Futures (Euro)(a) | 9/20/19 | 3 | $ | (118,205 | ) | $ | (854 | ) | ||||||||
Nasdaq 100 E-Mini September Futures (U.S. Dollar)(a) | 9/20/19 | 11 | (1,692,625 | ) | (4,621 | ) | ||||||||||
Nikkei 225 Index September Futures (Japanese Yen)(a) | 9/12/19 | 69 | (6,818,391 | ) | (13,923 | ) | ||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar)(a) | 9/20/19 | 12 | (1,766,520 | ) | (11,217 | ) | ||||||||||
|
| |||||||||||||||
$ | (30,615 | ) | ||||||||||||||
|
|
See accompanying notes to the consolidated financial statements.
12
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Mini MSCI Emerging Markets Index September Futures (U.S. Dollar)(a) | 9/20/19 | 48 | $ | 2,528,160 | $ | 26,060 | ||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 131 | 19,284,510 | 384,614 | ||||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 150 | 19,195,320 | 407,192 | ||||||||||||
|
| |||||||||||||||
$ | 817,866 | |||||||||||||||
|
| |||||||||||||||
Total Net Futures Contracts | $ | 787,251 | ||||||||||||||
|
|
Contracts for Differences
At June 30, 2019, the Fund’s open over-the-counter equity contracts for differences were as follows:(a)
Reference Entity | Counterparty | Long/ Short | Currency | Financing Rate | Expiration Date | Trade Notional | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
AAC Technologies Holdings, Inc. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 3,500 | $ | (30,817 | ) | $ | 10,917 | ||||||||||||||||||
Activision Blizzard, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 352 | (15,795 | ) | (820 | ) | |||||||||||||||||||
Advanced Micro Devices, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 1,785 | (51,266 | ) | (2,945 | ) | |||||||||||||||||||
Advantech Co., Ltd. | Citigroup | Short | TWD | (1.75 | )% | 12/30/39 | 3,000 | (20,268 | ) | (5,244 | ) | |||||||||||||||||||
AmerisourceBergen Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 16 | (1,288 | ) | (77 | ) | |||||||||||||||||||
Aptiv plc | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 531 | (41,535 | ) | (1,386 | ) | |||||||||||||||||||
Autohome, Inc. | JPMorgan Chase | Short | USD | 1.75 | % | 12/30/39 | 248 | (20,025 | ) | (1,208 | ) | |||||||||||||||||||
Baker Hughes | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 253 | (5,523 | ) | (708 | ) | |||||||||||||||||||
Bollore SA | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 469 | (2,005 | ) | (65 | ) | |||||||||||||||||||
Bollore SA | JPMorgan Chase | Short | EUR | 2.12 | % | 12/30/39 | 906 | (3,861 | ) | (140 | ) | |||||||||||||||||||
Boston Scientific Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 933 | (35,774 | ) | (4,326 | ) | |||||||||||||||||||
Brilliance China Automotive Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 26,000 | (31,277 | ) | 2,530 | ||||||||||||||||||||
Brown Forman Corp. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 33 | (1,625 | ) | (204 | ) | |||||||||||||||||||
BT Group plc | JPMorgan Chase | Short | GBP | 2.15 | % | 12/30/39 | 4,954 | (15,830 | ) | 3,520 | ||||||||||||||||||||
Cenovus Energy, Inc. | JPMorgan Chase | Short | CAD | 2.20 | % | 12/30/39 | 5,250 | (48,766 | ) | 2,250 | ||||||||||||||||||||
China Everbright International, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 10,000 | (8,279 | ) | (949 | ) | |||||||||||||||||||
China Everbright International, Ltd. | Citigroup | Short | HKD | (0.31 | )% | 12/30/39 | 17,000 | (15,176 | ) | (514 | ) | |||||||||||||||||||
China Gas Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 1,200 | (3,936 | ) | (526 | ) | |||||||||||||||||||
China International Capital Corp., Ltd. | Citigroup | Short | HKD | (1.27 | )% | 12/30/39 | 11,200 | (19,987 | ) | (2,603 | ) | |||||||||||||||||||
China Molybdenum, Ltd. H | Citigroup | Short | HKD | (0.88 | )% | 12/30/39 | 12,000 | (3,969 | ) | 175 | ||||||||||||||||||||
China Southern Airlines, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 28,000 | (20,160 | ) | 654 | ||||||||||||||||||||
China State Construction International Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 40,000 | (38,889 | ) | (2,167 | ) | |||||||||||||||||||
Clorox | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 36 | (5,382 | ) | (130 | ) | |||||||||||||||||||
Coles Group, Ltd. | JPMorgan Chase | Short | AUD | 2.10 | % | 12/30/39 | 112 | (979 | ) | (70 | ) | |||||||||||||||||||
ConAgra Brands, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 1,316 | (38,124 | ) | 3,223 | ||||||||||||||||||||
Concho Resources, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 249 | (29,397 | ) | 3,705 | ||||||||||||||||||||
Constellation Brands, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 91 | (18,608 | ) | 687 | ||||||||||||||||||||
Continental AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 168 | (23,577 | ) | (901 | ) | |||||||||||||||||||
Daiichi Sankyo, Ltd. | JPMorgan Chase | Short | JPY | 2.12 | % | 12/30/39 | 200 | (8,060 | ) | (2,337 | ) | |||||||||||||||||||
Daimler AG | JPMorgan Chase | Short | EUR | 2.12 | % | 12/30/39 | 871 | (53,390 | ) | 4,884 | ||||||||||||||||||||
Daimler AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 118 | (6,940 | ) | 376 | ||||||||||||||||||||
Deere | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 155 | (22,186 | ) | (3,499 | ) | |||||||||||||||||||
Digital Realty Trust REIT, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 109 | (13,176 | ) | 337 | ||||||||||||||||||||
Digital Realty Trust REIT, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 136 | (16,720 | ) | 700 | ||||||||||||||||||||
Dish Network Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 399 | (13,142 | ) | (2,183 | ) | |||||||||||||||||||
Dominion Energy, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 286 | (21,690 | ) | (423 | ) | |||||||||||||||||||
Evergrande Group | Citigroup | Short | HKD | (1.50 | )% | 12/30/39 | 1,000 | (3,172 | ) | 368 | ||||||||||||||||||||
Familymart UNY Holdings, Ltd. | JPMorgan Chase | Short | JPY | 2.12 | % | 12/30/39 | 800 | (28,864 | ) | 9,585 | ||||||||||||||||||||
Fast Retailing, Ltd. | JPMorgan Chase | Short | JPY | 2.12 | % | 12/30/39 | 100 | (46,674 | ) | (13,215 | ) | |||||||||||||||||||
Fortescue Metals Group, Ltd. | JPMorgan Chase | Short | AUD | 2.10 | % | 12/30/39 | 278 | (1,623 | ) | (135 | ) | |||||||||||||||||||
Fortive Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 107 | (8,011 | ) | (712 | ) |
See accompanying notes to the consolidated financial statements.
13
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Reference Entity | Counterparty | Long/ Short | Currency | Financing Rate | Expiration Date | Trade Notional | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Freeport McMoRan, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 3,945 | $ | (44,253 | ) | $ | (1,548 | ) | |||||||||||||||||||
Galaxy Entertainment Group, Ltd. | Citigroup | Short | HKD | (0.30 | )% | 12/30/39 | 3,000 | (18,838 | ) | (1,381 | ) | |||||||||||||||||||||
Geely Automobile Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 1,000 | (1,957 | ) | 246 | ||||||||||||||||||||||
Great Wall Motor, Ltd. | Citigroup | Short | HKD | (2.00 | )% | 12/30/39 | 16,000 | (9,732 | ) | (1,708 | ) | |||||||||||||||||||||
Hess Corp. | Citigroup | Short | USD | 2.20 | % | 12/30/39 | 55 | (3,224 | ) | (272 | ) | |||||||||||||||||||||
Hormel Foods Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 1,444 | (59,137 | ) | 597 | ||||||||||||||||||||||
Hotai Motor, Ltd. | Citigroup | Short | TWD | (1.00 | )% | 12/30/39 | 1,000 | (8,248 | ) | (8,122 | ) | |||||||||||||||||||||
Huazhu Group, Ltd. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 1,310 | (41,994 | ) | (5,494 | ) | |||||||||||||||||||||
Hyundai Heavy Industries, Ltd. | Citigroup | Short | KRW | (0.54 | )% | 12/30/39 | 100 | (11,307 | ) | 1,044 | ||||||||||||||||||||||
Hyundai Steel | JPMorgan Chase | Short | KRW | 2.05 | % | 12/30/39 | 27 | (1,039 | ) | 60 | ||||||||||||||||||||||
Industrias Penoles SAB de C.V. | Citigroup | Short | MXN | (0.50 | )% | 12/30/39 | 328 | (5,623 | ) | 1,308 | ||||||||||||||||||||||
Iqiyi Ads Representing, Inc. | JPMorgan Chase | Short | USD | 1.42 | % | 12/30/39 | 2,439 | (58,083 | ) | 7,717 | ||||||||||||||||||||||
LG Display, Ltd. | Citigroup | Short | KRW | (0.40 | )% | 12/30/39 | 1,158 | (19,173 | ) | 1,155 | ||||||||||||||||||||||
LG Display, Ltd. | JPMorgan Chase | Short | KRW | 2.05 | % | 12/30/39 | 804 | (12,478 | ) | 27 | ||||||||||||||||||||||
Linde plc | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 240 | (40,769 | ) | (7,423 | ) | |||||||||||||||||||||
Line Corp. | Citigroup | Short | JPY | (1.38 | )% | 12/30/39 | 400 | (14,290 | ) | 3,046 | ||||||||||||||||||||||
Line Corp. | Citigroup | Short | JPY | 1.03 | % | 12/30/39 | 600 | (20,936 | ) | 4,064 | ||||||||||||||||||||||
Lojas Americanas | JPMorgan Chase | Short | BRL | 1.86 | % | 12/30/39 | 2,065 | (9,839 | ) | 980 | ||||||||||||||||||||||
Lotte Corp. | Citigroup | Short | KRW | (1.00 | )% | 12/30/39 | 354 | (15,805 | ) | 2,268 | ||||||||||||||||||||||
Lotte Corp. | JPMorgan Chase | Short | KRW | 1.45 | % | 12/30/39 | 78 | (3,098 | ) | 116 | ||||||||||||||||||||||
Lotte Shopping, Ltd. | JPMorgan Chase | Short | KRW | 2.05 | % | 12/30/39 | 28 | (4,926 | ) | 1,035 | ||||||||||||||||||||||
Makita Corp. | JPMorgan Chase | Short | JPY | 2.12 | % | 12/30/39 | 100 | (5,145 | ) | 1,687 | ||||||||||||||||||||||
Mbank SA | JPMorgan Chase | Short | PLN | 1.90 | % | 12/30/39 | 6 | (680 | ) | (12 | ) | |||||||||||||||||||||
Meituan Dianping | Citigroup | Short | HKD | (0.68 | )% | 12/30/39 | 1,900 | (14,603 | ) | (2,057 | ) | |||||||||||||||||||||
Neste | JPMorgan Chase | Short | EUR | 2.15 | % | 12/30/39 | 47 | (1,589 | ) | (6 | ) | |||||||||||||||||||||
Nippon Paint Holdings Co., Ltd. | Citigroup | Short | JPY | (0.40 | )% | 12/30/39 | 200 | (7,976 | ) | 214 | ||||||||||||||||||||||
Nippon Paint Holdings Co., Ltd. | JPMorgan Chase | Short | JPY | 2.12 | % | 12/30/39 | 800 | (29,976 | ) | (988 | ) | |||||||||||||||||||||
NVIDIA Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 108 | (17,039 | ) | (697 | ) | |||||||||||||||||||||
Pembina Pipeline Corp. | Citigroup | Short | CAD | (0.18 | )% | 12/30/39 | 459 | (16,845 | ) | (247 | ) | |||||||||||||||||||||
Petrobras | JPMorgan Chase | Short | BRL | 2.30 | % | 12/30/39 | 108 | (857 | ) | 12 | ||||||||||||||||||||||
Pge Polska Grupa Energetyczna SA | JPMorgan Chase | Short | PLN | 1.90 | % | 12/30/39 | 263 | (643 | ) | (33 | ) | |||||||||||||||||||||
Reckitt Benckiser Group plc | Citigroup | Short | GBP | (0.25 | )% | 12/30/39 | 26 | (2,139 | ) | 87 | ||||||||||||||||||||||
Santander Bank Polska SA | JPMorgan Chase | Short | PLN | 1.90 | % | 12/30/39 | 56 | (5,573 | ) | — | ||||||||||||||||||||||
Saputo, Inc. | JPMorgan Chase | Short | CAD | 2.20 | % | 12/30/39 | 253 | (7,965 | ) | 374 | ||||||||||||||||||||||
Shenzhou International Group, Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 1,000 | (11,388 | ) | (2,356 | ) | |||||||||||||||||||||
Sherwin-Williams Co. (The) | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 49 | (22,556 | ) | 99 | ||||||||||||||||||||||
Sherwin-Williams Co. (The) | Citigroup | Short | USD | 2.20 | % | 12/30/39 | 54 | (24,173 | ) | (574 | ) | |||||||||||||||||||||
Shopify Subordinate Voting, Inc. Cla | Citigroup | Short | CAD | (0.18 | )% | 12/30/39 | 131 | (38,401 | ) | (925 | ) | |||||||||||||||||||||
Sino Biopharmaceutical, Ltd. | Citigroup | Short | HKD | (0.30 | )% | 12/30/39 | 10,000 | (9,589 | ) | (640 | ) | |||||||||||||||||||||
SMC Corp. | JPMorgan Chase | Short | JPY | 2.12 | % | 12/30/39 | 100 | (33,555 | ) | (3,608 | ) | |||||||||||||||||||||
Square, Inc. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 202 | (13,240 | ) | (1,411 | ) | |||||||||||||||||||||
Sunny Optical Technology Group Co., Ltd. | JPMorgan Chase | Short | HKD | 2.10 | % | 12/30/39 | 2,900 | (35,000 | ) | 5,035 | ||||||||||||||||||||||
Suzano SA | JPMorgan Chase | Short | BRL | 1.90 | % | 12/30/39 | 3,144 | (28,293 | ) | 1,317 | ||||||||||||||||||||||
Swisscom AG | Citigroup | Short | CHF | (0.25 | )% | 12/30/39 | 39 | (18,682 | ) | (876 | ) | |||||||||||||||||||||
T. Rowe Price Group, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 98 | (10,787 | ) | 35 | ||||||||||||||||||||||
Tesla, Inc. | JPMorgan Chase | Short | USD | 1.25 | % | 12/30/39 | 178 | (49,675 | ) | 9,899 | ||||||||||||||||||||||
Ultrapar Participoes SA | JPMorgan Chase | Short | BRL | 1.83 | % | 12/30/39 | 1,262 | (7,108 | ) | 470 | ||||||||||||||||||||||
Vipshop Holdings, Ltd. | JPMorgan Chase | Short | USD | 2.20 | % | 12/30/39 | 631 | (4,545 | ) | (900 | ) | |||||||||||||||||||||
Volkswagen AG | Citigroup | Short | EUR | (0.26 | )% | 12/30/39 | 331 | (56,119 | ) | (803 | ) | |||||||||||||||||||||
Volkswagen AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 258 | (42,726 | ) | (764 | ) | |||||||||||||||||||||
Worldpay, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 177 | (14,917 | ) | (6,774 | ) | |||||||||||||||||||||
Wuxi Biologics Cayman, Inc. | Citigroup | Short | HKD | (0.30 | )% | 12/30/39 | 2,000 | (19,687 | ) | 1,731 | ||||||||||||||||||||||
Xiaomi Corp. | Citigroup | Short | HKD | (1.13 | )% | 12/30/39 | 50,200 | (71,756 | ) | 7,451 | ||||||||||||||||||||||
ZTE Corp. | Citigroup | Short | HKD | (1.46 | )% | 12/30/39 | 2,400 | (7,960 | ) | 1,025 | ||||||||||||||||||||||
Zto Express Cayman ADR Representin | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 2,953 | (56,732 | ) | 271 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
$ | (1,888,434 | ) | $ | 175 | ||||||||||||||||||||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
14
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Option Contracts(a)
At June 30, 2019, the Fund’s over-the-counter options purchased were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(b) | Fair Value | |||||||||||||||||||
Agilent Technologies, Inc. | Nomura | Call | 71.00 USD | 1/17/20 | 5,449 | $ | 386,879 | $ | 41,347 | |||||||||||||||||
Alibaba Group Holding, Ltd. | Citigroup | Call | 167.00 USD | 11/22/19 | 2,785 | 465,095 | 43,968 | |||||||||||||||||||
Alibaba Group Holding, Ltd. | Bank of America | Call | 162.50 USD | 1/17/20 | 2,397 | 389,513 | 50,030 | |||||||||||||||||||
Alphabet, Inc. | JPMorgan Chase | Call | 1225.00 USD | 1/17/20 | 669 | 819,525 | 17,761 | |||||||||||||||||||
Anadarko Petroleum Corp. | Credit Suisse First Boston | Call | 67.50 USD | 1/17/20 | 7,067 | 477,023 | 38,139 | |||||||||||||||||||
Apple, Inc. | Morgan Stanley | Call | 185.00 USD | 9/20/19 | 2,143 | 396,455 | 38,814 | |||||||||||||||||||
Apple, Inc. | Morgan Stanley | Call | 180.00 USD | 12/20/19 | 5,096 | 917,280 | 128,091 | |||||||||||||||||||
BP plc | Nomura | Call | 45.00 USD | 1/17/20 | 33,538 | 1,509,210 | 27,536 | |||||||||||||||||||
CVS Health Corp. | JPMorgan Chase | Call | 78.50 USD | 1/17/20 | 4,950 | 388,575 | 907 | |||||||||||||||||||
Emerson Electric Co. | Bank of America | Call | 65.00 USD | 12/20/19 | 12,814 | 832,910 | 60,951 | |||||||||||||||||||
EURO STOXX 50 Index | Credit Suisse First Boston | Call | 3500.00 EUR | 7/19/19 | 276 | 966,000 | 6,893 | |||||||||||||||||||
EURO STOXX 50 Index | UBS Warburg | Call | 3500.00 EUR | 7/19/19 | 192 | 672,000 | 4,795 | |||||||||||||||||||
EURO STOXX 50 Index | BNP Paribas | Call | 3525.00 EUR | 7/19/19 | 325 | 1,145,625 | 5,024 | |||||||||||||||||||
EURO STOXX 50 Index | UBS Warburg | Call | 3475.00 EUR | 7/26/19 | 344 | 1,195,400 | 15,220 | |||||||||||||||||||
EURO STOXX 50 Index | Credit Suisse First Boston | Call | 3450.00 EUR | 8/16/19 | 331 | 1,141,950 | 25,223 | |||||||||||||||||||
EURO STOXX 50 Index | Credit Suisse First Boston | Call | 3600.00 EUR | 10/18/19 | 271 | 975,600 | 10,643 | |||||||||||||||||||
EURO STOXX 50 Index | Credit Suisse First Boston | Call | 3600.00 EUR | 3/20/20 | 108 | 388,800 | 9,767 | |||||||||||||||||||
EURO STOXX 50 Index | Barclays Bank | Call | 110.00 EUR | 3/19/21 | 4,979 | 547,690 | 10,878 | |||||||||||||||||||
EURO STOXX 70 Index | UBS Warburg | Call | 110.00 EUR | 6/18/21 | 6,330 | 696,300 | 12,591 | |||||||||||||||||||
Facebook, Inc. | UBS Warburg | Call | 185.00 USD | 9/20/19 | 3,209 | 593,665 | 52,738 | |||||||||||||||||||
Facebook, Inc. | UBS Warburg | Call | 195.00 USD | 12/20/19 | 6,440 | 1,255,800 | 106,041 | |||||||||||||||||||
FedEx Corp. | Citigroup | Call | 170.00 USD | 10/18/19 | 2,567 | 436,390 | 19,806 | |||||||||||||||||||
FedEx Corp. | Credit Suisse First Boston | Call | 162.00 USD | 1/17/20 | 5,587 | 905,094 | 86,514 | |||||||||||||||||||
Halliburton Co. | Citigroup | Call | 50.00 USD | 1/17/20 | 13,346 | 667,300 | 40 | |||||||||||||||||||
J.P. Morgan Chase & Co. | Citigroup | Call | 114.50 USD | 1/17/20 | 4,968 | 568,836 | 24,268 | |||||||||||||||||||
Johnson & Johnson | Bank of America | Call | 155.00 USD | 1/17/20 | 5,018 | 777,790 | 8,110 | |||||||||||||||||||
Kroger Co. (The) | Nomura | Call | 25.00 USD | 1/17/20 | 12,802 | 320,050 | 10,013 | |||||||||||||||||||
Lowe’s Cos., Inc. | Nomura | Call | 97.50 USD | 10/18/19 | 4,304 | 419,640 | 33,494 | |||||||||||||||||||
Lowe’s Cos., Inc. | Nomura | Call | 98.00 USD | 1/17/20 | 4,470 | 438,060 | 42,087 | |||||||||||||||||||
Marathon Petroleum Corp. | Morgan Stanley | Call | 55.00 USD | 12/20/19 | 11,372 | 625,460 | 60,146 | |||||||||||||||||||
Marathon Petroleum Corp. | Citigroup | Call | 64.00 USD | 1/17/20 | 15,702 | 1,004,928 | 38,418 | |||||||||||||||||||
Nasdaq 100 Stock Index | Morgan Stanley | Call | 7800.00 USD | 7/12/19 | 442 | 3,447,600 | 23,012 | |||||||||||||||||||
Nasdaq 100 Stock Index | Citigroup | Call | 7825.00 USD | 7/19/19 | 164 | 1,283,300 | 10,588 | |||||||||||||||||||
Nasdaq 100 Stock Index | Barclays Bank | Call | 7950.00 USD | 7/19/19 | 112 | 890,400 | 3,057 | |||||||||||||||||||
Qualcomm, Inc. | Morgan Stanley | Call | 70.00 USD | 10/18/19 | 6,695 | 468,650 | 58,871 | |||||||||||||||||||
Qualcomm, Inc. | Citigroup | Call | 71.00 USD | 1/17/20 | 7,025 | 498,775 | 67,085 | |||||||||||||||||||
S&P 500 Index | Goldman Sachs | Call | 2970.00 USD | 7/05/19 | 3,466 | 10,294,020 | 33,347 | |||||||||||||||||||
S&P 500 Index | Goldman Sachs | Call | 2975.00 USD | 7/19/19 | 499 | 1,484,525 | 10,886 | |||||||||||||||||||
S&P 500 Index | Bank of America | Call | 2985.00 USD | 7/19/19 | 521 | 1,555,185 | 9,348 | |||||||||||||||||||
S&P 500 Index | Bank of America | Call | 2995.00 USD | 7/19/19 | 3,495 | 10,467,525 | 51,001 | |||||||||||||||||||
S&P 500 Index | Nomura | Call | 2975.00 USD | 8/30/19 | 589 | 1,752,275 | 29,034 | |||||||||||||||||||
S&P 500 Index | Societe Generale | Call | 2975.00 USD | 9/20/19 | 785 | 2,335,375 | 47,016 | |||||||||||||||||||
Schlumberger, Ltd. | Credit Suisse First Boston | Call | 45.00 USD | 1/17/20 | 9,370 | 421,650 | 13,957 | |||||||||||||||||||
Schlumberger, Ltd. | UBS Warburg | Call | 70.00 USD | 1/17/20 | 11,244 | 787,080 | 245 | |||||||||||||||||||
SPDR Gold Shares(c) | Morgan Stanley | Call | 128.00 USD | 7/19/19 | 6,191 | 792,448 | 34,764 | |||||||||||||||||||
SPDR Gold Shares(c) | JPMorgan Chase | Call | 136.00 USD | 8/16/19 | 13,149 | 1,788,264 | 25,608 | |||||||||||||||||||
SPDR Gold Shares(c) | Societe Generale | Call | 126.00 USD | 9/20/19 | 16,215 | 2,043,090 | 135,685 | |||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 4756.33 JPY | 3/13/20 | 14,063 | 66,888,269 | 2,862 | |||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 4816.24 JPY | 9/11/20 | 11,381 | 54,813,627 | 4,401 | |||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 4894.87 JPY | 12/11/20 | 11,358 | 55,595,933 | 4,386 | |||||||||||||||||||
Taiwan Mobile Co., Ltd. | Credit Suisse First Boston | Call | 40.00 USD | 1/17/20 | 8,941 | 357,640 | 24,485 | |||||||||||||||||||
Tokyo Stock Exchange Price Index | Bank of America | Call | 191.28 JPY | 12/13/19 | 269,219 | 51,496,210 | 112 | |||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 191.28 JPY | 12/13/19 | 509,036 | 97,368,406 | 212 | |||||||||||||||||||
Tokyo Stock Exchange Price Index | BNP Paribas | Call | 194.04 JPY | 3/13/20 | 363,317 | 70,498,031 | 526 | |||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 192.04 JPY | 4/10/20 | 323,621 | 62,148,177 | 560 | |||||||||||||||||||
Total SA | UBS Warburg | Call | 70.00 USD | 9/20/19 | 24,693 | 1,728,510 | 355 | |||||||||||||||||||
|
| |||||||||||||||||||||||||
Total (Cost $1,965,663) |
| $ | 1,621,656 | |||||||||||||||||||||||
|
|
See accompanying notes to the consolidated financial statements.
15
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
At June 30, 2019, the Fund’s over-the-counter options written were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(b) | Fair Value | |||||||||||||||||||
Agilent Technologies, Inc. | Nomura | Call | 81.00 USD | 1/17/20 | 5,449 | $ | 441,369 | $ | (14,805 | ) | ||||||||||||||||
Alibaba Group Holding, Ltd. | Citigroup | Call | 195.00 USD | 11/22/19 | 2,785 | 543,075 | (14,870 | ) | ||||||||||||||||||
Alibaba Group Holding, Ltd. | Bank of America | Call | 202.50 USD | 1/17/20 | 2,397 | 485,393 | (13,860 | ) | ||||||||||||||||||
Anadarko Petroleum Corp. | Credit Suisse First Boston | Call | 76.00 USD | 1/17/20 | 7,067 | 537,092 | (2,638 | ) | ||||||||||||||||||
Apple, Inc. | Morgan Stanley | Call | 215.00 USD | 9/20/19 | 2,143 | 460,745 | (7,726 | ) | ||||||||||||||||||
Apple, Inc. | Morgan Stanley | Call | 200.00 USD | 12/20/19 | 5,096 | 1,019,200 | (66,509 | ) | ||||||||||||||||||
Comcast Corp. | Citigroup | Call | 37.50 USD | 1/17/20 | 12,216 | 458,100 | (70,918 | ) | ||||||||||||||||||
Emerson Electric Co. | Bank of America | Call | 75.00 USD | 12/20/19 | 12,814 | 961,050 | (12,107 | ) | ||||||||||||||||||
EURO STOXX 70 Index | UBS Warburg | Call | 135.00 EUR | 6/18/21 | 6,330 | 854,550 | (2,825 | ) | ||||||||||||||||||
Facebook, Inc. | UBS Warburg | Call | 225.00 USD | 12/20/19 | 6,440 | 1,449,000 | (38,166 | ) | ||||||||||||||||||
FedEx Corp. | Citigroup | Call | 195.00 USD | 10/18/19 | 2,567 | 500,565 | (3,869 | ) | ||||||||||||||||||
FedEx Corp. | Credit Suisse First Boston | Call | 190.00 USD | 1/17/20 | 5,587 | 1,061,530 | (27,560 | ) | ||||||||||||||||||
J.P. Morgan Chase & Co. | Citigroup | Call | 125.50 USD | 1/17/20 | 4,968 | 623,484 | (7,493 | ) | ||||||||||||||||||
Lowe’s Cos., Inc. | Nomura | Call | 115.00 USD | 10/18/19 | 4,304 | 494,960 | (5,256 | ) | ||||||||||||||||||
Lowe’s Cos., Inc. | Nomura | Call | 115.00 USD | 1/17/20 | 4,470 | 514,050 | (12,027 | ) | ||||||||||||||||||
Marathon Petroleum Corp. | Morgan Stanley | Call | 65.00 USD | 12/20/19 | 11,372 | 739,180 | (20,466 | ) | ||||||||||||||||||
Marathon Petroleum Corp. | Citigroup | Call | 73.00 USD | 1/17/20 | 15,702 | 1,146,246 | (14,746 | ) | ||||||||||||||||||
Qualcomm, Inc. | Morgan Stanley | Call | 85.00 USD | 10/18/19 | 6,695 | 569,075 | (13,633 | ) | ||||||||||||||||||
Qualcomm, Inc. | Citigroup | Call | 86.00 USD | 1/17/20 | 7,025 | 604,150 | (22,593 | ) | ||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 5679.90 JPY | 3/13/20 | 14,063 | 79,876,434 | (197 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | Bank of America | Call | 221.29 JPY | 12/13/19 | 269,219 | 59,575,473 | (14 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 221.29 JPY | 12/13/19 | 509,036 | 112,644,576 | (26 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | BNP Paribas | Call | 237.47 JPY | 3/13/20 | 363,317 | 86,276,888 | (24 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 233.87 JPY | 4/10/20 | 323,621 | 75,685,243 | (34 | ) | ||||||||||||||||||
Agilent Technologies, Inc. | Nomura | Put | 61.00 USD | 1/17/20 | 4,744 | 289,384 | (5,851 | ) | ||||||||||||||||||
Alibaba Group Holding, Ltd. | Citigroup | Put | 140.00 USD | 11/22/19 | 1,810 | 253,400 | (5,964 | ) | ||||||||||||||||||
Alibaba Group Holding, Ltd. | Bank of America | Put | 135.00 USD | 1/17/20 | 1,598 | 215,730 | (5,915 | ) | ||||||||||||||||||
Alphabet, Inc. | JPMorgan Chase | Put | 860.00 USD | 1/17/20 | 669 | 575,340 | (8,238 | ) | ||||||||||||||||||
BP plc | Nomura | Put | 36.00 USD | 1/17/20 | 33,538 | 1,207,368 | (27,856 | ) | ||||||||||||||||||
CVS Health Corp. | JPMorgan Chase | Put | 56.00 USD | 1/17/20 | 4,950 | 277,200 | (26,743 | ) | ||||||||||||||||||
Emerson Electric Co. | Bank of America | Put | 55.00 USD | 12/20/19 | 6,408 | 352,440 | (6,396 | ) | ||||||||||||||||||
EURO STOXX 50 Index | UBS Warburg | Put | 106.38 EUR | 6/18/21 | 4,268 | 454,030 | (147,978 | ) | ||||||||||||||||||
EURO STOXX Bank Index | Barclays Bank | Put | 110.23 EUR | 3/19/21 | 4,201 | 463,076 | (145,328 | ) | ||||||||||||||||||
FedEx Corp. | Citigroup | Put | 140.00 USD | 10/18/19 | 1,283 | 179,620 | (3,359 | ) | ||||||||||||||||||
FedEx Corp. | Credit Suisse First Boston | Put | 130.00 USD | 1/17/20 | 3,156 | 410,280 | (10,328 | ) | ||||||||||||||||||
Johnson & Johnson | Bank of America | Put | 109.00 USD | 1/17/20 | 5,018 | 546,962 | (6,079 | ) | ||||||||||||||||||
Kroger Co. (The) | Nomura | Put | 21.00 USD | 1/17/20 | 6,401 | 134,421 | (10,458 | ) | ||||||||||||||||||
Lowe’s Cos., Inc. | Nomura | Put | 82.50 USD | 10/18/19 | 3,188 | 263,010 | (2,981 | ) | ||||||||||||||||||
Lowe’s Cos., Inc. | Nomura | Put | 80.00 USD | 1/17/20 | 3,193 | 255,440 | (5,542 | ) | ||||||||||||||||||
Marathon Petroleum Corp. | Morgan Stanley | Put | 46.00 USD | 12/20/19 | 8,099 | 372,554 | (15,299 | ) | ||||||||||||||||||
Marathon Petroleum Corp. | Citigroup | Put | 49.00 USD | 1/17/20 | 15,702 | 769,398 | (46,926 | ) | ||||||||||||||||||
Qualcomm, Inc. | Citigroup | Put | 57.00 USD | 1/17/20 | 3,513 | 200,241 | (4,628 | ) | ||||||||||||||||||
S&P 500 Index | Nomura | Put | 2725.00 USD | 8/30/19 | 290 | 790,250 | (5,544 | ) | ||||||||||||||||||
S&P 500 Index | Societe Generale | Put | 2645.00 USD | 9/20/19 | 389 | 1,028,905 | (7,297 | ) | ||||||||||||||||||
Schlumberger, Ltd. | Credit Suisse First Boston | Put | 33.00 USD | 1/17/20 | 9,370 | 309,210 | (13,004 | ) | ||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Put | 3832.77 JPY | 3/13/20 | 14,063 | 53,900,245 | (41,084 | ) | ||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Put | 3820.96 JPY | 9/11/20 | 7,587 | 28,989,624 | (29,902 | ) | ||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Put | 3786.60 JPY | 12/11/20 | 7,573 | 28,675,922 | (33,412 | ) | ||||||||||||||||||
Taiwan Mobile Co., Ltd. | Credit Suisse First Boston | Put | 35.50 USD | 1/17/20 | 4,471 | 158,721 | (7,044 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | Bank of America | Put | 156.59 JPY | 12/13/19 | 269,219 | 42,157,003 | (52,562 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Put | 156.59 JPY | 12/13/19 | 509,036 | 79,709,947 | (99,373 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | BNP Paribas | Put | 155.80 JPY | 3/13/20 | 363,317 | 56,604,789 | (73,765 | ) | ||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Put | 157.82 JPY | 4/10/20 | 323,621 | 51,073,866 | (77,623 | ) | ||||||||||||||||||
|
| |||||||||||||||||||||||||
Total (Premiums $1,032,871) |
| $ | (1,298,841 | ) | ||||||||||||||||||||||
|
|
See accompanying notes to the consolidated financial statements.
16
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
At June 30, 2019, the Fund’s exchange traded options written were as follows:
Description | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(b) | Fair Value | ||||||||||||||||||
SPDR Gold Shares(c) | Put | 118.00 USD | 9/20/19 | 112 | $ | 13,216 | $ | (784 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Total (Premiums $10,389) |
| $ | (784 | ) | ||||||||||||||||||||
|
|
At June 30, 2019, the Fund’s over-the-counter currency options purchased were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Notional Amount | Fair Value | ||||||||||||||||
Australian Dollar Call Currency Option (AUD/USD) | Morgan Stanley | Call | 0.71 AUD | 7/11/19 | 55,360 | $ | 10,042 | |||||||||||||||
British Pound Call Currency Option (GBP/USD) | UBS Warburg | Call | 1.34 GBP | 10/08/19 | 63,230 | 16,828 | ||||||||||||||||
European Dollar Call Currency Option (EUR/USD) | Bank of America | Call | 1.14 EUR | 7/12/19 | 77,490 | 46,283 | ||||||||||||||||
Japanese Yen Call Currency Option (JPY/USD) | BNP Paribas | Call | 108.50 USD | 7/11/19 | 38,750 | 9,034 | ||||||||||||||||
|
| |||||||||||||||||||||
Total (Cost $208,190) |
| $ | 82,187 | |||||||||||||||||||
|
|
At June 30, 2019, the Fund’s over-the-counter currency options written were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Notional Amount | Fair Value | ||||||||||||||||
United States Dollar Call Currency Option (USD/ZAR) | Bank of America | Call | 15.25 USD | 9/25/19 | (11,470 | ) | $ | (11,438 | ) | |||||||||||||
United States Dollar Put Currency Option (USD/GBP) | UBS Warburg | Put | 1.25 GBP | 10/08/19 | (63,230 | ) | (68,753 | ) | ||||||||||||||
|
| |||||||||||||||||||||
Total (Premiums $96,287) |
| $ | (80,191 | ) | ||||||||||||||||||
|
|
At June 30, 2019, the Fund’s open over-the-counter interest rate swaptions purchased were as follows:(a)
Paid by the Fund | Received by the Fund | Expiration Date | Counterparty | Notional Amount (Local) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Rate | Frequency | Rate | Frequency | |||||||||||||||||||||||||||
3-Month U.S. Dollar LIBOR | Quarterly | 2.15% | Semi- annually | 9/20/19 | Nomura | 1,964 | USD | $ | 85,872 | $ | (1,439 | ) | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||
Total (Cost $87,311) | $ | 85,872 | $ | (1,439 | ) | |||||||||||||||||||||||||
|
|
|
|
At June 30, 2019, the Fund’s open over-the-counter interest rate swaptions written were as follows:(a)
Paid by the Fund | Received by the Fund | Expiration Date | Counterparty | Notional Amount (Local) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||||
Rate | Frequency | Rate | Frequency | |||||||||||||||||||||||||||||||
1.55% | Semi-annually | 3-Month U.S. Dollar LIBOR | Quarterly | 7/25/19 | Goldman Sachs | (491) | USD | $ | (5,435 | ) | $ | 4,615 | ||||||||||||||||||||||
1.90% | Semi-annually | 3-Month U.S. Dollar LIBOR | Quarterly | 9/20/19 | Nomura | (1,964) | USD | (30,653 | ) | (4,056 | ) | |||||||||||||||||||||||
1.55% | Semi-annually | 3-Month U.S. Dollar LIBOR | Quarterly | 9/25/19 | Goldman Sachs | (491) | USD | (18,871 | ) | 5,519 | ||||||||||||||||||||||||
1.55% | Semi-annually | 3-Month U.S. Dollar LIBOR | Quarterly | 12/27/19 | Goldman Sachs | (328) | USD | (20,893 | ) | 3,637 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||
Total (Premiums $85,567) | $ | (75,852 | ) | $ | 9,715 | |||||||||||||||||||||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
17
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
At June 30, 2019, the Fund’s open interest rate cap contracts purchased were as follows:
Description | Exercise Rate | Counterparty | Expiration Date | Notional Amount | Upfront Premiums Paid/ (Received) | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
2Yr-10Yr Constant Maturity Swap Capital | 0.50 | % | Goldman Sachs | 2/27/20 | $ | 30,932,000 | $ | 40,212 | $ | 50,098 | $ | 9,886 | ||||||||||||||||
2Yr-10Yr Constant Maturity Swap Capital | 0.50 | % | Goldman Sachs | 8/27/20 | $ | 31,341,000 | 79,919 | 89,831 | 9,912 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 120,131 | $ | 139,929 | $ | 19,798 | |||||||||||||||||||||||
|
|
|
|
|
|
Forward Currency Contracts(a)
At June 30, 2019, the Fund’s open forward currency contracts were as follows:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Net Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Japanese Yen | 108,100,000 | U.S. Dollar | 976,190 | JPMorgan Chase | 7/1/19 | $ | 26,593 | |||||||||||||
South African Rand | 8,337,060 | U.S. Dollar | 581,000 | Bank of America | 7/25/19 | 9,368 | ||||||||||||||
U.S. Dollar | 614,967 | Australian Dollar | 873,000 | Bank of America | 7/25/19 | 1,654 | ||||||||||||||
Japanese Yen | 205,940,000 | U.S. Dollar | 1,855,167 | Goldman Sachs | 7/25/19 | 59,074 | ||||||||||||||
Japanese Yen | 671,000 | U.S. Dollar | 6,044 | Goldman Sachs | 7/25/19 | 193 | ||||||||||||||
Japanese Yen | 202,806,000 | U.S. Dollar | 1,826,145 | Goldman Sachs | 7/25/19 | 58,966 | ||||||||||||||
European Euro | 806,000 | U.S. Dollar | 910,369 | JPMorgan Chase | 7/25/19 | 7,843 | ||||||||||||||
Norwegian Krone | 5,981,000 | U.S. Dollar | 693,641 | UBS Warburg | 8/1/19 | 8,573 | ||||||||||||||
Japanese Yen | 311,921,000 | U.S. Dollar | 2,868,785 | BNP Paribas | 8/16/19 | 35,313 | ||||||||||||||
European Euro | 1,677,000 | U.S. Dollar | 1,897,623 | Bank of America | 9/12/19 | 20,203 | ||||||||||||||
European Euro | 1,693,147 | U.S. Dollar | 1,911,094 | Citigroup | 9/13/19 | 25,339 | ||||||||||||||
South African Rand | 15,773,000 | U.S. Dollar | 1,051,043 | Citigroup | 9/19/19 | 57,922 | ||||||||||||||
South African Rand | 315,000 | U.S. Dollar | 21,005 | JPMorgan Chase | 9/19/19 | 1,142 | ||||||||||||||
European Euro | 14,000 | U.S. Dollar | 15,965 | Goldman Sachs | 9/20/19 | 55 | ||||||||||||||
European Euro | 1,673,000 | U.S. Dollar | 1,907,848 | Goldman Sachs | 9/20/19 | 6,518 | ||||||||||||||
|
| |||||||||||||||||||
$ | 318,756 | |||||||||||||||||||
|
| |||||||||||||||||||
U.S. Dollar | 2,850,231 | Japanese Yen | 315,150,000 | Morgan Stanley | 7/1/19 | $ | (73,239 | ) | ||||||||||||
Japanese Yen | 207,050,000 | U.S. Dollar | 1,925,097 | Morgan Stanley | 7/1/19 | (4,411 | ) | |||||||||||||
British Pound | 1,255,000 | U.S. Dollar | 1,652,775 | JPMorgan Chase | 7/19/19 | (57,740 | ) | |||||||||||||
British Pound | 1,418,000 | U.S. Dollar | 1,840,023 | Citigroup | 8/16/19 | (35,473 | ) | |||||||||||||
British Pound | 753,000 | U.S. Dollar | 962,357 | Bank of America | 8/23/19 | (3,797 | ) | |||||||||||||
British Pound | 4,000 | U.S. Dollar | 5,112 | UBS Warburg | 8/23/19 | (20 | ) | |||||||||||||
U.S. Dollar | 953,666 | Indian Rupee | 67,294,000 | Citigroup | 8/30/19 | (13,811 | ) | |||||||||||||
U.S. Dollar | 3,916,827 | European Euro | 3,428,053 | JPMorgan Chase | 9/13/19 | (3,798 | ) | |||||||||||||
U.S. Dollar | 2,844,348 | European Euro | 2,508,000 | Bank of America | 9/19/19 | (25,276 | ) | |||||||||||||
|
| |||||||||||||||||||
$ | (217,565 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Total Net Forward Currency Contracts | $ | 101,191 | ||||||||||||||||||
|
|
Swap Agreements(a)
At June 30, 2019, the Fund’s open centrally cleared credit default swap agreements (sell protection) were as follows:
Description | Payment Frequency | Implied Credit Spread at June 30, 2019(d) | Expiration Date | Notional Amount(e) | Fixed Rate | Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||
CDX North America High Yield Index Swap Agreement with Series 32 | Quarterly | 0.54% | 6/20/24 | $ | 914,938 | 5.00 | % | $ | 69,471 | $ | 59,361 | $ | 10,110 |
See accompanying notes to the consolidated financial statements.
18
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
At June 30, 2019, the Fund’s open over-the-counter total return swap agreements were as follows:
Pay/Receive | Financing Rate | Description | Expiration Date | Counterparty | Notional Amount (Local) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Pay | 0.00 | % | S&P 500 Index Dividends December Futures | 12/18/20 | Goldman Sachs | 83,956 USD | $ | 19,469 | ||||||||||||||
Pay | 0.00 | % | S&P 500 Index Dividends December Futures | 12/17/21 | BNP Paribas SA | 109,238 USD | 26,325 | |||||||||||||||
|
| |||||||||||||||||||||
$ | 45,794 | |||||||||||||||||||||
|
|
† | Represents less than 0.05% |
(a) | These securities are held by the AZL BlackRock Global Allocation Fund (the “VIP Subsidiary”). |
(b) | Notional amount is expressed as the number of contracts multiplied by the strike price of the underlying asset. |
(c) | All or a portion of these securities are held by the AZL Cayman Global Allocation Fund I, Ltd. (the “Subsidiary”). |
(d) | Implied credit spread, represented in absolute terms, utilized in determining the market value of the credit default swap agreements as of period end will serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a referenced entity reflects the cost of buying/selling protection and may include upfront or daily payments required to be made to enter into the agreement. Generally, wider credit spreads represent a perceived deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the swap agreement. |
(e) | The notional amount represents the maximum potential amount the Fund could be required to make as a seller of credit protection if a credit event occurs, as defined under the terms of the swap agreement. |
Amounts | shown as “—” are either $0 or rounds to less than $1. |
Balances Reported in the Consolidated Statement of Assets and Liabilities for Options Written, Forward Currency Contracts and Swap Agreements
Premiums Paid | Premiums Received | Unrealized Appreciation | Unrealized Depreciation | Value | ||||||||||||||||
Written options and swaptions | $ | — | $ | 1,225,114 | $ | 304,493 | $ | (535,047 | ) | $ | (1,455,668 | ) | ||||||||
Forward currency contracts | — | — | 318,756 | (217,565 | ) | 101,191 | ||||||||||||||
Centrally cleared swap agreements(a) | 59,361 | — | 10,110 | — | 69,471 | |||||||||||||||
Over-the-counter swap agreements | — | — | 45,794 | — | 45,794 |
(a) | Includes cumulative unrealized appreciation (depreciation) on these swap agreements as reported in the Consolidated Schedule of Portfolio Investments. Only current day’s variation margin for centrally cleared swap agreements is reported within the Consolidated Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts. |
Amounts shown as “—” are either $0 or rounds to less than $1.
See accompanying notes to the consolidated financial statements.
19
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Statement of Assets and Liabilities
June 30, 2019
Assets: | |||||
Investments in non-affiliates, at cost | $ | 360,167,759 | |||
Investments in affiliates, at cost | 309,833,068 | ||||
|
| ||||
Investments in non-affiliates, at value* | $ | 391,379,814 | |||
Investments in affiliates, at value | 348,105,455 | ||||
Segregated cash for collateral on futures contracts | 38,683,896 | ||||
Segregated cash for collateral on swap agreements | 657,430 | ||||
Deposits with brokers for securities sold short | 550,768 | ||||
Interest and dividends receivable | 1,120,801 | ||||
Foreign currency, at value (cost $108,348) | 109,513 | ||||
Unrealized appreciation on forward currency contracts | 318,756 | ||||
Unrealized appreciation on swap agreements | 45,794 | ||||
Receivable for investments sold | 4,001,408 | ||||
Receivable for variation margin on swap agreements | 1,908 | ||||
Reclaims receivable | 389,220 | ||||
Prepaid expenses | 2,952 | ||||
|
| ||||
Total Assets | 785,367,715 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 463,337 | ||||
Cash received as collateral on open option contracts | 40,000 | ||||
Cash received as collateral on swap agreements | 540,000 | ||||
Written options (Proceeds received $1,225,114) | 1,455,668 | ||||
Unrealized depreciation on forward currency contracts | 217,565 | ||||
Payable for investments purchased | 1,059,220 | ||||
Payable for collateral received on loaned securities | 5,624,955 | ||||
Payable for capital shares redeemed | 723,471 | ||||
Securities sold short (cost $309,988) | 239,491 | ||||
Payable for variation margin on futures contracts | 78,707 | ||||
Payable for variation margin on contracts for differences | 22,095 | ||||
Interest payable on securities sold short | 4,638 | ||||
Accrued foreign taxes | 63,957 | ||||
Manager fees payable | 299,912 | ||||
Administration fees payable | 8,938 | ||||
Distribution fees payable | 78,970 | ||||
Custodian fees payable | 23,015 | ||||
Administrative and compliance services fees payable | 8,735 | ||||
Transfer agent fees payable | 1,647 | ||||
Trustee fees payable | 1,302 | ||||
Other accrued liabilities | 93,253 | ||||
|
| ||||
Total Liabilities | 11,048,876 | ||||
|
| ||||
Net Assets | $ | 774,318,839 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in Capital | $ | 635,974,939 | |||
Total distributable earnings | 138,343,900 | ||||
|
| ||||
Net Assets | $ | 774,318,839 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 60,432,536 | ||||
Net Asset Value (offering and redemption price per share) | $ | 12.81 | |||
|
|
* | Includes securities on loan of $5,462,274. |
Consolidated Statement of Operations
For the Period Ended June 30, 2019
Investment Income: | |||||
Dividends from non-affiliates | $ | 3,049,034 | |||
Interest | 2,377,062 | ||||
Income from securities lending | 16,840 | ||||
Foreign withholding tax | (193,619 | ) | |||
|
| ||||
Total Investment Income | 5,249,317 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 1,801,252 | ||||
Administration fees | 103,048 | ||||
Distribution fees | 474,292 | ||||
Custodian fees | 99,880 | ||||
Administrative and compliance services fees | 10,177 | ||||
Transfer agent fees | 6,033 | ||||
Trustee fees | 32,101 | ||||
Professional fees | 27,766 | ||||
Shareholder reports | 14,656 | ||||
Dividends on securities sold short | 7,406 | ||||
Other expenses | 40,580 | ||||
|
| ||||
Total expenses | 2,617,191 | ||||
|
| ||||
Net Investment Income/(Loss) | 2,632,126 | ||||
|
| ||||
Net realized and Change in net unrealized gains/(losses) on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 6,539,757 | ||||
Net realized gains/(losses) on affiliated securities | (1,075,475 | ) | |||
Net realized gains/(losses) on futures contracts | 1,080,455 | ||||
Net realized gains/(losses) on contracts for differences | (64,141 | ) | |||
Net realized gains/(losses) on written options contracts | 314,654 | ||||
Net realized gains (losses) on securities held short | 33,880 | ||||
Net realized gains/(losses) on swap agreements | 426,321 | ||||
Net realized gains/(losses) on forward currency contracts | (107,536 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | 31,579,144 | ||||
Change in net unrealized appreciation/depreciation on affiliated securities | 31,369,476 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 1,139,979 | ||||
Change in net unrealized appreciation/depreciation on contracts for differences | (174,341 | ) | |||
Change in net unrealized appreciation/depreciation on written options contracts | 746,109 | ||||
Change in net unrealized appreciation/depreciation on securities held short | (144,524 | ) | |||
Change in net unrealized appreciation/depreciation on swap agreements | (458,974 | ) | |||
Change in net unrealized appreciation/depreciation on forward currency contracts | 122,851 | ||||
Change in accrued foreign tax liability | (26,032 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 71,301,603 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 73,933,729 | |||
|
|
See accompanying notes to the consolidated financial statements.
20
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Statements of Changes in Net Assets
For the Period Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 2,632,126 | $ | 11,465,490 | ||||||
Net realized gains/(losses) on investment transactions | 7,147,915 | 14,116,924 | ||||||||
Change in unrealized appreciation/depreciation on investments | 64,153,688 | (70,873,458 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 73,933,729 | (45,291,044 | ) | |||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Distributions | — | (15,884,365 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | — | (15,884,365 | ) | |||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 1,761,706 | 7,902,972 | ||||||||
Proceeds from dividends reinvested | — | 15,884,365 | ||||||||
Value of shares redeemed | (36,865,766 | ) | (61,287,105 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (35,104,060 | ) | (37,499,768 | ) | ||||||
|
|
|
| |||||||
Change in net assets | 38,829,669 | (98,675,177 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 735,489,170 | 834,164,347 | ||||||||
|
|
|
| |||||||
End of period | $ | 774,318,839 | $ | 735,489,170 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 133,788 | 631,927 | ||||||||
Dividends reinvested | — | 1,320,396 | ||||||||
Shares redeemed | (2,989,595 | ) | (4,935,276 | ) | ||||||
|
|
|
| |||||||
Change in shares | (2,855,807 | ) | (2,982,953 | ) | ||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
21
AZL MVP BlackRock Global Strategy Plus Fund
Consolidated Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, | |||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.62 | $ | 12.59 | $ | 11.33 | $ | 11.69 | $ | 12.22 | $ | 12.02 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.04 | (a) | 0.18 | 0.11 | 0.10 | 0.07 | 0.10 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.40 | (0.90 | ) | 1.20 | 0.27 | (0.26 | ) | 0.16 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from Investment Activities | 1.44 | 0.72 | 1.31 | 0.37 | (0.19 | ) | 0.26 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | (0.18 | ) | (0.18 | ) | (0.05 | ) | (0.31 | ) | (0.14 | ) | — | (b) | ||||||||||||||||||
Net Realized Gains | (0.07 | ) | (0.07 | ) | — | (0.42 | ) | (0.20 | ) | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Dividends | (0.25 | ) | (0.25 | ) | (0.05 | ) | (0.73 | ) | (0.34 | ) | (0.06 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net Asset Value, End of Period | $ | 12.81 | $ | 11.62 | $ | 12.59 | $ | 11.33 | $ | 11.69 | $ | 12.22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Return(c) | 10.24 | %(d) | (5.77 | )% | 11.54 | % | 3.34 | % | (1.57 | )% | 2.18 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 774,319 | $ | 735,489 | $ | 834,164 | $ | 814,519 | $ | 830,363 | $ | 818,435 | ||||||||||||||||||
Net Investment Income/(Loss)(e) | 0.70 | % | 1.43 | % | 0.97 | % | 0.85 | % | 0.67 | % | 0.96 | % | ||||||||||||||||||
Expenses Before Reductions*(e)(f) | 0.69 | % | 0.69 | % | 0.71 | % | 1.11 | % | 1.18 | % | 1.18 | % | ||||||||||||||||||
Expenses Net of Reductions*(e) | 0.69 | % | 0.69 | % | 0.71 | % | 1.11 | % | 1.18 | % | 1.18 | % | ||||||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly*(e) | 0.69 | % | 0.69 | % | 0.71 | % | 1.11 | % | 1.18 | % | 1.18 | %(g) | ||||||||||||||||||
Portfolio Turnover Rate | 25 | %(d) | 39 | % | 40 | % | 91 | % | 64 | % | 61 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Calculated using the average shares method. |
(b) | Represents less than $0.005. |
(c) | The return includes reinvested dividends and fund level expenses, but excludes insurance contract charges. If these charges were included, the returns would have been lower. |
(d) | Not annualized for periods less than one year. |
(e) | Annualized for periods less than one year. |
(f) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(g) | Expenses net of reductions excludes expenses paid indirectly, pursuant to a “commission recapture” program, under which brokers remitted a portion of the brokerage commission which were used to pay certain Fund expenses. The Fund ceased participation in the program in June 2014. |
See accompanying notes to the consolidated financial statements.
22
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP BlackRock Global Strategy Plus Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available. Income received by the Fund from sources within foreign countries may be subject to withholding or similar taxes imposed by such countries. The Fund accrues such taxes, as applicable, based on their current interpretation of tax rules in the foreign markets in which they invest.
Consolidation of Subsidiaries
During the period ended June 30, 2019, the Fund primarily invested in shares of another mutual fund managed by the Manager, the AZL BlackRock Global Allocation Fund (the “VIP Subsidiary”), a wholly-owned and controlled subsidiary of the Fund. As of June 30, 2019, the Fund’s aggregate investment in the VIP Subsidiary was $387,933,846, representing 50.10% of the Fund’s net assets.
The VIP Subsidiary’s primary vehicle for gaining exposure to the commodities markets is through investment in the AZL Cayman Global Allocation Fund I, Ltd. (the “Cayman Subsidiary”), a wholly-owned and controlled subsidiary of the VIP Subsidiary formed in the Cayman Islands, which invests primarily in commodity-related instruments. The Subsidiaries’ financial statements, including its investments, and its operating results have been consolidated with those of the Fund which includes the consolidation of the Cayman Subsidiary. All intercompany transactions have been eliminated.
Real Estate Investment Trusts
The Fund may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. Certain distributions received from REITs during the period, which are known to be a return of capital, are recorded as a reduction to the cost of the individual REIT. A REIT may focus on particular types of projects, such as apartment complexes or shopping centers, or on particular geographic regions, or both. An investment in a REIT may be subject to certain risks similar to those associated with direct ownership of real estate, including: declines in the value of real estate; risks related to general and local economic conditions, overbuilding and competition; increases in property taxes and operating expenses; and variations in rental income.
Foreign Currency Translation and Withholding Taxes
The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the fair value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included in the net realized and unrealized gain or loss on investments and foreign currencies. Income received by the Fund from sources within foreign countries may be subject to withholding and other income or similar taxes imposed by such countries. The Funds accrue such taxes, as applicable, based on their current interpretation of tax rules in the foreign markets in which they invest.
23
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
Floating Rate Loans
The Fund may invest in floating rate loans, which usually take the form of loan participations and assignments. These loans are made by banks and other large financial institutions to various companies and are typically senior in the borrowing companies’ capital structure. Coupon rates are variable and are tied to a benchmark lending rate. Loans involve a risk of loss in case of default or insolvency of the financial intermediaries who are parties to the transactions. A Fund records an investment when the borrower withdraws money and records the interest as earned.
Short Sales
The Fund may engage in short sales against the box (i.e., where the Fund owns or has an unconditional right to acquire at no additional cost a security substantially similar to the security sold short) for hedging purposes to limit exposure to a possible market decline in the value of its portfolio securities. In a short sale, the Fund sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Fund may also incur an interest expense if a security that has been sold short has an interest payment. When the Fund engages in a short sale, the Fund records a liability for securities sold short and records an asset equal to the proceeds received. The amount of the liability is subsequently marked to market to reflect the market value of the securities sold short. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Bank Loans
The Fund may invest in bank loans, which generally have interest rates which are reset periodically by reference to a base lending rate plus a premium. These base rates are primarily the London-Interbank Offered Rate and, secondarily, the prime rate offered by one or more major U.S. banks and the certificate of deposit rate or other base lending rates used by commercial lenders. Bank loans often require prepayments from excess cash flows or allow the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. Therefore, the anticipated or actual maturity may be considerably earlier than the stated maturity shown in the Consolidated Schedule of Portfolio of Investments. All or a portion of any bank loans may be unfunded. The portfolio is obligated to fund any commitments at the borrower’s discretion. Therefore, the portfolio must have funds sufficient to cover its contractual obligation.
Securities Lending
To generate additional income, the Fund may lend up to 331/3% of its assets pursuant to agreements requiring that the loan be continuously secured by any combination of cash, U.S. government or U.S. government agency securities, equal initially to at least 102% of the fair value plus accrued interest on the securities loaned (105% for foreign securities). The borrower of securities is at all times required to post collateral to the Fund in an amount equal to 100% of the fair value of the securities loaned based on the previous day’s fair value of the securities loaned, marked-to-market daily. Any collateral shortfalls are adjusted the next business day. The Fund bears all of the gains and losses on such investments. The Fund receives payments from borrowers equivalent to the dividends and interest that would have been earned on securities lent while simultaneously seeking to earn income on the investment of cash collateral received. In extremely low interest rate environments, the broker rebate fee may exceed the interest earned or the cash collateral which would result in a loss to the Fund. The investment of cash collateral deposited by the borrower is subject to inherent market risks such as interest rate risk, credit risk, liquidity risk, and other risks that are present in the market, and as such, the value of these investments may not be sufficient, when liquidated, to repay the borrower when the loaned security is returned. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will be made only to borrowers, such as broker-dealers, banks or institutional borrowers of securities, deemed by the Manager to be of good standing and credit worthy and when in its judgment, the consideration which can be earned currently from such securities loans justifies the attendant risks. Loans are subject to termination by the Trust or the borrower at any time, and are, therefore, not considered to be illiquid investments. Securities on loan at June 30, 2019 are presented on the Fund’s Consolidated Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested on behalf of the Fund in the BlackRock Liquidity FedFund, Institutional Class, a money market fund which invests in short-term investments that have a remaining maturity of 397 days or less in accordance with Rule 2a-7 under the 1940 Act. The Fund pays the Securities Lending Agent 9% of the gross revenues received from securities lending activities and keeps 91%. The Fund paid securities lending fees of $1,727 during the period ended June 30, 2019. These fees have been netted against “Income from securities lending” on the Consolidated Statement of Operations. The Fund had securities lending transactions of $5,462,274 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of June 30, 2019. At June 30, 2019, there were no master netting provisions in the securities lending agreement.
TBA Purchase and Sale Commitments
The Fund may enter into to-be-announced (TBA) purchase or sale commitments, pursuant to which it agrees to purchase or sell, respectively, mortgage-backed securities for a fixed unit price, with payment and delivery at a scheduled future date beyond the customary settlement period for such securities. With TBA transactions, the particular securities to be delivered are not identified at the trade date; however, delivered securities must meet specified terms, including issuer, rate, and mortgage term, and be within industry-accepted
24
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
“good delivery” standards. The Fund may enter into TBA purchase transactions with the intention of taking possession of the underlying securities, may elect to extend the settlement by “rolling” the transaction, and/or may use TBAs to gain interim exposure to underlying securities. Until settlement, the Fund maintains liquid assets sufficient to settle its TBA commitments.
To mitigate counterparty risk, the Fund has entered into agreements with TBA counterparties that provide for collateral and the right to offset amounts due to or from those counterparties under specified conditions. Subject to minimum transfer amounts, collateral requirements are determined and transfers made based on the net aggregate unrealized gain or loss on all TBA commitments with a particular counterparty. At any time, the Fund’s risk of loss from a particular counterparty related to its TBA commitments is the aggregate unrealized gain on appreciated TBAs in excess of unrealized loss on depreciated TBAs and collateral held, if any, by such counterparty. As of June 30, 2019, no collateral had been posted by the Fund to counterparties for TBAs.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Consolidated Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type.
Forward Currency Contracts
During the period ended June 30, 2019, the Fund entered into forward currency contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies. In addition to the foreign currency risk related to the use of these contracts, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. In the event of default by the counterparty to the transaction, the Fund’s maximum amount of loss, as either the buyer or the seller, is the unrealized appreciation of the contract. The forward currency contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized gains or losses until the contract settlement date. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. For the period ended June 30, 2019, the monthly average notional amount for long contracts was $25.1 million and the monthly average notional amount for short contracts was $14.1 million. Realized gains and losses are reported as “Net realized gains/(losses) on forward currency contracts” on the Consolidated Statement of Operations.
Futures Contracts
During the period ended June 30, 2019, the Fund used futures contracts to gain exposure to, or economically hedge against changes in the value of equity securities. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Consolidated Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for long contracts was $38.6 million and the monthly average notional amount for short contracts was $8.8 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Consolidated Statement of Operations.
Contracts for Difference
The Fund may invest in Contracts for Difference (“CFD”). A CFD is a privately negotiated contract between two parties, buyer and seller, stipulating that the seller will pay to or receive from the buyer the difference between the nominal value of the underlying instrument at the opening of the contract and that instrument’s value at the end of the contract. The underlying instrument may be a single security, stock basket or index. A CFD can be set up to take either a short or long position on the underlying instrument. The buyer and seller are both required to post margin, which is adjusted daily. The buyer will also pay to the seller a financing rate on the notional amount of the capital employed by the seller less the margin deposit. A CFD is usually terminated at the buyer’s initiative. The seller of the CFD will simply match the exposure of the underlying instrument in the open market and the parties will exchange whatever payment is due.
As is the case with owning any financial instrument, there is the risk of loss associated with buying a CFD. For example, if the Fund buys a long CFD and the underlying security is worth less at the end of the contract, the Fund would be required to make a payment to the seller and would suffer a loss. Also, there may be liquidity risk if the underlying instrument is illiquid because the liquidity of a CFD is based on the liquidity of the underlying instrument. CFDs also carry counterparty risk, i.e., the risk that the counterparty to the CFD transaction may be unable or unwilling to make payments or to otherwise honor its financial obligations under the terms of the contract. If the counterparty were to do so, the value of the contract, and of the Fund’s shares, may be reduced. The Fund will not enter into a CFD transaction that is inconsistent with its investment objective, policies and strategies. For the period ended June 30, 2019, the monthly average notional amount on contracts for differences was $1.8 million. Realized gains and losses are reported as “Net realized gains/(losses) on contracts for differences” on the Consolidated Statement of Operations.
Options Contracts
The Fund may purchase or write put and call options on a security or an index of securities. During the period ended June 30, 2019, the Fund purchased and wrote call and put options to increase or decrease its exposure to underlying instruments (including equity risk, interest rate risk and/or foreign currency exchange rate risk) and/or, in the case of options written, to generate gains from options premiums.
25
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
Purchased Options Contracts — The Fund pays a premium which is included in “Investments, at value” on the Consolidated Statement of Assets and Liabilities and marked to market to reflect the current value of the option. Premiums paid for purchasing options that expire are treated as realized losses. When a put option is exercised or closed, premiums paid for purchasing options are offset against proceeds to determine the realized gain/loss on the transaction. The Fund bears the risk of loss of the premium and change in value should the counterparty not perform under the contract.
Written Options Contracts — The Fund receives a premium which is recorded as a liability and is subsequently adjusted to the current value of the options written. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options that are either exercised or closed are offset against the proceeds received or the amount paid on the transaction to determine realized gains or losses. The risk associated with writing an option is that the Fund bears the market risk of an unfavorable change in the price of an underlying asset and is required to buy or sell an underlying asset under the contractual terms of the option at a price different from the current value.
A swaption is an option to enter into a pre-defined swap agreement by some specified date in the future. The writer of the swaption becomes the counterparty to the swap if the buyer exercises their option. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed rate receiver or a fixed rate buyer. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in interest rates.
For the period ended June 30, 2019, the monthly average notional amount for written options contracts was $1.5 million. Realized gains and losses are reported as “Net realized gains/(losses) on written options contracts” on the Consolidated Statement of Operations.
Swap Agreements
The Fund may invest in swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are privately negotiated in the over-the-counter (“OTC”) market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”). The Fund may enter into swap agreements to manage its exposure to market, interest rate, foreign currencies and credit risk. The value of swap agreements are equal to the Fund’s obligations (or rights) under swap agreements, which will generally be equal to the net amounts to be paid or received under the agreements based upon the relative values of the positions held by each party to the agreements. In connection with these arrangements, securities may be identified as collateral in accordance with the terms of the swap agreements to provide assets of value and recourse in the event of default or bankruptcy by the counterparty.
Swaps are marked to market daily using pricing sources approved by the Trustees and the change in value, if any, is recorded as unrealized gain or loss. For OTC swaps, payments received or made at the beginning of the measurement period are recorded as realized gain or loss upon termination or maturity of the OTC swap. A liquidation payment received or made at the termination of the OTC swap is recorded as a realized gain or loss. Net periodic payments received or paid by the Fund are included as part of realized gains (losses). Upon entering a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or assets determined to be liquid (the amount is subject to the clearing organization that clears the trade). Daily changes in valuation of centrally cleared swaps, if any, are reported as “Payable/Receivable for variation margin on centrally cleared swap agreements” on the Consolidated Statement of Operations.
Swap agreements involve, to varying degrees, elements of market risk and exposure to loss. The primary risks associated with the use of swap agreements are imperfect correlation between movements in the notional amount and the price of the underlying instruments and the inability of counterparties or clearing house to perform. The counterparty risk for centrally cleared swap agreements is generally lower than for OTC swap agreements because generally a clearing organization becomes substituted for each counterparty to a centrally cleared swap agreement and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to a clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members will satisfy its obligations to the Fund.
The notional amounts reflect the extent of the total investment exposure the Fund has under the swap agreement. The Fund bears the risk of loss of the amount expected to be received under a swap agreement (i.e., any unrealized appreciation) in the event of the default or bankruptcy of the swap agreement counterparty. The notional amount and related unrealized appreciation (depreciation) of each swap agreement at period end is disclosed in the swap tables in the Consolidated Schedule of Portfolio Investments. The Fund is a party to International Swap Dealers Association, Inc. Master Agreements (“ISDA Master Agreements”) with select counterparties that govern transactions, such as OTC swap contracts, entered into by the Fund, through the VIP Subsidiary or Cayman Subsidiary, and those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding OTC swap transactions under the applicable ISDA Master Agreement.
Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional amount and are subject to interest rate risk exposure. Interest rate swaps do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that a Fund is contractually obligated to make. If the other party to an interest rate swap defaults, a Fund’s risk of loss consists of the net amount of interest payments that the Fund is contractually entitled to receive. As of June 30, 2019, the Fund entered into centrally cleared interest rate swap agreements to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). The monthly average gross notional amount for interest rate swaps was $23.3 million for the period ended June 30, 2019.
Currency swaps are interest rate swaps in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Currency swaps may also involve an exchange of notional amounts at the start, during and/or at expiration of the contract, either at the current spot rate or another specified rate. The Fund did not have any currency swap activity for the period ended June 30, 2019.
Total return swap agreements involve commitments to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. The monthly average gross notional amount for total return swaps was $0.1 million for the period ended June 30, 2019.
Credit default swap agreements may have as reference obligations one or more securities that are not currently held by the Fund. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront, periodic, or daily stream of payments over the term of the contract provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. A Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover nothing if the swap is held through its
26
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, a Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap.
Credit default swap agreements involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A Fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront, periodic, or daily payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. The Fund’s obligations under a credit default swap agreement will be accrued daily (offset against any amounts owed to the Fund). In connection with credit default swaps in which a Fund is the buyer, the Fund will segregate or “earmark” cash or assets determined to be liquid, or enter into certain offsetting positions, with a value at least equal to the Fund’s exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a marked-to-market basis. In connection with credit default swaps in which a Fund is the seller, the Fund will segregate or “earmark” cash or assets determined to be liquid, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the Fund). Such segregation or “earmarking” will ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and will limit any potential leveraging of the Fund’s portfolio. Such segregation or “earmarking” will not limit the Fund’s exposure to loss.
As of June 30, 2019, the Fund entered into centrally cleared credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk). The monthly average gross notional amount for credit default swaps was $0.7 million for the period ended June 30, 2019.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Consolidated Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivatives | Liability Derivatives | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value | Statement of Assets and Liabilities Location | Total Fair Value | ||||||||
Equity Risk |
| |||||||||||
Futures Contracts | Receivable for variation margin on futures contracts* | $ | 410,674 | Payable for variation margin on futures contracts * | $ | 30,615 | ||||||
Contracts for differences | Receivable for variation margin on contracts for differences* | 97,279 | Payable for variation margin on contracts for differences* | 97,104 | ||||||||
Options Contracts | Written options contracts | 1,299,625 | ||||||||||
Total Return Swap Agreements | Unrealized appreciation on swap agreements | 45,794 | Unrealized depreciation on swap agreements | — | ||||||||
Credit Risk | ||||||||||||
Centrally Cleared Credit Default Swap Agreements | Unrealized appreciation on swap agreements* | 10,110 | Unrealized depreciation on swap agreements* | — | ||||||||
Interest Rate Risk | ||||||||||||
Futures Contracts | Receivable for variation margin on futures contracts* | 407,192 | Payable for variation margin on futures contracts* | — | ||||||||
Swaptions Contracts | Written options contracts | 75,852 | ||||||||||
Foreign Exchange Risk | ||||||||||||
Forward Currency Contracts | Unrealized appreciation on forward currency contracts | 318,756 | Unrealized depreciation on forward currency contracts | 217,565 | ||||||||
Option Contracts | Written options contracts | 80,191 |
* | Includes cumulative appreciation/depreciation of futures contracts and contracts for differences and cumulative unrealized gain (loss) on these swap agreements as reported in the Consolidated Schedule of Portfolio Investments. Only current day’s variation margin for both futures contracts and these centrally cleared swap agreements are reported within the Consolidated Statement of Assets and Liabilities. |
27
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
The following is a summary of the effect of derivative instruments on the Consolidated Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Net Realized Gains/(Losses) on Derivatives Recognized as a Result from Operations | |||||||||||||||||||||||||
Net Realized Gains/(Losses) on Futures Contracts | Net Realized Gains/(Losses) on Contracts for Differences | Net Realized Gains/(Losses) on Swap Agreements | Net Realized Gains/(Losses) on Written Options Contracts | Net Realized Gains/(Losses) on Forward Currency Contracts | |||||||||||||||||||||
Equity Risk | $ | 317,548 | $ | (64,141 | ) | $ | 58,092 | $ | 430,947 | $ | — | ||||||||||||||
Credit Risk | — | — | 2,855 | — | — | ||||||||||||||||||||
Interest Rate Risk | 762,907 | — | 365,374 | (188,339 | ) | — | |||||||||||||||||||
Foreign Exchange Rate Risk | — | — | — | 72,046 | (107,536 | ) | |||||||||||||||||||
Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result from Operations | |||||||||||||||||||||||||
Change in Net Contracts | Change in Net Unrealized Appreciation/ Depreciation on Contracts for Differences | Change in Net Unrealized Appreciation/ Depreciation on Swap Agreements | Change in Net Unrealized Appreciation/ Depreciation on Written Options Contracts | Change in Net Unrealized Appreciation/ Depreciation on Forward Currency Contracts | |||||||||||||||||||||
Equity Risk | $ | 1,117,658 | $ | (174,341 | ) | $ | (113,718 | ) | $ | 634,082 | $ | — | |||||||||||||
Credit Risk | — | — | 27,918 | — | — | ||||||||||||||||||||
Interest Rate Risk | 22,321 | — | (373,174 | ) | 95,931 | — | |||||||||||||||||||
Foreign Exchange Rate Risk | — | — | — | 16,096 | 122,851 |
The Fund is generally subject to master netting agreements that allow for amounts owed between the Fund and the counterparty to be netted. The party that has the larger payable pays the excess of the larger amount over the smaller amount to the other party. The master netting agreements do not apply to amounts owed to/from different counterparties. The amounts shown in the Consolidated Statement of Assets and Liabilities do not take into consideration the effects of legally enforceable master netting agreements. The table below presents the gross and net amounts of these assets and liabilities with any offsets to reflect the Fund’s ability to transact net amounts in accordance with the master netting agreements at June 30, 2019. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to master netting arrangements in the Consolidated Statement of Assets and Liabilities. This table also summarizes the fair values of derivative instruments on the Fund’s Consolidated Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019.
As of June 30, 2019, the Fund’s derivative assets and liabilities by type were as follows:
Assets | Liabilities | |||||||||
Derivative Financial Instruments: | ||||||||||
Futures contracts | $ | — | $ | 78,707 | ||||||
Contracts for differences | — | 22,095 | ||||||||
Written options contracts | — | 1,455,668 | ||||||||
Forward currency contracts | 318,756 | 217,565 | ||||||||
Swap agreements | 47,702 | — | ||||||||
|
|
|
| |||||||
Total derivative assets and liabilities in the Consolidated Statement of Assets and Liabilities | 366,458 | 1,774,035 | ||||||||
Derivatives not subject to a master netting agreement or similar agreement (“MNA”) | (1,908 | ) | (101,586 | ) | ||||||
|
|
|
| |||||||
Total assets and liabilities subject to a MNA | $ | 364,550 | $ | 1,672,449 | ||||||
|
|
|
|
The following table presents the Fund’s derivative assets by counterparty net of amounts available for offset under a MNA and net of the related collateral received by the Fund as of June 30, 2019:
Counterparty | Derivative Assets Subject to a MNA by Counterparty | Derivatives Available for Offset | Non-cash Collateral Received* | Cash Collateral Received* | Net Amount of Derivative Assets | ||||||||||||||||||||
Bank of America | $ | 31,225 | $ | (31,225 | ) | $ | — | $ | — | $ | — | ||||||||||||||
BNP Paribas SA | 61,638 | (61,638 | ) | — | — | — | |||||||||||||||||||
Citigroup | 83,261 | (83,261 | ) | — | — | — | |||||||||||||||||||
Goldman Sachs | 144,275 | (45,199 | ) | — | — | 99,076 | |||||||||||||||||||
JPMorgan Chase | 35,578 | (35,578 | ) | — | — | — | |||||||||||||||||||
UBS Warburg | 8,573 | (8,573 | ) | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 364,550 | $ | (265,474 | ) | $ | — | $ | — | $ | 99,076 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
28
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
The following table presents the Fund’s derivative liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral pledged by the Fund as of June 30, 2019:
Counterparty | Derivative Liabilities Subject to a MNA by Counterparty | Derivatives Available for Offset | Non-cash Collateral Pledged* | Cash Collateral Pledged* | Net Amount of Derivative Liabilities | ||||||||||||||||||||
Bank of America | $ | 137,444 | $ | (31,225 | ) | $ | — | $ | (50,000 | ) | $ | 56,219 | |||||||||||||
Barclays Bank | 145,328 | — | — | — | 145,328 | ||||||||||||||||||||
BNP Paribas SA | 73,789 | (61,638 | ) | — | — | 12,151 | |||||||||||||||||||
Citigroup | 244,650 | (83,261 | ) | — | — | 161,389 | |||||||||||||||||||
Credit Suisse First Boston | 60,574 | — | — | — | 60,574 | ||||||||||||||||||||
Goldman Sachs | 45,199 | (45,199 | ) | — | — | — | |||||||||||||||||||
JPMorgan Chase | 96,519 | (35,578 | ) | — | — | 60,941 | |||||||||||||||||||
Morgan Stanley | 482,934 | — | — | (40,000 | ) | 442,934 | |||||||||||||||||||
Nomura | 120,973 | — | — | (120,973 | ) | — | |||||||||||||||||||
Societe Generale | 7,297 | — | — | (7,297 | ) | — | |||||||||||||||||||
UBS Warburg | 257,742 | (8,573 | ) | — | — | 249,169 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 1,672,449 | $ | (265,474 | ) | $ | — | $ | (218,270 | ) | $ | 1,188,705 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
* | The actual collateral received or pledged may be in excess of the amounts shown in the table. The table only reflects collateral amounts up to the amount of the financial instrument disclosed on the Consolidated Statement of Assets and Liabilities. |
Recent Accounting Pronouncements
In March 2017, FASB issued Accounting Standards Update No. 2017-08 (“ASU 2017-08”), “Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU 2017-08 changed the amortization period for non-contingently callable debt securities held at a premium. Specifically, it required the premium to be amortized to the earliest call date. ASU 2017-08 does not require an accounting change for securities held at a discount, which continues to accrete to maturity. The Fund has adopted ASU 2017-08 on a modified retrospective basis as of January 1, 2019. The adoption of ASU 2017-08 did not have a significant impact on the amortized cost of investments as of January 1, 2019, and had no impact on beginning net assets, the current period results from operations, or any prior period information presented in the financial statements.
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has retained an independent money management organization (the “Subadviser”), to make investment decisions on behalf of the Fund. Pursuant to a subadvisory agreement with BlackRock Investment Management, LLC (“BlackRock Investment”), BlackRock Investment provides investment advisory services as the Subadviser for the Fund subject to the general supervision of the Trustees and the Manager. The Manager is entitled to a fee, computed daily and paid monthly, based on the average daily net assets of the Fund. Expenses incurred by the Fund for investment advisory and management services are reflected on the Consolidated Statement of Operations as “Manager fees.” For its services, the Subadviser is entitled to a fee payable by the Manager. The Manager has contractually agreed to waive fees and reimburse the Fund limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2021.
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP BlackRock Global Strategy Plus Fund | 0.10 | % | 0.15 | % | ||||||
AZL BlackRock Global Allocation Fund | 0.75 | % | 1.19 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Consolidated Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the period can be found on the Consolidated Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
29
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized | Change in Net Unrealized | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 210,006,372 | $ | 152,907 | $ | (10,617,534 | ) | $ | (42,584 | ) | $ | 12,207,583 | $ | 211,706,744 | 18,868,694 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL MSCI Global Equity Index Fund | $ | 120,964,934 | $ | 266,024 | $ | (5,112,199 | ) | $ | 1,118,059 | $ | 19,161,893 | $ | 136,398,711 | 11,638,115 | $ | — | $ | — | |||||||||||||||||||||||||||
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$ | 330,971,306 | $ | 418,931 | $ | (15,729,733 | ) | $ | 1,075,475 | $ | 31,369,476 | $ | 348,105,455 | 30,506,809 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Consolidated Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a Trust-wide asset-based fee, which is based on the following schedule: 0.05% of daily average net assets on the first $4 billion, 0.04% of daily average net assets on the next $2 billion, 0.02% of daily average net assets on the next $2 billion and 0.01% of daily average net assets over $8 billion. The overall Trust-wide fees are accrued daily and paid monthly and are subject to a minimum annual fee. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Consolidated Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual 12b-1 fee in the maximum amount of 0.25% of the average daily net assets attributable of Class 2 shares, plus a Trust-wide annual fee of $42,500 paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $5,222 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). Equity securities are valued at the last quoted sale price or, if there is no sale, the last quoted bid price is used for long securities and the last quoted ask price is used for securities sold short. Securities listed on NASDAQ Stock Market, Inc. (“NASDAQ”) are valued at the official closing price as reported by NASDAQ. In each of these situations, valuations are typically categorized as a Level 1 in the fair value hierarchy. Investments in open-end investment companies are valued at their respective net asset value as reported by such companies and are typically categorized as Level 1 in the fair value hierarchy.
30
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
Debt and other fixed income securities are generally valued at an evaluated bid price provided by an independent pricing source approved by the Trustees. To value debt securities, pricing services may use various pricing techniques which take into account appropriate factors such as market activity, yield, quality, coupon rate, maturity, type of issue, trading characteristics, call features, credit ratings and other data, as well as broker quotes. Short-term securities of sufficient credit quality with sixty days or less remaining until maturity may be valued at amortized cost, which approximates fair value. In each of these situations, valuations are typically categorized as Level 2 in the fair value hierarchy.
Options are generally valued at the average of the closing bid and ask quotations on the principal exchange on which the option is traded, which are then typically categorized as Level 1 in the fair value hierarchy. The Fund generally values index options at the average of the closing bid and ask quotations on the principal exchange on which the option is traded and are typically categorized as Level 1 in the fair value hierarchy. For options where market quotations are not readily available, fair value procedures as described below may be applied.
Forward currency contracts are generally valued at the forward foreign currency exchange rate as of the close of the NYSE and are typically categorized as Level 2 in the fair value hierarchy.
Non exchange-traded derivatives, such as swaps and certain options, are generally valued by approved independent pricing services utilizing techniques which take into account factors such as yield, quality, maturity, type of issue, trading characteristics, call features, credit ratings and other data, as well as broker quotes and are typically categorized as Level 2 in the fair value hierarchy.
Other assets and securities for which market quotations are not readily available, or are deemed unreliable are valued at fair value as determined in good faith by the Trustees or persons acting on the behalf of the Trustees. Fair value pricing may be used for significant events such as securities whose trading has been suspended, whose price has become stale or for which there is no currently available price at the close of the NYSE. Depending on the source and relative significance of valuation inputs, these instruments may be classified as Level 2 or Level 3 in the fair value hierarchy. The Fund utilizes a pricing service to assist in determining the fair value of securities when certain significant events occur that may affect the value of foreign securities.
In accordance with procedures adopted by the Trustees, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Fund’s net asset value is calculated. Management identifies possible fluctuation in international securities by monitoring the increase or decrease in the value of a designated benchmark index. In the event of an increase or decrease greater than predetermined levels, the Fund may use a systematic valuation model provided by an independent third party to fair value its international equity securities which are then typically categorized as Level 2 in the fair value hierarchy.
Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Other^ | Total | ||||||||||||||||||||
Common Stocks+ | $ | 134,181,897 | $ | 88,470,029 | $ | 301,025 | $ | — | $ | 222,952,951 | |||||||||||||||
Preferred Stocks+ | 947,849 | 1,207,153 | 1,124,629 | — | 3,279,631 | ||||||||||||||||||||
Convertible Preferred Stocks+ | — | 158,247 | — | — | 158,247 | ||||||||||||||||||||
Private Placements+ | — | — | 457,418 | — | 457,418 | ||||||||||||||||||||
Convertible Bonds+ | — | 184,816 | — | — | 184,816 | ||||||||||||||||||||
Bank Loans+ | — | 579,225 | — | — | 579,225 | ||||||||||||||||||||
Corporate Bonds+ | — | 20,242,241 | — | — | 20,242,241 | ||||||||||||||||||||
Foreign Bonds+ | — | 30,642,250 | — | — | 30,642,250 | ||||||||||||||||||||
Yankee Dollars+ | — | 4,661,329 | 772,033 | — | 5,433,362 | ||||||||||||||||||||
U.S. Treasury Obligations+ | — | 98,111,067 | — | — | 98,111,067 | ||||||||||||||||||||
Purchased Options | — | 1,621,656 | — | — | 1,621,656 | ||||||||||||||||||||
Purchased Currency Options | — | 82,187 | — | — | 82,187 | ||||||||||||||||||||
Purchased Swaptions | — | 85,872 | — | — | 85,872 | ||||||||||||||||||||
Purchased Interest Rate Cap | — | 139,929 | — | — | 139,929 | ||||||||||||||||||||
Securities Held as Collateral for Securities on Loan | — | — | — | 5,624,955 | 5,624,955 | ||||||||||||||||||||
Affiliated Investment Companies | 348,105,455 | — | — | — | 348,105,455 | ||||||||||||||||||||
Money Markets | 1,784,007 | — | — | — | 1,784,007 | ||||||||||||||||||||
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Total Investment Securities | 485,019,208 | 246,186,001 | 2,655,105 | 5,624,955 | 739,485,269 | ||||||||||||||||||||
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Securities Sold Short | — | (239,491 | ) | — | — | (239,491 | ) | ||||||||||||||||||
Other Financial Instruments: * | |||||||||||||||||||||||||
Written Options | (784 | ) | (1,298,841 | ) | — | — | (1,299,625 | ) | |||||||||||||||||
Written Currency Options | — | (80,191 | ) | — | — | (80,191 | ) | ||||||||||||||||||
Written Swaptions | — | (75,852 | ) | — | — | (75,852 | ) | ||||||||||||||||||
Futures Contracts | 787,251 | — | — | — | 787,251 | ||||||||||||||||||||
Contracts for Differences | — | 175 | — | — | 175 | ||||||||||||||||||||
Centrally Cleared Credit Default Swap | — | 10,110 | — | — | 10,110 | ||||||||||||||||||||
Forward Currency Contracts | — | 101,191 | — | — | 101,191 | ||||||||||||||||||||
Over-the-Counter Total Return Swaps | — | 45,794 | — | — | 45,794 | ||||||||||||||||||||
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Total Investments | $ | 485,805,675 | $ | 244,648,896 | $ | 2,655,105 | $ | 5,624,955 | $ | 738,734,631 | |||||||||||||||
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+ | For detailed industry descriptions, see the accompanying Consolidated Schedule of Portfolio Investments. |
^ | Investments categorized as Securities Held as Collateral for Securities on Loan in the Consolidated Schedule of Portfolio Investments, are measured at fair value using the NAV per share practical expedient. These investments are not classified within the fair value hierarchy, and are reflected as “Other” in the above table. Although there can be no assurance, in general, the fair value of investments measured using the NAV per share practical expedient represents the amount the owner of such investments might reasonably expect to receive in an orderly sale. |
31
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
* | Other Financial Instruments would include any derivative instruments, such as futures contracts, contracts for differences, written options, forward currency contracts and swaps. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment except futures contracts, contracts for differences and centrally cleared interest rate swaps which are presented at variation margin. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP BlackRock Global Strategy Plus Fund | $ | 264,224,247 | $ | 309,203,174 |
For the period ended June 30, 2019, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL MVP BlackRock Global Strategy Plus Fund | $ | 175,109,704 | $ | 173,802,648 |
6. Restricted Securities
A restricted security is a security which has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (the “1933 Act”) or pursuant to the resale limitations provided by Rule 144A under the 1933 Act, or an exemption from the registration requirements of the 1933 Act. Whether a restricted security is illiquid is determined pursuant to guidelines established by the Trustees. Not all restricted securities are considered illiquid. The illiquid restricted securities held as of June 30, 2019 are identified below.
Security | Acquisition Date(a) | Acquisition Cost | Shares or Principal Amount | Fair Value | Percentage of Net Assets | ||||||||||||||||||||
Fieldwood Energy LLC | 4/25/18 | $ | 247,017 | $ | 941 | $ | 28,230 | 0.00 | % | ||||||||||||||||
Fieldwood Energy LLC | 3/13/18 | 81,305 | 3,485 | 104,550 | 0.01 | % | |||||||||||||||||||
Grand Rounds, Inc., Series C | 3/31/15 | 399,608 | 143,925 | 368,448 | 0.05 | % | |||||||||||||||||||
Inversiones Alsacia SA, 8.00%, 12/31/18 | 12/22/14 | 420,057 | 517,099 | 12,927 | 0.00 | % | |||||||||||||||||||
Jawbone | 1/24/17 | — | 23,389 | — | 0.00 | % | |||||||||||||||||||
Lookout, Inc. | 3/4/15 | 63,364 | 5,547 | 3,550 | 0.00 | % | |||||||||||||||||||
Lookout, Inc. Preferred Shares, Series F | 9/19/14 | 730,222 | 63,925 | 453,868 | 0.06 | % | |||||||||||||||||||
Palantir Technologies, Inc., Series I | 3/27/14 | 712,042 | 116,157 | 756,181 | 0.10 | % | |||||||||||||||||||
Quintis Pty, Ltd. | 10/25/18 | 316,328 | 386,370 | 301,025 | 0.04 | % | |||||||||||||||||||
Quintis Pty, Ltd., 7.50%, 10/1/26, Callable 10/1/21 @ 105.63 | 10/25/18 | 42,158 | 41,361 | 41,361 | 0.01 | % | |||||||||||||||||||
Quintis Pty, Ltd., 10/1/28, Callable 8/5/19 @ 90.00 | 10/25/18 | 753,320 | 730,672 | 730,672 | 0.10 | % | |||||||||||||||||||
REI Agro, Ltd., Registered Shares, 5.50%, 11/13/14 | 2/7/12 | 300,000 | 400,000 | — | 0.00 | % | |||||||||||||||||||
Uber Technologies 6mo Lock Up | 3/21/14 | 1,063,120 | 68,532 | 3,062,852 | 0.39 | % |
(a) | Acquisition date represents the initial purchase date of the security. |
7. Investment Risks
Bank Loan Risk: There are a number of risks associated with an investment in bank loans including credit risk, interest rate risk, liquidity risk and prepayment risk. Lack of an active trading market, restrictions on resale, irregular trading activity, wide bid/ask spreads and extended trade settlement periods may impair the Fund’s ability to sell bank loans within its desired time frame or at an acceptable price and its ability to accurately value existing and prospective investments. Extended trade settlement periods may result in cash not being immediately available to the Fund. As a result, the Fund may have to sell other investments or engage in borrowing transactions to raise cash to meet its obligations. The risk of holding bank loans is also directly tied to the risk of insolvency or bankruptcy of the issuing banks. These risks could cause the Fund to lose income or principal on a particular investment, which in turn could affect the Fund’s returns. The value of bank loans can be affected by and sensitive to changes in government regulation and to economic downturns in the United States and abroad. Bank loans generally are floating rate loans, which are subject to interest rate risk as the interest paid on the floating rate loans adjusts periodically based on changes in widely accepted reference rates.
Commodities-Related Investment Risk: Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or sectors affecting a particular industry or commodity, such as drought, floods, weather, embargoes, tariffs and international economic, political and regulatory developments. The U.S. Commodities Futures Trading Commission has proposed changes to certain of its rules governing investment in commodities by mutual funds, such as the Fund. In the event these changes are adopted, or if there are changes in the tax treatment of the Fund’s direct and indirect investments in commodities, the Fund may be unable to obtain exposure to commodity markets, or may be limited in the extent to which or manner in which it can obtain such exposure.
Derivatives Risk: The Fund may invest in derivatives as a principal strategy. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives
32
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The counterparty to a derivatives contract could default. As required by applicable law, a Fund that invests in derivatives segregates cash or liquid securities, or both, to the extent that its obligations under the instrument are not covered through ownership of the underlying security, financial instrument, or currency.
Emerging Markets Risk: Emerging markets may have less developed trading markets and exchanges which may make it more difficult to sell securities at an acceptable price and their prices may be more volatile than securities of companies in more developed markets. Settlements of trades may be subject to greater delays so that the Fund may not receive the proceeds of a sale of a security on a timely basis. Emerging countries may also have less developed legal and accounting systems and investments may be subject to greater risks of government restrictions, nationalization, or confiscation.
Foreign Securities and Currencies Risk: Investments in securities of foreign issuers carry certain risks not ordinarily associated with investments in securities of domestic issuers. Such risks include future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is the possibility of expropriation of assets, confiscatory taxation, political or social instability or diplomatic developments which could adversely affect investments in those securities.
Security Quality Risk (also known as “High Yield Risk”): The Fund may invest in high yield, high risk debt securities and unrated securities of similar credit quality (commonly known as “junk bonds”) and may be subject to greater levels of credit and liquidity risk than funds that do not invest in such securities. These securities are considered predominately speculative with respect to the issuer’s continuing ability to make principal and interest payments. An economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce the Fund’s ability to sell these securities (liquidity risk). If the issuer of a security is in default with respect to interest or principal payments, the Fund may lose the value of its entire investment.
Short Sale Risk: The Fund may engage in short sales, which are transactions in which the Fund sells securities borrowed from others with the expectation that the price of the security will fall before the Fund must purchase the security to return it to the lender. The Fund may make short sales of securities, either as a hedge against potential declines in value of a portfolio security or to realize appreciation when a security that the Fund does not own declines in value. Because making short sales in securities that it does not own exposes the Fund to the risks associated with those securities, such short sales involve speculative exposure risk. The Fund will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the security sold short. The Fund will realize a gain if the security declines in price between those dates. As a result, if the Fund makes short sales in securities that increase in value, it will likely underperform similar funds that do not make short sales in securities they do not own. There can be no assurance that the Fund will be able to close out a short sale position at any particular time or at an acceptable price. Although the Fund’s gain is limited to the amount at which it sold a security short, its potential loss is limited only by the maximum attainable price of the security, less the price at which the security was sold. The Fund may also pay transaction costs and borrowing fees in connection with short sales.
8. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $670,776,270. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 75,810,962 | ||
Unrealized (depreciation) | (10,570,116 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 65,240,846 | ||
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As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP BlackRock Global Strategy Plus Fund | $ | 15,782,716 | $ | 101,649 | $ | 15,884,365 |
(a) | Total distributions paid may differ from the Consolidated Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
At December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP BlackRock Global Strategy Plus Fund | $ | 19,848,933 | $ | 41,301,818 | $ | — | $ | 3,425,896 | $ | 64,576,647 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on foreign currency gains or losses, wash sales, mark-to-market of passive foreign investment companies and straddles. |
33
AZL MVP BlackRock Global Strategy Plus Fund
Notes to the Consolidated Financial Statements
June 30, 2019 (Unaudited)
9. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2(a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund. As of June 30, 2019, the Fund had a controlling interest (in excess of 50%) in the AZL MSCI Global Equity Index Fund, which is affiliated with the Manager .
10. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
34
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
35
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP DFA Multi-Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP DFA Multi-Strategy Fund
(Unaudited)
As a shareholder of the AZL MVP DFA Multi-Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP DFA Multi-Strategy Fund | $ | 1,000.00 | $ | 1,098.60 | $ | 0.78 | 0.15 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP DFA Multi-Strategy Fund | $ | 1,000.00 | $ | 1,024.05 | $ | 0.75 | 0.15 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Domestic Equity Funds | 45.2 | % | |||
Fixed Income Funds | 37.8 | ||||
International Equity Funds | 12.0 | ||||
|
| ||||
Total Investment Securities | 95.0 | ||||
Net other assets (liabilities) | 5.0 | ||||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
1
AZL MVP DFA Multi-Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.0%): | ||||||||
Domestic Equity Funds (45.2%): | ||||||||
2,487,298 | AZL DFA U.S. Core Equity Fund | $ | 33,105,940 | |||||
820,210 | AZL DFA U.S. Small Cap Fund | 9,539,048 | ||||||
|
| |||||||
42,644,988 | ||||||||
|
| |||||||
Fixed Income Funds (37.8%): | ||||||||
3,444,012 | AZL DFA Five-Year Global Fixed Income Fund | 35,611,085 | ||||||
|
| |||||||
International Equity Funds (12.0%): | ||||||||
1,097,892 | AZL DFA International Core Equity Fund | 11,341,223 | ||||||
|
| |||||||
Total Affiliated Investment Companies (Cost $80,742,917) | 89,597,296 | |||||||
|
| |||||||
Total Investment Securities (Cost $80,742,917) — 95.0%(a) | 89,597,296 | |||||||
Net other assets (liabilities) — 5.0% | 4,677,697 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 94,274,993 | ||||||
|
|
Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $4,699,575 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 19 | $ | 2,796,990 | $ | 56,216 | ||||||||||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 14 | 1,791,563 | 38,483 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
$ | 94,699 | |||||||||||||||||||||||
|
|
See accompanying notes to the financial statements.
2
AZL MVP DFA Multi-Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 80,742,917 | |||
|
| ||||
Investments in affiliates, at value | $ | 89,597,296 | |||
Segregated cash for collateral for futures contracts | 4,699,575 | ||||
Interest and dividends receivable | 7,067 | ||||
Receivable for affiliated investments sold | 265,709 | ||||
Prepaid expenses | 655 | ||||
|
| ||||
Total Assets | 94,570,302 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 265,709 | ||||
Payable for capital shares redeemed | 11,954 | ||||
Manager fees payable | 8,171 | ||||
Administration fees payable | 5,024 | ||||
Custodian fees payable | 440 | ||||
Administrative and compliance services fees payable | 201 | ||||
Transfer agent fees payable | 912 | ||||
Trustee fees payable | 141 | ||||
Other accrued liabilities | 2,757 | ||||
|
| ||||
Total Liabilities | 295,309 | ||||
|
| ||||
Net Assets | $ | 94,274,993 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 83,512,795 | |||
Total distributable earnings | 10,762,198 | ||||
|
| ||||
Net Assets | $ | 94,274,993 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 8,062,087 | ||||
Net Asset Value (offering and redemption price per share) | $ | 11.69 | |||
|
|
For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Interest | $ | 47,446 | |||
Dividends non-affiliates | 318 | ||||
|
| ||||
Total Investment Income | 47,764 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 92,140 | ||||
Administration fees | 28,576 | ||||
Custodian fees | 1,222 | ||||
Administrative and compliance services fees | 787 | ||||
Transfer agent fees | 2,589 | ||||
Trustee fees | 2,466 | ||||
Professional fees | 2,073 | ||||
Shareholder reports | 1,266 | ||||
Other expenses | 660 | ||||
|
| ||||
Total expenses before reductions | 131,779 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (46,069 | ) | |||
Less expense contractually waived/reimbursed by the Manager | (15,427 | ) | |||
|
| ||||
Net expenses | 70,283 | ||||
|
| ||||
Net Investment Income/(Loss) | (22,519 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | (58,723 | ) | |||
Net realized gains/(losses) on futures contracts | (203,406 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 8,626,798 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 184,263 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 8,548,932 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 8,526,413 | |||
|
|
See accompanying notes to the financial statements.
3
AZL MVP DFA Multi-Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (22,519 | ) | $ | 789,640 | |||||
Net realized gains/(losses) on investments | (262,129 | ) | 1,592,880 | |||||||
Change in unrealized appreciation/depreciation on investments | 8,811,061 | (8,305,060 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 8,526,413 | (5,922,540 | ) | |||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Distributions | — | (1,931,934 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | — | (1,931,934 | ) | |||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 4,231,062 | 25,192,387 | ||||||||
Proceeds from dividends reinvested | — | 1,931,934 | ||||||||
Value of shares redeemed | (5,083,065 | ) | (10,425,833 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (852,003 | ) | 16,698,488 | |||||||
|
|
|
| |||||||
Change in net assets | 7,674,410 | 8,844,014 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 86,600,583 | 77,756,569 | ||||||||
|
|
|
| |||||||
End of period | $ | 94,274,993 | $ | 86,600,583 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 374,380 | 2,154,661 | ||||||||
Dividends reinvested | — | 169,766 | ||||||||
Shares redeemed | (443,848 | ) | (897,570 | ) | ||||||
|
|
|
| |||||||
Change in shares | (69,468 | ) | 1,426,857 | |||||||
|
|
|
|
See accompanying notes to the financial statements.
4
AZL MVP DFA Multi-Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | April 27, 2015 to December 31, | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.65 | $ | 11.60 | $ | 10.36 | $ | 9.50 | $ | 10.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | — | (b),(c) | 0.08 | 0.09 | 0.05 | (0.01 | ) | ||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.04 | (0.79 | ) | 1.21 | 0.81 | (0.49 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | 1.04 | (0.71 | ) | 1.30 | 0.86 | (0.50 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | — | (0.08 | ) | (0.05 | ) | — | — | ||||||||||||||||||
Net Realized Gains | — | (0.16 | ) | (0.01 | ) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | — | (0.24 | ) | (0.06 | ) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 11.69 | $ | 10.65 | $ | 11.60 | $ | 10.36 | $ | 9.50 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(d) | 9.86 | %(e) | (6.22 | )% | 12.55 | % | 9.05 | % | (5.00 | )%(e) | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 94,275 | $ | 86,601 | $ | 77,757 | $ | 53,326 | $ | 26,087 | |||||||||||||||
Net Investment Income/(Loss)(f) | (0.05 | )% | 0.91 | % | 0.96 | % | 0.71 | % | (0.14 | )% | |||||||||||||||
Expenses Before Reductions*(f)(g) | 0.29 | % | 0.29 | % | 0.30 | % | 0.36 | % | 0.52 | % | |||||||||||||||
Expenses Net of Reductions*(f) | 0.15 | % | 0.15 | % | 0.15 | % | 0.15 | % | 0.14 | % | |||||||||||||||
Portfolio Turnover Rate | 3 | %(e) | 16 | % | 15 | % | 15 | % | 2 | %(e) |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | For the period April 27, 2015 (commencement of share class) to December 31, 2015. |
(b) | Represents less than $0.005. |
(c) | Calculated using the average shares method. |
(d) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(e) | Not annualized for periods less than one year. |
(f) | Annualized for periods less than one year. |
(g) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL MVP DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP DFA Multi-Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts was $4.5 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
| |||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 56,216 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 38,483 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on | |||||||
Equity Risk |
| |||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | (279,596 | ) | $ | 183,443 | ||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 76,190 | 820 |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP DFA Multi-Strategy Fund | 0.20 | % | 0.15 | % |
* | The Manager voluntarily reduced the management fee to 0.10% on all assets. The manager reserves the right to increase the management fee to the amount shown in the table at any time. |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.”
7
AZL MVP DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
At June 30, 2019, the contractual reimbursements subject to repayment by the Fund in subsequent years were as follows:
Expires 12/31/2019 | Expires 12/31/2020 | Expires 12/31/2021 | Expires 12/31/2022 | Total | |||||||||||||||||||||
AZL MVP DFA Multi-Strategy Fund | $ | 31,356 | $ | 30,855 | $ | 32,488 | $ | 15,427 | $ | 110,126 |
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 34,590,662 | $ | 1,398,075 | $ | (1,347,818 | ) | $ | 18,185 | $ | 951,981 | $ | 35,611,085 | 3,444,012 | $ | — | $ | — | |||||||||||||||||||||||||||
AZL DFA International Core Equity Fund | 10,265,090 | 389,262 | (578,871 | ) | (72,384 | ) | 1,338,126 | 11,341,223 | 1,097,892 | — | — | ||||||||||||||||||||||||||||||||||
AZL DFA U.S. Core Equity Fund | 29,427,162 | 747,124 | (2,233,976 | ) | 20,357 | 5,145,273 | 33,105,940 | 2,487,298 | — | — | |||||||||||||||||||||||||||||||||||
AZL DFA U.S. Small Cap Fund | 8,139,889 | 459,080 | (226,458 | ) | (24,881 | ) | 1,191,418 | 9,539,048 | 820,210 | — | — | ||||||||||||||||||||||||||||||||||
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$ | 82,422,803 | $ | 2,993,541 | $ | (4,387,123 | ) | $ | (58,723 | ) | $ | 8,626,798 | $ | 89,597,296 | 7,849,412 | $ | — | $ | — | |||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $636 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
8
AZL MVP DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 89,597,296 | $ | — | $ | 89,597,296 | |||||||||
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Total Investment Securities | 89,597,296 | — | 89,597,296 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 94,699 | — | 94,699 | ||||||||||||
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Total Investments | $ | 89,691,995 | $ | — | $ | 89,691,995 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP DFA Multi-Strategy Fund | $ | 2,993,541 | $ | 4,387,123 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $81,080,197. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 8,517,099 | ||
Unrealized (depreciation) | — | |||
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Net unrealized appreciation/(depreciation) | $ | 8,517,099 | ||
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As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP DFA Multi-Strategy Fund | $ | 817,569 | $ | 1,114,365 | $ | 1,931,934 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
9
AZL MVP DFA Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ | Total Earnings/ | |||||||||||||||||||||
AZL MVP DFA Multi-Strategy Fund | $ | 874,736 | $ | 1,396,981 | $ | — | $ | (35,932 | ) | $ | 2,235,785 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership of 90% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP FIAM Multi-Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP FIAM Multi-Strategy Fund
(Unaudited)
As a shareholder of the AZL MVP FIAM Multi-Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP FIAM Multi-Strategy Fund | $ | 1,000.00 | $ | 1,098.50 | $ | 0.73 | 0.14 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP FIAM Multi-Strategy Fund | $ | 1,000.00 | $ | 1,024.10 | $ | 0.70 | 0.14 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Balanced Funds | 95.1 | % | |||
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Total Investment Securities | 95.1 | ||||
Net other assets (liabilities) | 4.9 | ||||
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Net Assets | 100.0 | % | |||
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1
AZL MVP FIAM Multi-Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Company (95.1%): | ||||||||
Balanced Funds (95.1%): | ||||||||
18,385,846 | AZL Fidelity Institutional Asset ManagementMulti-Strategy Fund | $ | 249,495,931 | |||||
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Total Affiliated Investment Company (Cost $231,149,893) | 249,495,931 | |||||||
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Total Investment Securities (Cost $231,149,893) — 95.1%(a) | 249,495,931 | |||||||
Net other assets (liabilities) — 4.9% | 12,991,857 | |||||||
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| |||||||
Net Assets — 100.0% | $ | 262,487,788 | ||||||
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Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $13,020,998 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 35 | $ | 5,152,350 | $ | 98,028 | ||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 61 | 7,806,097 | 154,629 | ||||||||||||
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$ | 252,657 | |||||||||||||||
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See accompanying notes to the financial statements.
2
AZL MVP FIAM Multi-Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 231,149,893 | |||
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Investments in affiliates, at value | $ | 249,495,931 | |||
Segregated cash for collateral for futures contracts | 13,020,998 | ||||
Interest and dividends receivable | 18,688 | ||||
Receivable for capital shares issued | 2,064 | ||||
Receivable for affiliated investments sold | 38,075 | ||||
Receivable for variation margin on futures contracts | 218 | ||||
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Total Assets | 262,575,974 | ||||
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Liabilities: | |||||
Cash overdraft | 38,075 | ||||
Payable for capital shares redeemed | 15,343 | ||||
Manager fees payable | 19,435 | ||||
Administration fees payable | 4,465 | ||||
Custodian fees payable | 516 | ||||
Administrative and compliance services fees payable | 490 | ||||
Transfer agent fees payable | 819 | ||||
Trustee fees payable | 307 | ||||
Other accrued liabilities | 8,736 | ||||
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Total Liabilities | 88,186 | ||||
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Net Assets | $ | 262,487,788 | |||
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Net Assets Consist of: | |||||
Paid in capital | $ | 250,846,484 | |||
Total distributable earnings | 11,641,304 | ||||
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Net Assets | $ | 262,487,788 | |||
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Shares of beneficial interest (unlimited number of shares authorized, no par value) | 21,393,811 | ||||
Net Asset Value (offering and redemption price per share) | $ | 12.27 | |||
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Statement of Operations
For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Interest | $ | 116,962 | |||
Other income | 217 | ||||
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Total Investment Income | 117,179 | ||||
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Expenses: | |||||
Manager fees | 127,165 | ||||
Administration fees | 29,580 | ||||
Custodian fees | 1,692 | ||||
Administrative and compliance services fees | 2,199 | ||||
Transfer agent fees | 2,687 | ||||
Trustee fees | 6,938 | ||||
Professional fees | 5,799 | ||||
Shareholder reports | 4,560 | ||||
Other expenses | 441 | ||||
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Total expenses | 181,061 | ||||
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Net Investment Income/(Loss) | (63,882 | ) | |||
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Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | (389,312 | ) | |||
Net realized gains/(losses) on futures contracts | (1,299,133 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated transactions | 25,076,886 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 636,695 | ||||
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Net realized and Change in net unrealized gains/losses on investments | 24,025,136 | ||||
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Change in Net Assets Resulting From Operations | $ | 23,961,254 | |||
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See accompanying notes to the financial statements.
3
AZL MVP FIAM Multi-Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (63,882 | ) | $ | 5,579,060 | |||||
Net realized gains/(losses) on investments | (1,688,445 | ) | 8,804,731 | |||||||
Change in unrealized appreciation/depreciation on investments | 25,713,581 | (19,711,412 | ) | |||||||
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Change in net assets resulting from operations | 23,961,254 | (5,327,621 | ) | |||||||
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Distributions to Shareholders: | ||||||||||
Distributions | — | (8,614,102 | ) | |||||||
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Change in net assets resulting from distributions to shareholders | — | (8,614,102 | ) | |||||||
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Capital Transactions: | ||||||||||
Proceeds from shares issued | 3,087,949 | 5,246,612 | ||||||||
Proceeds from dividends reinvested | — | 8,614,102 | ||||||||
Value of shares redeemed | (10,497,815 | ) | (28,825,642 | ) | ||||||
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Change in net assets resulting from capital transactions | (7,409,866 | ) | (14,964,928 | ) | ||||||
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Change in net assets | 16,551,388 | (28,906,651 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 245,936,400 | 274,843,051 | ||||||||
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End of period | $ | 262,487,788 | $ | 245,936,400 | ||||||
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Share Transactions: | ||||||||||
Shares issued | 260,299 | 448,193 | ||||||||
Dividends reinvested | — | 749,704 | ||||||||
Shares redeemed | (888,256 | ) | (2,447,578 | ) | ||||||
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Change in shares | (627,957 | ) | (1,249,681 | ) | ||||||
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See accompanying notes to the financial statements.
4
AZL MVP FIAM Multi-Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.17 | $ | 11.81 | $ | 10.79 | $ | 11.33 | $ | 12.49 | $ | 12.39 | ||||||||||||||||||
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Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | — | (a),(b) | 0.28 | — | (a) | 0.15 | 0.43 | 0.12 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.10 | (0.52 | ) | 1.17 | (0.07 | ) | (1.20 | ) | 0.17 | |||||||||||||||||||||
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Total from Investment Activities | 1.10 | (0.24 | ) | 1.17 | 0.08 | (0.77 | ) | 0.29 | ||||||||||||||||||||||
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Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.40 | ) | (0.15 | ) | (0.45 | ) | (0.18 | ) | (0.11 | ) | |||||||||||||||||||
Net Realized Gains | — | — | — | (0.17 | ) | (0.21 | ) | (0.08 | ) | |||||||||||||||||||||
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Total Dividends | — | (0.40 | ) | (0.15 | ) | (0.62 | ) | (0.39 | ) | (0.19 | ) | |||||||||||||||||||
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Net Asset Value, End of Period | $ | 12.27 | $ | 11.17 | $ | 11.81 | $ | 10.79 | $ | 11.33 | $ | 12.49 | ||||||||||||||||||
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Total Return(c) | 9.85 | %(d) | (2.14 | )% | 10.93 | % | 0.82 | % | (6.21 | )% | 2.33 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 262,488 | $ | 245,936 | $ | 274,843 | $ | 287,156 | $ | 307,668 | $ | 297,191 | ||||||||||||||||||
Net Investment Income/(Loss)(e) | (0.05 | )% | 2.12 | % | (0.09 | )% | 1.25 | % | 3.85 | % | 1.42 | % | ||||||||||||||||||
Expenses Before Reductions*(e)(f) | 0.14 | % | 0.14 | % | 0.13 | % | 0.13 | % | 0.15 | % | 0.15 | % | ||||||||||||||||||
Expenses Net of Reductions*(e) | 0.14 | % | 0.14 | % | 0.13 | % | 0.13 | % | 0.15 | % | 0.15 | % | ||||||||||||||||||
Portfolio Turnover Rate | — | (d) | 7 | % | 4 | % | 4 | % | 4 | % | 4 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Represents less than $0.005. |
(b) | Calculated using the average shares method. |
(c) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(d) | Not annualized for periods less than one year. |
(e) | Annualized for periods less than one year. |
(f) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL MVP FIAM Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP FIAM Multi-Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP FIAM Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for long contracts was $10.8 million and the monthly average notional amount for short contracts was $1.9 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
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Equity Contracts | Receivable for variation margin on futures contracts | $ | 98,028 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 154,629 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||||
Equity Risk | ||||||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | (1,607,318 | ) | $ | 647,203 | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 308,185 | (10,508 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP FIAM Multi-Strategy Fund | 0.10 | % | 0.15 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
7
AZL MVP FIAM Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL FIAM Multi-Strategy Fund | $ | 234,683,127 | $ | — | $ | (9,874,770 | ) | $ | (389,312 | ) | $ | 25,076,886 | $ | 249,495,931 | 18,385,846 | $ | — | $ | — | ||||||||||||||||||||||||||
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$ | 234,683,127 | $ | — | $ | (9,874,770 | ) | $ | (389,312 | ) | $ | 25,076,886 | $ | 249,495,931 | 18,385,846 | $ | — | $ | — | |||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $1,752 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
8
AZL MVP FIAM Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 249,495,931 | $ | — | $ | 249,495,931 | |||||||||
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Total Investment Securities | 249,495,931 | — | 249,495,931 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 252,657 | — | 252,657 | ||||||||||||
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Total Investments | $ | 249,748,588 | $ | — | $ | 249,748,588 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP FIAM Multi-Strategy Fund | $ | — | $ | 9,874,770 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $234,128,425. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 18,355,488 | ||
Unrealized (depreciation) | (2,987,982 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 15,367,506 | ||
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As of the end of its tax year ended December 31, 2018, the Fund has capital loss carry forwards (“CLCFs”) as summarized in the table below. CLCFs subject to expiration are applied as short-term capital loss regardless of whether the originating capital loss was short-term or long-term. CLCFs that are not subject to expiration must be utilized before those that are subject to expiration. The Board does not intend to authorize a distribution of any realized gain for the Fund until any applicable CLCF has been offset or expires.
During the year ended June 30, 2019, the Fund utilized $3,914,190 in CLCFs to offset capital gains.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL MVP FIAM Multi-Strategy Fund | $ | 5,880,163 | $ | 6,972,889 | $ | 12,853,052 |
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP FIAM Multi-Strategy Fund | $ | 8,614,102 | $ | — | $ | 8,614,102 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
9
AZL MVP FIAM Multi-Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Earnings/ | |||||||||||||||||||||
AZL MVP FIAM Multi-Strategy Fund | $ | 10,251,932 | $ | — | $ | (12,853,052 | ) | $ | (9,718,830 | ) | $ | (12,319,950 | ) |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP Fusion Dynamic Balanced Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP Fusion Dynamic Balanced Fund
(Unaudited)
As a shareholder of the AZL MVP Fusion Dynamic Balanced Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Fusion Dynamic Balanced Fund | $ | 1,000.00 | $ | 1,101.50 | $ | 1.20 | 0.23 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Fusion Dynamic Balanced Fund | $ | 1,000.00 | $ | 1,023.65 | $ | 1.15 | 0.23 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Fixed Income Funds | 47.6 | % | |||
Domestic Equity Funds | 30.0 | ||||
International Equity Funds | 17.5 | ||||
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Total Investment Securities | 95.1 | ||||
Net other assets (liabilities) | 4.9 | ||||
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Net Assets | 100.0 | % | |||
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1
AZL MVP Fusion Dynamic Balanced Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.1%): | ||||||||
Domestic Equity Funds (30.0%): | ||||||||
2,166,957 | AZL DFA U.S. Core Equity Fund | $ | 28,842,193 | |||||
1,213,505 | AZL DFA U.S. Small Cap Fund | 14,113,057 | ||||||
1,448,473 | AZL Gateway Fund | 19,235,721 | ||||||
2,382,112 | AZL Mid Cap Index Fund, Class 2 | 53,264,032 | ||||||
3,647,468 | AZL Russell 1000 Growth Index Fund, Class 2 | 59,781,993 | ||||||
6,847,681 | AZL Russell 1000 Value Index Fund, Class 2 | 89,088,325 | ||||||
1,694,442 | AZL Small Cap Stock Index Fund, Class 2 | 23,400,238 | ||||||
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287,725,559 | ||||||||
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Fixed Income Funds (47.6%): | ||||||||
6,391,201 | AZL Enhanced Bond Index Fund | 71,709,273 | ||||||
9,085,414 | AZL Fidelity Institutional Asset Management Total Bond Fund, Class 2 | 95,487,699 | ||||||
9,050,972 | AZL MetWest Total Return Bond Fund | 95,578,259 | ||||||
4,438,511 | PIMCO VIT Income Portfolio | 48,024,689 |
Shares | Fair Value | |||||||
Affiliated Investment Companies, continued | ||||||||
Fixed Income Funds, continued | ||||||||
4,694,651 | PIMCO VIT Low Duration Portfolio | $ | 47,932,388 | |||||
8,743,541 | PIMCO VIT Total Return Portfolio | 95,741,770 | ||||||
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International Equity Funds (17.5%): | ||||||||
3,244,845 | AZL DFA International Core Equity Fund | 33,519,250 | ||||||
5,761,391 | AZL International Index Fund, Class 2 | 93,564,998 | ||||||
5,283,535 | AZL MSCI Emerging Markets Equity Index Fund, Class 2 | 40,683,223 | ||||||
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167,767,471 | ||||||||
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Total Affiliated Investment Companies (Cost $846,652,663) | 909,967,108 | |||||||
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Total Investment Securities (Cost $846,652,663) — 95.1%(a) | 909,967,108 | |||||||
Net other assets (liabilities) — 4.9% | 47,302,082 | |||||||
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Net Assets — 100.0% | $ | 957,269,190 | ||||||
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Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $47,688,862 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 161 | $ | 23,700,810 | $ | 473,376 | ||||||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 186 | 23,802,197 | 503,773 | ||||||||||||||||
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| |||||||||||||||||||
$ | 977,149 | |||||||||||||||||||
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See accompanying notes to the financial statements.
2
AZL MVP Fusion Dynamic Balanced Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 846,652,663 | |||
|
| ||||
Investments in affiliates, at value | $ | 909,967,108 | |||
Segregated cash for collateral for futures contracts | 47,688,862 | ||||
Interest and dividends receivable | 604,895 | ||||
Receivable for affiliated investments sold | 784,164 | ||||
Receivable for variation margin on futures contracts | 218 | ||||
Prepaid expenses | 7,073 | ||||
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| ||||
Total Assets | 959,052,320 | ||||
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| ||||
Liabilities: | |||||
Cash overdraft | 784,164 | ||||
Payable for affiliated investments purchased | 533,610 | ||||
Payable for capital shares redeemed | 269,333 | ||||
Manager fees payable | 155,683 | ||||
Administration fees payable | 5,539 | ||||
Custodian fees payable | 2,305 | ||||
Administrative and compliance services fees payable | 2,082 | ||||
Transfer agent fees payable | 1,065 | ||||
Trustee fees payable | 1,280 | ||||
Other accrued liabilities | 28,069 | ||||
|
| ||||
Total Liabilities | 1,783,130 | ||||
|
| ||||
Net Assets | $ | 957,269,190 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 827,344,148 | |||
Total distributable earnings | 129,925,042 | ||||
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Net Assets | $ | 957,269,190 | |||
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| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 83,207,038 | ||||
Net Asset Value (offering and redemption price per share) | $ | 11.50 | |||
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For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Dividends from affiliates | $ | 3,483,516 | |||
Interest | 489,832 | ||||
Dividends from non-affiliates | 273 | ||||
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| ||||
Total Investment Income | 3,973,621 | ||||
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| ||||
Expenses: | |||||
Manager fees | 942,368 | ||||
Administration fees | 33,729 | ||||
Custodian fees | 6,663 | ||||
Administrative and compliance services fees | 8,522 | ||||
Transfer agent fees | 3,099 | ||||
Trustee fees | 26,953 | ||||
Professional fees | 22,436 | ||||
Shareholder reports | 12,743 | ||||
Other expenses | 8,065 | ||||
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| ||||
Total expenses | 1,064,578 | ||||
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| ||||
Net Investment Income/(Loss) | 2,909,043 | ||||
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| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | (1,938,167 | ) | |||
Net realized gains/(losses) on futures contracts | 3,029,254 | ||||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 86,739,475 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 1,147,185 | ||||
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| ||||
Net realized and Change in net unrealized gains/losses on investments | 88,977,747 | ||||
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| ||||
Change in Net Assets Resulting From Operations | $ | 91,886,790 | |||
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See accompanying notes to the financial statements.
3
AZL MVP Fusion Dynamic Balanced Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 2,909,043 | $ | 17,911,628 | ||||||
Net realized gains/(losses) on investments | 1,091,087 | 46,615,686 | ||||||||
Change in unrealized appreciation/depreciation on investments | 87,886,660 | (117,516,408 | ) | |||||||
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Change in net assets resulting from operations | 91,886,790 | (52,989,094 | ) | |||||||
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Distributions to Shareholders: | ||||||||||
Distributions | — | (72,295,259 | ) | |||||||
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Change in net assets resulting from distributions to shareholders | — | (72,295,259 | ) | |||||||
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Capital Transactions: | ||||||||||
Proceeds from shares issued | 7,508,459 | 4,808,540 | ||||||||
Proceeds from dividends reinvested | — | 72,295,258 | ||||||||
Value of shares redeemed | (61,331,736 | ) | (132,108,153 | ) | ||||||
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| |||||||
Change in net assets resulting from capital transactions | (53,823,277 | ) | (55,004,355 | ) | ||||||
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Change in net assets | 38,063,513 | (180,288,708 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 919,205,677 | 1,099,494,385 | ||||||||
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End of period | $ | 957,269,190 | $ | 919,205,677 | ||||||
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Share Transactions: | ||||||||||
Shares issued | 670,886 | 414,118 | ||||||||
Dividends reinvested | — | 6,650,898 | ||||||||
Shares redeemed | (5,512,107 | ) | (11,356,593 | ) | ||||||
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Change in shares | (4,841,221 | ) | (4,291,577 | ) | ||||||
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See accompanying notes to the financial statements.
4
AZL MVP Fusion Dynamic Balanced Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.44 | $ | 11.91 | $ | 11.88 | $ | 12.15 | $ | 13.03 | $ | 12.62 | ||||||||||||||||||
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Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.03 | (a) | 0.22 | 0.14 | 0.20 | 0.24 | 0.15 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.03 | (0.83 | ) | 1.27 | 0.44 | (0.42 | ) | 0.44 | ||||||||||||||||||||||
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Total from Investment Activities | 1.06 | (0.61 | ) | 1.41 | 0.64 | (0.18 | ) | 0.59 | ||||||||||||||||||||||
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Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.15 | ) | (0.22 | ) | (0.29 | ) | (0.17 | ) | (0.18 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.71 | ) | (1.16 | ) | (0.62 | ) | (0.53 | ) | — | ||||||||||||||||||||
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Total Dividends | — | (0.86 | ) | (1.38 | ) | (0.91 | ) | (0.70 | ) | (0.18 | ) | |||||||||||||||||||
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Net Asset Value, End of Period | $ | 11.50 | $ | 10.44 | $ | 11.91 | $ | 11.88 | $ | 12.15 | $ | 13.03 | ||||||||||||||||||
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Total Return(b) | 10.15 | %(c) | (5.40 | )% | 12.23 | % | 5.40 | % | (1.27 | )% | 4.59 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 957,269 | $ | 919,206 | $ | 1,099,494 | $ | 1,102,124 | $ | 1,171,370 | $ | 1,280,573 | ||||||||||||||||||
Net Investment Income/(Loss)(d) | 0.62 | % | 1.74 | % | 1.00 | % | 1.48 | % | 1.80 | % | 1.13 | % | ||||||||||||||||||
Expenses Before Reductions*(d)(e) | 0.23 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | ||||||||||||||||||
Expenses Net of Reductions*(d) | 0.23 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | ||||||||||||||||||
Portfolio Turnover Rate | 7 | %(c) | 15 | % | 17 | % | 52 | % | 11 | % | 23 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Calculated using the average shares method. |
(b) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(c) | Not annualized for periods less than one year. |
(d) | Annualized for periods less than one year. |
(e) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL MVP Fusion Dynamic Balanced Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP Fusion Dynamic Balanced Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP Fusion Dynamic Balanced Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts was $47.3 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
| |||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 473,376 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 503,773 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk |
| |||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | 1,999,477 | $ | 1,175,460 | |||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 1,029,777 | (28,275 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP Fusion Dynamic Balanced Fund | 0.20 | % | 0.30 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
7
AZL MVP Fusion Dynamic Balanced Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL DFA International Core Equity Fund | $ | 31,074,885 | $ | 116,699 | $ | (1,482,750 | ) | $ | 63,364 | $ | 3,747,052 | $ | 33,519,250 | 3,244,845 | $ | — | $ | — | |||||||||||||||||||||||||||
AZL DFA U.S. Core Equity Fund | 26,082,825 | 79,183 | (1,873,167 | ) | 374,462 | 4,178,890 | 28,842,193 | 2,166,957 | — | — | |||||||||||||||||||||||||||||||||||
AZL DFA U.S. Small Cap Fund | 12,576,387 | 4,491 | (249,165 | ) | 2,776 | 1,778,568 | 14,113,057 | 1,213,505 | — | — | |||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | 24,998,381 | 47,619,668 | (3,812,873 | ) | (18,230 | ) | 2,922,327 | 71,709,273 | 6,391,201 | — | — | ||||||||||||||||||||||||||||||||||
AZL FIAM Total Bond Fund | 94,748,453 | 103,359 | (5,935,945 | ) | 119,330 | 6,452,502 | 95,487,699 | 9,085,414 | — | — | |||||||||||||||||||||||||||||||||||
AZL Gateway Fund | 18,826,965 | — | (694,679 | ) | 22,575 | 1,080,860 | 19,235,721 | 1,448,473 | — | — | |||||||||||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 79,541,619 | 9,519,442 | (6,430,210 | ) | (423,122 | ) | 11,357,269 | 93,564,998 | 5,761,391 | — | — | ||||||||||||||||||||||||||||||||||
AZL MetWest Total Return Bond Fund | 94,819,701 | 359,718 | (5,084,515 | ) | 138,271 | 5,345,084 | 95,578,259 | 9,050,972 | — | — | |||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 47,424,477 | 1,378,512 | (3,920,214 | ) | (425,437 | ) | 8,806,694 | 53,264,032 | 2,382,112 | — | — | ||||||||||||||||||||||||||||||||||
AZL MSCI Emerging Markets Equity Fund, Class 2 | 48,923,903 | 781,228 | (14,223,536 | ) | 19,305 | 5,182,323 | 40,683,223 | 5,283,535 | — | — | |||||||||||||||||||||||||||||||||||
AZL Russell 1000 Growth Index Fund, Class 2 | 55,153,230 | 733,546 | (7,481,507 | ) | 771,268 | 10,605,456 | 59,781,993 | 3,647,468 | — | — | |||||||||||||||||||||||||||||||||||
AZL Russell 1000 Value Index Fund, Class 2 | 81,029,766 | 1,366,555 | (6,152,367 | ) | (727,744 | ) | 13,572,115 | 89,088,325 | 6,847,681 | — | — | ||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 20,551,930 | 418,115 | (356,519 | ) | (5,459 | ) | 2,792,171 | 23,400,238 | 1,694,442 | — | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Income Portfolio | 48,819,022 | 819,098 | (3,653,088 | ) | 72,432 | 1,967,225 | 48,024,689 | 4,438,511 | 819,098 | — | |||||||||||||||||||||||||||||||||||
PIMCO VIT Low Duration Portfolio | 94,757,327 | 1,148,157 | (48,818,375 | ) | (2,003,520 | ) | 2,848,799 | 47,932,388 | 4,694,651 | 1,148,157 | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Total Return Portfolio | 94,968,410 | 1,699,819 | (5,110,161 | ) | 81,562 | 4,102,140 | 95,741,770 | 8,743,541 | 1,516,261 | — | |||||||||||||||||||||||||||||||||||
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$ | 874,297,281 | $ | 66,147,590 | $ | (115,279,071 | ) | $ | (1,938,167 | ) | $ | 86,739,475 | $ | 909,967,108 | 76,094,699 | $ | 3,483,516 | $ | — | |||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $6,519 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
8
AZL MVP Fusion Dynamic Balanced Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 909,967,108 | $ | — | $ | 909,967,108 | |||||||||
|
|
|
|
|
| ||||||||||
Total Investment Securities | 909,967,108 | — | 909,967,108 | ||||||||||||
|
|
|
|
|
| ||||||||||
Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 977,149 | — | 977,149 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total Investments | $ | 910,944,257 | $ | — | $ | 910,944,257 | |||||||||
|
|
|
|
|
|
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP Fusion Dynamic Balanced Fund | $ | 66,147,590 | $ | 115,279,071 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $849,730,507. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 63,636,020 | ||
Unrealized (depreciation) | (3,399,419 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | 60,236,601 | ||
|
|
9
AZL MVP Fusion Dynamic Balanced Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP Fusion Dynamic Balanced Fund | $ | 21,121,964 | $ | 51,173,295 | $ | 72,295,259 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP Fusion Dynamic Balanced Fund | $ | 23,671,642 | $ | 41,128,020 | $ | — | $ | (26,761,410 | ) | $ | 38,038,252 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 90% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP Fusion Dynamic Conservative Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP Fusion Dynamic Conservative Fund
(Unaudited)
As a shareholder of the AZL MVP Fusion Dynamic Conservative Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Fusion Dynamic Conservative Fund | $ | 1,000.00 | $ | 1,089.60 | $ | 1.30 | 0.25 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Fusion Dynamic Conservative Fund | $ | 1,000.00 | $ | 1,023.56 | $ | 1.25 | 0.25 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Fixed Income Funds | 61.6 | % | |||
Domestic Equity Funds | 22.4 | ||||
International Equity Funds | 11.1 | ||||
|
| ||||
Total Investment Securities | 95.1 | ||||
Net other assets (liabilities) | 4.9 | ||||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
1
AZL MVP Fusion Dynamic Conservative Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.1%): | ||||||||
Domestic Equity Funds (22.4%): | ||||||||
289,622 | AZL DFA U.S. Core Equity Fund | $ | 3,854,874 | |||||
221,578 | AZL DFA U.S. Small Cap Fund | 2,576,954 | ||||||
284,112 | AZL Gateway Fund | 3,773,012 | ||||||
457,268 | AZL Mid Cap Index Fund, Class 2 | 10,224,510 | ||||||
789,241 | AZL Russell 1000 Growth Index Fund, Class 2 | 12,935,658 | ||||||
1,389,271 | AZL Russell 1000 Value Index Fund, Class 2 | 18,074,411 | ||||||
372,906 | AZL Small Cap Stock Index Fund, Class 2 | 5,149,834 | ||||||
|
| |||||||
56,589,253 | ||||||||
|
| |||||||
Fixed Income Funds (61.6%): | ||||||||
2,172,592 | AZL Enhanced Bond Index Fund | 24,376,481 | ||||||
3,098,304 | AZL Fidelity Institutional Asset Management Total Bond Fund, Class 2 | 32,563,178 | ||||||
3,080,530 | AZL MetWest Total Return Bond Fund | 32,530,393 | ||||||
1,389,257 | PIMCO VIT Income Portfolio | 15,031,762 |
Shares | Fair Value | |||||||
Affiliated Investment Companies, continued | ||||||||
Fixed Income Funds, continued | ||||||||
1,706,031 | PIMCO VIT Low Duration Portfolio | $ | 17,418,575 | |||||
2,973,652 | PIMCO VIT Total Return Portfolio | 32,561,489 | ||||||
|
| |||||||
154,481,878 | ||||||||
|
| |||||||
International Equity Funds (11.1%): | ||||||||
616,559 | AZL DFA International Core Equity Fund | 6,369,059 | ||||||
972,914 | AZL International Index Fund, Class 2 | 15,800,121 | ||||||
741,940 | AZL MSCI Emerging Markets Equity Index Fund, Class 2 | 5,712,941 | ||||||
|
| |||||||
27,882,121 | ||||||||
|
| |||||||
Total Affiliated Investment Companies (Cost $226,620,862) | 238,953,252 | |||||||
|
| |||||||
Total Investment Securities (Cost $226,620,862) — 95.1%(a) | 238,953,252 | |||||||
Net other assets (liabilities) — 4.9% | 12,365,634 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 251,318,886 | ||||||
|
|
Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $12,533,390 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 29 | $ | 4,269,090 | $ | 85,802 | ||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 63 | 8,062,034 | 169,267 | ||||||||||||
|
| |||||||||||||||
$ | 255,069 | |||||||||||||||
|
|
See accompanying notes to the financial statements.
2
AZL MVP Fusion Dynamic Conservative Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 226,620,862 | |||
|
| ||||
Investments in affiliates, at value | $ | 238,953,252 | |||
Segregated cash for collateral for futures contracts | 12,533,390 | ||||
Interest and dividends receivable | 199,107 | ||||
Receivable for affiliated investments sold | 58,394 | ||||
Prepaid expenses | 1,978 | ||||
|
| ||||
Total Assets | 251,746,121 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 58,394 | ||||
Payable for affiliated investments purchased | 180,170 | ||||
Payable for capital shares redeemed | 134,047 | ||||
Manager fees payable | 40,838 | ||||
Administration fees payable | 4,644 | ||||
Custodian fees payable | 1,013 | ||||
Administrative and compliance services fees payable | 494 | ||||
Transfer agent fees payable | 851 | ||||
Trustee fees payable | 333 | ||||
Other accrued liabilities | 6,451 | ||||
|
| ||||
Total Liabilities | 427,235 | ||||
|
| ||||
Net Assets | $ | 251,318,886 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 225,480,863 | |||
Total distributable earnings | 25,838,023 | ||||
|
| ||||
Net Assets | $ | 251,318,886 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 20,664,252 | ||||
Net Asset Value (offering and redemption price per share) | $ | 12.16 | |||
|
|
For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Dividends from affiliates | $ | 1,126,621 | |||
Interest | 127,181 | ||||
Dividends from non-affiliates | 1,057 | ||||
|
| ||||
Total Investment Income | 1,254,859 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 242,445 | ||||
Administration fees | 30,939 | ||||
Custodian fees | 3,332 | ||||
Administrative and compliance services fees | 2,198 | ||||
Transfer agent fees | 2,810 | ||||
Trustee fees | 6,928 | ||||
Professional fees | 5,812 | ||||
Shareholder reports | 3,329 | ||||
Other expenses | 1,991 | ||||
|
| ||||
Total expenses | 299,784 | ||||
|
| ||||
Net Investment Income/(Loss) | 955,075 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | (337,655 | ) | |||
Net realized gains/(losses) on futures contracts | �� | 724,222 | |||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 19,323,144 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 287,143 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 19,996,854 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 20,951,929 | |||
|
|
See accompanying notes to the financial statements.
3
AZL MVP Fusion Dynamic Conservative Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 955,075 | $ | 4,695,898 | ||||||
Net realized gains/(losses) on investments | 386,567 | 8,758,509 | ||||||||
Change in unrealized appreciation/depreciation on investments | 19,610,287 | (22,726,403 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 20,951,929 | (9,271,996 | ) | |||||||
|
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| |||||||
Distributions to Shareholders: | ||||||||||
Distributions | — | (12,826,949 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | — | (12,826,949 | ) | |||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 14,318,788 | 18,300,210 | ||||||||
Proceeds from dividends reinvested | — | 12,826,949 | ||||||||
Value of shares redeemed | (19,081,145 | ) | (42,470,441 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (4,762,357 | ) | (11,343,282 | ) | ||||||
|
|
|
| |||||||
Change in net assets | 16,189,572 | (33,442,227 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 235,129,314 | 268,571,541 | ||||||||
|
|
|
| |||||||
End of period | $ | 251,318,886 | $ | 235,129,314 | ||||||
|
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| |||||||
Share Transactions: | ||||||||||
Shares issued | 1,223,641 | 1,523,988 | ||||||||
Dividends reinvested | — | 1,122,218 | ||||||||
Shares redeemed | (1,624,263 | ) | (3,537,200 | ) | ||||||
|
|
|
| |||||||
Change in shares | (400,622 | ) | (890,994 | ) | ||||||
|
|
|
|
See accompanying notes to the financial statements.
4
AZL MVP Fusion Dynamic Conservative Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.16 | $ | 12.23 | $ | 11.89 | $ | 11.93 | $ | 12.63 | $ | 12.53 | ||||||||||||||||||
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|
|
| |||||||||||||||||||
Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.05 | (a) | 0.23 | 0.16 | 0.19 | 0.25 | 0.16 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 0.95 | (0.67 | ) | 0.93 | 0.44 | (0.35 | ) | 0.44 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from Investment Activities | 1.00 | (0.44 | ) | 1.09 | 0.63 | (0.10 | ) | 0.60 | ||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.17 | ) | (0.23 | ) | (0.28 | ) | (0.17 | ) | (0.19 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.46 | ) | (0.52 | ) | (0.39 | ) | (0.43 | ) | (0.31 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Dividends | — | (0.63 | ) | (0.75 | ) | (0.67 | ) | (0.60 | ) | (0.50 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net Asset Value, End of Period | $ | 12.16 | $ | 11.16 | $ | 12.23 | $ | 11.89 | $ | 11.93 | $ | 12.63 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Return(b) | 8.96 | %(c) | (3.75 | )% | 9.31 | % | 5.32 | % | (0.77 | )% | 4.81 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 251,319 | $ | 235,129 | $ | 268,572 | $ | 277,889 | $ | 268,335 | $ | 271,443 | ||||||||||||||||||
Net Investment Income/(Loss)(d) | 0.79 | % | 1.83 | % | 1.14 | % | 1.63 | % | 2.09 | % | 1.25 | % | ||||||||||||||||||
Expenses Before Reductions*(d)(e) | 0.25 | % | 0.24 | % | 0.23 | % | 0.24 | % | 0.24 | % | 0.24 | % | ||||||||||||||||||
Expenses Net of Reductions*(d) | 0.25 | % | 0.24 | % | 0.23 | % | 0.24 | % | 0.24 | % | 0.24 | % | ||||||||||||||||||
Portfolio Turnover Rate | 12 | %(c) | 16 | % | 18 | % | 62 | % | 16 | % | 36 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Calculated using the average shares method. |
(b) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(c) | Not annualized for periods less than one year. |
(d) | Annualized for periods less than one year. |
(e) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL MVP Fusion Dynamic Conservative Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP Fusion Dynamic Conservative Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP Fusion Dynamic Conservative Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts was $12.1 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
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Equity Contracts | Receivable for variation margin on futures contracts | $ | 85,802 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 169,267 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk |
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Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | 383,026 | $ | 295,225 | |||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 341,196 | (8,082 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP Fusion Dynamic Conservative Fund | 0.20 | % | 0.35 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
7
AZL MVP Fusion Dynamic Conservative Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL DFA International Core Equity Fund | $ | 5,548,312 | $ | 601,412 | $ | (484,316 | ) | $ | 52,147 | $ | 651,504 | $ | 6,369,059 | 616,559 | $ | — | $ | — | |||||||||||||||||||||||||||
AZL DFA U.S. Core Equity Fund | 3,205,689 | 416,378 | (356,561 | ) | 73,639 | 515,729 | 3,854,874 | 289,622 | — | — | |||||||||||||||||||||||||||||||||||
AZL DFA U.S. Small Cap Fund | 2,070,432 | 409,668 | (220,769 | ) | 35,235 | 282,388 | 2,576,954 | 221,578 | — | — | |||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | 11,735,762 | 12,620,198 | (1,044,802 | ) | (19,559 | ) | 1,084,882 | 24,376,481 | 2,172,592 | — | — | ||||||||||||||||||||||||||||||||||
AZL FIAM Total Bond Fund | 31,216,994 | 949,404 | (1,796,739 | ) | (11,070 | ) | 2,204,589 | 32,563,178 | 3,098,304 | — | — | ||||||||||||||||||||||||||||||||||
AZL Gateway Fund | 3,513,164 | 102,339 | (51,244 | ) | 778 | 207,975 | 3,773,012 | 284,112 | — | — | |||||||||||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 12,589,403 | 3,024,335 | (1,594,761 | ) | (88,131 | ) | 1,869,275 | 15,800,121 | 972,914 | — | — | ||||||||||||||||||||||||||||||||||
AZL MetWest Total Return Bond Fund | 31,309,316 | 1,167,383 | (1,779,833 | ) | 26,687 | 1,806,840 | 32,530,393 | 3,080,530 | — | — | |||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 8,681,007 | 1,168,263 | (1,210,363 | ) | (40,380 | ) | 1,625,983 | 10,224,510 | 457,268 | — | — | ||||||||||||||||||||||||||||||||||
AZL MSCI Emerging Markets Equity Fund, Class 2 | 6,994,738 | 660,531 | (2,725,896 | ) | 145,201 | 638,367 | 5,712,941 | 741,940 | — | — | |||||||||||||||||||||||||||||||||||
AZL Russell 1000 Growth Index Fund, Class 2 | 11,411,247 | 1,363,204 | (2,263,103 | ) | 180,723 | 2,243,587 | 12,935,658 | 789,241 | — | — | |||||||||||||||||||||||||||||||||||
AZL Russell 1000 Value Index Fund, Class 2 | 16,147,050 | 1,252,530 | (1,908,685 | ) | (227,623 | ) | 2,811,139 | 18,074,411 | 1,389,271 | — | — | ||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 4,200,982 | 825,505 | (490,453 | ) | (9,688 | ) | 623,488 | 5,149,834 | 372,906 | — | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Income Portfolio | 14,700,292 | 537,280 | (830,869 | ) | (17,514 | ) | 642,573 | 15,031,762 | 1,389,257 | 251,373 | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Low Duration Portfolio | 28,942,719 | 1,117,889 | (12,920,966 | ) | (381,500 | ) | 660,433 | 17,418,575 | 1,706,031 | 368,841 | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Total Return Portfolio | 31,355,612 | 1,531,006 | (1,722,921 | ) | (56,600 | ) | 1,454,392 | 32,561,489 | 2,973,652 | 506,407 | — | ||||||||||||||||||||||||||||||||||
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$ | 223,622,719 | $ | 27,747,325 | $ | (31,402,281 | ) | $ | (337,655 | ) | $ | 19,323,144 | $ | 238,953,252 | 20,555,777 | $ | 1,126,621 | $ | — | |||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $1,671 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
8
AZL MVP Fusion Dynamic Conservative Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 238,953,252 | $ | — | $ | 238,953,252 | |||||||||
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Total Investment Securities | 238,953,252 | — | 238,953,252 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 255,069 | — | 255,069 | ||||||||||||
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Total Investments | $ | 239,208,321 | $ | — | $ | 239,208,321 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP Fusion Dynamic Conservative Fund | $ | 27,747,325 | $ | 31,402,281 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $228,611,495. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 11,610,538 | ||
Unrealized (depreciation) | (1,268,781 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 10,341,757 | ||
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9
AZL MVP Fusion Dynamic Conservative Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term Capital Gains | Total Distributions(a) | |||||||||||||
AZL MVP Fusion Dynamic Conservative Fund | $ | 5,442,607 | $ | 7,384,342 | $ | 12,826,949 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP Fusion Dynamic Conservative Fund | $ | 5,970,156 | $ | 7,696,006 | $ | — | $ | (8,780,068 | ) | $ | 4,886,094 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 90% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP Fusion Dynamic Moderate Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP Fusion Dynamic Moderate Fund
(Unaudited)
As a shareholder of the AZL MVP Fusion Dynamic Moderate Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Fusion Dynamic Moderate Fund | $ | 1,000.00 | $ | 1,110.60 | $ | 1.15 | 0.22 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Fusion Dynamic Moderate Fund | $ | 1,000.00 | $ | 1,023.70 | $ | 1.10 | 0.22 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Fixed Income Funds | 38.0 | % | |||
Domestic Equity Funds | 35.6 | ||||
International Equity Funds | 21.5 | ||||
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Total Investment Securities | 95.1 | ||||
Net other assets (liabilities) | 4.9 | ||||
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Net Assets | 100.0 | % | |||
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1
AZL MVP Fusion Dynamic Moderate Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.1%): | ||||||||
Domestic Equity Funds (35.6%): | ||||||||
3,888,538 | AZL DFA U.S. Core Equity Fund | $ | 51,756,442 | |||||
3,489,668 | AZL DFA U.S. Small Cap Fund | 40,584,841 | ||||||
3,876,720 | AZL Gateway Fund | 51,482,841 | ||||||
6,403,878 | AZL Mid Cap Index Fund, Class 2 | 143,190,707 | ||||||
9,334,557 | AZL Russell 1000 Growth Index Fund, Class 2 | 152,993,383 | ||||||
17,375,485 | AZL Russell 1000 Value Index Fund, Class 2 | 226,055,058 | ||||||
4,372,269 | AZL Small Cap Stock Index Fund, Class 2 | 60,381,039 | ||||||
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726,444,311 | ||||||||
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Fixed Income Funds (38.0%): | ||||||||
11,394,414 | AZL Enhanced Bond Index Fund | 127,845,324 | ||||||
16,028,496 | AZL Fidelity Institutional Asset Management Total Bond Fund, Class 2 | 168,459,492 | ||||||
15,957,043 | AZL MetWest Total Return Bond Fund | 168,506,375 | ||||||
7,605,571 | PIMCO VIT Income Portfolio | 82,292,277 |
Shares | Fair Value | |||||||
Affiliated Investment Companies, continued | ||||||||
Fixed Income Funds, continued | ||||||||
6,044,600 | PIMCO VIT Low Duration Portfolio | $ | 61,715,367 | |||||
15,425,380 | PIMCO VIT Total Return Portfolio | 168,907,915 | ||||||
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777,726,750 | ||||||||
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International Equity Funds (21.5%): | ||||||||
9,946,605 | AZL DFA International Core Equity Fund | 102,748,435 | ||||||
13,889,445 | AZL International Index Fund, Class 2 | 225,564,580 | ||||||
14,490,396 | AZL MSCI Emerging Markets Equity Index Fund, Class 2 | 111,576,050 | ||||||
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439,889,065 | ||||||||
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Total Affiliated Investment Companies (Cost $1,796,658,197) | 1,944,060,126 | |||||||
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Total Investment Securities | 1,944,060,126 | |||||||
Net other assets (liabilities) — 4.9% | 100,833,070 | |||||||
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Net Assets — 100.0% | $ | 2,044,893,196 | ||||||
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Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $101,794,343 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 414 | $ | 60,944,940 | $ | 1,218,414 | ||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 317 | 40,566,110 | 860,769 | ||||||||||||
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$ | 2,079,183 | |||||||||||||||
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See accompanying notes to the financial statements.
2
AZL MVP Fusion Dynamic Moderate Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 1,796,658,197 | |||
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Investments in affiliates, at value | $ | 1,944,060,126 | |||
Segregated cash for collateral for futures contracts | 101,794,343 | ||||
Interest and dividends receivable | 1,023,445 | ||||
Receivable for affiliated investments sold | 623,993 | ||||
Receivable for variation margin on futures contracts | 218 | ||||
Prepaid expenses | 12,859 | ||||
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Total Assets | 2,047,514,984 | ||||
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Liabilities: | |||||
Cash overdraft | 623,993 | ||||
Payable for affiliated investments purchased | 871,698 | ||||
Payable for capital shares redeemed | 727,290 | ||||
Manager fees payable | 332,336 | ||||
Administration fees payable | 5,567 | ||||
Custodian fees payable | 3,966 | ||||
Administrative and compliance services fees payable | 4,133 | ||||
Transfer agent fees payable | 1,138 | ||||
Trustee fees payable | 2,564 | ||||
Other accrued liabilities | 49,103 | ||||
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Total Liabilities | 2,621,788 | ||||
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Net Assets | $ | 2,044,893,196 | |||
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Net Assets Consist of: | |||||
Paid in capital | $ | 1,739,606,482 | |||
Total distributable earnings | 305,286,714 | ||||
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Net Assets | $ | 2,044,893,196 | |||
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Shares of beneficial interest (unlimited number of shares authorized, no par value) | 178,593,429 | ||||
Net Asset Value (offering and redemption price per share) | $ | 11.45 | |||
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For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Dividends from affiliates | $ | 5,925,947 | |||
Interest | 1,038,868 | ||||
Dividends from non-affiliates | 61 | ||||
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Total Investment Income | 6,964,876 | ||||
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Expenses: | |||||
Manager fees | 2,020,883 | ||||
Administration fees | 38,412 | ||||
Custodian fees | 12,085 | ||||
Administrative and compliance services fees | 18,520 | ||||
Transfer agent fees | 3,583 | ||||
Trustee fees | 58,506 | ||||
Professional fees | 48,695 | ||||
Shareholder reports | 20,069 | ||||
Other expenses | 17,848 | ||||
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Total expenses | 2,238,601 | ||||
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Net Investment Income/(Loss) | 4,726,275 | ||||
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Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | (1,922,959 | ) | |||
Net realized gains/(losses) on futures contracts | 6,479,532 | ||||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 200,522,179 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 2,335,268 | ||||
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Net realized and Change in net unrealized gains/losses on investments | 207,414,020 | ||||
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Change in Net Assets Resulting From Operations | $ | 212,140,295 | |||
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See accompanying notes to the financial statements.
3
AZL MVP Fusion Dynamic Moderate Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 4,726,275 | $ | 36,841,125 | ||||||
Net realized gains/(losses) on investments | 4,556,573 | 114,156,791 | ||||||||
Change in unrealized appreciation/depreciation on investments | 202,857,447 | (287,587,078 | ) | |||||||
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Change in net assets resulting from operations | 212,140,295 | (136,589,162 | ) | |||||||
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Distributions to Shareholders: | ||||||||||
Distributions | — | (167,837,097 | ) | |||||||
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Change in net assets resulting from distributions to shareholders | — | (167,837,097 | ) | |||||||
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Capital Transactions: | ||||||||||
Proceeds from shares issued | 1,740,091 | 12,607,258 | ||||||||
Proceeds from dividends reinvested | — | 167,837,097 | ||||||||
Value of shares redeemed | (122,717,662 | ) | (283,774,000 | ) | ||||||
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Change in net assets resulting from capital transactions | (120,977,571 | ) | (103,329,645 | ) | ||||||
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Change in net assets | 91,162,724 | (407,755,904 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 1,953,730,472 | 2,361,486,376 | ||||||||
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End of period | $ | 2,044,893,196 | $ | 1,953,730,472 | ||||||
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Share Transactions: | ||||||||||
Shares issued | 158,610 | 1,082,105 | ||||||||
Dividends reinvested | — | 15,468,857 | ||||||||
Shares redeemed | (11,064,939 | ) | (24,299,498 | ) | ||||||
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Change in shares | (10,906,329 | ) | (7,748,536 | ) | ||||||
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See accompanying notes to the financial statements.
4
AZL MVP Fusion Dynamic Moderate Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.31 | $ | 11.97 | $ | 11.60 | $ | 12.15 | $ | 13.05 | $ | 12.68 | ||||||||||||||||||
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Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.03 | (a) | 0.21 | 0.12 | 0.18 | 0.22 | 0.14 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.11 | (0.93 | ) | 1.46 | 0.32 | (0.45 | ) | 0.40 | ||||||||||||||||||||||
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Total from Investment Activities | 1.14 | (0.72 | ) | 1.58 | 0.50 | (0.23 | ) | 0.54 | ||||||||||||||||||||||
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Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.14 | ) | (0.20 | ) | (0.27 | ) | (0.17 | ) | (0.17 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.80 | ) | (1.01 | ) | (0.78 | ) | (0.50 | ) | — | ||||||||||||||||||||
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Total Dividends | — | (0.94 | ) | (1.21 | ) | (1.05 | ) | (0.67 | ) | (0.17 | ) | |||||||||||||||||||
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Net Asset Value, End of Period | $ | 11.45 | $ | 10.31 | $ | 11.97 | $ | 11.60 | $ | 12.15 | $ | 13.05 | ||||||||||||||||||
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Total Return(b) | 11.06 | %(c) | (6.46 | )% | 13.98 | % | 4.29 | % | (1.71 | )% | 4.24 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 2,044,893 | $ | 1,953,730 | $ | 2,361,486 | $ | 2,336,333 | $ | 2,466,434 | $ | 2,724,412 | ||||||||||||||||||
Net Investment Income/(Loss)(d) | 0.47 | % | 1.66 | % | 0.90 | % | 1.38 | % | 1.61 | % | 1.04 | % | ||||||||||||||||||
Expenses Before Reductions*(d)(e) | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | ||||||||||||||||||
Expenses Net of Reductions*(d) | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | 0.22 | % | ||||||||||||||||||
Portfolio Turnover Rate | 7 | %(c) | 18 | % | 17 | % | 58 | % | 13 | % | 20 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Calculated using the average shares method. |
(b) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(c) | Not annualized for periods less than one year. |
(d) | Annualized for periods less than one year. |
(e) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
5
AZL MVP Fusion Dynamic Moderate Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP Fusion Dynamic Moderate Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP Fusion Dynamic Moderate Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts was $100.9 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
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Equity Contracts | Receivable for variation margin on futures contracts | $ | 1,218,414 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 860,769 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk |
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Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | 4,736,186 | $ | 2,369,012 | |||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 1,743,346 | (33,744 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP Fusion Dynamic Moderate Fund | 0.20 | % | 0.30 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
7
AZL MVP Fusion Dynamic Moderate Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL DFA International Core Equity Fund | $ | 95,042,994 | $ | — | $ | (3,965,972 | ) | $ | (4,053 | ) | $ | 11,675,466 | $ | 102,748,435 | 9,946,605 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL DFA U.S. Core Equity Fund | 47,367,099 | — | (3,860,574 | ) | 777,609 | 7,472,308 | 51,756,442 | 3,888,538 | — | — | |||||||||||||||||||||||||||||||||||
AZL DFA U.S. Small Cap Fund | 36,216,741 | — | (766,456 | ) | 12,072 | 5,122,484 | 40,584,841 | 3,489,668 | — | — | |||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | 26,340,228 | 102,324,100 | (5,568,225 | ) | 29,298 | 4,719,923 | 127,845,324 | 11,394,414 | — | — | |||||||||||||||||||||||||||||||||||
AZL FIAM Total Bond Fund | 166,767,373 | — | (9,930,109 | ) | 70,754 | 11,551,474 | 168,459,492 | 16,028,496 | — | — | |||||||||||||||||||||||||||||||||||
AZL Gateway Fund | 50,125,373 | — | (1,588,925 | ) | 57,132 | 2,889,261 | 51,482,841 | 3,876,720 | — | — | |||||||||||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 189,851,166 | 25,219,300 | (15,682,287 | ) | (12,589 | ) | 26,188,990 | 225,564,580 | 13,889,445 | — | — | ||||||||||||||||||||||||||||||||||
AZL MetWest Total Return Bond Fund | 166,758,959 | 18,935 | (7,959,004 | ) | 250,220 | 9,437,265 | 168,506,375 | 15,957,043 | — | — | |||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 129,596,650 | — | (9,127,920 | ) | (1,004,772 | ) | 23,726,749 | 143,190,707 | 6,403,878 | — | — | ||||||||||||||||||||||||||||||||||
AZL MSCI Emerging Markets Equity Fund, Class 2 | 135,041,675 | — | (37,698,170 | ) | 485,301 | 13,747,244 | 111,576,050 | 14,490,396 | — | — | |||||||||||||||||||||||||||||||||||
AZL Russell 1000 Growth Index Fund, Class 2 | 142,143,098 | — | (18,433,155 | ) | 1,839,245 | 27,444,195 | 152,993,383 | 9,334,557 | — | — | |||||||||||||||||||||||||||||||||||
AZL Russell 1000 Value Index Fund, Class 2 | 207,263,151 | — | (13,945,786 | ) | (1,666,897 | ) | 34,404,590 | 226,055,058 | 17,375,485 | — | — | ||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 53,442,444 | — | (266,672 | ) | (7,180 | ) | 7,212,447 | 60,381,039 | 4,372,269 | — | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Income Portfolio | 83,100,476 | 1,408,883 | (5,718,720 | ) | 210,241 | 3,291,397 | 82,292,277 | 7,605,571 | 1,408,883 | — | |||||||||||||||||||||||||||||||||||
PIMCO VIT Low Duration Portfolio | 161,979,164 | 1,836,746 | (103,388,012 | ) | (2,794,382 | ) | 4,081,851 | 61,715,367 | 6,044,600 | 1,836,746 | — | ||||||||||||||||||||||||||||||||||
PIMCO VIT Total Return Portfolio | 167,171,929 | 2,680,318 | (8,335,909 | ) | (164,958 | ) | 7,556,535 | 168,907,915 | 15,425,380 | 2,680,317 | — | ||||||||||||||||||||||||||||||||||
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$ | 1,858,208,520 | $ | 133,488,282 | $ | (246,235,896 | ) | $ | (1,922,959 | ) | $ | 200,522,179 | $ | 1,944,060,126 | 159,523,065 | $ | 5,925,946 | $ | — | |||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
8
AZL MVP Fusion Dynamic Moderate Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $13,995 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 1,944,060,126 | $ | — | $ | 1,944,060,126 | |||||||||
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| ||||||||||
Total Investment Securities | 1,944,060,126 | — | 1,944,060,126 | ||||||||||||
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| ||||||||||
Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 2,079,183 | — | 2,079,183 | ||||||||||||
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| ||||||||||
Total Investments | $ | 1,946,139,309 | $ | — | $ | 1,946,139,309 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP Fusion Dynamic Moderate Fund | $ | 133,488,282 | $ | 246,235,896 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
9
AZL MVP Fusion Dynamic Moderate Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $1,802,105,680. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 149,537,650 | ||
Unrealized (depreciation) | (7,583,204 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | 141,954,446 | ||
|
|
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP Fusion Dynamic Moderate Fund | $ | 47,347,962 | $ | 120,489,135 | $ | 167,837,097 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP Fusion Dynamic Moderate Fund | $ | 50,733,557 | $ | 101,174,014 | $ | — | $ | (58,761,152 | ) | $ | 93,146,419 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund. As of June 30, 2019, the Fund had a controlling interest (in excess of 50%) in the AZL MetWest Total Return Bond Fund, which is affiliated with the Manager.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP Growth Index Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP Growth Index Strategy Fund
(Unaudited)
As a shareholder of the AZL MVP Growth Index Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Growth Index Strategy Fund | $ | 1,000.00 | $ | 1,125.10 | $ | 0.63 | 0.12 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Growth Index Strategy Fund | $ | 1,000.00 | $ | 1,024.20 | $ | 0.60 | 0.12 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Domestic Equity Funds | 52.9 | % | |||
Fixed Income Funds | 23.4 | ||||
International Equity Funds | 19.2 | ||||
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Total Investment Securities | 95.5 | ||||
Net other assets (liabilities) | 4.5 | ||||
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Net Assets | 100.0 | % | |||
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1
AZL MVP Growth Index Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.5%): | ||||||||
Domestic Equity Funds (52.9%): | ||||||||
13,265,458 | AZL Mid Cap Index Fund, Class 2 | $ | 296,615,640 | |||||
55,533,672 | AZL S&P 500 Index Fund, Class 2 | 959,621,845 | ||||||
10,278,241 | AZL Small Cap Stock Index Fund, Class 2 | 141,942,515 | ||||||
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1,398,180,000 | ||||||||
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Fixed Income Funds (23.4%): | ||||||||
55,310,778 | AZL Enhanced Bond Index Fund | 620,586,932 | ||||||
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| |||||||
International Equity Funds (19.2%): | ||||||||
31,376,932 | AZL International Index Fund, Class 2 | 509,561,382 | ||||||
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| |||||||
Total Affiliated Investment Companies (Cost $2,152,391,340) | 2,528,328,314 | |||||||
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| |||||||
Total Investment Securities (Cost $2,152,391,340) — 95.5%(a) | 2,528,328,314 | |||||||
Net other assets (liabilities) — 4.5% | 119,814,144 | |||||||
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| |||||||
Net Assets — 100.0% | $ | 2,648,142,458 | ||||||
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Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $120,263,709 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
S&P 500 IndexE-Mini September Futures (U.S. Dollar) | 9/20/19 | 611 | $ | 89,945,310 | $ | 1,765,885 | ||||||||||||||
U.S. Treasury10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 234 | 29,944,699 | 611,058 | ||||||||||||||||
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$ | 2,376,943 | |||||||||||||||||||
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See accompanying notes to the financial statements.
2
AZL MVP Growth Index Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 2,152,391,340 | |||
|
| ||||
Investments in affiliates, at value | $ | 2,528,328,314 | |||
Segregated cash for collateral for futures contracts | 120,263,709 | ||||
Interest and dividends receivable | 175,013 | ||||
Receivable for capital shares issued | 5,805 | ||||
Receivable for affiliated investments sold | 488,688 | ||||
Receivable for variation margin on futures contracts | 218 | ||||
Prepaid expenses | 14,644 | ||||
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Total Assets | 2,649,276,391 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 488,688 | ||||
Payable for capital shares redeemed | 351,488 | ||||
Manager fees payable | 213,934 | ||||
Administration fees payable | 5,771 | ||||
Custodian fees payable | 2,669 | ||||
Administrative and compliance services fees payable | 5,356 | ||||
Transfer agent fees payable | 1,198 | ||||
Trustee fees payable | 3,284 | ||||
Other accrued liabilities | 61,545 | ||||
|
| ||||
Total Liabilities | 1,133,933 | ||||
|
| ||||
Net Assets | $ | 2,648,142,458 | |||
|
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Net Assets Consist of: | |||||
Paid in capital | $ | 2,187,159,443 | |||
Total distributable earnings | 460,983,015 | ||||
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Net Assets | $ | 2,648,142,458 | |||
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| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 168,186,796 | ||||
Net Asset Value (offering and redemption price per share) | $ | 15.75 | |||
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For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Interest | $ | 1,063,481 | |||
Dividends fromnon-affiliates | 1,617 | ||||
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Total Investment Income | 1,065,098 | ||||
|
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Expenses: | |||||
Manager fees | 1,282,642 | ||||
Administration fees | 40,204 | ||||
Custodian fees | 8,156 | ||||
Administrative and compliance services fees | 23,408 | ||||
Transfer agent fees | 3,768 | ||||
Trustee fees | 73,770 | ||||
Professional fees | 61,630 | ||||
Shareholder reports | 24,442 | ||||
Other expenses | 21,871 | ||||
|
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Total expenses | 1,539,891 | ||||
|
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Net Investment Income/(Loss) | (474,793 | ) | |||
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Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | 4,122,745 | ||||
Net realized gains/(losses) on futures contracts | (23,184,878 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 311,467,862 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 9,320,616 | ||||
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Net realized and Change in net unrealized gains/losses on investments | 301,726,345 | ||||
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Change in Net Assets Resulting From Operations | $ | 301,251,552 | |||
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See accompanying notes to the financial statements.
3
AZL MVP Growth Index Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (474,793 | ) | $ | 45,144,198 | |||||
Net realized gains/(losses) on investments | (19,062,133 | ) | 80,098,385 | |||||||
Change in unrealized appreciation/depreciation on investments | 320,788,478 | (294,210,342 | ) | |||||||
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| |||||||
Change in net assets resulting from operations | 301,251,552 | (168,967,759 | ) | |||||||
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Distributions to Shareholders: | ||||||||||
Distributions | — | (102,284,487 | ) | |||||||
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Change in net assets resulting from distributions to shareholders | — | (102,284,487 | ) | |||||||
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Capital Transactions: | ||||||||||
Proceeds from shares issued | 34,860,386 | 104,828,201 | ||||||||
Proceeds from dividends reinvested | — | 102,284,487 | ||||||||
Value of shares redeemed | (111,134,791 | ) | (147,250,114 | ) | ||||||
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| |||||||
Change in net assets resulting from capital transactions | (76,274,405 | ) | 59,862,574 | |||||||
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| |||||||
Change in net assets | 224,977,147 | (211,389,672 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 2,423,165,311 | 2,634,554,983 | ||||||||
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End of period | $ | 2,648,142,458 | $ | 2,423,165,311 | ||||||
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Share Transactions: | ||||||||||
Shares issued | 2,307,446 | 6,733,674 | ||||||||
Dividends reinvested | — | 6,814,423 | ||||||||
Shares redeemed | (7,341,915 | ) | (9,619,518 | ) | ||||||
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| |||||||
Change in shares | (5,034,469 | ) | 3,928,579 | |||||||
|
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|
|
See accompanying notes to the financial statements.
4
AZL MVP Growth Index Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.99 | $ | 15.56 | $ | 14.08 | $ | 13.55 | $ | 13.90 | $ | 13.23 | ||||||||||||||||||
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Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | — | (a),(b) | 0.26 | 0.11 | 0.14 | 0.25 | 0.10 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.76 | (1.22 | ) | 2.10 | 0.77 | (0.36 | ) | 0.75 | ||||||||||||||||||||||
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Total from Investment Activities | 1.76 | (0.96 | ) | 2.21 | 0.91 | (0.11 | ) | 0.85 | ||||||||||||||||||||||
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Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.13 | ) | (0.18 | ) | (0.30 | ) | (0.12 | ) | (0.10 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.48 | ) | (0.55 | ) | (0.08 | ) | (0.12 | ) | (0.08 | ) | |||||||||||||||||||
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| |||||||||||||||||||
Total Dividends | — | (0.61 | ) | (0.73 | ) | (0.38 | ) | (0.24 | ) | (0.18 | ) | |||||||||||||||||||
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Net Asset Value, End of Period | $ | 15.75 | $ | 13.99 | $ | 15.56 | $ | 14.08 | $ | 13.55 | $ | 13.90 | ||||||||||||||||||
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| |||||||||||||||||||
Total Return(c) | 12.51 | %(d) | (6.45 | )% | 15.96 | % | 6.80 | % | (0.80 | )% | 6.47 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 2,648,142 | $ | 2,423,165 | $ | 2,634,555 | $ | 2,243,373 | $ | 1,392,460 | $ | 1,118,257 | ||||||||||||||||||
Net Investment Income/(Loss)(e) | (0.04 | )% | 1.71 | % | 0.74 | % | 1.55 | % | 2.17 | % | 1.05 | % | ||||||||||||||||||
Expenses Before Reductions*(e)(f) | 0.12 | % | 0.12 | % | 0.11 | % | 0.12 | % | 0.12 | % | 0.12 | % | ||||||||||||||||||
Expenses Net of Reductions*(e) | 0.12 | % | 0.12 | % | 0.11 | % | 0.12 | % | 0.12 | % | 0.12 | % | ||||||||||||||||||
Portfolio Turnover Rate | — | (d),(g) | 4 | % | 4 | % | 4 | %(h) | 1 | % | 1 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Represents less than $0.005. |
(b) | Calculated using the average shares method. |
(c) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(d) | Not annualized for periods less than one year. |
(e) | Annualized for periods less than one year. |
(f) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(g) | Represents less than 0.5%. |
(h) | Cost of purchases and proceeds from sales of portfolio securities incurred to realign the Fund’s portfolio after the fund merger are excluded from the portfolio turnover rate. If such amounts had not been excluded, the portfolio turnover rate would have been 4%. |
See accompanying notes to the financial statements.
5
AZL MVP Growth Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversifiedopen-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP Growth Index Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on theex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on theex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federaltax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP Growth Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for long contracts was $95.1 million and the monthly average notional amount for short contracts was $31.2 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
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Equity Contracts | Receivable for variation margin on futures contracts | $ | 1,765,885 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 611,058 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk |
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Equity Contracts | Net realized gains/(losses) on futures contracts/ Change net in unrealized appreciation/depreciation on futures contracts | $ | (24,399,923 | ) | $ | 9,370,106 | ||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/ Change net in unrealized appreciation/depreciation on futures contracts | 1,215,045 | (49,490 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2020. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP Growth Index Strategy Fund | 0.10 | % | 0.20 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
7
AZL MVP Growth Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 628,734,103 | $ | — | $ | (44,243,949 | ) | $ | (1,098,411 | ) | $ | 37,195,189 | $ | 620,586,932 | 55,310,778 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 447,213,308 | — | (101,708 | ) | (10,268 | ) | 62,460,050 | 509,561,382 | 31,376,932 | — | — | ||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 254,024,169 | — | (2,153,936 | ) | (107,797 | ) | 44,853,204 | 296,615,640 | 13,265,458 | — | — | ||||||||||||||||||||||||||||||||||
AZL S&P 500 Index Fund, Class 2 | 859,151,295 | — | (54,969,111 | ) | 5,343,028 | 150,096,633 | 959,621,845 | 55,533,672 | — | — | |||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 125,112,978 | — | (29,442 | ) | (3,807 | ) | 16,862,786 | 141,942,515 | 10,278,241 | — | — | ||||||||||||||||||||||||||||||||||
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$ | 2,314,235,853 | $ | — | $ | (101,498,146 | ) | $ | 4,122,745 | $ | 311,467,862 | $ | 2,528,328,314 | 165,765,081 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonableout-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certainout-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $17,703 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, eachnon-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
8
AZL MVP Growth Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments inopen-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 2,528,328,314 | $ | — | $ | 2,528,328,314 | |||||||||
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Total Investment Securities | 2,528,328,314 | — | 2,528,328,314 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 2,376,943 | — | 2,376,943 | ||||||||||||
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Total Investments | $ | 2,530,705,257 | $ | — | $ | 2,530,705,257 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP Growth Index Strategy Fund | $ | — | $ | 101,498,146 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $2,186,075,203. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 342,253,111 | ||
Unrealized (depreciation) | — | |||
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Net unrealized appreciation/(depreciation) | $ | 342,253,111 | ||
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As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP Growth Index Strategy Fund | $ | 28,652,893 | $ | 73,631,594 | $ | 102,284,487 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
9
AZL MVP Growth Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP Growth Index Strategy Fund | $ | 65,147,887 | $ | 63,836,044 | $ | — | $ | 58,086,724 | $ | 187,070,655 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and straddles. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent12-month period ended June 30th is available (i) without charge, upon request, by calling800-624-0197; (ii) on the Allianz Variable Insurance Products Fund of Funds Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on FormN-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP Moderate Index Strategy Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP Moderate Index Strategy Fund
(Unaudited)
As a shareholder of the AZL MVP Moderate Index Strategy Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Moderate Index Strategy Fund | $ | 1,000.00 | $ | 1,117.50 | $ | 0.68 | 0.13 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP Moderate Index Strategy Fund | $ | 1,000.00 | $ | 1,024.15 | $ | 0.65 | 0.13 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Domestic Equity Funds | 42.0 | % | |||
Fixed Income Funds | 38.0 | ||||
International Equity Funds | 15.1 | ||||
Money Markets | — | † | |||
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Total Investment Securities | 95.1 | ||||
Net other assets (liabilities) | 4.9 | ||||
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Net Assets | 100.0 | % | |||
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† | Represents less than 0.05% |
1
AZL MVP Moderate Index Strategy Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.1%): | ||||||||
Domestic Equity Funds (42.0%): | ||||||||
2,108,960 | AZL Mid Cap Index Fund, Class 2 | $ | 47,156,350 | |||||
8,752,388 | AZL S&P 500 Index Fund, Class 2 | 151,241,258 | ||||||
1,680,703 | AZL Small Cap Stock Index Fund, Class 2 | 23,210,505 | ||||||
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221,608,113 | ||||||||
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Fixed Income Funds (38.0%): | ||||||||
17,844,686 | AZL Enhanced Bond Index Fund | 200,217,382 | ||||||
|
| |||||||
International Equity Funds (15.1%): | ||||||||
4,921,323 | AZL International Index Fund, Class 2 | 79,922,280 | ||||||
|
| |||||||
Total Affiliated Investment Companies (Cost $444,344,567) | 501,747,775 | |||||||
|
| |||||||
Money Markets (0.0%)†: | ||||||||
212,970 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.10%(a) | 212,970 | ||||||
|
| |||||||
Total Money Markets (Cost $212,970) | 212,970 | |||||||
|
| |||||||
Total Investment Securities (Cost $444,557,537) — 95.1%(b) | 501,960,745 | |||||||
Net other assets (liabilities) — 4.9% | 26,054,710 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 528,015,455 | ||||||
|
|
Percentages indicated are based on net assets as of June 30, 2019.
† | Represents less than 0.05%. |
(a) | The rate represents the effective yield at June 30, 2019. |
(b) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $26,356,393 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 107 | $ | 15,751,470 | $ | 313,606 | ||||||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 82 | 10,493,442 | 219,728 | ||||||||||||||||
|
| |||||||||||||||||||
$ | 533,334 | |||||||||||||||||||
|
|
See accompanying notes to the financial statements.
2
AZL MVP Moderate Index Strategy Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investment securities, at cost | $ | 212,970 | |||
Investments in affiliates, at cost | 444,344,567 | ||||
|
| ||||
Investment securities, at value | $ | 212,970 | |||
Investments in affiliates, at value | 501,747,775 | ||||
Segregated cash for collateral for futures contracts | 26,356,393 | ||||
Interest and dividends receivable | 39,143 | ||||
Receivable for variation margin on futures contracts | 218 | ||||
|
| ||||
Total Assets | 528,356,499 | ||||
|
| ||||
Liabilities: | |||||
Payable for affiliated investments purchased | 212,970 | ||||
Payable for capital shares redeemed | 61,272 | ||||
Manager fees payable | 42,758 | ||||
Administration fees payable | 4,405 | ||||
Custodian fees payable | 991 | ||||
Administrative and compliance services fees payable | 943 | ||||
Transfer agent fees payable | 822 | ||||
Trustee fees payable | 611 | ||||
Other accrued liabilities | 16,272 | ||||
|
| ||||
Total Liabilities | 341,044 | ||||
|
| ||||
Net Assets | $ | 528,015,455 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 442,488,615 | |||
Total distributable earnings | 85,526,840 | ||||
|
| ||||
Net Assets | $ | 528,015,455 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 35,566,883 | ||||
Net Asset Value (offering and redemption price per share) | $ | 14.85 | |||
|
|
Statement of Operations
For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Interest | $ | 265,938 | |||
Dividends from non-affiliates | 224 | ||||
|
| ||||
Total Investment Income | 266,162 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 256,464 | ||||
Administration fees | 29,916 | ||||
Custodian fees | 3,145 | ||||
Administrative and compliance services fees | 4,344 | ||||
Transfer agent fees | 2,730 | ||||
Trustee fees | 13,657 | ||||
Professional fees | 11,442 | ||||
Shareholder reports | 7,876 | ||||
Other expenses | 834 | ||||
|
| ||||
Total expenses | 330,408 | ||||
|
| ||||
Net Investment Income/(Loss) | (64,246 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | 827,877 | ||||
Net realized gains/(losses) on futures contracts | 1,380,874 | ||||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 54,672,688 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 309,338 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 57,190,777 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 57,126,531 | |||
|
|
See accompanying notes to the financial statements.
3
AZL MVP Moderate Index Strategy Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (64,246 | ) | $ | 9,237,594 | |||||
Net realized gains/(losses) on investments | 2,208,751 | 16,417,447 | ||||||||
Change in unrealized appreciation/depreciation on investments | 54,982,026 | (52,545,577 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 57,126,531 | (26,890,536 | ) | |||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Distributions | — | (23,512,014 | ) | |||||||
|
|
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| |||||||
Change in net assets resulting from distributions to shareholders | — | (23,512,014 | ) | |||||||
|
|
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| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 4,888,597 | 10,442,882 | ||||||||
Proceeds from dividends reinvested | — | 23,512,014 | ||||||||
Value of shares redeemed | (23,071,859 | ) | (46,347,799 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (18,183,262 | ) | (12,392,903 | ) | ||||||
|
|
|
| |||||||
Change in net assets | 38,943,269 | (62,795,453 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 489,072,186 | 551,867,639 | ||||||||
|
|
|
| |||||||
End of period | $ | 528,015,455 | $ | 489,072,186 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 347,755 | 718,590 | ||||||||
Dividends reinvested | — | 1,679,430 | ||||||||
Shares redeemed | (1,609,345 | ) | (3,157,169 | ) | ||||||
|
|
| �� | |||||||
Change in shares | (1,261,590 | ) | (759,149 | ) | ||||||
|
|
|
|
See accompanying notes to the financial statements.
4
AZL MVP Moderate Index Strategy Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.28 | $ | 14.68 | $ | 13.50 | $ | 13.49 | $ | 14.37 | $ | 13.34 | ||||||||||||||||||
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|
| |||||||||||||||||||
Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | — | (a),(b) | 0.26 | 0.12 | 0.23 | 0.25 | 0.06 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.57 | (1.00 | ) | 1.64 | 0.48 | (0.71 | ) | 1.06 | ||||||||||||||||||||||
|
|
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|
|
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|
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| |||||||||||||||||||
Total from Investment Activities | 1.57 | (0.74 | ) | 1.76 | 0.71 | (0.46 | ) | 1.12 | ||||||||||||||||||||||
|
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| |||||||||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.13 | ) | (0.24 | ) | (0.30 | ) | (0.07 | ) | (0.05 | ) | |||||||||||||||||||
Net Realized Gains | — | (0.53 | ) | (0.34 | ) | (0.40 | ) | (0.35 | ) | (0.04 | ) | |||||||||||||||||||
|
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|
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| |||||||||||||||||||
Total Dividends | — | (0.66 | ) | (0.58 | ) | (0.70 | ) | (0.42 | ) | (0.09 | ) | |||||||||||||||||||
|
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|
|
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|
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| |||||||||||||||||||
Net Asset Value, End of Period | $ | 14.85 | $ | 13.28 | $ | 14.68 | $ | 13.50 | $ | 13.49 | $ | 14.37 | ||||||||||||||||||
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| |||||||||||||||||||
Total Return(c) | 11.75 | %(d) | (5.26 | )% | 13.21 | % | 5.43 | % | (3.21 | )% | 8.42 | % | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 528,015 | $ | 489,072 | $ | 551,868 | $ | 520,112 | $ | 520,844 | $ | 467,457 | ||||||||||||||||||
Net Investment Income/(Loss)(e) | (0.03 | )% | 1.73 | % | 0.73 | % | 1.71 | % | 1.97 | % | 0.65 | % | ||||||||||||||||||
Expenses Before Reductions*(e)(f) | 0.13 | % | 0.13 | % | 0.12 | % | 0.13 | % | 0.13 | % | 0.14 | % | ||||||||||||||||||
Expenses Net of Reductions*(e) | 0.13 | % | 0.13 | % | 0.12 | % | 0.13 | % | 0.13 | % | 0.14 | % | ||||||||||||||||||
Portfolio Turnover Rate | 1 | %(d) | 5 | % | 5 | % | 108 | %(g) | 2 | % | 1 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | Represents less than $0.005. |
(b) | Calculated using the average shares method. |
(c) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(d) | Not annualized for periods less than one year. |
(e) | Annualized for periods less than one year. |
(f) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(g) | Effective October 14, 2016, the investment strategy of the Fund changed. Costs of purchases and proceeds from sales of portfolio securities associated with the changes in investment strategy contributed to higher portfolio turnover rate for the period ended December 31, 2016 as compared to prior years. |
See accompanying notes to the financial statements.
5
AZL MVP Moderate Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP Moderate Index Strategy Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may
6
AZL MVP Moderate Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts was $25.8 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
| |||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 313,606 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 219,728 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on | |||||||
Equity Risk |
| |||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | 939,401 | $ | 313,314 | |||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 441,473 | (3,976 | ) |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP Moderate Index Strategy Fund | 0.10 | % | 0.15 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
7
AZL MVP Moderate Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 201,227,371 | $ | 233,076 | $ | (12,803,822 | ) | $ | (51,407 | ) | $ | 11,612,164 | $ | 200,217,382 | 17,844,686 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 70,025,179 | 440,108 | (337,595 | ) | (9,147 | ) | 9,803,735 | 79,922,280 | 4,921,323 | — | — | ||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 40,899,214 | 153,825 | (1,110,484 | ) | 31,060 | 7,182,735 | 47,156,350 | 2,108,960 | — | — | |||||||||||||||||||||||||||||||||||
AZL S&P 500 Index Fund, Class 2 | 132,737,984 | 1,282,981 | (7,019,012 | ) | 857,592 | 23,381,713 | 151,241,258 | 8,752,388 | — | — | |||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | 19,885,973 | 637,420 | (5,008 | ) | (221 | ) | 2,692,341 | 23,210,505 | 1,680,703 | — | — | ||||||||||||||||||||||||||||||||||
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$ | 464,775,721 | $ | 2,747,410 | $ | (21,275,921 | ) | $ | 827,877 | $ | 54,672,688 | $ | 501,747,775 | 35,308,060 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $3,539 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
8
AZL MVP Moderate Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 501,747,775 | $ | — | $ | 501,747,775 | |||||||||
Money Markets | 212,970 | — | 212,970 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total Investment Securities | 501,960,745 | — | 501,960,745 | ||||||||||||
|
|
|
|
|
| ||||||||||
Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 533,334 | — | 533,334 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total Investments | $ | 502,494,079 | $ | — | $ | 502,494,079 | |||||||||
|
|
|
|
|
|
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP Moderate Index Strategy Fund | $ | 2,747,410 | $ | 21,275,921 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $444,893,426. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 57,067,319 | ||
Unrealized (depreciation) | — | |||
|
| |||
Net unrealized appreciation/(depreciation) | $ | 57,067,319 | ||
|
|
As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP Moderate Index Strategy Fund | $ | 9,436,246 | $ | 14,075,768 | $ | 23,512,014 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
9
AZL MVP Moderate Index Strategy Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Appreciation/ Depreciation(a) | Total Earnings/ | |||||||||||||||||||||
AZL MVP Moderate Index Strategy Fund | $ | 11,104,558 | $ | 14,900,672 | $ | — | $ | 2,537,696 | $ | 28,542,926 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and straddles. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
AZL® MVP T. Rowe Price Capital Appreciation Plus Fund
Semi-Annual Report
June 30, 2019
(Unaudited)
Expense Examples and Portfolio Composition Page 1 |
Schedule of Portfolio Investments Page 2 |
Statement of Assets and Liabilities Page 3 |
Page 3 |
Statements of Changes in Net Assets Page 4 |
Page 5 |
Notes to the Financial Statements Page 6 |
Page 11 |
This report is submitted for the general information of the shareholder of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, which contains details concerning the sales charges and other pertinent information.
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
(Unaudited)
As a shareholder of the AZL MVP T. Rowe Price Capital Appreciation Plus Fund (the “Fund”), you incur ongoing costs, including management fees, distribution fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in each table do not reflect expenses that apply to the subaccount or the insurance contract. If the expenses that apply to the subaccount of the insurance contract were included, your costs would have been higher.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the periods presented below.
TheActual Expense table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP T. Rowe Price Capital Appreciation Plus Fund | $ | 1,000.00 | $ | 1,138.00 | $ | 0.64 | 0.12 | % |
TheHypothetical Expense table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning Account Value 1/1/19 | Ending Account Value 6/30/19 | Expenses Paid During Period 1/1/19 - 6/30/19* | Annualized Expense Ratio During Period 1/1/19 - 6/30/19 | |||||||||||||||||
AZL MVP T. Rowe Price Capital Appreciation Plus Fund | $ | 1,000.00 | $ | 1,024.20 | $ | 0.60 | 0.12 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 181/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Domestic Equity Funds | 77.2 | % | |||
Fixed Income Funds | 17.8 | ||||
|
| ||||
Total Investment Securities | 95.0 | ||||
Net other assets (liabilities) | 5.0 | ||||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
1
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Schedule of Portfolio Investments
June 30, 2019 (Unaudited)
Shares | Fair Value | |||||||
Affiliated Investment Companies (95.0%): | ||||||||
Domestic Equity Funds (77.2%): | ||||||||
19,513,490 | AZL S&P 500 Index Fund, Class 2 | $ | 337,193,110 | |||||
31,345,999 | AZL T. Rowe Price Capital Appreciation Fund | 622,218,075 | ||||||
|
| |||||||
959,411,185 | ||||||||
|
| |||||||
Fixed Income Funds (17.8%): | ||||||||
19,692,245 | AZL Enhanced Bond Index Fund | 220,946,994 | ||||||
|
| |||||||
Total Affiliated Investment Companies (Cost $989,167,003) | 1,180,358,179 | |||||||
|
| |||||||
Total Investment Securities (Cost $989,167,003) — 95.0%(a) | 1,180,358,179 | |||||||
Net other assets (liabilities) — 5.0% | 61,932,824 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 1,242,291,003 | ||||||
|
|
Percentages indicated are based on net assets as of June 30, 2019.
(a) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $62,016,478 has been segregated to cover margin requirements for the following open contracts as of June 30, 2019:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 Index E-Mini September Futures (U.S. Dollar) | 9/20/19 | 252 | $ | 37,096,920 | $ | 739,104 | ||||||||||
U.S. Treasury 10-Year Note September Futures (U.S. Dollar) | 9/19/19 | 193 | 24,697,978 | 519,296 | ||||||||||||
|
| |||||||||||||||
$ | 1,258,400 | |||||||||||||||
|
|
See accompanying notes to the financial statements.
2
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Statement of Assets and Liabilities
June 30, 2019
(Unaudited)
Assets: | |||||
Investments in affiliates, at cost | $ | 989,167,003 | |||
|
| ||||
Investments in affiliates, at value | $ | 1,180,358,179 | |||
Segregated cash for collateral for futures contracts | 62,016,479 | ||||
Interest and dividends receivable | 91,974 | ||||
Receivable for capital shares issued | 60,233 | ||||
Receivable for affiliated investments sold | 312,664 | ||||
Receivable for variation margin on futures contracts | 218 | ||||
Prepaid expenses | 7,543 | ||||
|
| ||||
Total Assets | 1,242,847,290 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 312,664 | ||||
Payable for capital shares redeemed | 96,398 | ||||
Manager fees payable | 100,546 | ||||
Administration fees payable | 5,757 | ||||
Custodian fees payable | 1,223 | ||||
Administrative and compliance services fees payable | 2,858 | ||||
Transfer agent fees payable | 1,096 | ||||
Trustee fees payable | 2,406 | ||||
Other accrued liabilities | 33,339 | ||||
|
| ||||
Total Liabilities | 556,287 | ||||
|
| ||||
Net Assets | $ | 1,242,291,003 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 1,004,975,047 | |||
Total distributable earnings | 237,315,956 | ||||
|
| ||||
Net Assets | $ | 1,242,291,003 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 91,237,544 | ||||
Net Asset Value (offering and redemption price per share) | $ | 13.62 | |||
|
|
For the Six Months Ended June 30, 2019
(Unaudited)
Investment Income: | |||||
Interest | $ | 561,596 | |||
Dividends non-affiliates | 2,313 | ||||
|
| ||||
Total Investment Income | 563,909 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 583,784 | ||||
Administration fees | 33,486 | ||||
Custodian fees | 3,315 | ||||
Administrative and compliance services fees | 10,411 | ||||
Transfer agent fees | 3,076 | ||||
Trustee fees | 32,553 | ||||
Professional fees | 27,535 | ||||
Shareholder reports | 13,058 | ||||
Other expenses | 9,705 | ||||
|
| ||||
Total expenses | 716,923 | ||||
|
| ||||
Net Investment Income/(Loss) | (153,014 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on affiliated underlying funds | 998,945 | ||||
Net realized gains/(losses) on futures contracts | (11,601,152 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | 156,238,601 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 4,951,099 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 150,587,493 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 150,434,479 | |||
|
|
See accompanying notes to the financial statements.
3
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||
(Unaudited) | ||||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (153,014 | ) | $ | 14,159,631 | |||||
Net realized gains/(losses) on investments | (10,602,207 | ) | 42,681,468 | |||||||
Change in unrealized appreciation/depreciation on investments | 161,189,700 | (76,276,696 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 150,434,479 | (19,435,597 | ) | |||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Distributions | — | (48,843,888 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | — | (48,843,888 | ) | |||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 41,459,670 | 73,125,433 | ||||||||
Proceeds from dividends reinvested | — | 48,843,888 | ||||||||
Value of shares redeemed | (32,978,184 | ) | (66,407,984 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | 8,481,486 | 55,561,337 | ||||||||
|
|
|
| |||||||
Change in net assets | 158,915,965 | (12,718,148 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 1,083,375,038 | 1,096,093,186 | ||||||||
|
|
|
| |||||||
End of period | $ | 1,242,291,003 | $ | 1,083,375,038 | ||||||
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|
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| |||||||
Share Transactions: | ||||||||||
Shares issued | 3,223,503 | 5,649,568 | ||||||||
Dividends reinvested | — | 3,904,388 | ||||||||
Shares redeemed | (2,550,493 | ) | (5,211,798 | ) | ||||||
|
|
|
| |||||||
Change in shares | 673,010 | 4,342,158 | ||||||||
|
|
|
|
See accompanying notes to the financial statements.
4
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | January 10, 2014 to December 31, 2014(a) | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.96 | $ | 12.71 | $ | 11.47 | $ | 10.88 | $ | 10.45 | $ | 10.00 | ||||||||||||||||||
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|
|
| |||||||||||||||||||
Investment Activities: | ||||||||||||||||||||||||||||||
Net Investment Income/(Loss) | — | (b),(c) | 0.16 | 0.11 | 0.03 | 0.04 | 0.01 | |||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 1.66 | (0.34 | ) | 1.50 | 0.79 | 0.39 | 1.11 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from Investment Activities | 1.66 | (0.18 | ) | 1.61 | 0.82 | 0.43 | 1.12 | |||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||||||||||||
Net Investment Income | — | (0.13 | ) | (0.15 | ) | (0.17 | ) | — | (0.01 | ) | ||||||||||||||||||||
Net Realized Gains | — | (0.44 | ) | (0.22 | ) | (0.06 | ) | — | (b) | (0.66 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Dividends | — | (0.57 | ) | (0.37 | ) | (0.23 | ) | — | (b) | (0.67 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net Asset Value, End of Period | $ | 13.62 | $ | 11.96 | $ | 12.71 | $ | 11.47 | $ | 10.88 | $ | 10.45 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Return(d) | 13.80 | %(e) | (1.67 | )% | 14.21 | % | 7.62 | % | 4.15 | % | 11.19 | %(e) | ||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 1,242,291 | $ | 1,083,375 | $ | 1,096,093 | $ | 899,716 | $ | 664,399 | $ | 288,843 | ||||||||||||||||||
Net Investment Income/(Loss)(f) | (0.03 | )% | 1.27 | % | 1.03 | % | 0.61 | % | 0.49 | % | 0.26 | % | ||||||||||||||||||
Expenses Before Reductions*(f)(g) | 0.12 | % | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.14 | % | ||||||||||||||||||
Expenses Net of Reductions*(f) | 0.12 | % | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.14 | % | ||||||||||||||||||
Portfolio Turnover Rate | 2 | %(e) | 5 | % | 3 | % | 52 | %(h) | 1 | % | 1 | %(e) |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | For the period January 10, 2014 (commencement of operations) to December 31, 2014. |
(b) | Represents less than $0.005. |
(c) | Calculated using the average shares method. |
(d) | The returns include reinvested dividends and fund level expenses, but exclude insurance contract charges. If these charges were included, the returns would have been lower. |
(e) | Not annualized for periods less than one year. |
(f) | Annualized for periods less than one year. |
(g) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(h) | Effective October 14, 2016, the investment strategy of the Fund changed. Costs of purchases and proceeds from sales of portfolio securities associated with the changes in investment strategy contributed to higher portfolio turnover rate for the period ended December 31, 2016 as compared to prior years. |
See accompanying notes to the financial statements.
5
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
1. Organization
The Allianz Variable Insurance Products Fund of Funds Trust (the “Trust”) was organized as a Delaware statutory trust on June 16, 2004. The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) and thus is determined to be an investment company, and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services — Investment Companies.”. The Trust consists of 12 separate investment portfolios (collectively, the “Funds”), of which one is included in this report, the AZL MVP T. Rowe Price Capital Appreciation Plus Fund (the “Fund”), and 11 are presented in separate reports.
The Fund is a “fund of funds”, which means that the Fund invests primarily in other mutual funds (the “Underlying Funds”). Underlying Funds invest in stock, bonds, and other securities and reflect varying amounts of potential investment risk and reward. The Underlying Funds record their investments at fair value. Periodically, the Fund will adjust its asset allocation as it seeks to achieve its investment objective.
The Trust is authorized to issue an unlimited number of shares of the Fund without par value. Shares of the Fund are available through the variable annuity contracts offered through the separate accounts of participating insurance companies. Currently, the Fund only offers its shares to separate accounts of Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York, affiliates of the Trust and the Manager, as defined below.
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects that risk of loss to be remote.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation
The Fund records its investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 4 below.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold and on foreign currency transactions are recorded on the basis of identified cost. Interest income is recorded on the accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date except in the case of foreign securities, in which case dividends are recorded as soon as such information becomes available.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund distributes its dividends from net investment income and net realized capital gains, if any, on an annual basis. The amount of distributions from net investment income and from net realized gains is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., return of capital, net operating loss, reclassification of certain market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales, and differing treatment on certain investments) do not require reclassification. Distributions to shareholders that exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Expense Allocation
Expenses directly attributable to the Fund are charged directly to the Fund, while expenses attributable to more than one Fund are allocated among the respective Funds based upon relative net assets or some other reasonable method. Expenses which are attributable to more than one Trust are allocated across the Allianz Variable Insurance Products and Allianz Variable Insurance Products Fund of Funds Trusts based upon relative net assets or another reasonable basis. Allianz Investment Management LLC (the “Manager”), serves as the investment manager for the Trust and the Allianz Variable Insurance Products Trust.
Affiliated Securities Transactions
Pursuant to Rule 17a-7 under the 1940 Act (the “Rule”), the Fund may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Manager and Subadviser. Any such purchase or sale transaction must be effected without a brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security’s last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. During the period ended June 30, 2019, the Fund did not engage in any Rule 17a-7 transactions under the Rule.
6
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
Derivative Instruments
All open derivative positions at period end are reflected on the Fund’s Schedule of Portfolio Investments. The following is a description of the derivative instruments utilized by the Fund, including the primary underlying risk exposures related to each instrument type. The Fund’s allocation to the MVP (Managed Volatility Portfolio) risk management process may include (a) derivatives such as index futures, other futures contracts, options, and other similar securities and (b) cash, money market equivalents, short-term debt instruments, money market funds, and short-term debt funds to satisfy all applicable margin requirements and to provide additional portfolio liquidity to satisfy large redemptions and any margin calls. Due to the leverage provided by derivatives, the notional value of the Fund’s derivative positions could exceed 20% of the Fund’s value. The Fund may also use futures to gain equity exposure and may hold cash as a buffer in the event of market shocks.
Futures Contracts
During the period ended June 30, 2019, the Fund invested in futures contracts to reduce volatility and limit the need to decrease or increase allocations to underlying funds. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to segregate liquid assets in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and a payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk (generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for long contracts was $52.1 million and the monthly average notional amount for short contracts was $18.8 million for the period ended June 30, 2019. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
Summary of Derivative Instruments
The following is a summary of the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of June 30, 2019:
Asset Derivative | Liability Derivative | |||||||||||
Primary Risk Exposure | Statement of Assets and Liabilities Location | Total Fair Value* | Statement of Assets and Liabilities Location | Total Fair Value* | ||||||||
Equity Risk |
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Equity Contracts | Receivable for variation margin on futures contracts | $ | 739,104 | Payable for variation margin on futures contracts | $ | — | ||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | 519,296 | Payable for variation margin on futures contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities as variation margin on futures contracts. |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended June 30, 2019:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk |
| |||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | $ | (12,547,452 | ) | $ | 4,901,241 | ||||
Interest Rate Risk | ||||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/Change net in unrealized appreciation/depreciation on futures contracts | 946,300 | 49,858 |
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has contractually agreed to waive fees and reimburse the Fund to limit the annual expenses, excluding interest expense (e.g., cash overdraft fees), taxes, brokerage commissions, acquired fund fees and expenses, other expenditures that are capitalized in accordance with U.S. GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, based on the daily net assets of the Fund, through April 30, 2019. Expenses incurred for investment advisory and management services are reflected on the Statement of Operations as “Manager fees.”
For the period ended June 30, 2019, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL MVP T. Rowe Price Capital Appreciation Plus Fund | 0.10 | % | 0.15 | % |
Any amounts contractually waived or reimbursed by the Manager in a particular fiscal year will be subject to repayment by the Fund to the Manager to the extent that from time to time through the next three fiscal years the repayment will not cause the Fund’s expenses to exceed the lesser of the stated limit at the time of the waiver or the current stated limit. Any amounts recouped by the Manager during the period are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At June 30, 2019, there were no contractual reimbursements subject to repayment by the Fund in subsequent years.
7
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
In addition, the Manager may voluntarily waive or reimburse additional fees in order to maintain more competitive expense ratios. Any voluntary waivers or reimbursements are not subject to repayment in subsequent years. Information on the total amount waived/reimbursed by the Manager or repaid to the Manager by the Fund during the year can be found on the Statement of Operations. During the period ended June 30, 2019, there were no voluntary waivers.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At June 30, 2019, these underlying funds are noted as Affiliated Investment Companies in the Fund’s Schedule of Portfolio Investments. Additional information, including financial statements, about these Funds is available at www.allianzlife.com. The Manager or an affiliate of the Manager is paid a separate fee from the underlying funds for such services. A summary of the Fund’s investments in affiliated investment companies for the period ended June 30, 2019 is as follows:
Fair Value 12/31/2018 | Purchases at Cost | Proceeds from Sales | Net Realized Gains(Losses) | Change in Net Unrealized Appreciation/ Depreciation | Fair Value 6/30/2019 | Shares as of 6/30/2019 | Dividend Income | Net Realized Gains Distributions from Affiliated Underlying Funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 205,728,223 | $ | 7,111,936 | $ | (4,174,077 | ) | $ | (22,831 | ) | $ | 12,303,743 | $ | 220,946,994 | 19,692,245 | $ | — | $ | — | ||||||||||||||||||||||||||
AZL S&P 500 Index Fund, Class 2 | 280,475,858 | 8,371,901 | (3,272,124 | ) | 137,372 | 51,480,103 | 337,193,110 | 19,513,490 | — | — | |||||||||||||||||||||||||||||||||||
AZL T. Rowe Price Capital Appreciation Fund | 547,877,821 | — | (18,998,905 | ) | 884,404 | 92,454,755 | 622,218,075 | 31,345,999 | — | — | |||||||||||||||||||||||||||||||||||
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$ | 1,034,081,902 | $ | 15,483,837 | $ | (26,445,106 | ) | $ | 998,945 | $ | 156,238,601 | $ | 1,180,358,179 | 70,551,734 | $ | — | $ | — | ||||||||||||||||||||||||||||
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Pursuant to separate agreements between the Funds and the Manager, the Manager provides a Chief Compliance Officer (“CCO”) and certain compliance oversight and regulatory filing services to the Trust. Under these agreements the Manager is entitled to an amount equal to a portion of the compensation and certain other expenses related to the individuals performing the CCO and compliance oversight services, as well as $100 per hour for time incurred in connection with the preparation and filing of certain documents with the SEC. The fees are paid to the Manager on a quarterly basis. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administrative and compliance services fees.”
Citi Fund Services Ohio, Inc. (“Citi” or the “Administrator”), a wholly owned subsidiary of Citigroup, Inc., with which an officer of the Trust is affiliated, serves as the Trust’s administrator and fund accountant, and assists the Trust in all aspects of its administration and operation. The Administrator is entitled to a fee, accrued daily and paid monthly. The Administrator is entitled to an annual fee for each additional class of shares of any Fund, certain annual fees in supporting fair values services, and a Trust-wide annual fee for providing infrastructure and support in implementing the written policies and procedures comprising the Fund’s compliance program. The Administrator is also reimbursed for certain expenses incurred. The total expenses incurred by the Fund for these services are reflected on the Statement of Operations as “Administration fees.”
FIS Investor Services LLC (“FIS”) serves as the Fund’s transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Bank of New York Mellon (“BNY Mellon” or the “Custodian”) serves as the Trust’s custodian and securities lending agent. For these services as custodian, the Funds pay BNY Mellon a fee based on a percentage of assets held on behalf of the Funds, plus certain out-of-pocket charges.
Allianz Life Financial Services, LLC (“ALFS”), an affiliate of the Manager, serves as distributor of the Fund. ALFS receives an annual a Trust-wide annual fee of $7,500, paid by the Manager from its profits and not by the Trust, for recordkeeping and reporting services.
In addition, certain legal fees and expenses are paid to a law firm, Dorsey & Whitney LLP, of which the Secretary of the Fund is Senior Counsel. During the period ended June 30, 2019, $7,993 was paid from the Fund relating to these fees and expenses.
Certain Officers and Trustees of the Trust are affiliated with the Manager or the Administrator. Such Officers (except for the Trust’s CCO as noted above) and Trustees receive no compensation from the Trust for serving in their respective roles. For their service to the Trust and to the Allianz Variable Insurance Products Trust, each non-interested Trustee receives a $182,500 annual Board retainer, the Lead Director receives an additional $45,625 annually, the Chair of the Audit Committee and Financial Expert receives an additional $10,000 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $10,000 annually. In addition, the Trustees are reimbursed for certain expenses associated with attending Board meetings. Compensation to the Trustees is allocated between the Trust and the Allianz Variable Insurance Products Trust in proportion to the assets under management of each trust. During the period ended June 30, 2019, actual Trustee compensation was $671,563 in total for both trusts.
4. Investment Valuation Summary
The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund’s investments are summarized in the three broad levels listed below:
● | Level 1 — quoted prices in active markets for identical assets |
● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodology used for valuing investments is not necessarily an indication of the risk associated with investing in those investments.
Investments in other investment companies are valued at their published net asset value (“NAV”). Security prices are generally provided by an independent third party pricing service approved by the Trust’s Board of Trustees (the “Board” or “Trustees”) as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 pm Eastern Time). The investments utilizing Level 1 valuations represent investments in open-end investment companies. Futures contracts are valued at the last sales price as of the close of the primary exchange and are typically categorized as Level 1 in the fair value hierarchy.
8
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
For the period ended June 30, 2019, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
The following is a summary of the valuation inputs used as of June 30, 2019 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Affiliated Investment Company | $ | 1,180,358,179 | $ | — | $ | 1,180,358,179 | |||||||||
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Total Investment Securities | 1,180,358,179 | — | 1,180,358,179 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 1,258,400 | — | 1,258,400 | ||||||||||||
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Total Investments | $ | 1,181,616,579 | $ | — | $ | 1,181,616,579 | |||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
5. Security Purchases and Sales
For the period ended June 30, 2019, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MVP T. Rowe Price Capital Appreciation Plus Fund | $ | 15,483,837 | $ | 26,445,106 |
6. Investment Risks
Derivatives Risk: The Fund may invest directly or through affiliated or unaffiliated mutual funds or unregistered investment pools in derivative instruments such as futures, options, and options on futures. A derivative is a financial contract whose value depends on, or is derived from, the value of an underlying asset, reference rate, or risk. Use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of other risks, such as liquidity risk, interest rate risk, market risk, credit risk, and selection risk. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value may not correlate perfectly with the underlying asset, rate, or index. Using derivatives may result in losses, possibly in excess of the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances. The other party to a derivatives contract could default.
Fund of Fund Risk: The Fund, as a shareholder of the underlying funds, indirectly bears its proportionate share of any investment management fees and other expenses of the underlying funds. Further due to the fees and expenses paid by the Fund, as well as small variations in the Fund’s actual allocations to the underlying funds and any futures and cash held in the Fund’s portfolio, the performance and income distributions of the Fund will not be the same as the performance and income distributions of the underlying funds.
7. Federal Tax Information
It is the policy of the Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined under Subchapter M of the Internal Revenue Code, and to make distributions of net investment income and net realized gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provisions for federal income taxes are required in the financial statements.
Management of the Fund has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at June 30, 2019 is $990,387,847. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 189,970,332 | ||
Unrealized (depreciation) | — | |||
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Net unrealized appreciation/(depreciation) | $ | 189,970,332 | ||
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As of the latest tax year end, December 31, 2018, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MVP T. Rowe Price Capital Appreciation Plus Fund | $ | 13,580,212 | $ | 35,263,676 | $ | 48,843,888 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
9
AZL MVP T. Rowe Price Capital Appreciation Plus Fund
Notes to the Financial Statements
June 30, 2019 (Unaudited)
As of the latest tax year end, December 31, 2018, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other Losses | Unrealized Depreciation(a) | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL MVP T. Rowe Price Capital Appreciation Plus Fund | $ | 25,425,167 | $ | 32,396,701 | $ | — | $ | 33,731,733 | $ | 91,553,601 |
(a) | The difference between book-basis and tax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
8. Ownership and Principal Holders
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2 (a)(9) of the 1940 Act. As of June 30, 2019, the Fund had an individual shareholder account which is affiliated with the Manager representing ownership in excess of 85% of the Fund. As of June 30, 2019, the Fund had a controlling interest (in excess of 50%) in the AZL T. Rowe Price Capital Appreciation Fund, which is affiliated with the Manager.
9. Subsequent Events
Management of the Fund has evaluated the need for additional disclosures or adjustments resulting from events through the date the financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have material impact on the Fund’s financial statements.
10
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request, by visiting the Securities and Exchange Commission’s (‘‘Commission’’) website at www.sec.gov, or by calling 800-624-0197.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 800-624-0197; (ii) on the Allianz Variable Insurance Products Trust’s website at https://www.allianzlife.com; and (iii) on the Commission’s website at http://www.sec.gov.
The Fund files complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-PORT. Schedules of Portfolio Holdings for the Fund in this report are available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
11
The Allianz VIP Fund of Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | SARRPT0619 08/19 |
Item 2. | Code of Ethics. |
Not applicable__ only for annual reports.
Item 3. | Audit Committee Financial Expert. |
Not applicable__ only for annual reports.
Item 4. | Principal Accountant Fees and Services. |
Not applicable__ only for annual reports.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
(a) | The Schedule of Investments as of the close of the reporting period are included as part of the report to shareholders filed under Item 1 of the FormN-CSR. |
(b) | Not applicable. |
Item 7. | Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers ofClosed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
Not applicable.
Item 11. | Controls and Procedures. |
(a) | The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on FormN-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule30a-3(d) under the Act (17 CFR270.30a-3(d)) that occurred during the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. | Disclosure of Securities Lending Activities forClosed-End Management Investment Companies. |
Not applicable.
Item 13. | Exhibits. |
(a)(1) | Not applicable__ only for annual reports. | |
(a)(2) | Certifications pursuant to Rule30a-2(a) are attached hereto. | |
(a)(3) | Not applicable. | |
(a)(4) | Not applicable. | |
(b) | Certifications pursuant to Rule30a-2(b) are furnished herewith. |
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) | Allianz Variable Insurance Products Fund of Funds Trust |
By (Signature and Title) | /s/ Brian Muench | |||
Brian Muench, Principal Executive Officer |
DateAugust 27, 2019
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 (Signature and Title) | /s/ Brian Muench | |||
Brian Muench, Principal Executive Officer |
DateAugust 27, 2019
By (Signature and Title) | /s/ Bashir C. Asad | |||
Bashir C. Asad, Principal Financial Officer & Principal Accounting Officer |
DateAugust 27, 2019
.