UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-09491
Allianz Variable Insurance Products 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: December 31, 2018
Item 1. | Reports to Stockholders. |
AZL® BlackRock Global Allocation Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Consolidated Expense Examples and Portfolio Composition
Page 3
Consolidated Schedule of Portfolio Investments
Page 4
Consolidated Statement of Assets and Liabilities
Page 22
Consolidated Statement of Operations
Page 22
Consolidated Statements of Changes in Net Assets
Page 23
Consolidated Financial Highlights
Page 24
Notes to the Consolidated Financial Statements
Page 25
Report of Independent Registered Public Accounting Firm
Page 38
Other Federal Income Tax Information
Page 39
Page 40
Approval of Investment Advisory and Subadvisory Agreements
Page 41
Information about the Board of Trustees and Officers
Page 44
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® BlackRock Global Allocation Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® BlackRock Global Allocation Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund.
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What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® BlackRock Global Allocation Fund (the “Fund”) returned-7.70%. That compared to a-8.77%,-4.38%,-13.81%, 1.46%,-1.82% and-4.56% total return for its benchmarks, the FTSE World Index1, the S&P 500 Index1, the FTSE World ex U.S. Index1, the ICE BofA Merrill Lynch5-Year U.S. Treasury Bond Index1, the FTSENon-USD World Government Bond Index1, and the Moderate Reference Benchmark1, respectively.
U.S. equity markets declined for the year, though they generally outperformed international equities for the12-month period. The S&P 500 Index returned-4.38%, while the FTSE World Ex U.S. Index returned-13.81% (in US dollar terms). Overall, equities suffered from investors’ concerns about slowing global growth, trade protectionism and geopolitical uncertainty, particularly in the U.K. and Italy. Positive corporate earnings reports and healthy macroeconomic data, including low unemployment, helped U.S. equities outperform their overseas counterparts.
Though markets had a strong start to the year, volatility quickly reared its head, first in equities and then in the investment-grade and emerging market bond sectors. In fixed-income markets, yields rose as the Federal Reserve Board pursued its schedule of four interest rate increases over the course of 2018. The European Central Bank left interest rates unchanged throughout the year and signaled the end of its quantitative easing program.
In the fourth quarter, yields initially reached a seven-year high before tightening financial conditions and a shift in tone from the Federal Open Market Committee caused yields to fall. Investors’ appetite for risk declined at the end of the period, leading to a strongsell-off in stocks.
The Fund underperformed its Moderate Reference Benchmark for the12-month period under review. Within the Fund’s equity holdings, a higher-than-benchmark exposure to Japanese stocks dragged on relative performance, as did an underweight to U.S. equities and anout-of-benchmark allocation to European financials. From a sector perspective, an above-benchmark allocation to European financials dragged on returns, as did stock selection within the technology, healthcare, consumer discretionary, materials and real estate sectors.*
An underweight allocation to fixed income had a broadly negative impact on relative results. Within fixed income, the Fund’s above-benchmark exposure to U.S. duration and an overweight exposure to select emerging market government bonds also detracted. Exposure to commodity-related securities and the Fund’s currency management, particularly exposure to the Indian rupee, dragged on relative results as well.*
Within equities, an above-benchmark exposure to India added to results, as it was one of the few Asian emerging markets to post a positive return for the year. From a sector perspective, an overweight allocation to the healthcare and technology sectors, along with underweight allocations to the consumer staples, financials and industrials sectors benefited relative returns. Stock selection within the utilities and industrials sectors also contributed. From a currency management perspective, the Fund’s underweight exposure to the euro and overweight exposure to the U.S. dollar also added to relative results.*
The Fund uses derivatives, which may include options, futures, swaps and forward contracts, both to seek to enhance returns of the Fund and to hedge (or protect) against adverse movements in currency exchange rates, interest rates and movements in the securities markets. During the period, the Fund’s use of derivatives detracted from the Fund’s performance.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmarks please refer to page 2 of this report. |
1
AZL® BlackRock Global Allocation Fund Review (Unaudited)
Fund Objective
The Fund’s investment objective is to seek high total investment return. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in a portfolio of equity, debt and money market securities.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
Emerging market investing may be subject to additional economic, political, liquidity, and currency risks not associated with more developed countries.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities.
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates.
High-yield bonds have a higher risk of default or other adverse credit events, but have the potential to pay higher earnings over investment-grade bonds. The higher risk of default, or the inability of the creditor to repay its debt, is the primary reason for the higher interest rates on high-yield bonds.
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
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Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmarks and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Since | ||||||||||||||||
1 | 3 | 5 | Inception | |||||||||||||
Year | Year | Year | (1/10/12) | |||||||||||||
AZL®BlackRock Global Allocation Fund | -7.70 | % | 2.89 | % | 1.81 | % | 4.25 | % | ||||||||
FTSE World Index | -8.77 | % | 7.14 | % | 4.91 | % | 8.91 | % | ||||||||
S&P 500 Index | -4.38 | % | 9.26 | % | 8.49 | % | 12.30 | % | ||||||||
FTSE World ex U.S. Index | -13.81 | % | 4.57 | % | 1.08 | % | 5.29 | % | ||||||||
ICE BofA Merrill Lynch5-Year U.S. Treasury Bond Index | 1.46 | % | 0.91 | % | 1.42 | % | 1.00 | % | ||||||||
FTSE(Non-USD) World Government Bond Index | -1.82 | % | 3.32 | % | 0.28 | % | -0.13 | % | ||||||||
Moderate Reference Benchmark | -4.56 | % | 5.40 | % | 3.88 | % | 6.07 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®BlackRock Global Allocation Fund | 1.20 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense and acquired fund fees and expenses), to 1.19% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
Acquired fund fees and expenses are incurred indirectly by the Fund through the valuation of the Fund’s investments in other investment companies. Accordingly, acquired fund fees and expenses affect the Fund’s total returns. Because these fees and expenses are not included in the Fund’s financial highlights, the Fund’s total annual fund operating expenses, as shown in the prospectus, do not correlate to the ratios of expenses to average net assets shown in the Financial Highlights. Without acquired fund fees and expenses, the Fund’s gross expense ratio would be 1.17%.
The Fund’s performance is measured against the FTSE World Index that is a market-capitalization weighted index representing the performance of the large-andmid-capitalization stocks from the FTSE Global Equity Index Series and covers90-95% of the investable market capitalization. The Standard & Poor’s 500 Index (“S&P 500”) is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. The FTSE World ex U.S. Index is part of a range of indexes designed to help U.S. investors benchmark their international investments. The index is comprised of (84%) large-and (16%)mid-cap stocks providing coverage of Developed and Emerging Markets (46 countries) excluding the U.S. The index is derived from the FTSE Global Equity Index Series, which covers 98% of the world’s investable market capitalization. The ICE BofA Merrill Lynch5-Year U.S. Treasury Bond Index is designed to track the total return of the current coupon5-Year U.S. Treasury bond. The FTSE(Non-USD) World Government Bond Index is a market capitalization-weighted index that tracks 10 government bond indexes, excluding the U.S. The Moderate Reference Benchmark is comprised of (36%) S&P 500, (24%) FTSE World ex U.S. Index, (24%) ICE BofA Merrill Lynch5-Year U.S. Treasury Bond Index, and (16%) FTSE(Non-USD) World Government Bond. These indexes are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL BlackRock Global Allocation Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL BlackRock Global Allocation 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL BlackRock Global Allocation Fund | $ | 1,000.00 | $ | 938.90 | $ | 5.43 | 1.11 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL BlackRock Global Allocation Fund | $ | 1,000.00 | $ | 1,019.61 | $ | 5.65 | 1.11 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Consolidated Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Common Stocks | 58.6 | % | |||
U.S. Treasury Obligations | 28.1 | ||||
Foreign Bonds | 4.4 | ||||
Corporate Bonds | 3.7 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 3.0 | ||||
Yankee Dollars | 1.8 | ||||
Exchange Traded Funds | 1.3 | ||||
Money Markets | 0.6 | ||||
Preferred Stocks | 0.5 | ||||
Convertible Preferred Stocks | 0.4 | ||||
Purchased Options | 0.2 | ||||
Convertible Bonds | 0.2 | ||||
Bank Loans | 0.2 | ||||
Private Placements | 0.1 | ||||
Purchased Currency Options | — | ^ | |||
Purchased Swaptions | — | ^ | |||
|
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Total Investment Securities | 103.1 | ||||
Net other assets (liabilities) | (3.1 | ) | |||
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Net Assets | 100.0 | % | |||
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^ | Represents less than 0.05%. |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
United States | 70.1 | % | |||
Japan | 9.9 | ||||
United Kingdom | 3.1 | ||||
France | 2.8 | ||||
Germany | 2.3 | ||||
Canada | 1.6 | ||||
China | 1.3 | ||||
Netherlands | 1.3 | ||||
India | 1.2 | ||||
Switzerland | 1.2 | ||||
All other countries | 8.3 | ||||
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Total Investment Securities | 103.1 | ||||
Net other assets (liabilities) | (3.1 | ) | |||
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Net Assets | 100.0 | % | |||
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3
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (58.6%): | ||||||||
Aerospace & Defense (1.2%): | ||||||||
384 | Boeing Co. (The) | $ | 123,840 | |||||
426 | Dassault Aviation SA | 589,803 | ||||||
77 | Northrop Grumman Corp. | 18,857 | ||||||
4,798 | Raytheon Co. | 735,773 | ||||||
12,478 | Safran SA | 1,498,904 | ||||||
10,830 | United Technologies Corp. | 1,153,179 | ||||||
|
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4,120,356 | ||||||||
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Air Freight & Logistics (0.0%)†: | ||||||||
1,268 | C.H. Robinson Worldwide, Inc.^ | 106,626 | ||||||
|
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Airlines (1.3%): | ||||||||
533 | American Airlines Group, Inc.^ | 17,115 | ||||||
48,224 | Azul SA, ADR* | 1,335,322 | ||||||
659 | Delta Air Lines, Inc. | 32,884 | ||||||
57,000 | Japan Airlines Co., Ltd. | 2,019,164 | ||||||
4,199 | Turk Hava Yollari Anonim Ortakligi* | 12,788 | ||||||
15,206 | United Continental Holdings, Inc.* | 1,273,198 | ||||||
|
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4,690,471 | ||||||||
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Auto Components (1.1%): | ||||||||
48,683 | Cheng Shin Rubber Industry Co., Ltd. | 64,309 | ||||||
328 | Compagnie Generale des Establissements Michelin SCA, Class B | 32,425 | ||||||
37,700 | Denso Corp. | 1,673,357 | ||||||
2,500 | Exedy Corp. | 61,070 | ||||||
21,400 | Koito Manufacturing Co., Ltd. | 1,091,819 | ||||||
141 | Lear Corp. | 17,323 | ||||||
2,300 | Stanley Electric Co., Ltd. | 64,151 | ||||||
20,400 | Toyota Industries Corp. | 938,846 | ||||||
|
| |||||||
3,943,300 | ||||||||
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Automobiles (1.2%): | ||||||||
1,500 | BAIC Motor Corp., Ltd., Class H | 793 | ||||||
6,000 | Dongfeng Motor Corp., Class H | 5,407 | ||||||
74,300 | Fuji Heavy Industries, Ltd. | 1,586,353 | ||||||
817 | General Motors Co. | 27,329 | ||||||
10,800 | Guangzhou Automobile Group Co., Ltd. | 10,673 | ||||||
2,973 | Hero MotoCorp, Ltd. | 132,008 | ||||||
4,100 | Maruti Suzuki India, Ltd. | 437,290 | ||||||
35,900 | Suzuki Motor Corp. | 1,816,807 | ||||||
|
| |||||||
4,016,660 | ||||||||
|
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Banks (2.9%): | ||||||||
27,240 | ABN AMRO Group NV | 637,964 | ||||||
23,000 | Agricultural Bank of China, Ltd., Class A | 10,022 | ||||||
9,649 | Banco Bilbao Vizcaya Argentaria SA | 50,892 | ||||||
2,022 | Banco do Brasil SA | 24,257 | ||||||
573 | Banco Santander Brasil SA | 6,314 | ||||||
56,040 | Bank of America Corp. | 1,380,826 | ||||||
7,000 | Bank of China, Ltd. | 3,008 | ||||||
12,891 | Barclays plc | 24,724 | ||||||
28,000 | China Citic Bank Co., Ltd. | 16,959 | ||||||
11,000 | China Construction Bank | 9,019 | ||||||
20,916 | Citigroup, Inc. | 1,088,887 | ||||||
888 | Danske Bank A/S | 17,598 | ||||||
1,416 | Fifth Third Bancorp | 33,318 | ||||||
287 | Grupo Financiero Banorte SAB de C.V. | 1,401 | ||||||
826 | Hana Financial Holdings Group, Inc. | 26,807 | ||||||
161,303 | HSBC Holdings plc | 1,323,510 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
72,000 | Industrial & Commercial Bank of China, Class H | $ | 51,101 | |||||
1,329 | Industrial Bank of Korea (IBK) | 16,735 | ||||||
13,344 | JPMorgan Chase & Co. | 1,302,641 | ||||||
322 | KB Financial Group, Inc. | 13,442 | ||||||
1,600 | Mitsubishi UFJ Financial Group, Inc. | 7,891 | ||||||
72,800 | PT Bank Central Asia Tbk | 131,651 | ||||||
1,341 | Shinhan Financial Group Co., Ltd. | 47,591 | ||||||
1,639 | Societe Generale | 52,029 | ||||||
91,540 | State Bank of India* | 386,839 | ||||||
21,541 | SunTrust Banks, Inc. | 1,086,528 | ||||||
60 | Taiwan Cooperative Financial Holding Co., Ltd. | 34 | ||||||
3,328 | Turkiye Is Bankasi AS, Class C | 2,857 | ||||||
811 | U.S. Bancorp | 37,063 | ||||||
548 | Unicredit SpA | 6,216 | ||||||
6,300 | United Overseas Bank, Ltd. | 112,949 | ||||||
66,352 | Wells Fargo & Co. | 3,057,500 | ||||||
1,133 | Woori Bank | 15,841 | ||||||
|
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10,984,414 | ||||||||
|
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Beverages (0.6%): | ||||||||
13,018 | Anheuser-Busch InBev NV | 861,443 | ||||||
546 | Carlsberg A/S, Class B | 58,100 | ||||||
4,000 | China Resources Enterprises, Ltd. | 13,861 | ||||||
103 | Constellation Brands, Inc., Class C | 16,564 | ||||||
10,300 | Jiangsu Yanghe Brewery Joint-Stock Co., Ltd., Class A | 141,948 | ||||||
5,900 | Kweichow Moutai Co., Ltd. | 506,531 | ||||||
25,900 | Luzhou Laojiao Co., Ltd. | 153,230 | ||||||
1,583 | PepsiCo, Inc. | 174,890 | ||||||
2,000 | Tsingtao Brewery Co., Ltd., Class H | 8,086 | ||||||
19,400 | Wuliangye Yibin Co., Ltd. | 143,626 | ||||||
|
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2,078,279 | ||||||||
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Biotechnology (0.8%): | ||||||||
1,367 | AbbVie, Inc. | 126,024 | ||||||
645 | Amgen, Inc. | 125,562 | ||||||
2,955 | Biogen Idec, Inc.* | 889,219 | ||||||
255 | Celgene Corp.* | 16,343 | ||||||
27,177 | Gilead Sciences, Inc. | 1,699,921 | ||||||
|
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2,857,069 | ||||||||
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Building Products (0.3%): | ||||||||
1,034 | Compagnie de Saint-Gobain SA | 34,412 | ||||||
5,500 | Daikin Industries, Ltd. | 578,850 | ||||||
1,887 | Fortune Brands Home & Security, Inc.^ | 71,687 | ||||||
6,303 | Masco Corp. | 184,300 | ||||||
4,100 | Nichias Corp. | 70,839 | ||||||
|
| |||||||
940,088 | ||||||||
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Capital Markets (0.9%): | ||||||||
598 | Ameriprise Financial, Inc. | 62,413 | ||||||
631 | Bank of New York Mellon Corp. (The) | 29,701 | ||||||
36,300 | Charles Schwab Corp. (The) | 1,507,539 | ||||||
480 | Goldman Sachs Group, Inc. (The) | 80,184 | ||||||
37,741 | Morgan Stanley | 1,496,431 | ||||||
229 | State Street Corp. | 14,443 | ||||||
|
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3,190,711 | ||||||||
|
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Chemicals (2.7%): | ||||||||
15,826 | Air Products & Chemicals, Inc. | 2,532,951 | ||||||
40,800 | Asahi Kasei Corp. | 416,344 |
See accompanying notes to the consolidated financial statements.
4
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
14,500 | Daicel Chemical Industries, Ltd. | $ | 149,027 | |||||
30,322 | DowDuPont, Inc. | 1,621,621 | ||||||
1,971 | Evonik Industries AG | 49,222 | ||||||
33,000 | Formosa Chemicals & Fibre Corp. | 111,810 | ||||||
37,000 | Formosa Plastics Corp. | 120,597 | ||||||
5,200 | Hitachi Chemical Co., Ltd. | 77,673 | ||||||
893 | Huntsman Corp. | 17,226 | ||||||
5,400 | Kuraray Co., Ltd. | 75,769 | ||||||
582 | LG Chem, Ltd. | 180,269 | ||||||
5 | Lotte Chemical Corp. | 1,238 | ||||||
47,000 | Nan Ya Plastics Corp. | 115,409 | ||||||
28,100 | Nitto Denko Corp. | 1,403,172 | ||||||
713 | Nutrien, Ltd. | 33,493 | ||||||
73,900 | PTT Global Chemical Public Co., Ltd. | 161,485 | ||||||
17,300 | Shin-Etsu Chemical Co., Ltd. | 1,332,989 | ||||||
54,000 | Sinopec Shanghai Petrochemical Co., Ltd., Class H | 23,495 | ||||||
5,000 | Sumitomo Chemical Co., Ltd. | 24,455 | ||||||
11,500 | Toagosei Co., Ltd. | 127,779 | ||||||
86,300 | Toray Industries, Inc. | 603,048 | ||||||
30,400 | Ube Industries, Ltd. | 612,752 | ||||||
|
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9,791,824 | ||||||||
|
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Commercial Services & Supplies (0.0%)†: | ||||||||
6,229 | Country Garden Services Holdings Co., Ltd.* | 9,804 | ||||||
191 | Waste Management, Inc. | 16,997 | ||||||
|
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26,801 | ||||||||
|
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Communications Equipment (0.0%)†: | ||||||||
2,693 | Cisco Systems, Inc. | 116,688 | ||||||
5,878 | Nokia OYJ | 33,958 | ||||||
4,265 | Telefonaktiebolaget LM Ericsson, Class B | 37,613 | ||||||
|
| |||||||
188,259 | ||||||||
|
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Construction & Engineering (0.3%): | ||||||||
1,000 | China Communications Construction Co., Ltd. | 939 | ||||||
3,077 | Eiffage SA | 257,389 | ||||||
700 | Kajima Corp. | 9,385 | ||||||
14,400 | Kinden Corp. | 231,668 | ||||||
1,900 | Kyudenko Corp. | 71,503 | ||||||
3,700 | Maeda Road Construction Co., Ltd. | 76,243 | ||||||
3,400 | Nippo Corp. | 65,044 | ||||||
4,300 | Okumura Corp. | 124,584 | ||||||
100 | TAISEI Corp. | 4,252 | ||||||
18,400 | Toda Corp. | 113,854 | ||||||
|
| |||||||
954,861 | ||||||||
|
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Construction Materials (0.0%)†: | ||||||||
3,500 | Anhui Conch Cement Co., Ltd., Class H | 16,795 | ||||||
14,576 | Cemex SAB de C.V.* | 7,048 | ||||||
8,000 | China National Buildings Material Co., Ltd. | 5,420 | ||||||
32,000 | China Resources Cement Holdings, Ltd. | 28,447 | ||||||
11,000 | Siam Cement PCL | 147,168 | ||||||
|
| |||||||
204,878 | ||||||||
|
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Consumer Finance (0.0%)†: | ||||||||
694 | Ally Financial, Inc. | 15,726 | ||||||
301 | Capital One Financial Corp. | 22,753 | ||||||
490 | Discover Financial Services | 28,900 | ||||||
|
| |||||||
67,379 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Containers & Packaging (0.0%)†: | ||||||||
331 | Packaging Corp. of America | $ | 27,625 | |||||
|
| |||||||
Distributors (0.0%)†: | ||||||||
3,700 | Canon Marketing Japan, Inc. | 65,430 | ||||||
|
| |||||||
Diversified Consumer Services (0.0%)†: | ||||||||
275 | New Oriental Education & Technology Group, Inc., ADR* | 15,073 | ||||||
|
| |||||||
Diversified Financial Services (0.2%): | ||||||||
1,130 | Berkshire Hathaway, Inc., Class B* | 230,723 | ||||||
126,000 | Fubon Financial Holdings Co., Ltd. | 192,102 | ||||||
|
| |||||||
422,825 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.3%): | ||||||||
11,075 | AT&T, Inc. | 316,081 | ||||||
48,548 | Cellnex Telecom SAU | 1,239,996 | ||||||
244,000 | Chunghwa Telecom Co., Ltd. | 896,151 | ||||||
81,000 | HKT Trust & HKT, Ltd. | 116,631 | ||||||
2,700 | Nippon Telegraph & Telephone Corp. | 109,948 | ||||||
62,300 | Singapore Telecommunications, Ltd. | 133,667 | ||||||
576,422 | Telecom Italia SpA* | 319,283 | ||||||
28,134 | Telecom Italia RNC | 13,446 | ||||||
426 | Telstra Corp., Ltd. | 855 | ||||||
24,657 | Verizon Communications, Inc. | 1,386,216 | ||||||
|
| |||||||
4,532,274 | ||||||||
|
| |||||||
Electric Utilities (1.2%): | ||||||||
6,710 | CEZ | 160,183 | ||||||
21,500 | CK Infrastructure Holdings, Ltd. | 162,300 | ||||||
17,000 | CLP Holdings, Ltd. | 191,648 | ||||||
161,458 | Enel SpA | 931,336 | ||||||
910 | Exelon Corp. | 41,041 | ||||||
6,500 | Hongkong Electric Holdings, Ltd. | 45,130 | ||||||
17,110 | NextEra Energy, Inc. | 2,974,060 | ||||||
739 | PG&E Corp.* | 17,551 | ||||||
1,236 | Scottish & Southern Energy plc | 16,991 | ||||||
374 | Xcel Energy, Inc. | 18,427 | ||||||
|
| |||||||
4,558,667 | ||||||||
|
| |||||||
Electrical Equipment (0.4%): | ||||||||
768 | Eaton Corp. plc | 52,731 | ||||||
4,900 | GS Yuasa Corp. | 99,595 | ||||||
3,900 | Mabuchi Motor Co., Ltd. | 119,227 | ||||||
124,600 | Mitsubishi Electric Corp. | 1,366,165 | ||||||
382 | Rockwell Automation, Inc.^ | 57,483 | ||||||
|
| |||||||
1,695,201 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.4%): | ||||||||
2,108 | ALPS Electric Co., Ltd. | 40,719 | ||||||
1,487 | Corning, Inc. | 44,922 | ||||||
2,100 | Hitachi, Ltd. | 55,829 | ||||||
62,320 | Hon Hai Precision Industry Co., Ltd. | 143,847 | ||||||
7,100 | Japan Aviation Electronics Industry, Ltd. | 81,469 | ||||||
300 | Keyence Corp. | 151,215 | ||||||
9,300 | Murata Manufacturing Co., Ltd. | 1,281,600 | ||||||
10 | Samsung Electro-Mechanics Co., Ltd., Series L | 935 | ||||||
1,000 | Yageo Corp. | 10,212 | ||||||
|
| |||||||
1,810,748 | ||||||||
|
|
See accompanying notes to the consolidated financial statements.
5
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Energy Equipment & Services (0.1%): | ||||||||
492 | Helmerich & Payne, Inc. | $ | 23,586 | |||||
8,746 | Schlumberger, Ltd. | 315,556 | ||||||
|
| |||||||
339,142 | ||||||||
|
| |||||||
Entertainment (0.2%): | ||||||||
282 | Ncsoft Corp. | 118,161 | ||||||
300 | Nexon Co., Ltd.* | 3,833 | ||||||
394 | Walt Disney Co. (The) | 43,202 | ||||||
193,901 | Zynga, Inc.* | 762,031 | ||||||
|
| |||||||
927,227 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.3%): | ||||||||
585 | American Tower Corp. | 92,541 | ||||||
9,597 | Equity Residential Property Trust | 633,499 | ||||||
17,500 | Link REIT (The) | 176,247 | ||||||
5,388 | Stockland Trust Group | 13,364 | ||||||
3,292 | Unibail-Rodamco-Westfield | 508,442 | ||||||
512 | Vornado Realty Trust | 31,759 | ||||||
1,363 | Weyerhaeuser Co. | 29,795 | ||||||
|
| |||||||
1,485,647 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
400 | Aeon Co., Ltd. | 7,873 | ||||||
483 | Coles Group, Ltd.* | 3,993 | ||||||
175 | Costco Wholesale Corp. | 35,649 | ||||||
96 | E-Mart Co., Ltd. | 15,659 | ||||||
6,789 | Jeronimo Martins SGPS SA | 80,366 | ||||||
879 | Koninklijke Ahold Delhaize NV | 22,172 | ||||||
1,128 | Kroger Co. (The) | 31,020 | ||||||
1,900 | Seven & I Holdings Co., Ltd. | 82,742 | ||||||
354 | Sysco Corp. | 22,182 | ||||||
71 | Walgreens Boots Alliance, Inc. | 4,851 | ||||||
1,009 | Wal-Mart Stores, Inc. | 93,989 | ||||||
1,020 | Woolworths, Ltd. | 21,131 | ||||||
|
| |||||||
421,627 | ||||||||
|
| |||||||
Food Products (2.2%): | ||||||||
77,300 | Ajinomoto Co., Inc. | 1,371,533 | ||||||
42,956 | Angel Yeast Co., Ltd., Class A | 157,735 | ||||||
583 | Conagra Brands, Inc. | 12,453 | ||||||
39,747 | Danone SA | 2,800,964 | ||||||
2,762 | Mondelez International, Inc., Class A | 110,563 | ||||||
40,107 | Nestle SA, Registered Shares | 3,262,060 | ||||||
6,000 | Tingyi (Caymen Is) Holding Corp. | 7,948 | ||||||
79,000 | Uni-President Enterprises Corp. | 178,799 | ||||||
176,000 | Want Want China Holdings, Ltd. | 122,444 | ||||||
56,000 | WH Group, Ltd. | 42,704 | ||||||
|
| |||||||
8,067,203 | ||||||||
|
| |||||||
Gas Utilities (0.4%): | ||||||||
3,500 | Beijing Enterprises Holdings, Ltd. | 18,446 | ||||||
4,000 | China Resources Gas Group, Ltd. | 15,745 | ||||||
52,200 | Tokyo Gas Co., Ltd. | 1,320,296 | ||||||
|
| |||||||
1,354,487 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (1.5%): | ||||||||
1,352 | Abbott Laboratories | 97,790 | ||||||
1,417 | Baxter International, Inc. | 93,267 | ||||||
160 | Edwards Lifesciences Corp.* | 24,507 | ||||||
8,444 | Essilor International SA Compagnie Generale d’Optique | 1,066,097 | ||||||
19,000 | HOYA Corp. | 1,161,483 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
51 | Intuitive Surgical, Inc.* | $ | 24,425 | |||||
85,806 | Koninklijke Philips Electronics NV | 3,023,654 | ||||||
1,416 | Medtronic plc | 128,800 | ||||||
200 | Olympus Co., Ltd. | 6,116 | ||||||
784 | Stryker Corp. | 122,892 | ||||||
300 | Sysmex Corp. | 14,476 | ||||||
|
| |||||||
5,763,507 | ||||||||
|
| |||||||
Health Care Providers & Services (3.7%): | ||||||||
4,100 | Alfresa Holdings Corp. | 106,087 | ||||||
12,669 | Anthem, Inc. | 3,327,259 | ||||||
157 | Cigna Corp. | 29,817 | ||||||
40,410 | CVS Health Corp. | 2,647,663 | ||||||
17,460 | DaVita, Inc.* | 898,492 | ||||||
36,490 | Fresenius SE & Co. KGaA | 1,763,600 | ||||||
57,784 | Hapvida Participacoes e Investimentos SA | 465,218 | ||||||
7,966 | HCA Healthcare, Inc. | 991,369 | ||||||
102 | Humana, Inc. | 29,221 | ||||||
298 | McKesson Corp. | 32,920 | ||||||
4,800 | Medipal Holdings Corp. | 103,846 | ||||||
39,986 | NMC Health plc | 1,397,561 | ||||||
102,541 | Notre Dame Intermedica Participacoes SA* | 769,460 | ||||||
1,900 | Suzuken Co., Ltd. | 97,529 | ||||||
7,586 | Tenet Healthcare Corp.* | 130,024 | ||||||
1,682 | UnitedHealth Group, Inc. | 419,020 | ||||||
|
| |||||||
13,209,086 | ||||||||
|
| |||||||
Health Care Technology (0.1%): | ||||||||
96,300 | Ping An Healthcare and Technology Co., Ltd.* | 340,248 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.1%): | ||||||||
85 | Carnival Corp., Class A | 4,191 | ||||||
2,000 | Galaxy Entertainment Group, Ltd. | 12,555 | ||||||
47,100 | Genting Singapore, Ltd. | 33,726 | ||||||
750 | Las Vegas Sands Corp. | 39,038 | ||||||
309 | McDonald’s Corp. | 54,869 | ||||||
29,146 | MGM Resorts International | 707,082 | ||||||
268 | Royal Caribbean Cruises, Ltd. | 26,208 | ||||||
400 | Sands China, Ltd. | 1,732 | ||||||
18,062 | Sodexo SA | 1,847,019 | ||||||
19,181 | Starbucks Corp. | 1,235,256 | ||||||
662 | Wyndham Worldwide Corp. | 23,726 | ||||||
3,169 | Yum China Holdings, Inc. | 106,257 | ||||||
589 | Yum! Brands, Inc. | 54,141 | ||||||
|
| |||||||
4,145,800 | ||||||||
|
| |||||||
Household Durables (0.0%)†: | ||||||||
2,841 | Berkeley Group Holdings plc (The) | 125,994 | ||||||
1,674 | Coway Co., Ltd. | 111,071 | ||||||
37 | LG Electronics, Inc. | 2,081 | ||||||
2,500 | Panasonic Corp. | 22,435 | ||||||
800 | Sony Corp. | 38,531 | ||||||
|
| |||||||
300,112 | ||||||||
|
| |||||||
Household Products (1.0%): | ||||||||
36,948 | Colgate-Palmolive Co. | 2,199,145 | ||||||
17,398 | Procter & Gamble Co. (The) | 1,599,224 | ||||||
600 | Unicharm Corp. | 19,387 | ||||||
|
| |||||||
3,817,756 | ||||||||
|
|
See accompanying notes to the consolidated financial statements.
6
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Independent Power and Renewable Electricity Producers (0.2%): | ||||||||
1,736 | AES Corp. (The) | $ | 25,103 | |||||
13,246 | NextEra Energy Partners LP^ | 570,240 | ||||||
716 | NRG Energy, Inc. | 28,354 | ||||||
7,687 | Vistra Energy Corp.* | 175,955 | ||||||
|
| |||||||
799,652 | ||||||||
|
| |||||||
Industrial Conglomerates (0.1%): | ||||||||
20,000 | Citic, Ltd. | 31,200 | ||||||
19,000 | Fosun International, Ltd. | 27,798 | ||||||
3,523 | General Electric Co. | 26,669 | ||||||
3,500 | Jardine Matheson Holdings, Ltd. | 243,698 | ||||||
1,300 | Toshiba Corp. | 36,908 | ||||||
|
| |||||||
366,273 | ||||||||
|
| |||||||
Insurance (1.2%): | ||||||||
125 | American International Group, Inc. | 4,926 | ||||||
31,074 | AXA SA | 669,417 | ||||||
105,000 | Cathay Financial Holding Co., Ltd. | 159,808 | ||||||
6,959 | Chubb, Ltd. | 898,964 | ||||||
2,142 | Hartford Financial Services Group, Inc. (The) | 95,212 | ||||||
2,671 | Manulife Financial Corp. | 37,903 | ||||||
29,613 | Marsh & McLennan Cos., Inc. | 2,361,637 | ||||||
1,285 | MetLife, Inc. | 52,762 | ||||||
60 | Muenchener Rueckversicherungs-Gesellschaft AG | 13,092 | ||||||
11,887 | Old Mutual, Ltd. | 18,498 | ||||||
500 | Ping An Insurance Group Co. of China, Ltd. | 4,391 | ||||||
315 | Prudential Financial, Inc. | 25,688 | ||||||
286 | Reinsurance Group of America, Inc. | 40,106 | ||||||
310 | Swiss Re AG | 28,495 | ||||||
1,208 | Travelers Cos., Inc. (The) | 144,658 | ||||||
|
| |||||||
4,555,557 | ||||||||
|
| |||||||
Interactive Media & Services (2.6%): | ||||||||
61 | Alphabet, Inc., Class A* | 63,743 | ||||||
5,282 | Alphabet, Inc., Class C* | 5,470,092 | ||||||
106 | Baidu, Inc., ADR* | 16,812 | ||||||
17,547 | Facebook, Inc., Class A* | 2,300,236 | ||||||
146 | Momo, Inc., ADR* | 3,468 | ||||||
571 | SINA Corp.* | 30,628 | ||||||
51,200 | Tencent Holdings, Ltd. | 2,029,647 | ||||||
|
| |||||||
9,914,626 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (1.2%): | ||||||||
5,905 | Alibaba Group Holding, Ltd., ADR*^ | 809,399 | ||||||
2,309 | Amazon.com, Inc.* | 3,468,049 | ||||||
22 | Booking Holdings, Inc.* | 37,893 | ||||||
1,336 | eBay, Inc.* | 37,502 | ||||||
277 | Expedia, Inc. | 31,204 | ||||||
14,468 | Meituan Dianping* | 81,384 | ||||||
|
| |||||||
4,465,431 | ||||||||
|
| |||||||
IT Services (0.6%): | ||||||||
440 | Accenture plc, Class C | 62,044 | ||||||
89 | Alliance Data Systems Corp.^ | 13,357 | ||||||
148 | Automatic Data Processing, Inc. | 19,406 | ||||||
709 | Cognizant Technology Solutions Corp., Class A | 45,007 | ||||||
421 | DXC Technology Co. | 22,385 | ||||||
8,515 | FleetCor Technologies, Inc.* | 1,581,406 | ||||||
200 | Fujitsu, Ltd. | 12,540 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services, continued | ||||||||
697 | Global Payments, Inc. | $ | 71,882 | |||||
910 | HCL Technologies, Ltd. | 12,548 | ||||||
1,482 | Infosys, Ltd. | 14,002 | ||||||
645 | International Business Machines Corp. | 73,317 | ||||||
762 | MasterCard, Inc., Class A | 143,751 | ||||||
609 | Paychex, Inc. | 39,676 | ||||||
311 | PayPal Holdings, Inc.* | 26,152 | ||||||
59 | Samsung SDS Co., Ltd. | 10,758 | ||||||
601 | Tata Consultancy Services, Ltd. | 16,308 | ||||||
321 | VeriSign, Inc.* | 47,601 | ||||||
1,277 | Visa, Inc., Class A | 168,487 | ||||||
|
| |||||||
2,380,627 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.1%): | ||||||||
328 | Agilent Technologies, Inc. | 22,127 | ||||||
148 | Illumina, Inc.* | 44,390 | ||||||
587 | Thermo Fisher Scientific, Inc. | 131,364 | ||||||
|
| |||||||
197,881 | ||||||||
|
| |||||||
Machinery (0.8%): | ||||||||
467 | Caterpillar, Inc. | 59,342 | ||||||
133 | Cummins, Inc. | 17,774 | ||||||
11,255 | Doosan Bobcat, Inc. | 316,921 | ||||||
12,254 | Dover Corp. | 869,421 | ||||||
6,900 | Hino Motors, Ltd. | 64,804 | ||||||
12,849 | Knorr-Bremse AG* | 1,157,706 | ||||||
800 | Mitsubishi Heavy Industries, Ltd. | 28,740 | ||||||
1,354 | Sandvik AB | 19,384 | ||||||
|
| |||||||
2,534,092 | ||||||||
|
| |||||||
Media (3.0%): | ||||||||
10,664 | Charter Communications, Inc., Class A*^ | 3,038,920 | ||||||
121,174 | Comcast Corp., Class A(c) | 4,125,975 | ||||||
7,600 | Eutelsat Communications SA^ | 150,276 | ||||||
15,329 | I-Cable Communications, Ltd.* | 230 | ||||||
2,470 | Liberty Broadband Corp., Class A*^ | 177,371 | ||||||
10,617 | Liberty Broadband Corp., Class C*^ | 764,743 | ||||||
33,076 | Liberty Global plc, Class A*^ | 705,842 | ||||||
1,102 | Liberty Global plc, Class C* | 22,745 | ||||||
8,858 | Liberty SiriusXM Group, Class A* | 325,974 | ||||||
14,843 | Liberty SiriusXM Group, Class C* | 548,894 | ||||||
9 | Naspers, Ltd. | 1,792 | ||||||
8,800 | Nippon Television Holdings, Inc. | 128,898 | ||||||
1,855 | Omnicom Group, Inc.^ | 135,860 | ||||||
592 | Publicis Groupe SA | 33,876 | ||||||
79,479 | RAI Way SpA | 394,410 | ||||||
6,400 | TV Asahi Holdings Corp. | 114,155 | ||||||
50,922 | Zon Multimedia Servicos de Telecommunicacoes e Multimedia SGPS SA | 308,163 | ||||||
|
| |||||||
10,978,124 | ||||||||
|
| |||||||
Metals & Mining (0.4%): | ||||||||
14,000 | Angang Steel Co., Ltd. | 9,576 | ||||||
745 | Anglo American plc | 16,467 | ||||||
419 | BHP Billiton, Ltd.^ | 10,107 | ||||||
2,100 | DOWA Mining Co. | 62,686 | ||||||
445 | Eregli Demir ve Celik Fabrikalari T.A.S. | 604 | ||||||
156 | Goldcorp, Inc. | 1,528 |
See accompanying notes to the consolidated financial statements.
7
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining, continued | ||||||||
400 | JFE Holdings, Inc. | $ | 6,365 | |||||
1,262 | JSW Steel, Ltd. | 5,545 | ||||||
54 | Kumba Iron Ore, Ltd.^ | 1,065 | ||||||
12,605 | Newcrest Mining, Ltd. | 194,155 | ||||||
30,407 | Newmont Mining Corp. | 1,053,603 | ||||||
776 | POSCO | 169,880 | ||||||
316 | Rio Tinto, Ltd. | 17,474 | ||||||
91 | Southern Copper Corp.^ | 2,800 | ||||||
926 | Teck Cominco, Ltd., Class B | 19,938 | ||||||
18,900 | Tokyo Steel Manufacturing Co., Ltd. | 152,586 | ||||||
5,927 | Wheaton Precious Metals Corp. | 115,717 | ||||||
2,700 | Yamato Kogyo Co., Ltd. | 62,936 | ||||||
16,000 | Zijin Mining Group Co., Ltd. | 6,048 | ||||||
|
| |||||||
1,909,080 | ||||||||
|
| |||||||
Multiline Retail (0.5%): | ||||||||
319 | Dollar General Corp. | 34,478 | ||||||
17,551 | Dollar Tree, Inc.* | 1,585,205 | ||||||
434 | Kohl’s Corp.^ | 28,792 | ||||||
378 | Target Corp. | 24,982 | ||||||
|
| |||||||
1,673,457 | ||||||||
|
| |||||||
Multi-Utilities (0.2%): | ||||||||
3,288 | AGL Energy, Ltd. | 47,566 | ||||||
707 | CenterPoint Energy, Inc. | 19,959 | ||||||
2,153 | Engie Group | 30,767 | ||||||
6,224 | National Grid plc | 60,180 | ||||||
7,167 | Sempra Energy^ | 775,397 | ||||||
|
| |||||||
933,869 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (6.0%): | ||||||||
34,372 | Anadarko Petroleum Corp. | 1,506,868 | ||||||
278 | Canadian Natural Resources, Ltd. | 6,709 | ||||||
734 | Chevron Corp. | 79,852 | ||||||
68,000 | China Petroleum & Chemical Corp., Class H | 48,587 | ||||||
11,500 | China Shenhua Energy Co., Ltd. | 25,050 | ||||||
31,000 | CNOOC, Ltd. | 47,497 | ||||||
41,259 | Coal India, Ltd. | 142,285 | ||||||
211 | ConocoPhillips Co. | 13,156 | ||||||
53,535 | Enbridge, Inc. | 1,663,310 | ||||||
64,488 | EnCana Corp. | 372,741 | ||||||
2,027 | ENI SpA | 31,917 | ||||||
49,584 | Exxon Mobil Corp. | 3,381,134 | ||||||
941 | Fieldwood Energy LLC*(a) | 35,758 | ||||||
3,485 | Fieldwood Energy LLC*(a) | 132,430 | ||||||
26,000 | Formosa Petrochemical Corp. | 91,483 | ||||||
7,090 | Hindustan Petroleum Corp., Ltd. | 25,748 | ||||||
1,670 | Husky Energy, Inc. | 17,263 | ||||||
716 | Imperial Oil, Ltd. | 18,144 | ||||||
438 | Kinder Morgan, Inc. | 6,736 | ||||||
19,348 | Marathon Petroleum Corp. | 1,141,725 | ||||||
616 | Occidental Petroleum Corp. | 37,810 | ||||||
41,802 | Oil & Natural Gas Corp., Ltd. | 89,662 | ||||||
6,000 | PetroChina Co., Ltd., Class H | 3,710 | ||||||
693 | Petroleo Brasileiro SA* | 4,056 | ||||||
1,008 | Phillips 66 | 86,839 | ||||||
203 | Polski Koncern Naftowy Orlen SA | 5,874 | ||||||
2,314 | Polskie Gornictwo Naftowe i Gazownictwo SA | 4,279 | ||||||
120,012 | Reliance Industries, Ltd. | 1,932,404 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
894 | Royal Dutch Shell plc, Class A | $ | 26,235 | |||||
105,399 | Royal Dutch Shell plc, Class A | 3,090,877 | ||||||
23,101 | Royal Dutch Shell plc, Class A, ADR | 1,346,095 | ||||||
1,266 | Royal Dutch Shell plc, Class B | 37,666 | ||||||
12 | SK Energy Co., Ltd. | 1,925 | ||||||
68,012 | Snam SpA | 297,662 | ||||||
1,248 | S-Oil Corp. | 108,901 | ||||||
411 | Statoil ASA | 8,771 | ||||||
49,395 | Suncor Energy, Inc. | 1,379,803 | ||||||
49,300 | Thai Oil Public Co., Ltd. | 100,181 | ||||||
554 | Total SA, ADR | 28,908 | ||||||
45,181 | TransCanada Corp. | 1,613,607 | ||||||
931 | Valero Energy Corp. | 69,797 | ||||||
132,104 | Williams Cos., Inc. (The) | 2,912,894 | ||||||
10,000 | Yanzhou Coal Mining Co. | 8,017 | ||||||
|
| |||||||
21,984,366 | ||||||||
|
| |||||||
Paper & Forest Products (0.1%): | ||||||||
3,000 | Nine Dragons Paper Holdings, Ltd. | 2,752 | ||||||
386,370 | Quintis Pty, Ltd.*(a)(b) | 206,782 | ||||||
554 | Suzano Papel e Celulose SA | 5,444 | ||||||
|
| |||||||
214,978 | ||||||||
|
| |||||||
Personal Products (0.2%): | ||||||||
15,192 | Edgewell Personal Care Co.*^ | 567,421 | ||||||
168 | L’Oreal SA | 38,559 | ||||||
500 | Shiseido Co., Ltd. | 31,072 | ||||||
|
| |||||||
637,052 | ||||||||
|
| |||||||
Pharmaceuticals (3.3%): | ||||||||
250 | Allergan plc | 33,415 | ||||||
1,071 | Aspen Pharmacare Holdings, Ltd. | 10,073 | ||||||
76,700 | Astellas Pharma, Inc. | 976,227 | ||||||
22,709 | Bayer AG, Registered Shares | 1,574,454 | ||||||
1,302 | Bristol-Myers Squibb Co. | 67,678 | ||||||
400 | Eisai Co., Ltd. | 31,150 | ||||||
146 | Eli Lilly & Co. | 16,895 | ||||||
3,143 | GlaxoSmithKline plc | 59,644 | ||||||
1,455 | �� | Gw Pharmaceuticals, ADR* | 141,702 | |||||
36,706 | Johnson & Johnson Co. | 4,736,910 | ||||||
700 | Kyowa Hakko Kogyo Co., Ltd. | 13,156 | ||||||
2,906 | Merck & Co., Inc. | 222,047 | ||||||
200 | Mitsubishi Tanabe Pharma Corp. | 2,874 | ||||||
5,510 | Novo Nordisk A/S, Class B | 253,333 | ||||||
400 | Ono Pharmaceutical Co., Ltd. | 8,096 | ||||||
200 | Otsuka Holdings Co., Ltd. | 8,163 | ||||||
72,800 | Pfizer, Inc. | 3,177,720 | ||||||
190 | Roche Holding AG | 47,001 | ||||||
2,670 | Sanofi-Aventis SA | 230,707 | ||||||
358 | Zoetis, Inc. | 30,623 | ||||||
|
| |||||||
11,641,868 | ||||||||
|
| |||||||
Professional Services (0.0%)†: | ||||||||
454 | Experian plc | 11,033 | ||||||
|
| |||||||
Real Estate Management & Development (1.2%): | ||||||||
12,000 | Agile Property Holdings, Ltd. | 13,963 | ||||||
707,300 | CapitaLand, Ltd. | 1,609,042 | ||||||
500 | CK Asset Holdings, Ltd. | 3,636 | ||||||
8,000 | Country Garden Holdings Co., Ltd. | 9,637 |
See accompanying notes to the consolidated financial statements.
8
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
300 | Daiwa House Industry Co., Ltd. | $ | 9,529 | |||||
96,000 | Hang Lung Properties, Ltd. | 182,995 | ||||||
4,300 | Hongkong Land Holdings, Ltd. | 27,107 | ||||||
6,900 | Mitsubishi Estate Co., Ltd. | 108,145 | ||||||
900 | Mitsui Fudosan Co., Ltd. | 19,944 | ||||||
52,000 | Sino Land Co., Ltd. | 88,501 | ||||||
127,666 | Sun Hung Kai Properties, Ltd. | 1,810,290 | ||||||
11,000 | Swire Pacific, Ltd., Class A | 115,566 | ||||||
5,127 | The St. Joe Co.*^ | 67,523 | ||||||
2,005 | Vonovia SE | 90,986 | ||||||
18,000 | Wharf Real Estate Investment Co., Ltd. | 107,004 | ||||||
|
| |||||||
4,263,868 | ||||||||
|
| |||||||
Road & Rail (0.6%): | ||||||||
81 | Canadian Pacific Railway, Ltd., Class 1 | 14,375 | ||||||
78,900 | ComfortDelGro Corp., Ltd. | 123,935 | ||||||
1,403 | CSX Corp. | 87,168 | ||||||
22,400 | East Japan Railway Co. | 1,991,264 | ||||||
266 | Norfolk Southern Corp. | 39,778 | ||||||
5,000 | Seino Holdings Co., Ltd. | 65,206 | ||||||
229 | Union Pacific Corp. | 31,655 | ||||||
|
| |||||||
2,353,381 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.7%): | ||||||||
40 | ASML Holding NV | 6,240 | ||||||
3,114 | Intel Corp. | 146,140 | ||||||
314 | KLA-Tencor Corp. | 28,100 | ||||||
1,000 | MediaTek, Inc. | 7,375 | ||||||
1,330 | Micron Technology, Inc.* | 42,201 | ||||||
10,000 | Nanya Technology Corp. | 17,666 | ||||||
500 | NXP Semiconductors NV | 36,640 | ||||||
22,536 | QUALCOMM, Inc. | 1,282,524 | ||||||
11,000 | ROHM Co., Ltd. | 695,049 | ||||||
32,000 | Taiwan Semiconductor Manufacturing Co., Ltd. | 232,304 | ||||||
|
| |||||||
2,494,239 | ||||||||
|
| |||||||
Software (3.1%): | ||||||||
390 | Adobe Systems, Inc.* | 88,234 | ||||||
111 | Autodesk, Inc.* | 14,276 | ||||||
62,818 | Cloudera, Inc.*^ | 694,767 | ||||||
63 | Dell Technologies, Inc., Class V*^ | 5,562 | ||||||
17,481 | Domo, Inc.,*^ | 343,152 | ||||||
9,632 | Domo, Inc., Class B*(a) | 189,076 | ||||||
63,800 | Dropbox, Inc., Class A* | 1,303,434 | ||||||
513 | Intuit, Inc. | 100,984 | ||||||
52,182 | Microsoft Corp. | 5,300,126 | ||||||
300 | Oracle Corp. Japan | 18,984 | ||||||
9,311 | Oracle Corp. | 420,392 | ||||||
202 | Red Hat, Inc.* | 35,479 | ||||||
346 | SAP AG | 34,460 | ||||||
131 | Symantec Corp. | 2,475 | ||||||
68,532 | Uber Technologies, Inc.*(a)(b) | 3,081,884 | ||||||
267 | VMware, Inc., Class A^ | 36,614 | ||||||
|
| |||||||
11,669,899 | ||||||||
|
| |||||||
Specialty Retail (0.3%): | ||||||||
531 | Home Depot, Inc. (The) | 91,236 | ||||||
318,213 | Kingfisher plc | 841,735 | ||||||
2,183 | Lowe’s Cos., Inc. | 201,623 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
642 | Petrobras Distribuidora SA | $ | 4,258 | |||||
417 | Ross Stores, Inc. | 34,694 | ||||||
800 | Shimamura Co., Ltd. | 61,498 | ||||||
|
| |||||||
1,235,044 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (1.9%): | ||||||||
33,731 | Apple, Inc. | 5,320,727 | ||||||
2,490 | Hewlett Packard Enterprise Co. | 32,893 | ||||||
1,175 | HP, Inc. | 24,041 | ||||||
31,984 | Pure Storage, Inc., Class A* | 514,303 | ||||||
1,534 | Samsung Electronics Co., Ltd. | 53,082 | ||||||
25,857 | Western Digital Corp. | 955,933 | ||||||
|
| |||||||
6,900,979 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.0%)†: | ||||||||
33 | Adidas AG | 6,895 | ||||||
145 | Kering | 67,853 | ||||||
378 | Nike, Inc., Class B | 28,025 | ||||||
239 | PVH Corp. | 22,215 | ||||||
155 | VF Corp. | 11,058 | ||||||
|
| |||||||
136,046 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.3%): | ||||||||
42,523 | Housing Development Finance Corp., Ltd. | 1,199,360 | ||||||
|
| |||||||
Tobacco (1.3%): | ||||||||
40,326 | Altria Group, Inc. | 1,991,702 | ||||||
11,728 | KT&G Corp. | 1,067,028 | ||||||
19,344 | Philip Morris International, Inc. | 1,291,405 | ||||||
|
| |||||||
4,350,135 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.0%)†: | ||||||||
100 | Mitsui & Co., Ltd. | 1,550 | ||||||
|
| |||||||
Transportation Infrastructure (0.1%): | ||||||||
168,000 | Beijing Capital International Airport Co., Ltd. | 178,678 | ||||||
2,000 | Jiangsu Expressway Co., Ltd., Series H | 2,778 | ||||||
3,600 | Kamigumi Co., Ltd. | 73,468 | ||||||
30,100 | Malaysia Airports Holdings Berhad | 61,129 | ||||||
12,000 | Zhejiang Expressway Co., Ltd. | 10,439 | ||||||
|
| |||||||
326,492 | ||||||||
|
| |||||||
Wireless Telecommunication Services (1.1%): | ||||||||
32,800 | Advanced Information Service plc | 174,438 | ||||||
22,026 | America Movil SAB de C.V., Series L | 15,683 | ||||||
4,500 | China Mobile, Ltd. | 43,370 | ||||||
148,000 | Far EasTone Telecommunications Co., Ltd. | 367,195 | ||||||
88,100 | Intouch Holdings Public Co., Ltd. | 129,371 | ||||||
5,600 | KDDI Corp. | 133,467 | ||||||
808 | MTN Group, Ltd. | 5,015 | ||||||
300 | NTT DoCoMo, Inc. | 6,737 | ||||||
498 | Rogers Communications, Inc. | 25,524 | ||||||
637 | SK Telecom Co., Ltd. | 153,985 | ||||||
165 | Sprint Corp.*^ | 960 | ||||||
118,000 | Taiwan Mobile Co., Ltd. | 408,544 | ||||||
1,258 | Tim Participacoes SA | 3,847 | ||||||
1,325,226 | Vodafone Group plc | 2,574,693 | ||||||
|
| |||||||
4,042,829 | ||||||||
|
| |||||||
Total Common Stocks (Cost $214,540,714) | 215,633,449 | |||||||
|
|
See accompanying notes to the consolidated financial statements.
9
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Preferred Stocks (0.5%): | ||||||||
Banks (0.2%): | ||||||||
13,017 | Citigroup Capital XIII, Series A, 8.89%, 10/30/40 | $ | 344,039 | |||||
20,628 | Itau Unibanco Holding SA, Series S, 0.47%, 10/29/18 | 188,965 | ||||||
75,000 | USB Capital IX, 3.50%, 10/29/49(US0003M+102bps), Callable 2/7/19 @ 100^ | 55,500 | ||||||
|
| |||||||
588,504 | ||||||||
|
| |||||||
Chemicals (0.0%)†: | ||||||||
364 | Braskem SA, Class A, 3.99% | 4,450 | ||||||
|
| |||||||
Consumer Finance (0.1%): | ||||||||
14,377 | GMAC Capital Trust I, Series 2, 8.40%, 2/15/40 | 364,457 | ||||||
|
| |||||||
Health Care Providers & Services (0.1%): | ||||||||
143,925 | Grand Rounds, Inc., Series C*(a)(b) | 352,616 | ||||||
|
| |||||||
Software (0.1%): | ||||||||
116,157 | Palantir Technologies, Inc., Series I*(a)(b) | 628,410 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.0%)†: | ||||||||
874 | Samsung Electronics Co., Ltd., 4.60%, 10/31/18 | 24,933 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $2,002,976) | 1,963,370 | |||||||
|
| |||||||
Convertible Preferred Stocks (0.4%): | ||||||||
Banks (0.0%)†: | ||||||||
116 | Wells Fargo & Co., Series L, Class A, 7.50%, 3/17/19 | 146,389 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.1%): | ||||||||
5,072 | Welltower, Inc., Series I, 6.50%, 4/15/19 | 320,297 | ||||||
|
| |||||||
Wireless Telecommunication Services (0.3%): | ||||||||
5,627 | Mandatory Exchange Trust, 5.75%, 3/1/19(d) | 868,414 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Cost $914,060) | 1,335,100 | |||||||
|
| |||||||
Private Placements (0.1%): | ||||||||
Household Durables (0.0%)†: | ||||||||
23,389 | Jawbone, 0.00%*(b) | — | ||||||
|
| |||||||
Internet Software & Services (0.1%): | ||||||||
5,547 | Lookout, Inc.*(a)(b) | 111 | ||||||
63,925 | Lookout, Inc. Preferred Shares, Series F*(a)(b) | 386,107 | ||||||
|
| |||||||
Total Private Placements (Cost $793,586) | 386,218 | |||||||
|
| |||||||
Convertible Bonds (0.2%): | ||||||||
Food Products (0.0%)†: | ||||||||
400,000 | REI Agro, Ltd., Registered Shares, 5.50%, 11/13/14(d)(e) | — | ||||||
|
| |||||||
Pharmaceuticals (0.2%): | ||||||||
600,000 | Bayer Capital Corp. BV, 5.63%, 11/22/19+(d) | 525,628 | ||||||
|
| |||||||
Real Estate Management & Development (0.0%)†: | ||||||||
250,000 | CapitaLand, Ltd., 1.95%, 10/17/23+(d) | 172,587 | ||||||
|
| |||||||
Total Convertible Bonds (Cost $1,216,451) | 698,215 | |||||||
|
| |||||||
Bank Loans (0.2%): | ||||||||
Hotels, Restaurants & Leisure (0.1%): | ||||||||
413,904 | Hilton Worldwide Finance LLC, 4.26% (LIBOR+175bps), 10/25/23 | 398,383 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.1%): | ||||||||
111,961 | Fieldwood Energy LLC, 7.77% (LIBOR+525bps), 4/11/22 | 104,334 | ||||||
151,147 | Fieldwood Energy LLC, 9.77% (LIBOR+725bps), 4/11/23 | 131,347 | ||||||
|
| |||||||
235,681 | ||||||||
|
| |||||||
Total Bank Loans (Cost $667,521) | 634,064 | |||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds (3.7%): | ||||||||
Aerospace & Defense (0.1%): | ||||||||
$ | 282,000 | Northrop Grumman Corp., 2.55%, 10/15/22, Callable 9/15/22 @ 100^ | $ | 272,878 | ||||
|
| |||||||
Banks (0.5%): | ||||||||
124,000 | Bank of America Corp., Series G, 2.37% (US0003M+66 bps), 7/21/21, Callable 7/21/20 @ 100 | 121,781 | ||||||
282,000 | Bank of America Corp., 3.30%, 1/11/23, MTN | 277,730 | ||||||
151,000 | Bank of America Corp., 4.00%, 1/22/25, MTN | 147,096 | ||||||
272,000 | Citigroup, Inc., 2.45%, 1/10/20, Callable 12/10/19 @ 100 | 269,816 | ||||||
255,000 | Citigroup, Inc., Series Q, 5.95% (US0003M+410 bps), Callable 8/15/20 @ 100^ | 246,075 | ||||||
628,000 | Citigroup, Inc., Series O, 5.87% (US0003M+406 bps), Callable 3/27/20 @ 100 | 606,019 | ||||||
56,000 | Wells Fargo & Co., 3.07%, 1/24/23, Callable 1/24/22 @ 100 | 54,540 | ||||||
370,000 | Wells Fargo Bank NA, 3.55%, 8/14/23, Callable 7/14/23 @ 100 | 368,436 | ||||||
|
| |||||||
2,091,493 | ||||||||
|
| |||||||
Beverages (0.1%): | ||||||||
169,000 | Anheuser-Busch InBev Worldwide, Inc., 3.50%, 1/12/24, Callable 12/12/23 @ 100 | 165,307 | ||||||
279,000 | Anheuser-Busch InBev Worldwide, Inc., 4.00%, 4/13/28, Callable 1/13/28 @ 100^ | 266,872 | ||||||
|
| |||||||
432,179 | ||||||||
|
| |||||||
Biotechnology (0.1%): | ||||||||
282,000 | Gilead Sciences, Inc., 3.25%, 9/1/22, Callable 7/1/22 @ 100^ | 281,337 | ||||||
|
| |||||||
Capital Markets (0.2%): | ||||||||
282,000 | Goldman Sachs Group, Inc., 2.91% (US0003M+105 bps), 6/5/23, Callable 6/5/22 @ 100 | 270,717 | ||||||
298,000 | Goldman Sachs Group, Inc., Series M, 5.38% (US0003M+392 bps), Callable 5/10/20 @ 100 | 287,948 | ||||||
211,000 | Morgan Stanley, Series H, 5.45% (US0003M+361 bps), Callable 7/15/19 @ 100 | 205,223 | ||||||
|
| |||||||
763,888 | ||||||||
|
| |||||||
Chemicals (0.1%): | ||||||||
220,000 | Dowdupont, Inc., 3.77%, 11/15/20 | 222,109 | ||||||
54,000 | Sherwin-Williams, 2.25%, 5/15/20 | 53,173 | ||||||
|
| |||||||
275,282 | ||||||||
|
| |||||||
Consumer Finance (0.3%): | ||||||||
598,000 | American Express Co., 3.70%, 8/3/23, Callable 7/3/23 @ 100 | 599,729 | ||||||
186,000 | American Express Co., Series C, 4.90% (US0003M+329 bps), Callable 3/15/20 @ 100 | 178,095 | ||||||
86,000 | Capital One Finance Corp., 3.30%, 10/30/24, Callable 9/30/24 @ 100 | 81,334 | ||||||
203,000 | Capital One Financial Corp., 3.20%, 1/30/23, Callable 12/30/22 @ 100 | 197,544 | ||||||
|
| |||||||
1,056,702 | ||||||||
|
|
See accompanying notes to the consolidated financial statements.
10
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Diversified Financial Services (0.1%): | ||||||||
$ | 235,000 | BP Capital Markets America, Inc., 3.79%, 2/6/24, Callable 1/6/24 @ 100 | $ | 237,536 | ||||
|
| |||||||
Diversified Telecommunication Services (0.3%): | ||||||||
586,000 | AT&T, Inc., 3.60%, 2/17/23, Callable 12/17/22 @ 100 | 582,369 | ||||||
48,000 | Hughes Satellite Systems Corp., 7.63%, 6/15/21 | 49,800 | ||||||
293,000 | Verizon Communications, 3.13%, 3/16/22 | 291,047 | ||||||
|
| |||||||
923,216 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.0%)†: | ||||||||
57,000 | AvalonBay Communities, Inc., 3.50%, 11/15/24, Callable 8/15/24 @ 100 | 56,659 | ||||||
113,000 | Simon Property Group, LP, 2.75%, 6/1/23, Callable 3/1/23 @ 100^ | 109,501 | ||||||
|
| |||||||
166,160 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
287,000 | Walgreen Co., 3.10%, 9/15/22 | 279,969 | ||||||
|
| |||||||
Health Care Equipment & Supplies (0.2%): | ||||||||
120,000 | Becton Dickinson & Co., 3.36%, 6/6/24, Callable 4/6/24 @ 100 | 115,257 | ||||||
271,000 | Becton, Dickinson & Co., 3.13%, 11/8/21 | 267,276 | ||||||
223,000 | Becton, Dickinson & Co., 2.89%, 6/6/22, Callable 5/6/22 @ 100 | 215,980 | ||||||
|
| |||||||
598,513 | ||||||||
|
| |||||||
Health Care Providers & Services (0.5%): | ||||||||
861,000 | CVS Health Corp., 3.70%, 3/9/23, Callable 2/9/23 @ 100 | 851,784 | ||||||
379,000 | Halfmoon Parent, Inc., 3.40%, 9/17/21^(d) | 378,138 | ||||||
323,000 | Halfmoon Parent, Inc., 3.75%, 7/15/23, Callable 6/15/23 @ 100(d) | 321,924 | ||||||
282,000 | UnitedHealth Group, Inc., 3.50%, 6/15/23^ | 284,431 | ||||||
170,000 | UnitedHealth Group, Inc., 3.50%, 2/15/24^ | 171,088 | ||||||
|
| |||||||
2,007,365 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.1%): | ||||||||
282,000 | Starbucks Corp., 3.10%, 3/1/23, Callable 2/1/23 @ 100^ | 277,757 | ||||||
|
| |||||||
Insurance (0.1%): | ||||||||
161,000 | Prudential Financial, Inc., 5.87% (US0003M+418 bps), 9/15/42, Callable 9/15/22 @ 100^ | 162,610 | ||||||
107,000 | Prudential Financial, Inc., 5.63% (US0003M+392 bps), 6/15/43, Callable 6/15/23 @ 100 | 104,788 | ||||||
|
| |||||||
267,398 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.0%)†: | ||||||||
152,000 | eBay, Inc., 2.75%, 1/30/23, Callable 12/30/22 @ 100^ | 146,131 | ||||||
|
| |||||||
Media (0.3%): | ||||||||
225,000 | Comcast Corp., 3.45%, 10/1/21^ | 227,281 | ||||||
282,000 | Comcast Corp., 2.75%, 3/1/23, Callable 2/1/23 @ 100 | 274,463 | ||||||
555,000 | Comcast Corp., 3.70%, 4/15/24, Callable 3/15/24 @ 100^ | 558,388 | ||||||
200,000 | NBCUniversal Enterprise, Inc., 5.25%, Callable 3/19/21 @ 100(d) | 202,500 | ||||||
|
| |||||||
1,262,632 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Multi-Utilities (0.0%)†: | ||||||||
$ | 76,000 | Sempra Energy, 2.88%, 10/1/22, Callable 7/1/22 @ 100 | $ | 73,297 | ||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.1%): | ||||||||
151,000 | Enterprise Products Operating LLC, 3.35%, 3/15/23, Callable 12/15/22 @ 100 | 148,938 | ||||||
85,000 | Enterprise Products Operating LLC, 3.90%, 2/15/24, Callable 11/15/23 @ 100 | 85,720 | ||||||
142,000 | Williams Companies, Inc., 3.70%, 1/15/23, Callable 10/15/22 @ 100 | 138,522 | ||||||
|
| |||||||
373,180 | ||||||||
|
| |||||||
Personal Products (0.1%): | ||||||||
134,000 | Edgewell Personal Care Co., 4.70%, 5/19/21^ | 131,990 | ||||||
139,000 | Edgewell Personal Care Co., 4.70%, 5/24/22^ | 133,788 | ||||||
|
| |||||||
265,778 | ||||||||
|
| |||||||
Pharmaceuticals (0.0%)†: | ||||||||
133,000 | Forest Laboratories, Inc., 5.00%, 12/15/21, Callable 9/16/21 @ 100(d) | 136,844 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.1%): | ||||||||
141,000 | Qualcomm, Inc., 2.60%, 1/30/23, Callable 12/30/22 @ 100 | 135,688 | ||||||
169,000 | Qualcomm, Inc., 2.90%, 5/20/24, Callable 3/20/24 @ 100 | 160,921 | ||||||
|
| |||||||
296,609 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.3%): | ||||||||
491,000 | Apple, Inc., 3.35%, 2/9/27, Callable 11/9/26 @ 100 | 478,426 | ||||||
469,000 | Apple, Inc., 3.20%, 5/11/27, Callable 2/11/27 @ 100 | 452,622 | ||||||
|
| |||||||
931,048 | ||||||||
|
| |||||||
Tobacco (0.0%)†: | ||||||||
53,000 | Philip Morris International, Inc., 2.50%, 11/2/22, Callable 10/2/22 @ 100^ | 50,938 | ||||||
113,000 | Philip Morris International, Inc., 3.60%, 11/15/23^ | 113,260 | ||||||
|
| |||||||
164,198 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $13,759,382) | 13,581,390 | |||||||
|
| |||||||
Foreign Bonds (4.4%): | ||||||||
Banks (0.2%): | ||||||||
330,000 | Lloyds TSB Bank plc, Series E, 13.00%(GUKG5+1,340bps), Callable 1/22/29 @ 126+ | 675,134 | ||||||
|
| |||||||
Sovereign Bond (4.2%): | ||||||||
1,195,000 | Australian Government, 3.00%, 3/21/47+(d) | 870,652 | ||||||
2,668,000 | Bundesrepublik Deutschland Bundesanleihe, 0.50%, 2/15/28+(d) | 3,145,887 | ||||||
938,000 | Canadian Government, 0.75%, 3/1/21+ | 670,962 | ||||||
227,800,000 | Japan Treasury Discount Bill, 0.00%, 1/28/19+(f) | 2,078,877 | ||||||
228,150,000 | Japan Treasury Discount Bill, 0.00%, 2/4/19+(f) | 2,082,142 | ||||||
238,200,000 | Japan Treasury Discount Bill, 0.00%, 3/4/19+(f) | 2,174,128 | ||||||
102,050,000 | Japan Treasury Discount Bill, 0.00%, 3/25/19+(f) | 931,529 | ||||||
26,469,000 | Mexican Bonos Desarr, Series M, 6.50%, 6/10/21+(g) | 1,285,837 | ||||||
25,300,000 | Mexican Bonos Desarr, 8.00%, 12/7/23+(g) | 1,256,720 | ||||||
310,000 | Republic of Argentina, 3.38%, 1/15/23+ | 278,780 | ||||||
100,000 | Republic of Argentina, 5.25%, 1/15/28+ | 81,761 |
See accompanying notes to the consolidated financial statements.
11
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Foreign Bonds, continued | ||||||||
Sovereign Bond, continued | ||||||||
$ | 676,775 | Republic of Argentina, 7.82%, 12/31/33+(e) | $ | 647,926 | ||||
|
| |||||||
15,505,201 | ||||||||
|
| |||||||
Total Foreign Bonds (Cost $16,566,599) | 16,180,335 | |||||||
|
| |||||||
Yankee Dollars (1.8%): | ||||||||
Banks (0.5%): | ||||||||
282,000 | HSBC Holdings plc, 3.26% (US0003M+106 bps), 3/13/23, Callable 3/13/22 @ 100 | 275,981 | ||||||
614,000 | HSBC Holdings plc, 6.38% (USISDA05+371 bps), Callable 9/17/24 @ 100 | 571,020 | ||||||
410,000 | ING Groep NV, 4.10%, 10/2/23 | 409,751 | ||||||
200,000 | ING Groep NV, 6.00% (USSW5+445 bps), Callable 4/16/20 @ 100 | 194,280 | ||||||
861,000 | Sumitomo Mitsui Financial Group, Inc., 3.94%, 10/16/23 | 876,135 | ||||||
|
| |||||||
2,327,167 | ||||||||
|
| |||||||
Capital Markets (0.1%): | ||||||||
207,000 | UBS Group AG, 4.13%, 9/24/25(d) | 206,235 | ||||||
|
| |||||||
Diversified Financial Services (0.0%)†: | ||||||||
80,000 | Intelsat Jackson Holdings SA, 8.00%, 2/15/24, Callable 2/15/19 @ 104(d) | 82,400 | ||||||
|
| |||||||
Diversified Telecommunication Services (0.1%): | ||||||||
289,000 | Telecom Italia SpA, 5.30%, 5/30/24(d) | 274,550 | ||||||
|
| |||||||
Food Products (0.1%): | ||||||||
208,000 | Danone SA, 2.59%, 11/2/23, Callable 9/2/23 @ 100(d) | 197,744 | ||||||
|
| |||||||
Interactive Media & Services (0.1%): | ||||||||
220,000 | Baidu, Inc., 4.38%, 5/14/24, Callable 4/14/24 @ 100 | 221,810 | ||||||
|
| |||||||
Paper & Forest Products (0.2%): | ||||||||
40,720 | Quintis Pty, Ltd., 7.50%, 10/1/26, Callable 10/1/21 @ 105.63(b)(d) | 40,720 | ||||||
753,320 | Quintis Pty, Ltd., 12.00%, 10/1/28, Callable 2/7/19 @ 90(b)(d) | 753,320 | ||||||
|
| |||||||
794,040 | ||||||||
|
| |||||||
Pharmaceuticals (0.2%): | ||||||||
265,000 | Actavis Funding SCS, 3.45%, 3/15/22, Callable 1/15/22 @ 100 | 260,771 | ||||||
205,000 | Takeda Pharmaceutical Co., Ltd., 3.80%, 11/26/20(d) | 206,237 | ||||||
|
| |||||||
467,008 | ||||||||
|
| |||||||
Road & Rail (0.0%)†: | ||||||||
517,099 | Inversiones Alsacia SA, 8.00%, 12/31/18(a)(e) | 5,171 | ||||||
|
| |||||||
Sovereign Bond (0.5%): | ||||||||
1,176,000 | Republic of Argentina, 6.88%, 1/26/27 | 896,700 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Sovereign Bond, continued | ||||||||
$ | 1,698,000 | Republic of Argentina, 5.88%, 1/11/28 | $ | 1,220,437 | ||||
|
| |||||||
2,117,137 | ||||||||
|
| |||||||
Total Yankee Dollars (Cost $7,579,396) | 6,693,262 | |||||||
|
| |||||||
U.S. Treasury Obligations (28.1%): | ||||||||
U.S. Treasury Bills (5.4%) | ||||||||
14,000,000 | 1.97%, 1/15/19(f) | 13,988,505 | ||||||
6,000,000 | 2.15%, 1/31/19(f) | 5,988,932 | ||||||
|
| |||||||
19,977,437 | ||||||||
|
| |||||||
U.S. Treasury Inflation Index Bond (0.8%) | ||||||||
3,019,782 | 0.63%, 4/15/23 | 2,969,785 | ||||||
|
| |||||||
U.S. Treasury Notes (21.9%) | ||||||||
1,500,000 | 1.50%, 11/30/19(h) | 1,484,531 | ||||||
9,030,200 | 2.75%, 8/31/23 | 9,131,437 | ||||||
23,424,700 | 2.88%, 9/30/23 | 23,805,351 | ||||||
25,120,700 | 2.88%, 10/31/23(c) | 25,538,725 | ||||||
11,848,300 | 3.13%, 10/31/25(c) | 12,155,152 | ||||||
8,228,000 | 2.88%, 11/30/25 | 8,375,525 | ||||||
|
| |||||||
80,490,721 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $101,692,242) | 103,437,943 | |||||||
|
| |||||||
Purchased Options (0.2%): | ||||||||
Total Purchased Options (Cost $1,729,594) | 737,645 | |||||||
|
| |||||||
Purchased Currency Options (0.0%)†: | ||||||||
Total Purchased Currency Options (Cost $190,251) | 142,517 | |||||||
|
| |||||||
Purchased Swaptions (0.0%)†: | ||||||||
Total Purchased Swaptions (Cost $44,844) | 5,160 | |||||||
|
| |||||||
Exchange Traded Funds (1.3%): | ||||||||
21,280 | VanEck Vectors Gold ETF | 448,795 | ||||||
191,469 | iShares Gold Trust(h) | 2,353,154 | ||||||
16,029 | SPDR Gold Trust(c)(h) | 1,943,516 | ||||||
|
| |||||||
Total Exchange Traded Funds (Cost $4,830,060) | 4,745,465 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.6%): | ||||||||
2,230,455 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(f) | 2,230,455 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $2,230,455) | 2,230,455 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (3.0%) | ||||||||
Miscellaneous Investments (3.0%) | ||||||||
11,159,870 | Short-Term Investments(i) | 11,159,870 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 11,159,870 | ||||||
|
| |||||||
Total Investment Securities (Cost $379,918,001) — 103.1%(j) | 379,564,458 | |||||||
Net other assets (liabilities) — (3.1)% | (11,466,114 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 368,098,344 | ||||||
|
|
See accompanying notes to the consolidated financial statements.
12
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
GUKG5—UK Govt Bonds 5 Year Note Generic Bid Yield
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
SPDR—Standard & Poor’s Depository Receipts
US0003M—3 Month US Dollar LIBOR
USISDA05—5 Year ICE Swap Rate
USSW5—USD 5 Year Swap Rate
† | Represents less than 0.05%. |
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $10,901,916. |
+ | The principal amount is disclosed in local currency and the fair value is disclosed in U.S. Dollars. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 1.36% of the net assets of the fund. |
(b) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 1.48% of the net assets of the fund. |
(c) | All or a portion of this security has been pledged as collateral for open derivative positions. |
(d) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(e) | Defaulted bond. |
(f) | The rate represents the effective yield at December 31, 2018. |
(g) | Principal amount is stated in 100 Mexican Peso Units. |
(h) | All or a portion of these securities are held by the AZL Cayman Global Allocation Fund I, Ltd. (the “Subsidiary”). |
(i) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Consolidated Financial Statements for details. |
(j) | See Federal Tax Information listed in the Notes to the Financial Statements. |
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 December 31, 2018:
(Unaudited) |
Country | Percentage | |||
Argentina | 0.8 | % | ||
Australia | 0.5 | % | ||
Belgium | 0.2 | % | ||
Bermuda | 0.1 | % | ||
Brazil | 0.8 | % | ||
Canada | 1.6 | % | ||
Cayman Islands | 0.1 | % | ||
Chile | — | %^ | ||
China | 1.3 | % | ||
Czech Republic | — | %^ | ||
Denmark | 0.1 | % | ||
European Community | (0.1 | )% | ||
Finland | — | %^ | ||
France | 2.8 | % | ||
Germany | 2.2 | % | ||
Hong Kong | 0.9 | % | ||
India | 1.2 | % | ||
Indonesia | — | %^ | ||
Ireland (Republic of) | — | %^ | ||
Italy | 0.6 | % | ||
Japan | 9.4 | % | ||
Jersey | 0.1 | % |
Country | Percentage | |||
Liberia | — | %^ | ||
Luxembourg | 0.1 | % | ||
Malaysia | — | %^ | ||
Mexico | 0.7 | % | ||
Netherlands | 1.2 | % | ||
Norway | — | %^ | ||
Panama | — | %^ | ||
Poland | — | %^ | ||
Portugal | 0.1 | % | ||
Republic of Korea (South) | 0.6 | % | ||
Singapore | 0.5 | % | ||
South Africa | — | %^ | ||
Spain | 0.3 | % | ||
Sweden | — | %^ | ||
Switzerland | 1.1 | % | ||
Taiwan, Province Of China | 0.8 | % | ||
Thailand | 0.2 | % | ||
Turkey | — | %^ | ||
United Arab Emirates | 0.4 | % | ||
United Kingdom | 3.0 | % | ||
United States | 68.4 | % | ||
|
| |||
100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
See accompanying notes to the consolidated financial statements.
13
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Securities Sold Short(-0.2%):
At December 31, 2018, the Fund’s securities sold short were as follows:
Security Description | Shares | Proceeds Received | Fair Value | |||||||||
Common Stocks | ||||||||||||
Beverages | ||||||||||||
Pernod Ricard SA | (1,192 | ) | $ | (199,683 | ) | $ | (195,697 | ) | ||||
Chemicals | ||||||||||||
LyondellBasell Industries NV | (1,549 | ) | (180,179 | ) | (128,815 | ) | ||||||
Electronic Equipment, Instruments & Components | ||||||||||||
Yaskawa Electric Corp. | (9,800 | ) | (312,588 | ) | (237,358 | ) | ||||||
Semiconductors & Semiconductor Equipment | ||||||||||||
SUMCO Corp. | (20,000 | ) | (309,987 | ) | (225,547 | ) | ||||||
|
|
|
| |||||||||
$ | (1,002,437 | ) | $ | (787,417 | ) | |||||||
|
|
|
|
Futures Contracts
Cash of $486,000 has been segregated to cover margin requirements for the following open exchange traded futures contracts as of December 31, 2018:
Short Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
CAC40 Index January Futures (Euro) | 1/18/19 | 1 | $ | (54,169 | ) | $ | (195 | ) | ||||||||
Canada10-Year Bond March Futures (Canadian Dollar) | 3/20/19 | 31 | (3,106,132 | ) | (37,811 | ) | ||||||||||
DJ EURO STOXX 50 March Futures (Euro) | 3/15/19 | 211 | (7,188,759 | ) | 207,581 | |||||||||||
NASDAQ 100E-Mini March Futures (U.S. Dollar) | 3/15/19 | 21 | (2,659,965 | ) | 62,537 | |||||||||||
Nikkei 225 Index March Futures (Japanese Yen) | 3/7/19 | 3 | (271,215 | ) | 18,071 | |||||||||||
S&P 500 IndexE-Mini March Futures (U.S. Dollar) | 3/15/19 | 4 | (501,040 | ) | (1,166 | ) | ||||||||||
|
| |||||||||||||||
$ | 249,017 | |||||||||||||||
|
|
Contracts for Differences
At December 31, 2018, the Fund’s openover-the-counter equity contracts for differences were as follows:
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 | 2.21 | % | 12/30/39 | 3,000 | $ | (27,302 | ) | $ | 9,890 | ||||||||||||||||||
Advantech Co., Ltd. | Citigroup | Short | TWD | (1.75 | )% | 12/30/39 | 3,000 | (20,480 | ) | (71 | ) | |||||||||||||||||||
Alibaba Health Information Technology, Ltd. | Citigroup | Short | HKD | (1.25 | )% | 12/30/39 | 24,000 | (22,467 | ) | 3,002 | ||||||||||||||||||||
Alibaba Health Information Technology, Ltd. | JPMorgan Chase | Short | HKD | 1.26 | % | 12/30/39 | 4,000 | (3,399 | ) | 155 | ||||||||||||||||||||
AmerisourceBergen Corp. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 76 | (6,669 | ) | 1,015 | ||||||||||||||||||||
Analog Devices, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 115 | (10,320 | ) | 450 | ||||||||||||||||||||
AP Moeller Maersk A/S | Citigroup | Short | DKK | (0.25 | )% | 12/30/39 | 1 | (1,415 | ) | 158 | ||||||||||||||||||||
Aptiv plc | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 70 | (5,099 | ) | 789 | ||||||||||||||||||||
ASE Technology Holding Co., Ltd. | JPMorgan Chase | Short | TWD | 2.11 | % | 12/30/39 | 2,000 | (4,787 | ) | 984 | ||||||||||||||||||||
Atacadao Carrefour SA | JPMorgan Chase | Short | BRL | 1.51 | % | 12/30/39 | 543 | (2,159 | ) | (383 | ) | |||||||||||||||||||
Autohome, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 356 | (27,473 | ) | (376 | ) | |||||||||||||||||||
Baker Hughes | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 179 | (3,823 | ) | (25 | ) | |||||||||||||||||||
Barrick Gold Corp. | JPMorgan Chase | Short | CAD | 2.15 | % | 12/30/39 | 197 | (2,064 | ) | (621 | ) | |||||||||||||||||||
BASF SE | JPMorgan Chase | Short | EUR | 2.24 | % | 12/30/39 | 100 | (6,859 | ) | (59 | ) | |||||||||||||||||||
Beijing Enterprises Water Group, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 4,000 | (2,122 | ) | 84 | ||||||||||||||||||||
Bollore NV | JPMorgan Chase | Short | EUR | 2.24 | % | 12/30/39 | 3 | (15 | ) | 3 | ||||||||||||||||||||
Bollore SA | JPMorgan Chase | Short | EUR | 2.24 | % | 12/30/39 | 1,103 | (4,695 | ) | 270 | ||||||||||||||||||||
Bollore SA | Citigroup | Short | EUR | (0.93 | )% | 12/30/39 | 2,566 | (10,811 | ) | 511 |
See accompanying notes to the consolidated financial statements.
14
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Reference Entity | Counterparty | Long/ Short | Currency | Financing Rate | Expiration Date | Trade Notional | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
Brilliance China Automotive Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 30,000 | $ | (34,373 | ) | $ | 12,042 | ||||||||||||||||||
British American Tobacco plc | Citigroup | Short | GBP | (0.25 | )% | 12/30/39 | 339 | (16,775 | ) | 6,046 | ||||||||||||||||||||
BT Group plc | JPMorgan Chase | Short | GBP | 2.27 | % | 12/30/39 | 4,136 | (13,379 | ) | 825 | ||||||||||||||||||||
BYD Electronic International Co., Ltd. | Citigroup | Short | HKD | (1.25 | )% | 12/30/39 | 2,000 | (2,833 | ) | 320 | ||||||||||||||||||||
Cenovus Energy, Inc. | JPMorgan Chase | Short | CAD | 2.15 | % | 12/30/39 | 6,497 | (57,230 | ) | 11,822 | ||||||||||||||||||||
China Everbright International, Ltd. | Citigroup | Short | HKD | (0.31 | )% | 12/30/39 | 11,000 | (9,330 | ) | (533 | ) | |||||||||||||||||||
China Everbright International, Ltd. | JPMorgan Chase | Short | HKD | 2.11 | % | 12/30/39 | 9,000 | (7,383 | ) | (687 | ) | |||||||||||||||||||
China Gas Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 800 | (2,608 | ) | (243 | ) | |||||||||||||||||||
China International Capital Corp., Ltd. | Citigroup | Short | HKD | (2.19 | )% | 12/30/39 | 10,800 | (19,010 | ) | (1,265 | ) | |||||||||||||||||||
China Southern Airlines, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 2,000 | (1,310 | ) | 72 | ||||||||||||||||||||
China State Construction International Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 8,000 | (7,198 | ) | 843 | ||||||||||||||||||||
Clorox | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 301 | (48,433 | ) | 2,037 | ||||||||||||||||||||
Concho Resources, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 58 | (8,089 | ) | 2,127 | ||||||||||||||||||||
Concho Resources, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 137 | (18,774 | ) | 4,692 | ||||||||||||||||||||
Ctrip.com International | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 321 | (11,178 | ) | 2,492 | ||||||||||||||||||||
Daiichi Sankyo, Ltd. | JPMorgan Chase | Short | JPY | 2.15 | % | 12/30/39 | 200 | (7,929 | ) | 1,490 | ||||||||||||||||||||
Daimler AG | JPMorgan Chase | Short | EUR | 2.24 | % | 12/30/39 | 776 | (48,005 | ) | 7,190 | ||||||||||||||||||||
Daimler AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 137 | (8,855 | ) | 1,651 | ||||||||||||||||||||
Delta Electronics, Inc. | JPMorgan Chase | Short | TWD | 2.11 | % | 12/30/39 | 4,000 | (16,035 | ) | (817 | ) | |||||||||||||||||||
Diamondback Energy, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 157 | (16,852 | ) | 2,298 | ||||||||||||||||||||
Digital Realty Trust REIT, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 178 | (21,987 | ) | 3,021 | ||||||||||||||||||||
Digital Realty Trust REIT, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 119 | (14,380 | ) | 1,701 | ||||||||||||||||||||
Edison International | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 132 | (9,111 | ) | 1,617 | ||||||||||||||||||||
Electronic Arts, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 30 | (2,609 | ) | 241 | ||||||||||||||||||||
Evergrande Group | Citigroup | Short | HKD | (1.67 | )% | 12/30/39 | 9,000 | (23,239 | ) | (3,717 | ) | |||||||||||||||||||
Familymart UNY Holdings, Ltd. | JPMorgan Chase | Short | JPY | 2.15 | % | 12/30/39 | 200 | (28,392 | ) | 3,016 | ||||||||||||||||||||
Fortive Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 435 | (32,105 | ) | 2,673 | ||||||||||||||||||||
Freeport McMoRan, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 12 | (176 | ) | 53 | ||||||||||||||||||||
Freeport McMoRan, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 153 | (2,009 | ) | 431 | ||||||||||||||||||||
Geely Automobile Holdings, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 4,000 | (7,298 | ) | 249 | ||||||||||||||||||||
General Mills, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 151 | (7,169 | ) | 1,289 | ||||||||||||||||||||
Great Wall Motor, Ltd. | Citigroup | Short | HKD | (2.00 | )% | 12/30/39 | 20,500 | (12,317 | ) | 563 | ||||||||||||||||||||
Hennes & Mauritz AB | Citigroup | Short | SEK | (1.27 | )% | 12/30/39 | 591 | (8,870 | ) | 405 | ||||||||||||||||||||
Hershey Co. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 48 | (4,995 | ) | (150 | ) | |||||||||||||||||||
Hess Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 83 | (5,429 | ) | 2,067 | ||||||||||||||||||||
Hormel Foods Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 435 | (17,213 | ) | (1,352 | ) | |||||||||||||||||||
Huazhu Group, Ltd. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 335 | (11,913 | ) | 2,322 | ||||||||||||||||||||
Huazhu Group, Ltd. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 1,140 | (34,820 | ) | 2,182 | ||||||||||||||||||||
Hyundai Glovis, Ltd. | JPMorgan Chase | Short | KRW | 2.16 | % | 12/30/39 | 74 | (8,375 | ) | (191 | ) | |||||||||||||||||||
Hyundai Heavy Industries, Ltd. | Citigroup | Short | KRW | (0.56 | )% | 12/30/39 | 58 | (6,710 | ) | 19 | ||||||||||||||||||||
Incyte Corp. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 301 | (20,443 | ) | 1,302 | ||||||||||||||||||||
Incyte Corp. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 328 | (23,214 | ) | 2,357 | ||||||||||||||||||||
Industrias Penoles SAB de C.V. | Citigroup | Short | MXN | (0.50 | )% | 12/30/39 | 328 | (5,491 | ) | 1,437 | ||||||||||||||||||||
Komatsu, Ltd. | JPMorgan Chase | Short | JPY | 2.15 | % | 12/30/39 | 400 | (11,247 | ) | 2,559 | ||||||||||||||||||||
Kone OYJ | JPMorgan Chase | Short | EUR | 2.27 | % | 12/30/39 | 172 | (8,739 | ) | 538 | ||||||||||||||||||||
LG Display, Ltd. | Citigroup | Short | KRW | (0.54 | )% | 12/30/39 | 556 | (10,141 | ) | 1,127 | ||||||||||||||||||||
LG Display, Ltd. | JPMorgan Chase | Short | KRW | 2.16 | % | 12/30/39 | 285 | (5,145 | ) | 523 | ||||||||||||||||||||
Linde plc | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 39 | (6,316 | ) | 231 | ||||||||||||||||||||
Line Corp. | Citigroup | Short | JPY | (1.38 | )% | 12/30/39 | 400 | (14,057 | ) | 286 | ||||||||||||||||||||
Line Corp. | JPMorgan Chase | Short | JPY | 1.40 | % | 12/30/39 | 100 | (4,420 | ) | 950 | ||||||||||||||||||||
Lojas Americanas | JPMorgan Chase | Short | BRL | 1.95 | % | 12/30/39 | 1,510 | (6,915 | ) | (775 | ) | |||||||||||||||||||
Lotte Corp. | Citigroup | Short | KRW | (1.82 | )% | 12/30/39 | 189 | (8,879 | ) | (54 | ) | |||||||||||||||||||
Lotte Corp. | JPMorgan Chase | Short | KRW | 1.03 | % | 12/30/39 | 36 | (1,575 | ) | (127 | ) | |||||||||||||||||||
Lotte Shopping, Ltd. | JPMorgan Chase | Short | KRW | 1.87 | % | 12/30/39 | 28 | (5,097 | ) | (199 | ) | |||||||||||||||||||
Makita Corp. | JPMorgan Chase | Short | JPY | 2.15 | % | 12/30/39 | 500 | (22,674 | ) | 4,752 | ||||||||||||||||||||
National Oilwell Varco, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 66 | (2,481 | ) | 785 | ||||||||||||||||||||
Naver Corp. | JPMorgan Chase | Short | KRW | 2.16 | % | 12/30/39 | 57 | (7,457 | ) | 1,202 | ||||||||||||||||||||
NetEase, Inc., | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 13 | (2,878 | ) | (181 | ) |
See accompanying notes to the consolidated financial statements.
15
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Reference Entity | Counterparty | Long/ Short | Currency | Financing Rate | Expiration Date | Trade Notional | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
NetEase, Inc., | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 97 | $ | (20,393 | ) | $ | (2,438 | ) | |||||||||||||||||
Netmarble Games Corp. | Citigroup | Short | KRW | (2.45 | )% | 12/30/39 | 353 | (34,609 | ) | (633 | ) | |||||||||||||||||||
Netmarble Games Corp. | JPMorgan Chase | Short | KRW | 1.24 | % | 12/30/39 | 179 | (19,175 | ) | 1,283 | ||||||||||||||||||||
Nippon Paint Holdings Co., Ltd. | JPMorgan Chase | Short | JPY | 2.15 | % | 12/30/39 | 700 | (26,225 | ) | 2,181 | ||||||||||||||||||||
Nippon Paint Holdings Co., Ltd. | Citigroup | Short | JPY | (0.40 | )% | 12/30/39 | 500 | (19,052 | ) | 1,863 | ||||||||||||||||||||
NVIDIA Corp. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 64 | (9,666 | ) | 1,122 | ||||||||||||||||||||
Orsted A/S | Citigroup | Short | DKK | (0.25 | )% | 12/30/39 | 277 | (17,308 | ) | (1,219 | ) | |||||||||||||||||||
Pegatron Corp. | Citigroup | Short | TWD | (0.50 | )% | 12/30/39 | 2,000 | (4,198 | ) | 849 | ||||||||||||||||||||
PPG Industries, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 125 | (13,277 | ) | 498 | ||||||||||||||||||||
Reckitt Benckiser Group plc | Citigroup | Short | GBP | (0.25 | )% | 12/30/39 | 139 | (11,534 | ) | 873 | ||||||||||||||||||||
Reckitt Benckiser Group plc | JPMorgan Chase | Short | GBP | 2.27 | % | 12/30/39 | 39 | (3,371 | ) | 381 | ||||||||||||||||||||
Regeneron Pharmaceuticals, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 68 | (26,769 | ) | 1,371 | ||||||||||||||||||||
Remgro, Ltd. | JPMorgan Chase | Short | ZAR | 2.02 | % | 12/30/39 | 50 | (652 | ) | (27 | ) | |||||||||||||||||||
Renesas Electronics Corp. | JPMorgan Chase | Short | JPY | 2.15 | % | 12/30/39 | 400 | (3,039 | ) | 1,188 | ||||||||||||||||||||
Salesforce.com, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 43 | (5,822 | ) | (68 | ) | |||||||||||||||||||
Samsung SDI Co., Ltd | JPMorgan Chase | Short | KRW | 2.16 | % | 12/30/39 | 73 | (16,348 | ) | 1,972 | ||||||||||||||||||||
Saputo, Inc. | JPMorgan Chase | Short | CAD | 2.15 | % | 12/30/39 | 966 | (28,066 | ) | 306 | ||||||||||||||||||||
Sharp Corp. | Citigroup | Short | JPY | (2.00 | )% | 12/30/39 | 800 | (10,177 | ) | 2,084 | ||||||||||||||||||||
Shenzhou International Group, Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 1,000 | (11,361 | ) | 25 | ||||||||||||||||||||
Sherwin-Williams Co. (The) | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 100 | (43,320 | ) | 3,974 | ||||||||||||||||||||
Sherwin-Williams Co. (The) | Citigroup | Short | USD | 2.23 | % | 12/30/39 | 35 | (16,048 | ) | 2,277 | ||||||||||||||||||||
Square, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 879 | (56,440 | ) | 7,137 | ||||||||||||||||||||
Sunny Optical Technology Group Co., Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 5,500 | (63,284 | ) | 14,404 | ||||||||||||||||||||
T. Rowe Price Group, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 6 | (698 | ) | 145 | ||||||||||||||||||||
T. Rowe Price Group, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 113 | (12,013 | ) | 1,581 | ||||||||||||||||||||
TAL Education Group | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 193 | (5,161 | ) | 11 | ||||||||||||||||||||
TAL Education Group | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 414 | (12,703 | ) | 1,657 | ||||||||||||||||||||
Tesla, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 104 | (30,074 | ) | (4,537 | ) | |||||||||||||||||||
Thyssenkrupp AG | JPMorgan Chase | Short | EUR | 1.77 | % | 12/30/39 | 1,731 | (38,069 | ) | 8,288 | ||||||||||||||||||||
Thyssenkrupp AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 419 | (8,805 | ) | 1,603 | ||||||||||||||||||||
Transurban Group | JPMorgan Chase | Short | AUD | 2.22 | % | 12/30/39 | 1,713 | (13,901 | ) | (160 | ) | |||||||||||||||||||
Ultrapar Participoes SA | JPMorgan Chase | Short | BRL | 2.01 | % | 12/30/39 | 388 | (4,290 | ) | (1,050 | ) | |||||||||||||||||||
Vipshop Holdings, Ltd. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 2,862 | (20,143 | ) | 4,516 | ||||||||||||||||||||
Vipshop Holdings, Ltd. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 6,747 | (42,165 | ) | 5,326 | ||||||||||||||||||||
Volkswagen AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 14 | (2,385 | ) | 156 | ||||||||||||||||||||
Volkswagen AG | JPMorgan Chase | Short | EUR | 2.24 | % | 12/30/39 | 101 | (16,641 | ) | 552 | ||||||||||||||||||||
Volkswagen AG | Citigroup | Short | EUR | (0.25 | )% | 12/30/39 | 60 | (9,960 | ) | 398 | ||||||||||||||||||||
Workday, Inc. | JPMorgan Chase | Short | USD | 2.23 | % | 12/30/39 | 137 | (21,820 | ) | (57 | ) | |||||||||||||||||||
Worldpay, Inc. | Citigroup | Short | USD | (0.18 | )% | 12/30/39 | 195 | (15,953 | ) | 1,049 | ||||||||||||||||||||
Wuxi Biologics Cayman, Inc. | JPMorgan Chase | Short | HKD | 1.51 | % | 12/30/39 | 500 | (4,485 | ) | 1,282 | ||||||||||||||||||||
Wuxi Biologics Cayman, Inc. | Citigroup | Short | HKD | (0.30 | )% | 12/30/39 | 5,500 | (48,768 | ) | 13,537 | ||||||||||||||||||||
Zhuzhou CSR Times Electric Co., Ltd. | JPMorgan Chase | Short | HKD | 2.21 | % | 12/30/39 | 1,500 | (8,073 | ) | (243 | ) | |||||||||||||||||||
ZTE Corp. | Citigroup | Short | HKD | (1.90 | )% | 12/30/39 | 1,000 | (1,619 | ) | (271 | ) | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||
$ | (1,721,684 | ) | $ | 174,516 | ||||||||||||||||||||||||||
|
|
|
|
Option Contracts
At December 31, 2018, the Fund’sover-the-counter options purchased were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | |||||||||||||||||||||||
Alphabet, Inc. | JPMorgan Chase | Call | 1225.00 | USD | 1/21/20 | 669 | $ | 819,525 | $ | 38,124 | ||||||||||||||||||||
Anadarko Petroleum Corp. | Credit Suisse First Boston | Call | 67.50 | USD | 1/21/20 | 7,067 | 477,023 | 11,108 | ||||||||||||||||||||||
BP plc | UBS Warburg | Call | 52.00 | USD | 6/24/19 | 34,666 | 1,802,632 | 1,443 | ||||||||||||||||||||||
BP plc | Nomura | Call | 43.50 | USD | 1/21/20 | 32,800 | 1,426,800 | 40,789 | ||||||||||||||||||||||
Chevron Corp. | UBS Warburg | Call | 125.00 | USD | 1/22/19 | 10,746 | 1,343,250 | 197 | ||||||||||||||||||||||
ConocoPhillips Co. | UBS Warburg | Call | 75.00 | USD | 6/24/19 | 18,108 | 1,358,100 | 21,897 |
See accompanying notes to the consolidated financial statements.
16
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | |||||||||||||||||||||||
CVS Health Corp. | JPMorgan Chase | Call | 78.50 | USD | 1/21/20 | 4,950 | $ | 388,575 | $ | 14,970 | ||||||||||||||||||||
EURO STOXX 50 Index | UBS Warburg | Call | 134.92 | EUR | 6/21/21 | 6,489 | 875,496 | 6,691 | ||||||||||||||||||||||
EURO STOXX Bank Index | Barclays Bank | Call | 136.97 | EUR | 3/22/21 | 6,300 | 862,911 | 6,359 | ||||||||||||||||||||||
Exxon Mobil Corp. | UBS Warburg | Call | 95.00 | USD | 1/22/19 | 7,306 | 694,070 | — | ||||||||||||||||||||||
Facebook, Inc. | UBS Warburg | Call | 165.00 | USD | 9/23/19 | 11,500 | 1,897,500 | 61,105 | ||||||||||||||||||||||
Halliburton Co. | Citigroup | Call | 50.00 | USD | 1/21/20 | 13,346 | 667,300 | 2,264 | ||||||||||||||||||||||
J.P. Morgan Chase & Co. | Citigroup | Call | 114.50 | USD | 1/21/20 | 4,968 | 568,836 | 15,689 | ||||||||||||||||||||||
Johnson & Johnson | Bank of America | Call | 155.00 | USD | 1/21/20 | 5,018 | 777,790 | 13,268 | ||||||||||||||||||||||
KOSPI 200 Index | Goldman Sachs | Call | 302.50 | USD | 3/15/19 | 5,549 | 1,678,573 | 878 | ||||||||||||||||||||||
Occidental Petroleum Corp. | UBS Warburg | Call | 92.50 | USD | 6/24/19 | 16,147 | 1,493,598 | 969 | ||||||||||||||||||||||
Royal Dutch Shell plc | UBS Warburg | Call | 77.00 | USD | 6/24/19 | 19,788 | 1,523,676 | 2,358 | ||||||||||||||||||||||
Russell 2000 Index | Bank of America | Call | 1700.00 | USD | 3/18/19 | 1,085 | 1,844,500 | 389 | ||||||||||||||||||||||
Schlumberger, Ltd. | UBS Warburg | Call | 90.00 | USD | 1/22/19 | 10,576 | 951,840 | — | ||||||||||||||||||||||
Schlumberger, Ltd. | UBS Warburg | Call | 70.00 | USD | 1/20/20 | 11,244 | 787,080 | 1,191 | ||||||||||||||||||||||
SPDR Gold Shares(b) | JPMorgan Chase | Call | 120.00 | USD | 2/19/19 | 5,955 | 714,600 | 17,206 | ||||||||||||||||||||||
SPDR Gold Shares(b) | Societe Generale | Call | 121.00 | USD | 3/18/19 | 10,516 | 1,272,436 | 32,463 | ||||||||||||||||||||||
SPDR Gold Shares(b) | Societe Generale | Call | 123.00 | USD | 4/22/19 | 11,146 | 1,370,958 | 33,911 | ||||||||||||||||||||||
SPDR Gold Shares(b) | Morgan Stanley | Call | 120.00 | USD | 5/20/19 | 6,045 | 725,400 | 30,744 | ||||||||||||||||||||||
SPDR Gold Shares(b) | Societe Generale | Call | 124.00 | USD | 6/24/19 | 10,516 | 1,303,984 | 41,400 | ||||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 4756.33 | JPY | 3/16/20 | 14,063 | 66,888,269 | 4,902 | ||||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 4816.24 | JPY | 9/14/20 | 11,381 | 54,813,627 | 4,800 | ||||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 4894.87 | JPY | 12/14/20 | 11,358 | 55,595,933 | 4,344 | ||||||||||||||||||||||
Suncor Energy Inc. | UBS Warburg | Call | 45.00 | USD | 6/24/19 | 23,428 | 1,054,260 | 499 | ||||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 1785.00 | JPY | 3/11/19 | 78,515 | 140,149,275 | 736 | ||||||||||||||||||||||
Tokyo Stock Exchange Price Index | Bank of America | Call | 191.28 | JPY | 12/16/19 | 269,219 | 51,496,210 | 2,607 | ||||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 191.28 | JPY | 12/16/19 | 509,036 | 97,368,406 | 4,928 | ||||||||||||||||||||||
Tokyo Stock Exchange Price Index | BNP Paribas | Call | 194.04 | JPY | 3/16/20 | 363,317 | 70,498,031 | 5,212 | ||||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 192.04 | JPY | 4/13/20 | 323,621 | 62,148,177 | 4,910 | ||||||||||||||||||||||
Total SA | UBS Warburg | Call | 70.00 | USD | 9/23/19 | 24,693 | 1,728,510 | 4,174 | ||||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2350.00 | USD | 1/21/19 | 149 | 350,150 | 2,583 | ||||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2700.00 | USD | 1/21/19 | 1,413 | 3,815,100 | 292,358 | ||||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2400.00 | USD | 1/22/19 | 180 | 432,000 | 4,685 | ||||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2400.00 | USD | 2/01/19 | 150 | 360,000 | 5,494 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total (Cost $1,729,594) |
| $ | 737,645 | |||||||||||||||||||||||||||
|
|
At December 31, 2018, the Fund’sover-the-counter options written were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | |||||||||||||||||||||||
Alphabet, Inc. | JPMorgan Chase | Call | 1350.00 | USD | 1/21/20 | 669 | $ | 903,150 | $ | (20,188 | ) | |||||||||||||||||||
Anadarko Petroleum Corp. | Credit Suisse First Boston | Call | 76.00 | USD | 1/21/20 | 7,067 | 537,092 | (6,306 | ) | |||||||||||||||||||||
Apple, Inc. | Barclays Bank | Call | 160.00 | USD | 1/21/19 | 2,690 | 430,400 | (11,373 | ) | |||||||||||||||||||||
Comcast Corp. | Citigroup | Call | 37.50 | USD | 1/21/20 | 12,216 | 458,100 | (29,135 | ) | |||||||||||||||||||||
ConocoPhillips Co. | UBS Warburg | Call | 85.00 | USD | 6/24/19 | 18,108 | 1,539,180 | (4,729 | ) | |||||||||||||||||||||
CVS Health Corp. | JPMorgan Chase | Call | 87.50 | USD | 1/21/20 | 4,950 | 433,125 | (7,517 | ) | |||||||||||||||||||||
Facebook, Inc. | UBS Warburg | Call | 220.00 | USD | 1/21/20 | 26,331 | 5,792,820 | (37,733 | ) | |||||||||||||||||||||
J.P. Morgan Chase & Co. | Citigroup | Call | 125.50 | USD | 1/21/20 | 4,968 | 623,484 | (7,117 | ) | |||||||||||||||||||||
Johnson & Johnson | Bank of America | Call | 170.00 | USD | 1/21/20 | 5,018 | 853,060 | (5,166 | ) | |||||||||||||||||||||
KOSPI 200 Index | Goldman Sachs | Call | 327.50 | USD | 3/15/19 | 5,549 | 1,817,298 | (115 | ) | |||||||||||||||||||||
Microsoft Corp. | Barclays Bank | Call | 90.00 | USD | 1/21/19 | 4,767 | 429,030 | (58,428 | ) | |||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Call | 5679.90 | JPY | 3/16/20 | 14,063 | 79,876,434 | (857 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 1950.00 | JPY | 3/11/19 | 78,515 | 153,104,250 | (91 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Bank of America | Call | 221.29 | JPY | 12/16/19 | 269,219 | 59,575,473 | (470 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 221.29 | JPY | 12/16/19 | 509,036 | 112,644,576 | (889 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | BNP Paribas | Call | 237.47 | JPY | 3/16/20 | 363,317 | 86,276,888 | (719 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Call | 233.87 | JPY | 4/13/20 | 323,621 | 75,685,243 | (778 | ) | |||||||||||||||||||||
Total SA | UBS Warburg | Call | 75.00 | USD | 9/23/19 | 24,693 | 1,851,975 | (1,656 | ) | |||||||||||||||||||||
United Continental Holdings, Inc. | Deutsche Bank | Call | 75.00 | USD | 1/21/19 | 3,469 | 260,175 | �� | (32,322 | ) |
See accompanying notes to the consolidated financial statements.
17
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | |||||||||||||||||||||||
Alphabet, Inc. | JPMorgan Chase | Put | 860.00 | USD | 1/21/20 | 669 | $ | 575,340 | $ | (30,492 | ) | |||||||||||||||||||
Anadarko Petroleum Corp. | Credit Suisse First Boston | Put | 46.00 | USD | 1/21/20 | 7,067 | 325,082 | (57,870 | ) | |||||||||||||||||||||
BP plc | Nomura | Put | 28.00 | USD | 1/21/20 | 32,800 | 918,400 | (34,732 | ) | |||||||||||||||||||||
CVS Health Corp. | JPMorgan Chase | Put | 56.00 | USD | 1/21/20 | 4,950 | 277,200 | (19,493 | ) | |||||||||||||||||||||
EURO STOXX 50 Index | UBS Warburg | Put | 106.38 | EUR | 6/21/21 | 4,268 | 454,030 | (170,340 | ) | |||||||||||||||||||||
EURO STOXX Bank Index | Barclays Bank | Put | 110.23 | EUR | 3/22/21 | 4,201 | 463,076 | (169,645 | ) | |||||||||||||||||||||
Facebook, Inc. | UBS Warburg | Put | 155.00 | USD | 1/21/20 | 26,331 | 4,081,305 | (814,059 | ) | |||||||||||||||||||||
Halliburton Co. | Citigroup | Put | 35.00 | USD | 1/21/20 | 13,346 | 467,110 | (127,496 | ) | |||||||||||||||||||||
J.P. Morgan Chase & Co. | Citigroup | Put | 87.25 | USD | 1/21/20 | 4,968 | 433,458 | (30,372 | ) | |||||||||||||||||||||
Johnson & Johnson | Bank of America | Put | 109.00 | USD | 1/21/20 | 5,018 | 546,962 | (23,889 | ) | |||||||||||||||||||||
KOSPI 200 Index | Goldman Sachs | Put | 270.00 | USD | 3/15/19 | 5,549 | 1,498,230 | (67,901 | ) | |||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2200.00 | USD | 1/21/19 | 149 | 327,800 | (778 | ) | |||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2250.00 | USD | 1/22/19 | 180 | 405,000 | (1,391 | ) | |||||||||||||||||||||
S&P 500 Index | Barclays Bank | Put | 2250.00 | USD | 2/01/19 | 150 | 337,500 | (2,010 | ) | |||||||||||||||||||||
S&P 500 Index | Bank of America | Put | 2600.00 | USD | 3/18/19 | 599 | 1,557,400 | (92,311 | ) | |||||||||||||||||||||
Schlumberger, Ltd. | UBS Warburg | Put | 52.50 | USD | 1/20/20 | 11,244 | 590,310 | (198,712 | ) | |||||||||||||||||||||
SPDR Gold Shares(b) | Morgan Stanley | Put | 113.00 | USD | 5/20/19 | 3,023 | �� | 341,599 | (2,122 | ) | ||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Put | 3832.77 | JPY | 3/16/20 | 14,063 | 53,900,245 | (70,552 | ) | |||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Put | 3820.96 | JPY | 9/14/20 | 7,587 | 28,989,624 | (43,876 | ) | |||||||||||||||||||||
Sumitomo Mitsui Financial Group, Inc. | Morgan Stanley | Put | 3786.60 | JPY | 12/14/20 | 7,573 | 28,675,922 | (46,724 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Put | 1600.00 | JPY | 3/11/19 | 78,515 | 125,624,000 | (88,721 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Bank of America | Put | 156.59 | JPY | 12/16/19 | 269,219 | 42,157,003 | (52,243 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Put | 156.59 | JPY | 12/16/19 | 509,036 | 79,709,947 | (98,772 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | BNP Paribas | Put | 155.80 | JPY | 3/16/20 | 363,317 | 56,604,789 | (73,472 | ) | |||||||||||||||||||||
Tokyo Stock Exchange Price Index | Morgan Stanley | Put | 157.82 | JPY | 4/13/20 | 323,621 | 51,073,866 | (75,253 | ) | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total (Premiums $1,673,647) |
| $ | (2,618,815 | ) | ||||||||||||||||||||||||||
|
|
At December 31, 2018, the Fund’s exchange traded options written were as follows:
Description | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | ||||||||||||||||||||
Amazon.com, Inc. | Call | 1780.00 | USD | 2/19/19 | 3 | $ | 5,340 | $ | (5,190 | ) | ||||||||||||||||
Amazon.com, Inc. | Call | 1790.00 | USD | 2/19/19 | 3 | 5,370 | (4,605 | ) | ||||||||||||||||||
Amazon.com, Inc. | Call | 1800.00 | USD | 2/19/19 | 3 | 5,400 | (4,155 | ) | ||||||||||||||||||
McDonald’s Corp. | Call | 185.00 | USD | 1/22/19 | 2 | 370 | (176 | ) | ||||||||||||||||||
Verisign, Inc | Call | 170.00 | USD | 1/22/19 | 1 | 170 | (39 | ) | ||||||||||||||||||
|
| |||||||||||||||||||||||||
Total (Premiums $68,886) | $ | (14,165 | ) | |||||||||||||||||||||||
|
|
At December 31, 2018, the Fund’sover-the-counter currency options purchased were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Notional Amount | Fair Value | ||||||||||||||||
British Pound Call Currency Option (GBP/USD) | UBS Warburg | Call | 1.32 GBP | 5/16/19 | 58,850 | $ | 142,517 | |||||||||||||||
|
| |||||||||||||||||||||
Total (Cost $190,251) | $ | 142,517 | ||||||||||||||||||||
|
|
At December 31, 2018, the Fund’s openover-the-counter interest rate swaptions purchased were as follows:
Paid by the Fund | Received by the Fund | |||||||||||||||||||||||||
Rate | Frequency | Rate | Frequency | Expiration Date | Counterparty | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||
3.00% | Semi-annually | 3-Month U.S. Dollar LIBOR | Quarterly | 3/4/19 | Nomura | 1,189 USD | $ | 5,160 | $ | (39,684 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||||||
Total (Cost $44,844) | $ | 5,160 | $ | (39,684 | ) | |||||||||||||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
18
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
At December 31, 2018, the Fund’s openover-the-counter interest rate swaptions written were as follows:
Paid by the Fund | Received by the Fund | |||||||||||||||||||||||||||||||||
Rate | Frequency | Rate | Frequency | Expiration Date | Counterparty | Notional Amount (Local) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||
2.70% | Semi-annually | 3-Month U.S. Dollar LIBOR | Quarterly | 3/4/19 | Nomura | (1,189 | ) | USD | $ | (104,357 | ) | $ | (86,216 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||
Total (Premiums $18,141) | $ | (104,357 | ) | $ | (86,216 | ) | ||||||||||||||||||||||||||||
|
|
|
|
Forward Currency Contracts
At December 31, 2018, the Fund’s open forward currency contracts were as follows:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Net Unrealized Appreciation/ (Depreciation) | ||||||||
Japanese Yen | 102,084,390 | U.S. Dollar | 922,057 | JPMorgan Chase | 1/7/19 | $10,000 | ||||||
Japanese Yen | 1,642,430 | U.S. Dollar | 14,877 | UBS Warburg | 1/7/19 | 119 | ||||||
U.S. Dollar | 628,128 | Australian Dollar | 888,000 | JPMorgan Chase | 1/25/19 | 2,464 | ||||||
Japanese Yen | 211,538,820 | U.S. Dollar | 1,905,000 | JPMorgan Chase | 1/25/19 | 29,311 | ||||||
Japanese Yen | 210,764,000 | U.S. Dollar | 1,887,078 | Citigroup | 1/31/19 | 41,094 | ||||||
Japanese Yen | 161,863,500 | U.S. Dollar | 1,439,638 | JPMorgan Chase | 2/14/19 | 42,690 | ||||||
Japanese Yen | 161,863,500 | U.S. Dollar | 1,439,638 | JPMorgan Chase | 2/14/19 | 42,690 | ||||||
European Euro | 838,000 | U.S. Dollar | 957,431 | Goldman Sachs | 2/15/19 | 6,296 | ||||||
European Euro | 834,000 | U.S. Dollar | 948,998 | Morgan Stanley | 2/28/19 | 11,093 | ||||||
Japanese Yen | 129,776,401 | U.S. Dollar | 1,149,000 | Morgan Stanley | 3/7/19 | 41,474 | ||||||
European Euro | 825,000 | U.S. Dollar | 938,374 | Morgan Stanley | 3/14/19 | 12,508 | ||||||
Swedish Krona | 17,198,882 | European Euro | 1,664,000 | Goldman Sachs | 3/21/19 | 35,519 | ||||||
| ||||||||||||
$275,258 | ||||||||||||
| ||||||||||||
U.S. Dollar | 1,636 | Japanese Yen | 180,000 | JPMorgan Chase | 1/4/19 | $(7) | ||||||
British Pound | 1,296,000 | U.S. Dollar | 1,691,897 | JPMorgan Chase | 1/11/19 | (39,341) | ||||||
European Euro | 827,000 | U.S. Dollar | 950,365 | Morgan Stanley | 1/25/19 | (882) | ||||||
U.S. Dollar | 2,055,204 | Japanese Yen | 227,800,000 | Morgan Stanley | 1/28/19 | (28,321) | ||||||
Norwegian Krone | 6,254,000 | U.S. Dollar | 754,556 | JPMorgan Chase | 2/1/19 | (29,574) | ||||||
U.S. Dollar | 2,039,625 | Japanese Yen | 228,150,000 | Goldman Sachs | 2/4/19 | (48,215) | ||||||
British Pound | 1,486,000 | U.S. Dollar | 1,945,241 | JPMorgan Chase | 2/15/19 | (47,204) | ||||||
U.S. Dollar | 963,545 | European Euro | 838,000 | Morgan Stanley | 2/15/19 | (181) | ||||||
British Pound | 775,000 | U.S. Dollar | 1,014,568 | JPMorgan Chase | 2/21/19 | (24,408) | ||||||
U.S. Dollar | 957,157 | European Euro | 834,000 | Deutsche Bank | 2/28/19 | (2,935) | ||||||
U.S. Dollar | 1,057,330 | Brazilian Real | 4,122,000 | Deutsche Bank | 3/1/19 | (1,711) | ||||||
U.S. Dollar | 2,137,446 | Japanese Yen | 238,199,999 | Goldman Sachs | 3/4/19 | (46,994) | ||||||
South African Rand | 16,446,000 | U.S. Dollar | 1,147,816 | Citigroup | 3/14/19 | (11,855) | ||||||
U.S. Dollar | 946,012 | European Euro | 825,000 | Morgan Stanley | 3/14/19 | (4,870) | ||||||
U.S. Dollar | 927,341 | Japanese Yen | 102,050,000 | JPMorgan Chase | 3/25/19 | (10,420) | ||||||
| ||||||||||||
$(296,918) | ||||||||||||
| ||||||||||||
Total Net Forward Currency Contracts | $(21,660) | |||||||||||
|
Swap Agreements
At December 31, 2018, the Fund’s open centrally cleared credit default swap agreements (sell protection) were as follows:
Description | Payment Frequency | Implied Credit Spread at December 31, 2018(c) | Expiration Date | Notional Amount(d) | Fixed Rate | Value | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
CDX North America High Yield Index Swap Agreement with Series 30 | Quarterly | 4.14 | % | 6/20/23 | $ | 531,318 | 5.00 | % | $ | 16,319 | $ | 34,127 | $ | (17,808 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 16,319 | $ | 34,127 | $ | (17,808 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
19
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Cash of $768,430 has been segregated to cover margin requirements for the following open centrally cleared interest rate swap agreements as of December 31, 2018:
Paid by the Fund | Received by the Fund | |||||||||||||||||||||||||||||||||
Rate | Frequency | Rate | Frequency | Expiration Date | Notional Amount | Upfront Premiums Paid/ (Received) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||
3-Month LIBOR | Quarterly | 2.97% | Semi-annually | 7/18/25 | 12,447,470 | USD | $ | 177 | $ | 207,705 | $ | 207,528 | ||||||||||||||||||||||
0.84% | Annually | 6-Month EURIBOR | Semi-annually | 2/15/28 | 1,463,000 | EUR | 31 | (18,345 | ) | (18,376 | ) | |||||||||||||||||||||||
0.84% | Annually | 6-Month EURIBOR | Semi-annually | 2/15/28 | 1,474,000 | EUR | 32 | (18,453 | ) | (18,485 | ) | |||||||||||||||||||||||
0.99% | Annually | 6-Month EURIBOR | Semi-annually | 10/29/28 | 7,981,613 | EUR | — | (170,415 | ) | (170,415 | ) | |||||||||||||||||||||||
3-Month LIBOR | Quarterly | 3.20% | Semi-annually | 10/29/28 | 10,098,436 | USD | — | 435,859 | 435,859 | |||||||||||||||||||||||||
2.99% | Semi- annually | 3-Month LIBOR | Quarterly | 7/18/50 | 2,797,184 | USD | 89 | (62,848 | ) | (62,937 | ) | |||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||
$ | 373,503 | $ | 373,174 | |||||||||||||||||||||||||||||||
|
|
|
|
At December 31, 2018, cash of $90,000 was received as collateral for the following over-the-counter total return swap agreements:
Pay/ Receive | Financing Rate | Description | Expiration Date | Counterparty | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Pay | 0.00 | % | EURO STOXX Bank Index April Futures | 4/30/19 | BNP Paribas SA | (574,875 | ) | EUR | $ | 61,806 | ||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/21 | BNP Paribas SA | 15,520,000 | JPY | 16,425 | ||||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/21 | BNP Paribas SA | 7,655,000 | JPY | 9,171 | ||||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/21 | BNP Paribas SA | 4,215,000 | JPY | 1,049 | ||||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/22 | BNP Paribas SA | 15,720,000 | JPY | 15,002 | ||||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/22 | BNP Paribas SA | 7,950,000 | JPY | 6,679 | ||||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/22 | BNP Paribas SA | 7,970,000 | JPY | 6,497 | ||||||||||||||
Pay | 0.00 | % | NIKKEI 225 Dividend IndexE-Mini March Futures | 3/31/22 | BNP Paribas SA | 4,260,000 | JPY | 739 | ||||||||||||||
Pay | 0.00 | % | S&P 500 Index Dividends December Futures | 12/18/20 | Goldman Sachs | 107,944 | USD | 19,181 | ||||||||||||||
Pay | 0.00 | % | S&P 500 Index Dividends December Futures | 12/17/21 | BNP Paribas SA | 133,513 | USD | 22,963 | ||||||||||||||
|
| |||||||||||||||||||||
$ | 159,512 | |||||||||||||||||||||
|
|
(a) | Notional amount is expressed as the number of contracts multiplied by the strike price of the underlying asset. |
(b) | All or a portion of these securities are held by the AZL Cayman Global Allocation Fund I, Ltd. (the “Subsidiary”). |
(c) | 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. |
(d) | 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. |
See accompanying notes to the consolidated financial statements.
20
AZL BlackRock Global Allocation Fund
Consolidated Schedule of Portfolio Investments
December 31, 2018
Balances Reported in the Consolidated Statement of Assets and Liabilities for Options Written, Forward Currency Contracts and Swap Agreements
Swap Premiums Paid | Swap Premiums Received | Unrealized Appreciation | Unrealized Depreciation | Value | ||||||||||||||||
Written options and swaptions | $ | — | $ | 1,176,674 | | $ | 54,721 | $ | (1,031,383 | ) | $ | (2,737,337 | ) | |||||||
Forward currency contracts | — | — | 275,258 | (296,918 | ) | (21,660 | ) | |||||||||||||
Centrally cleared swap agreements(a) | 34,456 | — | 643,387 | (288,021 | ) | 389,822 | ||||||||||||||
Over-the-counter swap agreements | — | — | 159,512 | — | — |
(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. |
See accompanying notes to the consolidated financial statements.
21
AZL BlackRock Global Allocation Fund
Consolidated Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 379,918,001 | |||
|
| ||||
Investment securities, at value(a) | $ | 379,564,458 | |||
Cash | 54,508 | ||||
Segregated cash for collateral for futures contracts | 486,000 | ||||
Segregated cash for collateral on swap agreeements | 768,430 | ||||
Deposits with brokers for securities sold short | 1,163,005 | ||||
Interest and dividends receivable | 1,183,889 | ||||
Foreign currency, at value (cost $63,713) | 63,930 | ||||
Unrealized appreciation on forward currency contracts | 275,258 | ||||
Unrealized appreciation on swap agreements | 159,512 | ||||
Receivable for investments sold | 926,926 | ||||
Receivable for capital shares issued | 281 | ||||
Receivable for variation margin on centrally cleared swap agreements | 75,118 | ||||
Receivable for variation margin on futures contracts | 101,784 | ||||
Receivable for variation margin on contracts for differences | 7,125 | ||||
Reclaims receivable | 328,426 | ||||
Prepaid expenses | 7,763 | ||||
|
| ||||
Total Assets | 385,166,413 | ||||
|
| ||||
Liabilities: | |||||
Cash received as collateral for swap agreements | 90,000 | ||||
Written options and swaptions (Proceeds received $1,760,675) | 2,737,337 | ||||
Unrealized depreciation on forward currency contracts | 296,918 | ||||
Payable for investments purchased | 1,423,199 | ||||
Payable for collateral received on loaned securities | 11,159,870 | ||||
Securities sold short (Proceeds received $1,002,437) | 787,417 | ||||
Payable for variation margin on futures contracts | 154,783 | ||||
Payable for variation margin on contracts for differences | 8,445 | ||||
Payable for variation margin on centrally cleared swap agreements | 32,216 | ||||
Interest payable on securities sold short | 4,285 | ||||
Accrued foreign taxes | 37,925 | ||||
Manager fees payable | 237,170 | ||||
Administration fees payable | 6,391 | ||||
Distribution fees payable | 79,057 | ||||
Custodian fees payable | 7,510 | ||||
Administrative and compliance services fees payable | 5,081 | ||||
Transfer agent fees payable | 221 | ||||
Trustee fees payable | 244 | ||||
|
| ||||
Total Liabilities | 17,068,069 | ||||
|
| ||||
Net Assets | $ | 368,098,344 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 356,319,328 | |||
Total distributable earnings | 11,779,016 | ||||
|
| ||||
Net Assets | $ | 368,098,344 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 33,786,163 | ||||
Net Asset Value (offering and redemption price per share) | $ | 10.89 | |||
|
|
(a) | Includes securities on loan of $10,901,916. |
Consolidated Statement of Operations
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 5,464,330 | |||
Interest | 3,913,906 | ||||
Income from securities lending | 53,199 | ||||
Foreign withholding tax | (295,336 | ) | |||
|
| ||||
Total Investment Income | 9,136,099 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 3,009,064 | ||||
Administration fees | 157,862 | ||||
Distribution fees | 1,003,021 | ||||
Custodian fees | 200,191 | ||||
Administrative and compliance services fees | 7,111 | ||||
Trustee fees | 22,202 | ||||
Transfer agency fees | 5,973 | ||||
Professional fees | 20,945 | ||||
Shareholder reports | 5,206 | ||||
Dividends on securities sold short | 22,298 | ||||
Other expenses | 73,020 | ||||
|
| ||||
Total expenses | 4,526,893 | ||||
|
| ||||
Net Investment Income/(Loss) | 4,609,206 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 12,300,949 | ||||
Net realized gains/(losses) on futures contracts | (41,646 | ) | |||
Net realized gains/(losses) on contracts for differences | 25,530 | ||||
Net realized gains/(losses) on written options contracts | 447,873 | ||||
Net realized gains (losses) on securities held short | 165,619 | ||||
Net realized gains/(losses) on swap agreements | (12,099 | ) | |||
Net realized gains/(losses) on forward currency contracts | (700,813 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (45,748,188 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | 273,230 | ||||
Change in net unrealized appreciation/depreciation on contracts for differences | 174,516 | ||||
Change in net unrealized appreciation/depreciation on written option contracts | (1,438,114 | ) | |||
Change in net unrealized appreciation/depreciation on securities held short | 215,020 | ||||
Change in net unrealized appreciation/depreciation on swap agreements | (562,836 | ) | |||
Change in net unrealized appreciation/depreciation on forward currency contracts | (276,672 | ) | |||
Change in accrued foreign tax liability | 7,909 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (35,169,722 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (30,560,516 | ) | ||
|
|
See accompanying notes to the consolidated financial statements.
22
AZL BlackRock Global Allocation Fund
Consolidated Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 4,609,206 | $ | 3,740,221 | ||||||
Net realized gains/(losses) on investments | 12,185,413 | 17,889,573 | ||||||||
Change in unrealized appreciation/depreciation on investments | (47,355,135 | ) | 29,429,868 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (30,560,516 | ) | 51,059,662 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (18,473,192 | ) | (7,349,577 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (18,473,192 | ) | (7,349,577 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 574,801 | 215,077 | ||||||||
Proceeds from dividends reinvested | 18,473,192 | 7,349,577 | ||||||||
Value of shares redeemed | (19,581,928 | ) | (43,709,966 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (533,935 | ) | (36,145,312 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (49,567,643 | ) | 7,564,773 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 417,665,987 | 410,101,214 | ||||||||
|
|
|
| |||||||
End of period | $ | 368,098,344 | $ | 417,665,987 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 45,611 | 17,936 | ||||||||
Dividends reinvested | 1,619,035 | 608,409 | ||||||||
Shares redeemed | (1,584,521 | ) | (3,675,557 | ) | ||||||
|
|
|
| |||||||
Change in shares | 80,125 | (3,049,212 | ) | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Consolidated Financial Statements. |
See accompanying notes to the consolidated financial statements.
23
AZL BlackRock Global Allocation Fund
Consolidated Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.39 | $ | 11.16 | $ | 10.99 | $ | 11.97 | $ | 12.05 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.14 | 0.12 | 0.20 | 0.10 | 0.12 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.07 | ) | 1.33 | 0.27 | (0.27 | ) | 0.12 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.93 | ) | 1.45 | 0.47 | (0.17 | ) | 0.24 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.07 | ) | (0.22 | ) | (0.02 | ) | (0.28 | ) | (0.08 | ) | |||||||||||||||
Net Realized Gains | (0.50 | ) | — | (0.28 | ) | (0.53 | ) | (0.24 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.57 | ) | (0.22 | ) | (0.30 | ) | (0.81 | ) | (0.32 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 10.89 | $ | 12.39 | $ | 11.16 | $ | 10.99 | $ | 11.97 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (7.70 | )% | 13.00 | % | 4.35 | % | (1.41 | )% | 1.78 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 368,098 | $ | 417,666 | $ | 410,101 | $ | 789,320 | $ | 777,743 | |||||||||||||||
Net Investment Income/(Loss) | 1.12 | % | 0.90 | % | 1.10 | % | 0.84 | % | 1.14 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.10 | % | 1.17 | % | 1.12 | % | 1.11 | % | 1.11 | % | |||||||||||||||
Expenses Net of Reductions | 1.10 | % | 1.17 | % | 1.12 | % | 1.11 | % | 1.11 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly | 1.10 | % | 1.17 | % | 1.12 | % | 1.11 | % | 1.11 | %(c) | |||||||||||||||
Portfolio Turnover Rate | 141 | % | 115 | % | 140 | % | 82 | % | 74 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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.
24
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL BlackRock Global Allocation Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the risk of loss to be remote.
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. The Fund is a wholly-owned and controlled subsidiary of AZL MVP BlackRock Global Strategy Plus Fund, which is affiliated with the Investment Adviser.
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. 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
The Fund’s primary vehicle for gaining exposure to the commodities markets is through investment in the AZL Cayman Global Allocation Fund I, Ltd. (the “Subsidiary”), a wholly owned and controlled subsidiary of the Fund formed in the Cayman Islands, which invests primarily in commodity-related instruments. As of December 31, 2018, the Fund’s aggregate investment in the Subsidiary was $5,957,393, representing 1.62% of the Fund’s net assets. The Subsidiary’s financial statements, including its investments, and its operating results have been consolidated with those of the Fund. 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 year, 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.
25
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 Fund of Funds 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 December 31, 2018 are presented on the Fund’s Consolidated Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Consolidated Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Consolidated Statement of Operations.
26
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 $5,389 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Consolidated Statement of Operations. The Fund had securities lending transactions of $11,130,249 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018.
TBA Purchase and Sale Commitments
The Fund may enter intoto-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 “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 December 31, 2018, no collateral had been posted by the Fund to counterparties for TBAs.
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 year ended December 31, 2018, 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 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 year ended December 31, 2018, 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 year ended December 31, 2018, the monthly average notional amount for long contracts was $22.1 million and the monthly average notional amount for short contracts was $11.1 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 year ended December 31, 2018, 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. For the year ended December 31, 2018, the monthly average notional amount for long contracts was $1.0 million and the monthly average notional for short contracts was $10.1 million. 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.
27
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 year ended December 31, 2018, the monthly average notional amount on contracts for differences was $0.2 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 year ended December 31, 2018, 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.
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 year ended December 31, 2018, the monthly average notional amount for written options contracts was $39.2 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 theover-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 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 December 31, 2018, 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 $37.9 million for the year ended December 31, 2018.
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 monthly average gross notional amount for currency swaps was $2.2 million for the year ended December 31, 2018.
28
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 $2.6 million for the year ended December 31, 2018.
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 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 amarked-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 December 31, 2018, the Fund entered into OTC and 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 $0.3 million for the year ended December 31, 2018.
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 December 31, 2018:
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* | $ | 288,189 | Payable for variation margin on futures contracts* | $ | 1,363 | ||||||
Contracts for differences | Receivable for variation margin on contracts for differences | 197,043 | Payable for variation margin on contracts for differences | 22,527 | ||||||||
Options Contracts | Written Options | 2,632,980 | ||||||||||
Total Return Swap Agreements | Unrealized appreciation on swap agreements | 159,512 | Unrealized depreciation on swap agreements | — | ||||||||
Credit Risk | ||||||||||||
Centrally Cleared Credit Default Swap Agreements | Receivable for variation margin on swap agreements* | — | Payable for variation margin on swap agreements* | 17,808 | ||||||||
Interest Rate Risk | ||||||||||||
Futures Contracts | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | 37,811 | ||||||||
Interest Rate Swap Agreements | Unrealized appreciation on swap agreements* | 643,387 | Unrealized depreciation on swap agreements* | 270,213 | ||||||||
Swaption Contracts | Written Options | 104,357 | ||||||||||
Foreign Exchange Risk | ||||||||||||
Forward Currency Contracts | Unrealized appreciation on forward currency contracts | 275,258 | Unrealized depreciation on forward currency contracts | 296,918 |
* | 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. |
29
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Consolidated Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 Written Option Contracts | Net Realized Contracts | |||||||||||||||||||||
Equity Risk | $ | (41,646 | ) | $ | 25,530 | $ | 580,832 | $ | 455,321 | $ | — | ||||||||||||||
Credit Risk | — | — | (28,151 | ) | — | — | |||||||||||||||||||
Interest Rate Risk | — | — | (25,545 | ) | (181,404 | ) | — | ||||||||||||||||||
Foreign Exchange Rate Risk | — | — | (539,235 | ) | 173,956 | 700,813 | |||||||||||||||||||
Change in Net Unrealized Appreciation/Depreciation | |||||||||||||||||||||||||
on Derivatives Recognized as a Result from Operations | |||||||||||||||||||||||||
Change in Net Unrealized Appreciation/ Depreciation on Futures Contracts | Change in Net Unrealized Appreciation/ Depreciation on Contracts for Differences | Change in Net Unrealized Appreciation/ Depreciation on Swap Agreements | Change in Net Option Contracts | Change in Net Unrealized Appreciation/ Depreciation on Forward Currency Contracts | |||||||||||||||||||||
Equity Risk | $ | 311,041 | $ | 174,516 | $ | (661,008 | ) | $ | (1,142,413 | ) | $ | — | |||||||||||||
Credit Risk | — | — | �� | 5,125 | — | — | |||||||||||||||||||
Interest Rate Risk | (37,811 | ) | — | 293,470 | (203,293 | ) | — | ||||||||||||||||||
Foreign Exchange Rate Risk | — | — | (200,423 | ) | (92,408 | ) | (276,672 | ) |
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 December 31, 2018. 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 December 31, 2018.
As of December 31, 2018, the Fund’s derivative assets and liabilities by type were as follows:
Assets | Liabilities | |||||||||
Derivative Financial Instruments: | ||||||||||
Forward currency contracts | $ | 275,258 | $ | 296,918 | ||||||
Futures contracts and contracts for differences | — | 52,999 | ||||||||
Contracts for differences | — | 1,320 | ||||||||
Option contracts | — | 2,737,337 | ||||||||
Swap agreements | 234,630 | 32,216 | ||||||||
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| |||||||
Total derivative assets and liabilities in the Consolidated Statement of Assets and Liabilities | 509,888 | 3,120,790 | ||||||||
Derivatives not subject to a master netting agreement or similar agreement (“MNA”) | (75,118 | ) | (100,700 | ) | ||||||
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| |||||||
Total assets and liabilities subject to a MNA | $ | 434,770 | $ | 3,020,090 | ||||||
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|
The following table presents the Fund’s derivative assets by counterparty net of amounts available for offset under MNA and net of the related collateral received by the Fund as of December 31, 2018:
Counterparty | Derivative Assets Subject to a MNA by Counterparty | Derivatives for Offset | Non-cash Received* | Cash Received* | Net Amount of Derivative Assets | ||||||||||||||||||||
BNP Paribas SA | $ | 140,331 | $ | (74,191 | ) | $ | — | $ | (66,140 | ) | $ | — | |||||||||||||
Citigroup | 41,094 | (41,094 | ) | — | — | — | |||||||||||||||||||
Goldman Sachs | 60,996 | (60,996 | ) | — | — | — | |||||||||||||||||||
JPMorgan Chase | 127,155 | (127,155 | ) | — | — | — | |||||||||||||||||||
Morgan Stanley | 65,075 | (65,075 | ) | — | — | — | |||||||||||||||||||
UBS Warburg | 119 | (119 | ) | — | — | — | |||||||||||||||||||
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| ||||||||||||||||
Total | $ | 434,770 | $ | (368,630 | ) | $ | — | $ | (66,140 | ) | $ | — | |||||||||||||
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30
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
The following table presents the Fund’s derivative liabilities by counterparty net of amounts available for offset under MNA and net of the related collateral received by the Fund as of December 31, 2018:
Counterparty | Derivative Liabilities by Counterparty | Derivatives for Offset | Non-cash Pledged* | Cash Pledged* | Net Amount of Derivative Liabilities | ||||||||||||||||||||
Bank of America | $ | 174,079 | $ | — | $ | — | $ | (174,079 | ) | $ | — | ||||||||||||||
Barclays Bank | 243,625 | — | — | — | 243,625 | ||||||||||||||||||||
BNP Paribas SA | 74,191 | (74,191 | ) | — | — | — | |||||||||||||||||||
Citigroup | 205,975 | (41,094 | ) | — | — | 164,881 | |||||||||||||||||||
Credit Suisse First Boston | 64,176 | — | — | — | 64,176 | ||||||||||||||||||||
Deutsche Bank | 36,968 | — | — | — | 36,968 | ||||||||||||||||||||
Goldman Sachs | 163,225 | (60,996 | ) | — | — | 102,229 | |||||||||||||||||||
JPMorgan Chase | 228,644 | (127,155 | ) | — | — | 101,489 | |||||||||||||||||||
Morgan Stanley | 462,889 | (65,075 | ) | — | — | 397,814 | |||||||||||||||||||
Nomura | 139,089 | — | — | — | 139,089 | ||||||||||||||||||||
UBS Warburg | 1,227,229 | (119 | ) | — | — | 1,227,110 | |||||||||||||||||||
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|
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|
|
|
| ||||||||||||||||
Total | $ | 3,020,090 | $ | (368,630 | ) | $ | — | $ | (174,079 | ) | $ | 2,477,381 | |||||||||||||
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* | 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, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Consolidated Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Consolidated Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (7,349,577 | ) | ||
From net realized gains | — | ||||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (7,349,577 | ) | ||
|
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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 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.
For the year ended December 31, 2018, the annual rate paid to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL BlackRock Global Allocation Fund | 0.75 | % | 1.19 | % |
31
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 year are reflected on the Consolidated Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 Consolidated Statement of Operations. During the year ended December 31, 2018, there were no voluntary waivers.
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 value 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 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 anannual 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 year ended December 31, 2018, $22,213 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
32
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | ||||||||||||||||||||
Aerospace & Defense | $ | 2,031,649 | $ | 2,088,707 | $ | — | $ | 4,120,356 | ||||||||||||
Air Freight & Logistics | 106,626 | — | — | 106,626 | ||||||||||||||||
Airlines | 2,658,519 | 2,031,952 | — | 4,690,471 | ||||||||||||||||
Auto Components | 17,323 | 3,925,977 | — | 3,943,300 | ||||||||||||||||
Automobiles | 27,329 | 3,989,331 | — | 4,016,660 | ||||||||||||||||
Banks | 8,018,735 | 2,965,679 | — | 10,984,414 | ||||||||||||||||
Beverages | 191,454 | 1,886,825 | — | 2,078,279 | ||||||||||||||||
Biotechnology | 2,857,069 | — | — | 2,857,069 | ||||||||||||||||
Building Products | 255,987 | 684,101 | — | 940,088 | ||||||||||||||||
Capital Markets | 3,190,711 | — | — | 3,190,711 | ||||||||||||||||
Chemicals | 4,205,291 | 5,586,533 | — | 9,791,824 | ||||||||||||||||
Commercial Services & Supplies | 16,997 | 9,804 | — | 26,801 | ||||||||||||||||
Communications Equipment | 116,688 | 71,571 | — | 188,259 | ||||||||||||||||
Construction & Engineering | — | 954,861 | — | 954,861 | ||||||||||||||||
Construction Materials | 7,048 | 197,830 | — | 204,878 | ||||||||||||||||
Consumer Finance | 67,379 | — | — | 67,379 | ||||||||||||||||
Containers & Packaging | 27,625 | — | — | 27,625 | ||||||||||||||||
Distributors | — | 65,430 | — | 65,430 | ||||||||||||||||
Diversified Consumer Services | 15,073 | — | — | 15,073 | ||||||||||||||||
Diversified Financial Services | 230,723 | 192,102 | — | 422,825 | ||||||||||||||||
Diversified Telecommunication Services | 1,702,297 | 2,829,977 | — | 4,532,274 | ||||||||||||||||
Electric Utilities | 3,051,079 | 1,507,588 | — | 4,558,667 | ||||||||||||||||
Electrical Equipment | 110,214 | 1,584,987 | — | 1,695,201 | ||||||||||||||||
Electronic Equipment, Instruments & Components | 44,922 | 1,765,826 | — | 1,810,748 | ||||||||||||||||
Energy Equipment & Services | 339,142 | — | — | 339,142 | ||||||||||||||||
Entertainment | 805,233 | 121,994 | — | 927,227 | ||||||||||||||||
Equity Real Estate Investment Trusts | 787,594 | 698,053 | — | 1,485,647 | ||||||||||||||||
Food & Staples Retailing | 191,684 | 229,943 | — | 421,627 | ||||||||||||||||
Food Products | 123,016 | 7,944,187 | — | 8,067,203 | ||||||||||||||||
Gas Utilities | — | 1,354,487 | — | 1,354,487 | ||||||||||||||||
Health Care Equipment & Supplies | 491,681 | 5,271,826 | — | 5,763,507 | ||||||||||||||||
Health Care Providers & Services | 9,740,463 | 3,468,623 | — | 13,209,086 | ||||||||||||||||
Health Care Technology | — | 340,248 | — | 340,248 | ||||||||||||||||
Hotels, Restaurants & Leisure | 2,250,768 | 1,895,032 | — | 4,145,800 | ||||||||||||||||
Household Durables | — | 300,112 | — | 300,112 | ||||||||||||||||
Household Products | 3,798,369 | 19,387 | — | 3,817,756 | ||||||||||||||||
Independent Power and Renewable Electricity Producers | 799,652 | — | — | 799,652 | ||||||||||||||||
Industrial Conglomerates | 26,669 | 339,604 | — | 366,273 | ||||||||||||||||
Insurance | 3,661,856 | 893,701 | — | 4,555,557 | ||||||||||||||||
Interactive Media & Services | 7,884,979 | 2,029,647 | — | 9,914,626 | ||||||||||||||||
Internet & Direct Marketing Retail | 4,384,047 | 81,384 | — | 4,465,431 | ||||||||||||||||
IT Services | 2,314,471 | 66,156 | — | 2,380,627 | ||||||||||||||||
Life Sciences Tools & Services | 197,881 | — | — | 197,881 | ||||||||||||||||
Machinery | 946,537 | 1,587,555 | — | 2,534,092 | ||||||||||||||||
Media | 9,846,324 | 1,131,800 | — | 10,978,124 | ||||||||||||||||
Metals & Mining | 1,193,586 | 715,494 | — | 1,909,080 |
33
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Multiline Retail | $ | 1,673,457 | $ | — | $ | — | $ | 1,673,457 | ||||||||||||
Multi-Utilities | 795,356 | 138,513 | — | 933,869 | ||||||||||||||||
Oil, Gas & Consumable Fuels | 15,687,447 | 6,296,919 | — | 21,984,366 | ||||||||||||||||
Paper & Forest Products | 5,444 | 2,752 | 206,782 | 214,978 | ||||||||||||||||
Personal Products | 567,421 | 69,631 | — | 637,052 | ||||||||||||||||
Pharmaceuticals | 8,426,990 | 3,214,878 | — | 11,641,868 | ||||||||||||||||
Professional Services | — | 11,033 | — | 11,033 | ||||||||||||||||
Real Estate Management & Development | 67,523 | 4,196,345 | — | 4,263,868 | ||||||||||||||||
Road & Rail | 172,976 | 2,180,405 | — | 2,353,381 | ||||||||||||||||
Semiconductors & Semiconductor Equipment | 1,535,605 | 958,634 | — | 2,494,239 | ||||||||||||||||
Software | 8,529,009 | 59,006 | 3,081,884 | 11,669,899 | ||||||||||||||||
Specialty Retail | 331,811 | 903,233 | — | 1,235,044 | ||||||||||||||||
Technology Hardware, Storage & Peripherals | 6,847,897 | 53,082 | — | 6,900,979 | ||||||||||||||||
Textiles, Apparel & Luxury Goods | 61,298 | 74,748 | — | 136,046 | ||||||||||||||||
Thrifts & Mortgage Finance | — | 1,199,360 | — | 1,199,360 | ||||||||||||||||
Tobacco | 3,283,107 | 1,067,028 | — | 4,350,135 | ||||||||||||||||
Trading Companies & Distributors | — | 1,550 | — | 1,550 | ||||||||||||||||
Transportation Infrastructure | — | 326,492 | — | 326,492 | ||||||||||||||||
Wireless Telecommunication Services | 46,014 | 3,996,815 | — | 4,042,829 | ||||||||||||||||
Preferred Stocks | ||||||||||||||||||||
Banks | 533,004 | 55,500 | — | 588,504 | ||||||||||||||||
Chemicals | 4,450 | — | — | 4,450 | ||||||||||||||||
Consumer Finance | 364,457 | — | — | 364,457 | ||||||||||||||||
Health Care Providers & Services | — | — | 352,616 | 352,616 | ||||||||||||||||
Software | — | — | 628,410 | 628,410 | ||||||||||||||||
Technology Hardware, Storage & Peripherals | — | 24,933 | — | 24,933 | ||||||||||||||||
Convertible Preferred Stocks | — | 1,335,100 | — | 1,335,100 | ||||||||||||||||
Private Placements | ||||||||||||||||||||
Household Durables | — | — | — | # | — | |||||||||||||||
Internet Software & Services | — | — | 386,218 | 386,218 | ||||||||||||||||
Convertible Bonds | — | 698,215 | — | 698,215 | ||||||||||||||||
Bank Loans | — | 634,064 | — | 634,064 | ||||||||||||||||
Corporate Bonds+ | — | 13,581,390 | — | 13,581,390 | ||||||||||||||||
Foreign Bonds+ | — | 16,180,335 | — | 16,180,335 | ||||||||||||||||
Yankee Dollars+ | ||||||||||||||||||||
Paper & Forest Products | — | — | 794,040 | 794,040 | ||||||||||||||||
Other Yankee Dollars+ | — | 5,899,222 | — | 5,899,222 | ||||||||||||||||
U.S. Treasury Obligations | — | 103,437,943 | — | 103,437,943 | ||||||||||||||||
Purchased Options | — | 880,162 | — | 880,162 | ||||||||||||||||
Purchased Swaptions | — | 5,160 | — | 5,160 | ||||||||||||||||
Exchange Traded Fund | 4,745,465 | — | — | 4,745,465 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 11,159,870 | — | 11,159,870 | ||||||||||||||||
Unaffiliated Investment Company | 2,230,455 | — | — | 2,230,455 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Investment Securities | $ | 134,643,876 | $ | 239,470,632 | $ | 5,449,950 | $ | 379,564,458 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Securities Sold Short | (128,815 | ) | (658,602 | ) | — | (787,417 | ) | |||||||||||||
Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | 249,017 | — | — | 249,017 | ||||||||||||||||
Contracts for Differences | 174,516 | — | — | 174,516 | ||||||||||||||||
Written Options | (14,165 | ) | (2,618,815 | ) | — | (2,632,980 | ) | |||||||||||||
Written Swaptions | — | (104,357 | ) | — | (104,357 | ) | ||||||||||||||
Forward Currency Contracts | — | (21,660 | ) | — | (21,660 | ) | ||||||||||||||
Centrally Cleared Credit Default Swaps | — | (17,808 | ) | — | (17,808 | ) | ||||||||||||||
Centrally Cleared Interest Rate Swaps | — | 373,174 | — | 373,174 | ||||||||||||||||
Over-the-Counter Total Return Swaps | — | 159,512 | — | 159,512 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Investments | $ | 134,924,429 | $ | 236,582,076 | $ | 5,449,950 | $ | 376,956,455 | ||||||||||||
|
|
|
|
|
|
|
|
+ | For detailed industry descriptions, see the accompanying Consolidated Schedule of Portfolio Investments. |
# | Represents the interest in securities that were determined to have a value of zero at December 31, 2018. |
* | 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. |
34
AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL BlackRock Global Allocation Fund | $ | 528,634,941 | $ | 546,865,108 |
For the year ended December 31, 2018, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL BlackRock Global Allocation Fund | $ | 342,903,719 | $ | 321,830,248 |
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 December 31, 2018 are identified below.
Security | Acquisition Date(a) | Acquisition Cost | Shares or Principal Amount | Fair Value | Percentage of Net Assets | ||||||||||||||||||||
Domo, Inc., Class B | 4/1/15 | $ | 1,218,214 | 9,632 | $ | 189,076 | 0.05 | % | |||||||||||||||||
Fieldwood Energy LLC | 3/13/18 | 81,305 | 3,485 | 132,430 | 0.04 | % | |||||||||||||||||||
Fieldwood Energy LLC | 4/25/18 | 247,017 | 941 | 35,758 | 0.01 | % | |||||||||||||||||||
Grand Rounds, Inc., Series C | 3/31/15 | 399,608 | 143,925 | 352,616 | 0.10 | % | |||||||||||||||||||
Inversiones Alsacia SA, 8.00%, 12/31/18, Callable | 12/22/14 | 420,057 | 517,099 | 5,171 | 0.00 | % | |||||||||||||||||||
Lookout, Inc. | 3/4/15 | 63,364 | 5,547 | 111 | 0.00 | % | |||||||||||||||||||
Lookout, Inc. Preferred Shares, Series F | 9/19/14 | 389,996 | 63,925 | 386,107 | 0.10 | % | |||||||||||||||||||
Palantir Technologies, Inc., Series I | 3/27/14 | 712,042 | 116,157 | 628,409 | 0.16 | % | |||||||||||||||||||
Quintis Pty, Ltd. | 10/25/18 | 316,328 | 386,370 | 206,782 | 0.06 | % | |||||||||||||||||||
Uber Technologies, Inc. | 3/21/14 | 1,063,120 | 68,532 | 3,081,884 | 0.83 | % |
(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 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.
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AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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 December 31, 2018 is $378,314,343. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 23,531,223 | ||
Unrealized (depreciation) | (26,803,696 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | (3,272,473 | ) | |
|
|
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL BlackRock Global Allocation Fund | $ | 6,272,410 | $ | 12,200,782 | $ | 18,473,192 |
(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. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL BlackRock Global Allocation Fund | $ | 7,349,577 | $ | — | $ | 7,349,577 |
(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 Depreciation(a) | Total (Deficit) | |||||||||||||||||||||
AZL BlackRock Global Allocation Fund | $ | 3,436,736 | $ | 11,943,618 | $ | — | $ | (3,434,862 | ) | $ | 11,945,492 |
(a) | The difference between book-basis andtax-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. |
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AZL BlackRock Global Allocation Fund
Notes to the Consolidated Financial Statements
December 31, 2018
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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL BlackRock Global Allocation Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of portfolio investments, of AZL BlackRock Global Allocation Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related consolidated statements of operations and consolidated changes in net assets, including the related notes, and the consolidated financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 27, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 28.05% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $3,907,742.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $12,200,783.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
43
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
44
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
45
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® DFA Five-Year Global Fixed Income Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 8
Page 8
Statements of Changes in Net Assets
Page 9
Page 10
Notes to the Financial Statements
Page 11
Report of Independent Registered Public Accounting Firm
Page 18
Page 19
Approval of Investment Advisory and Subadvisory Agreements
Page 20
Information about the Board of Trustees and Officers
Page 23
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 Five-Year Global Fixed Income Fund (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL®DFA Five-Year Global Fixed Income Fund and Dimensional Fund Advisors LP serves as Subadviser to the Fund.
| ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® DFA Five-Year Global Fixed Income Fund (the “Fund”) returned 1.17%. That compared to a 2.12% total return for its benchmark, the FTSE World Government Bond Index,1-5 Years, Currency-Hedged in USD Terms1.
Yield curves were upwardly sloped in many developed markets for the year, indicating positive expected term premiums. Manynon-U.S. yield curves exhibited expected returns equal to or greater than those of the U.S. yield curve, when hedged against foreign currency exchange rates. Realized term premiums were negative in the U.S. however generally positive innon-U.S. developed markets for the year.
The Fund underperformed its benchmark for the period. The Fund’s underweight position in shorter-term securities of one– to three–years and its overweight exposure to three– to five–year securities detracted from performance. Longer-dated securities underperformed their shorter-dated counterparts. The Fund’s underweight position in Japaneseyen-denominated bonds also detracted from performance compared to the benchmark, as those bonds outperformed the benchmark.*
The Fund’s average overweight position in Australian dollar-, euro-, and Swedish krona-denominated bonds in the four- to five-year maturity range boosted relative performance.*
The Fund hedged foreign currency exposure within bonds not denominated in U.S. dollars with currency forward contracts. Given that the benchmark index is also currency hedged, this strategy had little impact on relative performance.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
1
AZL® DFA Five-Year Global Fixed Income Fund (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek to provide a market rate of return for a fixed income portfolio with low relative volatility of returns, and seeks to focus the eligible universe on securities with relatively less expected upward or downward movement in market value. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in fixed income securities that mature within five years from the date of settlement. | ||||
Investment Concerns | ||||
Bonds offer a relatively stable level of income, although bond prices will fluctuate, providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. | ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. | ||||
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | Since Inception (4/27/15) | ||||||||||
AZL®DFA Five-Year Global Fixed Income Fund | 1.17 | % | 1.34 | % | 0.84 | % | ||||||
FTSE World Government Bond Index,1-5 Years, Currency-Hedged in USD Terms | 2.12 | % | 1.58 | % | 1.36 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®DFA Five-Year Global Fixed Income Fund | 0.90 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.50% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.95% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the FTSE World Government Bond Index,1-5 Years, Currency-Hedged in USD Terms, an unmanaged index that is designed to measure the performance of fixed-rate; local currency, investment-grade sovereign bonds, and currently comprises sovereign debt from over 20 countries. This index follows the same inclusion criteria and methodology as the FTSE(Non-USD) World Government Bond Index, which is a market capitalization-weighted index that tracks 10 government bond indexes, excluding the U.S. (“WGBI”), but only includes the securities from the WGBI with a weighted average life of greater than or equal to 1 and less than 5 years. The index does not reflect the deduction of fees associated with a mutual fund, such as investment fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL DFA Five-Year Global Fixed Income Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL DFA Five-Year Global Fixed Income 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 1,000.00 | $ | 1,012.70 | $ | 4.06 | 0.80 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | 0.80 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Foreign Bonds | 70.5 | % | |||
Corporate Bonds | 16.5 | ||||
Yankee Dollars | 10.4 | ||||
Money Markets | 1.7 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 1.5 | ||||
|
| ||||
Total Investment Securities | 100.6 | ||||
Net other assets (liabilities) | (0.6 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
AZL DFA Five-Year Global Fixed Income Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds (16.5%): | ||||||||
Beverages (1.8%): | ||||||||
$ | 210,000 | Coca-Cola Co. (The), 2.20%, 5/25/22 | $ | 204,113 | ||||
1,200,000 | Coca-Cola Co. (The), 1.13%, 9/22/22 | 1,417,767 | ||||||
5,800,000 | Coca-Cola Co. (The), 0.75%, 3/9/23, Callable 12/9/22 @ 100 | 6,728,893 | ||||||
|
| |||||||
8,350,773 | ||||||||
|
| |||||||
Communications Equipment (0.6%): | ||||||||
1,000,000 | Cisco Systems, Inc., 2.20%, 2/28/21 | 986,749 | ||||||
2,000,000 | Cisco Systems, Inc., 1.85%, 9/20/21, Callable 8/20/21 @ 100 | 1,944,717 | ||||||
|
| |||||||
2,931,466 | ||||||||
|
| |||||||
Consumer Finance (2.6%): | ||||||||
11,435,000 | Toyota Motor Credit Corp., 2.60%, 1/11/22 | 11,252,996 | ||||||
200,000 | Toyota Motor Credit Corp., 0.75%, 7/21/22 | 232,496 | ||||||
257,000 | Toyota Motor Credit Corp., 2.38%, 2/1/23 | 317,274 | ||||||
|
| |||||||
11,802,766 | ||||||||
|
| |||||||
Diversified Financial Services (0.3%): | ||||||||
1,610,000 | Berkshire Hathaway, Inc., 2.20%, 3/15/21, Callable 2/15/21 @ 100 | 1,588,884 | ||||||
|
| |||||||
Household Products (2.0%): | ||||||||
2,000,000 | Procter & Gamble Co. (The), 1.70%, 11/3/21 | 1,948,778 | ||||||
1,474,000 | Procter & Gamble Co. (The), 2.15%, 8/11/22 | 1,431,758 | ||||||
4,700,000 | Procter & Gamble Co. (The), 2.00%, 8/16/22 | 5,729,928 | ||||||
|
| |||||||
9,110,464 | ||||||||
|
| |||||||
Industrial Conglomerates (0.5%): | ||||||||
1,850,000 | 3M Co., 0.38%, 2/15/22, Callable 11/15/21 @ 100 | 2,129,491 | ||||||
200,000 | 3M Co., 0.95%, 5/15/23 | 234,755 | ||||||
|
| |||||||
2,364,246 | ||||||||
|
| |||||||
IT Services (0.7%): | ||||||||
3,217,000 | IBM Corp., 2.50%, 1/27/22 | 3,132,138 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.5%): | ||||||||
600,000 | Chevron Corp., 2.10%, 5/16/21, Callable 4/15/21 @ 100^ | 588,418 | ||||||
6,000,000 | Chevron Corp., 2.50%, 3/3/22, Callable 2/3/22 @ 100 | 5,884,234 | ||||||
350,000 | Exxon Mobil Corp., 2.40%, 3/6/22, Callable 1/6/22 @ 100^ | 343,483 | ||||||
|
| |||||||
6,816,135 | ||||||||
|
| |||||||
Pharmaceuticals (2.1%): | ||||||||
100,000 | Johnson & Johnson, 0.25%, 1/20/22, Callable 12/20/21 @ 100 | 114,819 | ||||||
2,000,000 | Merck & Co., Inc., 2.35%, 2/10/22 | 1,961,228 | ||||||
3,000,000 | Pfizer, Inc., 1.95%, 6/3/21 | 2,941,851 | ||||||
4,021,000 | Pfizer, Inc., 0.25%, 3/6/22, Callable 2/6/22 @ 100 | 4,611,564 | ||||||
|
| |||||||
9,629,462 | ||||||||
|
| |||||||
Software (3.9%): | ||||||||
4,551,000 | Microsoft Corp., 2.40%, 2/6/22, Callable 1/6/22 @ 100^ | 4,498,566 | ||||||
1,500,000 | Microsoft Corp., 2.38%, 2/12/22, Callable 1/12/22 @ 100 | 1,481,826 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Software, continued | ||||||||
$ | 10,307,000 | Oracle Corp., 1.90%, 9/15/21, Callable 8/15/21 @ 100 | $ | 9,999,928 | ||||
1,833,000 | Oracle Corp., 2.50%, 5/15/22, Callable 3/15/22 @ 100 | 1,793,650 | ||||||
|
| |||||||
17,773,970 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.5%): | ||||||||
2,000,000 | Apple, Inc., 1.00%, 11/10/22 | 2,367,942 | ||||||
|
| |||||||
Total Corporate Bonds (Cost $78,232,217) | 75,868,246 | |||||||
|
| |||||||
Foreign Bonds (70.5%): | ||||||||
Banks (15.2%): | ||||||||
3,000,000 | Bank of Montreal, 1.88%, 3/31/21+ | 2,158,725 | ||||||
1,000,000 | Commonwealth Bank of Australia, Series E, 0.50%, 7/11/22+ | 1,147,536 | ||||||
2,389,000 | Cooperatieve Rabobank UA, Series E, 4.75%, 6/6/22+ | 3,151,451 | ||||||
2,093,000 | Cooperatieve Rabobank UA, 0.50%, 12/6/22+ | 2,417,463 | ||||||
4,350,000 | Dexia Credit Local SA, 0.25%, 6/2/22+ | 5,017,607 | ||||||
1,500,000 | Dexia Credit Local SA, Series E, 1.13%, 6/15/22+ | 1,884,353 | ||||||
5,200,000 | Dexia Credit Local SA, 0.25%, 6/1/23, MTN+ | 5,965,140 | ||||||
650,000 | International Bank for Reconstruction & Development, 1.00%, 12/19/22+ | 821,567 | ||||||
6,123,000 | Kreditanstalt fuer Wiederaufbau, 2.13%, 8/15/23+ | 7,725,973 | ||||||
475,000 | Land Nordrhein-Westfalen, 0.13%, 3/16/23+ | 547,905 | ||||||
1,000,000 | Land Nordrhein-Westfalen, 0.20%, 4/17/23+ | 1,156,469 | ||||||
3,000,000 | National Australia Bank, Ltd., Series G, 0.88%, 1/20/22+ | 3,482,920 | ||||||
500,000 | National Australia Bank, Ltd., 0.35%, 9/7/22+ | 568,687 | ||||||
1,900,000 | Nordea Bank AB, Series E, 3.25%, 7/5/22+ | 2,392,373 | ||||||
1,164,000 | Oesterreichische Kontrollbank AG, Series E, 0.75%, 3/7/22+ | 1,459,272 | ||||||
7,700,000 | Royal Bank of Canada, Series DPNT, 1.97%, 3/2/22+ | 5,496,728 | ||||||
1,190,000 | Skandinaviska Enskilda Banken AB, 1.25%, 8/5/22+ | 1,489,136 | ||||||
2,700,000 | State of North Rhine-Westphalia Germany, 0.05%, 12/5/22+ | 3,102,611 | ||||||
3,167,000 | State of North Rhine-Westphalia Germany, 0.38%, 2/16/23+ | 3,690,284 | ||||||
2,318,000 | Svenska Handelsbanken AB, Series E, 0.25%, 2/28/22+ | 2,648,882 | ||||||
1,000,000 | Svenska Handelsbanken AB, 2.63%, 8/23/22+ | 1,237,353 | ||||||
1,100,000 | Svenska Handelsbanken AB, 1.13%, 12/14/22+ | 1,291,737 | ||||||
5,000,000 | Toronto-Dominion Bank (The), Series DPNT, 2.62%, 12/22/21+ | 3,651,465 | ||||||
10,300,000 | Toronto-Dominion Bank (The), Series DPNT, 1.99%, 3/23/22+ | 7,369,066 | ||||||
300,000 | Westpac Banking Corp., Series E, 0.25%, 1/17/22+ | 341,731 | ||||||
|
| |||||||
70,216,434 | ||||||||
|
| |||||||
Capital Markets (1.2%): | ||||||||
3,000,000 | Canada Housing Trust, 2.40%, 12/15/22+(a) | 2,212,066 | ||||||
3,000,000 | Canada Housing Trust No 1, 1.75%, 6/15/22+(a) | 2,166,681 | ||||||
400,000 | FMS Wertmanagement, 1.00%, 9/7/22+ | 504,832 | ||||||
300,000 | FMS Wertmanagement, 1.13%, 9/7/23+ | 377,892 | ||||||
|
| |||||||
5,261,471 | ||||||||
|
|
See accompanying notes to the financial statements.
4
AZL DFA Five-Year Global Fixed Income Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Foreign Bonds, continued | ||||||||
Consumer Finance (0.4%): | ||||||||
$ | 1,000,000 | Toyota Credit Canada, Inc., 2.20%, 2/25/21+ | $ | 723,883 | ||||
1,500,000 | Toyota Credit Canada, Inc., 2.02%, 2/28/22+ | 1,068,780 | ||||||
|
| |||||||
1,792,663 | ||||||||
|
| |||||||
Diversified Financial Services (27.5%): | ||||||||
1,000,000 | Agence Francaise de Developpement, 0.13%, 4/30/22+ | 1,151,150 | ||||||
1,500,000 | Agence Francaise de Developpement, 0.50%, 10/25/22+ | 1,746,657 | ||||||
5,700,000 | ASB Finance, Ltd., Series E, 0.50%, 6/10/22+ | 6,500,557 | ||||||
11,248,000 | Asian Development Bank, 0.20%, 5/25/23+ | 13,029,440 | ||||||
400,000 | Bank Nederlandse Gemeenten NV, Series E, 1.00%, 3/15/22+ | 504,796 | ||||||
1,600,000 | Bank Nederlandse Gemeenten NV, 0.25%, 2/22/23+ | 1,855,905 | ||||||
6,334,000 | BNG Bank NV, 0.05%, 7/11/23, MTN+ | 7,262,241 | ||||||
700,000 | Caisse d’Amortissement de la Dette Sociale, 0.13%, 11/25/22+ | 808,170 | ||||||
5,600,000 | Caisse d’Amortissement de la Dette Sociale, 0.13%, 10/25/23, MTN+ | 6,418,158 | ||||||
403,000 | Council Of Europe Development Bank, 0.38%, 10/27/22+ | 470,838 | ||||||
750,000 | Council Of Europe Development Bank, 0.13%, 5/25/23, MTN+ | 865,983 | ||||||
12,300,000 | European Financial Stability Facility, 0.13%, 10/17/23, MTN+ | 14,126,844 | ||||||
400,000 | European Investment Bank, 2.50%, 10/31/22+ | 532,697 | ||||||
2,000,000 | European Investment Bank, 2.38%, 1/18/23+ | 1,471,417 | ||||||
257,000 | European Investment Bank, 1.63%, 3/15/23+ | 315,352 | ||||||
143,000 | European Investment Bank, 0.00%, 10/16/23+ | 163,873 | ||||||
11,145,000 | European Stability Mechanism, 0.10%, 7/31/23+ | 12,819,782 | ||||||
400,000 | Kommunalbanken AS, 1.13%, 11/30/22+ | 507,228 | ||||||
846,000 | Kommunekredit, 0.13%, 8/28/23, MTN+ | 971,405 | ||||||
97,000,000 | Kommuninvest I Sverige AB, 0.25%, 6/1/22+ | 10,942,874 | ||||||
24,000,000 | Kommuninvest I Sverige AB, 0.75%, 2/22/23+ | 2,740,440 | ||||||
4,253,000 | Kreditanstalt fuer Wiederaufbau, 0.00%, 9/15/23+ | 4,881,242 | ||||||
200,000 | Landeskreditbank Baden-Wuerttemberg Foerderbank, Series E, 0.88%, 3/7/22+ | 251,569 | ||||||
5,250,000 | Landwirtschaftliche Rentenbank, 0.05%, 6/12/23, MTN+ | 6,036,017 | ||||||
1,466,000 | Municipality Finance plc, 1.25%, 12/7/22+ | 1,863,639 | ||||||
100,000 | Nederlandse Waterschapsbank NV, 0.50%, 1/19/23+ | 117,096 | ||||||
3,091,000 | Nederlandse Waterschapsbank NV, 0.13%, 9/25/23, MTN+ | 3,550,307 | ||||||
500,000 | Nestle Finance International, Ltd., 1.75%, 9/12/22+ | 606,810 | ||||||
1,787,000 | NRW Bank, 0.08%, 11/11/22+ | 2,053,440 | ||||||
4,500,000 | NRW Bank, 0.13%, 3/10/23+ | 5,192,133 | ||||||
5,850,000 | NRW Bank, 0.13%, 7/7/23+ | 6,731,746 | ||||||
4,680,000 | OP Corporate Bank plc, Series E, 0.75%, 3/3/22+ | 5,431,059 | ||||||
450,000 | OP Corporate Bank plc, 0.38%, 10/11/22+ | 514,316 | ||||||
700,000 | Roche Finance Europe BV, 0.50%, 2/27/23, Callable 11/27/22 @ 100+ | 814,732 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Foreign Bonds, continued | ||||||||
Diversified Financial Services, continued | ||||||||
$ | 500,000 | Temasek Financial I, Ltd., Series E, 0.50%, 3/1/22+ | $ | 579,112 | ||||
800,000 | Temasek Financial I, Ltd., Series G, 4.63%, 7/26/22+ | 1,130,773 | ||||||
600,000 | Total Capital Canada, Ltd., Series E, 1.13%, 3/18/22+ | 707,172 | ||||||
900,000 | Total Capital International SA, 0.25%, 7/12/23+ | 1,022,875 | ||||||
|
| |||||||
126,689,845 | ||||||||
|
| |||||||
Insurance (0.8%): | ||||||||
600,000 | UNEDIC ASSEO, 0.13%, 5/25/22+ | 691,602 | ||||||
2,600,000 | UNEDIC ASSEO, 0.88%, 10/25/22+ | 3,079,912 | ||||||
|
| |||||||
3,771,514 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.0%): | ||||||||
1,800,000 | Shell International Finance BV, Series E, 1.25%, 3/15/22+ | 2,128,220 | ||||||
900,000 | Shell International Finance BV, Series E, 1.00%, 4/6/22+ | 1,055,452 | ||||||
1,300,000 | Statoil ASA, 0.88%, 2/17/23, Callable 11/17/22 @ 100+ | 1,518,902 | ||||||
|
| |||||||
4,702,574 | ||||||||
|
| |||||||
Pharmaceuticals (2.9%): | ||||||||
2,000,000 | Novartis Finance SA, 0.50%, 8/14/23, Callable 5/14/23 @ 100+ | 2,316,120 | ||||||
1,100,000 | Sanofi, 0.25%, 9/13/22, Callable 6/13/22 @ 100+ | 1,250,830 | ||||||
8,300,000 | Sanofi, 0.50%, 3/21/23, Callable 12/21/22 @ 100+ | 9,599,308 | ||||||
|
| |||||||
13,166,258 | ||||||||
|
| |||||||
Road & Rail (0.2%): | ||||||||
667,000 | Transport For London, 2.25%, 8/9/22, MTN+ | 869,362 | ||||||
|
| |||||||
Sovereign Bond (21.3%): | ||||||||
61,000,000 | Denmark Government Bond, 1.50%, 11/15/23+ | 10,158,459 | ||||||
6,800,000 | Finland Government Bond, 0.00%, 9/15/23+(a) | 7,846,903 | ||||||
2,054,000 | French Republic Government Bond OAT, 0.00%, 3/25/23+ | 2,367,160 | ||||||
4,100,000 | French Republic Government Bond OAT, 1.75%, 5/25/23+ | 5,091,077 | ||||||
3,250,000 | Kingdom of Belgium Government Bond, 2.25%, 6/22/23+ | 4,124,456 | ||||||
550,000 | Netherlands Government Bond, 1.75%, 7/15/23+(a) | 688,740 | ||||||
92,000,000 | Norwegian Government Bond, 2.00%, 5/24/23+(a) | 10,928,713 | ||||||
8,000,000 | Province of Alberta, 1.35%, 9/1/21+ | 5,728,586 | ||||||
2,000,000 | Province of Alberta, 2.55%, 12/15/22+ | 1,471,883 | ||||||
4,000,000 | Province of British Columbia, 3.25%, 12/18/21+ | 3,016,967 | ||||||
4,000,000 | Province of British Columbia, 2.70%, 12/18/22+ | 2,972,190 | ||||||
6,700,000 | Province of Ontario, 3.15%, 6/2/22+ | 5,037,369 | ||||||
6,000,000 | Province of Quebec, 4.25%, 12/1/21+ | 4,645,934 | ||||||
950,000 | Province of Quebec, 0.88%, 5/24/22+ | 1,189,321 | ||||||
8,900,000 | Province of Quebec, 3.50%, 12/1/22+ | 6,796,274 | ||||||
11,300,000 | Republic of Austria Government Bond, 0.00%, 7/15/23+(a) | 13,050,063 | ||||||
48,000,000 | Sweden Government Bond, 1.50%, 11/13/23+(a) | 5,821,048 | ||||||
61,500,000 | Swedish Government Bond, 3.50%, 6/1/22+ | 7,823,700 | ||||||
|
| |||||||
98,758,843 | ||||||||
|
| |||||||
Total Foreign Bonds (Cost $334,827,364) | 325,228,964 | |||||||
|
|
See accompanying notes to the financial statements.
5
AZL DFA Five-Year Global Fixed Income Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars (10.4%): | ||||||||
Banks (6.7%): | ||||||||
$ | 667,000 | Australia & New Zealand Banking Group, Ltd., 2.63%, 11/9/22 | $ | 647,735 | ||||
1,000,000 | Bank of Nova Scotia, 2.70%, 3/7/22 | 978,179 | ||||||
2,625,000 | Commonwealth Bank of Australia, 2.75%, 3/10/22(a) | 2,575,581 | ||||||
1,000,000 | Cooperatieve Rabobank UA, 3.88%, 2/8/22 | 1,011,050 | ||||||
5,500,000 | National Australia Bank, Ltd., 2.80%, 1/10/22 | 5,391,365 | ||||||
2,587,000 | National Australia Bank, Ltd., Series G, 2.50%, 5/22/22 | 2,510,870 | ||||||
8,031,000 | Royal Bank of Canada, Series G, 2.75%, 2/1/22^ | 7,902,515 | ||||||
3,000,000 | Toronto-Dominion Bank (The), 1.80%, 7/13/21 | 2,903,069 | ||||||
1,000,000 | Westpac Banking Corp., 2.00%, 8/19/21^ | 968,054 | ||||||
4,000,000 | Westpac Banking Corp., 2.80%, 1/11/22 | 3,925,281 | ||||||
1,976,000 | Westpac Banking Corp., 2.50%, 6/28/22 | 1,915,234 | ||||||
|
| |||||||
30,728,933 | ||||||||
|
| |||||||
Diversified Financial Services (0.9%): | ||||||||
4,129,000 | Total Capital International SA, 2.88%, 2/17/22 | 4,079,914 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.5%): | ||||||||
1,135,000 | Equinor ASA, 3.15%, 1/23/22 | 1,131,978 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 10,000,000 | Shell International Finance BV, 1.75%, 9/12/21 | $ | 9,663,139 | ||||
1,000,000 | Shell International Finance BV, 2.38%, 8/21/22^ | 974,911 | ||||||
|
| |||||||
11,770,028 | ||||||||
|
| |||||||
Sovereign Bond (0.3%): | ||||||||
1,500,000 | Province of Manitoba, 2.13%, 5/4/22 | 1,464,750 | ||||||
|
| |||||||
Total Yankee Dollars (Cost $49,042,813) | 48,043,625 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.7%): | ||||||||
7,831,003 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(b) | 7,831,003 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $7,831,003) | 7,831,003 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (1.5%) | ||||||||
Miscellaneous Investments (1.5%) | ||||||||
6,813,212 | Short-Term Investments(c) | 6,813,212 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 6,813,212 | ||||||
|
| |||||||
Total Investment Securities (Cost $476,746,609) — 100.6%(d) | 463,785,050 | |||||||
Net other assets (liabilities) — (0.6)% | (2,890,779 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 460,894,271 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
MTN—Medium Term Note
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $6,574,173. |
+ | The principal amount is disclosed in local currency and the fair value is disclosed in U.S. Dollars. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(b) | The rate represents the effective yield at December 31, 2018. |
(c) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | See Federal Tax Information listed in the Notes to the Financial Statements. |
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 December 31, 2018: (Unaudited)
Country | Percentage | |||
Australia | 5.1 | % | ||
Austria | 3.1 | % | ||
Belgium | 0.9 | % | ||
Canada | 15.0 | % | ||
Denmark | 2.4 | % | ||
Finland | 3.4 | % | ||
France | 10.7 | % | ||
Germany | 9.1 | % | ||
Luxembourg | 3.7 | % | ||
Netherlands | 7.6 | % | ||
New Zealand | 1.4 | % | ||
Norway | 3.0 | % | ||
Singapore | 0.4 | % | ||
SNAT | 6.6 | % | ||
Sweden | 7.8 | % | ||
United Kingdom | 0.2 | % | ||
United States | 19.6 | % | ||
|
| |||
100.0 | % | |||
|
|
See accompanying notes to the financial statements.
6
AZL DFA Five-Year Global Fixed Income Fund
Schedule of Portfolio Investments
December 31, 2018
Forward Currency Contracts
At December 31, 2018, the Fund’s open forward currency contracts were as follows:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Net Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
U.S. Dollar | 2,012,679 | Danish Krone | 13,040,769 | State Street | 1/15/19 | $ | 8,021 | |||||||||||||
U.S. Dollar | 13,893,822 | British Pound | 10,550,640 | Citigroup | 1/16/19 | 437,051 | ||||||||||||||
U.S. Dollar | 11,067,541 | Norwegian Krone | 95,533,526 | State Street | 1/18/19 | 869 | ||||||||||||||
U.S. Dollar | 77,309,059 | European Euro | 67,317,781 | State Street | 1/22/19 | 41,495 | ||||||||||||||
U.S. Dollar | 78,454,930 | European Euro | 68,311,957 | State Street | 1/23/19 | 39,386 | ||||||||||||||
Swedish Krona | 66,202 | U.S. Dollar | 7,366 | Bank of America | 1/24/19 | 124 | ||||||||||||||
Swedish Krona | 621,691 | U.S. Dollar | 69,009 | Bank of America | 1/24/19 | 1,325 | ||||||||||||||
European Euro | 2,028,902 | U.S. Dollar | 2,325,773 | Bank of America | 1/24/19 | 3,415 | ||||||||||||||
Swedish Krona | 9,007,880 | U.S. Dollar | 993,520 | Bank of America | 1/24/19 | 25,586 | ||||||||||||||
Swedish Krona | 944,442 | U.S. Dollar | 105,127 | Barclays Bank | 1/24/19 | 1,722 | ||||||||||||||
Swedish Krona | 266,154 | U.S. Dollar | 29,593 | Citigroup | 1/24/19 | 518 | ||||||||||||||
European Euro | 120,282 | U.S. Dollar | 137,574 | Citigroup | 1/24/19 | 510 | ||||||||||||||
European Euro | 37,151 | U.S. Dollar | 42,471 | Citigroup | 1/24/19 | 179 | ||||||||||||||
Swedish Krona | 264,050 | U.S. Dollar | 29,501 | State Street | 1/24/19 | 373 | ||||||||||||||
U.S. Dollar | 57,856,249 | Canadian Dollar | 75,940,544 | Barclays Bank | 1/25/19 | 2,181,016 | ||||||||||||||
U.S. Dollar | 566,026 | Canadian Dollar | 768,641 | State Street | 1/25/19 | 2,503 | ||||||||||||||
|
| |||||||||||||||||||
$ | 2,744,093 | |||||||||||||||||||
|
| |||||||||||||||||||
U.S. Dollar | 23,716 | Swedish Krona | 212,633 | State Street | 1/3/19 | $ | (295 | ) | ||||||||||||
U.S. Dollar | 1,985,947 | Danish Krone | 13,057,241 | Citigroup | 1/15/19 | (21,243 | ) | |||||||||||||
U.S. Dollar | 4,976,373 | Danish Krone | 32,596,950 | State Street | 1/15/19 | (34,507 | ) | |||||||||||||
U.S. Dollar | 1,163,935 | Danish Krone | 7,611,848 | State Street | 1/15/19 | (6,176 | ) | |||||||||||||
U.S. Dollar | 106,107 | European Euro | 93,079 | Bank of America | 1/22/19 | (729 | ) | |||||||||||||
U.S. Dollar | 1,218,609 | Swedish Krona | 10,974,716 | Barclays Bank | 1/24/19 | (23,014 | ) | |||||||||||||
U.S. Dollar | 79,672,762 | European Euro | 69,412,540 | Barclays Bank | 1/24/19 | (13,118 | ) | |||||||||||||
U.S. Dollar | 27,058,605 | Swedish Krona | 244,147,522 | Citigroup | 1/24/19 | (562,988 | ) | |||||||||||||
U.S. Dollar | 290,312 | European Euro | 255,660 | State Street | 1/24/19 | (3,187 | ) | |||||||||||||
European Euro | 699,115 | U.S. Dollar | 803,962 | State Street | 1/24/19 | (1,375 | ) | |||||||||||||
|
| |||||||||||||||||||
$ | (666,632 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Total Net Forward Currency Contracts |
| $ | 2,077,461 | |||||||||||||||||
|
|
Balances Reported in the Statement of Assets and Liabilities for Forward Currency Contracts
Unrealized Appreciation | Unrealized Depreciation | |||
Forward currency contracts | $2,744,093 | $(666,632) |
See accompanying notes to the financial statements.
7
AZL DFA Five-Year Global Fixed Income Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 476,746,609 | |||
|
| ||||
Investment securities, at value(a) | $ | 463,785,050 | |||
Interest and dividends receivable | 2,157,791 | ||||
Foreign currency, at value (cost $3,414) | 3,463 | ||||
Unrealized appreciation on forward currency contracts | 2,744,093 | ||||
Receivable for capital shares issued | 117,269 | ||||
Receivable for investments sold | 381,648 | ||||
Prepaid expenses | 5,582 | ||||
|
| ||||
Total Assets | 469,194,896 | ||||
|
| ||||
Liabilities: | |||||
Unrealized depreciation on forward currency contracts | 666,632 | ||||
Payable for investments purchased | 364,623 | ||||
Payable for capital shares redeemed | 137,783 | ||||
Payable for collateral received on loaned securities | 6,813,212 | ||||
Manager fees payable | 197,936 | ||||
Administration fees payable | 5,952 | ||||
Distribution fees payable | 98,967 | ||||
Custodian fees payable | 3,744 | ||||
Administrative and compliance services fees payable | 1,276 | ||||
Transfer agent fees payable | 361 | ||||
Trustee fees payable | 489 | ||||
Other accrued liabilities | 9,650 | ||||
|
| ||||
Total Liabilities | 8,300,625 | ||||
|
| ||||
Net Assets | $ | 460,894,271 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 458,605,170 | |||
Total distributable earnings | 2,289,101 | ||||
|
| ||||
Net Assets | $ | 460,894,271 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 45,828,879 | ||||
Net Asset Value (offering and redemption price per share) | $ | 10.06 | |||
|
|
(a) | Includes securities on loan of $6,574,173. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Interest | $ | 6,097,963 | |||
Dividends | 54,604 | ||||
Income from securities lending | 46,295 | ||||
|
| ||||
Total Investment Income | 6,198,862 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,955,130 | ||||
Administration fees | 144,714 | ||||
Distribution fees | 1,231,298 | ||||
Custodian fees | 54,109 | ||||
Administrative and compliance services fees | 7,762 | ||||
Transfer agent fees | 5,429 | ||||
Trustee fees | 24,250 | ||||
Professional fees | 23,143 | ||||
Shareholder reports | 5,871 | ||||
Other expenses | 9,355 | ||||
|
| ||||
Total expenses before reductions | 4,461,061 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (492,516 | ) | |||
|
| ||||
Net expenses | 3,968,545 | ||||
|
| ||||
Net Investment Income/(Loss) | 2,230,317 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | (12,440,288 | ) | |||
Net realized gains/(losses) on forward currency contracts | 24,959,758 | ||||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (14,142,414 | ) | |||
Change in net unrealized appreciation/depreciation on forward currency contracts | 4,598,290 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 2,975,346 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 5,205,663 | |||
|
|
See accompanying notes to the financial statements.
8
AZL DFA Five-Year Global Fixed Income Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 2,230,317 | $ | 5,533,775 | ||||||
Net realized gains/(losses) on investments | 12,519,470 | (1,500,815 | ) | |||||||
Change in unrealized appreciation/depreciation on investments | (9,544,124 | ) | 3,547,619 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 5,205,663 | 7,580,579 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (2,736,651 | ) | (5,705,989 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (2,736,651 | ) | (5,705,989 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 23,263,345 | 25,078,366 | ||||||||
Proceeds from dividends reinvested | 2,736,651 | 5,705,989 | ||||||||
Value of shares redeemed | (73,662,691 | ) | (9,400,860 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (47,662,695 | ) | 21,383,495 | |||||||
|
|
|
| |||||||
Change in net assets | (45,193,683 | ) | 23,258,085 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 506,087,954 | 482,829,869 | ||||||||
|
|
|
| |||||||
End of period | $ | 460,894,271 | $ | 506,087,954 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 2,334,447 | 2,500,042 | ||||||||
Dividends reinvested | 275,594 | 568,326 | ||||||||
Shares redeemed | (7,385,373 | ) | (926,898 | ) | ||||||
|
|
|
| |||||||
Change in shares | (4,775,332 | ) | 2,141,470 | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
9
AZL DFA Five-Year Global Fixed Income Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | April 27, 2015 to December 31, 2015(a) | |||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.00 | $ | 9.96 | $ | 9.91 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Investment Activities: | ||||||||||||||||||||
Net Investment Income/(Loss) | 0.06 | 0.11 | 0.11 | 0.06 | ||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | 0.06 | 0.05 | 0.02 | (0.15 | ) | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total from Investment Activities | 0.12 | 0.16 | 0.13 | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||
Net Investment Income | (0.06 | ) | (0.12 | ) | (0.08 | ) | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Dividends | (0.06 | ) | (0.12 | ) | (0.08 | ) | — | |||||||||||||
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| |||||||||||||
Net Asset Value, End of Period | $ | 10.06 | $ | 10.00 | $ | 9.96 | $ | 9.91 | ||||||||||||
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| |||||||||||||
Total Return(b) | 1.17 | % | 1.57 | % | 1.28 | % | (0.90 | )%(c) | ||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 460,894 | $ | 506,088 | $ | 482,830 | $ | 517,049 | ||||||||||||
Net Investment Income/(Loss)(d) | 0.45 | % | 1.11 | % | 1.01 | % | 0.90 | % | ||||||||||||
Expenses Before Reductions(d)(e) | 0.91 | % | 0.90 | % | 0.90 | % | 0.91 | % | ||||||||||||
Expenses Net of Reductions(d) | 0.81 | % | 0.80 | % | 0.80 | % | 0.81 | % | ||||||||||||
Portfolio Turnover Rate | 69 | % | 83 | % | 52 | % | 127 | %(c) |
(a) | For the period April 27, 2015 (commencement of share class) to December 31, 2015. |
(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.
10
AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL DFA Five-Year Global Fixed Income Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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
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.
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 Fund of Funds Trust.
11
AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $4,554 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $6,788,059 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Forward Currency Contracts
During the year ended December 31, 2018, the Fund entered into forward currency contracts in connections with planned purchases or sales of securities or to hedge the U.S. dollar value of securities denominated in a particular currency. 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 year ended December 31, 2018, the monthly average notional amount for long contracts was $4.9 million and the monthly average notional amount for short contracts was $329.9 million. Realized gains and losses are reported as “Net realized gains/(losses) on forward currency 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 December 31, 2018:
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 | ||||||||
Foreign Exchange Risk | ||||||||||||
Forward Currency Contracts | Unrealized appreciation on forward currency contracts | $ | 2,744,093 | Unrealized depreciation on forward currency contracts | $ | 666,632 |
12
AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 | |||||||
Foreign Exchange Risk | ||||||||||
Forward Currency Contracts | Net realized gains/(losses) on forward currency contracts/ Change in net unrealized appreciation/depreciation on forward currency contracts | $ | 24,959,758 | $ | 4,598,290 |
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 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 December 31, 2018. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to master netting arrangements in the Statement of Assets and Liabilities. This table also summarizes the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of December 31, 2018.
As of December 31, 2018, the Fund’s derivative assets and liabilities by type were as follows:
Assets | Liabilities | |||||||||
Derivative Financial Instruments: | ||||||||||
Forward currency contracts | $ | 2,744,093 | $ | 666,632 | ||||||
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|
|
| |||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | 2,744,093 | 666,632 | ||||||||
Derivatives not subject to a master netting agreement or similar agreement (“MNA”) | — | — | ||||||||
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|
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| |||||||
Total assets and liabilities subject to a MNA | $ | 2,744,093 | $ | 666,632 | ||||||
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|
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 December 31, 2018:
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 | $ | 30,450 | $ | (729 | ) | $ | — | $ | — | $ | 29,721 | ||||||||||||||
Barclays Bank | 2,182,738 | (36,132 | ) | — | — | 2,146,606 | |||||||||||||||||||
Citigroup | 438,258 | (438,258 | ) | — | — | — | |||||||||||||||||||
State Street | 92,647 | (45,540 | ) | — | — | 47,107 | |||||||||||||||||||
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| ||||||||||||||||
Total | $ | 2,744,093 | $ | (520,659 | ) | $ | — | $ | — | $ | 2,223,434 | ||||||||||||||
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The following table presents the Fund’s derivative liabilitites by counterparty net of amounts available for offset under MNA and net of the related collateral received by the Fund as of December 31, 2018:
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 | $ | 729 | $ | (729 | ) | $ | — | $ | — | $ | — | ||||||||||||||
Barclays Bank | 36,132 | (36,132 | ) | — | — | — | |||||||||||||||||||
Citigroup | 584,231 | (438,258 | ) | — | — | 145,973 | |||||||||||||||||||
State Street | 45,540 | (45,540 | ) | — | — | — | |||||||||||||||||||
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| ||||||||||||||||
Total | $ | 666,632 | $ | (520,659 | ) | $ | — | $ | — | $ | 145,973 | ||||||||||||||
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* | 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 Statement of Assets and Liabilities. |
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
13
AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (5,705,989 | ) | ||
From net realized gains | — | ||||
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| ||||
Change in net assets resulting from distributions to shareholders | $ | (5,705,989 | ) | ||
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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 Dimensional Fund Advisors LP (“DFA”), DFA 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL DFA Five-Year Global Fixed Income Fund | 0.60 | % | 0.95 | % |
* | The Manager voluntarily reduced the management fee to 0.50% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $3,915 was paid from the Fund relating to these fees and expenses.
14
AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
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.
For the year ended December 31, 2018, 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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Corporate Bonds+ | $ | — | $ | 75,868,246 | $ | 75,868,246 | |||||||||
Foreign Bonds+ | — | 325,228,964 | 325,228,964 | ||||||||||||
Yankee Dollars+ | — | 48,043,625 | 48,043,625 | ||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 6,813,212 | 6,813,212 | ||||||||||||
Unaffiliated Investment Company | 7,831,003 | — | 7,831,003 | ||||||||||||
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| ||||||||||
Total Investment Securities | 7,831,003 | 455,954,047 | 463,785,050 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Forward Currency Contracts | — | 2,077,461 | 2,077,461 | ||||||||||||
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Total Investments | $ | 7,831,003 | $ | 458,031,508 | $ | 465,862,511 | |||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as forward currency contracts. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment. |
15
AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
5. Security Purchases and Sales
For the year ended December 31, 2018, 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 Five-Year Global Fixed Income Fund | $ | 332,127,846 | $ | 357,243,013 |
6. Investment Risks
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 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.
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 December 31, 2018 is $476,761,010. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 777,159 | ||
Unrealized (depreciation) | (13,753,119 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | (12,975,960 | ) | |
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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.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 3,152,801 | $ | 5,411,193 | $ | 8,563,994 |
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 2,736,651 | $ | — | $ | 2,736,651 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
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AZL DFA Five-Year Global Fixed Income Fund
Notes to the Financial Statements
December 31, 2018
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA Five-Year Global Fixed Income Fund | $ | 5,705,989 | $ | — | $ | 5,705,989 |
(a) Total distributions paid may differ from the 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 DFA Five-Year Global Fixed Income Fund | $ | 24,282,525 | $ | — | $ | (8,563,995 | ) | $ | (13,046,252 | ) | $ | 2,672,278 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on foreign currency gains or losses, 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 December 31, 2018, the Fund had an individual shareholder account which are 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL DFA Five-Year Global Fixed Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL DFA Five-Year Global Fixed Income Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
23
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
24
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® DFA International Core Equity Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 37
Page 37
Statements of Changes in Net Assets
Page 38
Page 39
Notes to the Financial Statements
Page 40
Report of Independent Registered Public Accounting Firm
Page 46
Other Federal Income Tax Information
Page 47
Page 48
Approval of Investment Advisory and Subadvisory Agreements
Page 49
Information about the Board of Trustees and Officers
Page 52
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 International Core Equity Fund (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® DFA International Core Equity Fund and Dimensional Fund Advisors LP serves as Subadviser to the Fund.
|
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® DFA International Core Equity Fund (the “Fund”) returned-17.65%. That compared to a-13.36% and-13.64% total return for its benchmarks, the MSCI EAFE Index1 and the MSCI WorldEx-USA Index1 respectively, each gross of withholding taxes.
Developed foreign market equities posted negative returns for the12-month period. They trailed U.S. equities but outperformed their emerging markets counterparts. Most developed market currencies (particularly the Australian and Canadian dollars) depreciated relative to the U.S. dollar, which negatively impacted returns in dollar-denominated terms.
Within the developedex-U.S. equity universe,large-cap stocks outperformedsmall-cap stocks, while growth stocks outperformed their value counterparts. Meanwhile, high-profitability stocks outperformed lower-profitability names across all market cap sizes.
The Fund underperformed both of its reference benchmarks for the12-month period. A bias towardsmall-cap stocks was a main driver of this relative underperformance, in an environment wheresmall-cap stocks underperformed. An emphasis on value stocks also detracted from performance relative to both benchmarks, given that value-oriented companies generally underperformed growth-oriented stocks for the year.*
Conversely, the Fund benefited from its tilt toward stocks with higher profitability, as these outperformed their lower-profitability counterparts.*
At the country level, the Fund’s inclusion of—and emphasison—small-cap stocks had a particularly negative impact on relative performance in Japan, as Japanese smaller caps underperformed for the year.*
At the sector level, the Fund’s lesser emphasis on healthcare negatively affected relative performance, as healthcare stocks were among the best performers for the year. Note, sector allocations are driven by the Fund’s greater emphases onsmall-cap, value, and higher- profitability stocks.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmarks please refer to page 2 of this report. |
1
AZL® DFA International Core Equity Fund (Unaudited)
Fund Objective
The Fund’s investment objective is to seek long-term capital appreciation. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in equity securities.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmarks and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Since | ||||||||||||
1 | 3 | Inception | ||||||||||
Year | Year | (4/27/15) | ||||||||||
AZL®DFA International Core Equity Fund | -17.65 | % | 2.32 | % | -0.90 | % | ||||||
MSCI EAFE Index (gross of withholding taxes) | -13.36 | % | 3.38 | % | -0.23 | % | ||||||
MSCI EAFE Index (net of withholding taxes) | -13.79 | % | 2.87 | % | -0.69 | % | ||||||
MSCI WorldEx-USA Index (gross of withholding taxes) | -13.64 | % | 3.64 | % | -0.41 | % | ||||||
MSCI WorldEx-USA Index (net of withholding taxes) | -14.09 | % | 3.11 | % | -0.90 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®DFA International Core Equity Fund | 1.41 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.75% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 1.39% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Morgan Stanley Capital International, Europe, Australasia and Far East (“MSCI EAFE”) Index and the Morgan Stanley Capital International WorldEx-USA (“MSCI WorldEx-USA”) Index. The MSCI EAFE Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The MSCI WorldEx-USA Index captures a large- andmid-capitalization representation across 22 of 23 developed markets countries, excluding the United States. The Indexes are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Index noted as “gross of withholding taxes” reflects the maximum possible reinvestment of dividends with no adjustment for withholding tax deductions or tax credits. The Index noted as “net of withholding taxes” reflects the reinvestment of dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable tonon-resident institutional investors who do not benefit from double taxation treaties. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL DFA International Core Equity Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL DFA International Core Equity 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL DFA International Core Equity Fund | $ | 1,000.00 | $ | 848.70 | $ | 5.45 | 1.17 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL DFA International Core Equity Fund | $ | 1,000.00 | $ | 1,019.31 | $ | 5.96 | 1.17 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Industrials | 18.1 | % | |||
Financials | 17.7 | ||||
Consumer Discretionary | 14.1 | ||||
Materials | 11.7 | ||||
Consumer Staples | 7.3 | ||||
Energy | 6.9 | ||||
Communication Services | 6.0 | ||||
Information Technology | 5.9 | ||||
Health Care | 5.7 | ||||
Utilities | 3.1 | ||||
Real Estate | 2.8 | ||||
|
| ||||
Total Common Stocks and Preferred Stocks | 99.3 | ||||
Warrants | — | ^ | |||
Rights | — | ^ | |||
Short-Term Securities Held as Collateral for Securities on Loan | 0.5 | ||||
Money Markets | 0.2 | ||||
|
| ||||
Total Investment Securities | 100.0 | ||||
Net other assets (liabilities) | — | ^ | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (98.9%): | ||||||||
Aerospace & Defense (1.1%): | ||||||||
15,989 | Austal, Ltd. | $ | 21,899 | |||||
982 | Avon Rubber plc | 15,626 | ||||||
44,779 | BAE Systems plc | 261,314 | ||||||
5,900 | Bombardier, Inc., Class B* | 8,774 | ||||||
6,187 | CAE, Inc. | 113,724 | ||||||
3,081 | Chemring Group plc | 6,323 | ||||||
119,811 | Cobham plc* | 148,708 | ||||||
15 | Dassault Aviation SA | 20,768 | ||||||
504 | Elbit Systems, Ltd. | 57,982 | ||||||
3,429 | European Aeronautic Defence & Space Co. NV | 327,908 | ||||||
1,280 | Facc AG | 19,491 | ||||||
9,452 | Finmeccanica SpA | 83,187 | ||||||
2,535 | Heroux-Devtek, Inc.* | 24,013 | ||||||
1,132 | LiSi | 26,562 | ||||||
539 | Maxar Technologies, Ltd. | 6,440 | ||||||
41,242 | Meggitt plc | 246,681 | ||||||
2,059 | MTU Aero Engines AG | 373,928 | ||||||
560 | Ohb Se | 19,796 | ||||||
25,592 | QinetiQ Group plc | 93,541 | ||||||
25,323 | Rolls-Royce Holdings plc | 266,446 | ||||||
1,420 | Saab AB | 49,438 | ||||||
1,661 | Safran SA | 199,525 | ||||||
20,156 | Senior plc | 48,521 | ||||||
17,700 | Singapore Technologies Engineering, Ltd. | 45,151 | ||||||
3,432 | Ste Industrielle d’Aviation Latecoere SA* | 10,949 | ||||||
1,426 | Thales SA | 165,859 | ||||||
4,950 | Ultra Electronics Holdings plc | 81,729 | ||||||
|
| |||||||
2,744,283 | ||||||||
|
| |||||||
Air Freight & Logistics (0.4%): | ||||||||
16,282 | Bollore, Inc. | 65,038 | ||||||
6,117 | BPOST SA | 55,933 | ||||||
2,399 | Compania de Distribucion Integral Logista Holdings SA | 59,955 | ||||||
6,355 | CTT-Correios de Portugal SA | 21,403 | ||||||
8,162 | Deutsche Post AG | 223,518 | ||||||
5,804 | Freightways, Ltd. | 28,647 | ||||||
73 | Id Logistics Group* | 9,617 | ||||||
37,500 | Kerry Network, Ltd. | 55,501 | ||||||
2,300 | Kintetsu World Express, Inc. | 33,635 | ||||||
1,800 | Konoike Transport Co., Ltd. | 26,087 | ||||||
1,284 | Mainfreight, Ltd. | 26,487 | ||||||
1,800 | Mitsui-Soko Holdings Co., Ltd.* | 30,860 | ||||||
1,146 | Oesterreichische Post AG | 39,374 | ||||||
682 | Panalpina Welttransport Holdings | 90,795 | ||||||
24,018 | PostNL NV | 54,691 | ||||||
23,649 | Royal Mail plc | 82,089 | ||||||
900 | SBS Holdings, Inc. | 11,604 | ||||||
58,500 | Singapore Post, Ltd. | 39,182 | ||||||
36 | XPO Logistics Europe SADIR | 12,841 | ||||||
2,000 | Yamato Holdings Co., Ltd. | 54,510 | ||||||
2,000 | Yasuda Logistics Corp. | 14,291 | ||||||
|
| |||||||
1,036,058 | ||||||||
|
| |||||||
Airlines (0.4%): | ||||||||
2,930 | Air Canada* | 55,724 | ||||||
13,467 | AirFrance-KLM* | 145,584 | ||||||
26,921 | Air New Zealand, Ltd. | 56,047 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Airlines, continued | ||||||||
1,200 | All Nippon Airways Co., Ltd. | $ | 43,263 | |||||
1,046 | Cathay Pacific Airways, Ltd. | 1,484 | ||||||
6,945 | Dart Group plc | 68,333 | ||||||
9,717 | Deutsche Lufthansa AG, Registered Shares | 219,110 | ||||||
2,130 | easyJet plc | 29,897 | ||||||
28,658 | El Al Israel Airlines* | 9,096 | ||||||
1,728 | Exchange Income Corp.^ | 35,775 | ||||||
13,156 | International Consolidated Airlines Group SA | 103,231 | ||||||
1,700 | Japan Airlines Co., Ltd. | 60,221 | ||||||
24,091 | Qantas Airways, Ltd. | 98,324 | ||||||
18,011 | Sas AB* | 42,420 | ||||||
21,400 | Singapore Airlines, Ltd. | 147,377 | ||||||
|
| |||||||
1,115,886 | ||||||||
|
| |||||||
Auto Components (2.2%): | ||||||||
1,000 | Aisan Industry Co., Ltd. | 6,822 | ||||||
5,800 | Aisin Sieki Co., Ltd. | 200,160 | ||||||
7,300 | Akebono Brake Industry Co., Ltd.* | 12,251 | ||||||
1,027 | Akwel | 18,945 | ||||||
2,288 | Arb Corp., Ltd. | 24,088 | ||||||
266 | Autoneum Holding AG | 39,961 | ||||||
8,806 | Brembo SpA | 89,527 | ||||||
12,900 | Bridgestone Corp. | 495,147 | ||||||
1,647 | Bulten AB | 16,426 | ||||||
11 | Burelle SA | 10,033 | ||||||
3,874 | CIE Automotive SA | 95,199 | ||||||
5,225 | Compagnie Generale des Establissements Michelin SCA, Class B | 516,521 | ||||||
887 | Continental AG | 122,637 | ||||||
2,800 | Daido Metal Co., Ltd. | 19,922 | ||||||
2,400 | Daikyonishikawa Corp. | 23,360 | ||||||
2,700 | Denso Corp. | 119,843 | ||||||
10,709 | Dometic Group AB(a) | 66,712 | ||||||
1,800 | Eagle Industry Co., Ltd. | 21,084 | ||||||
673 | Edag Engineering Group AG | 12,227 | ||||||
1,724 | ElringKlinger AG | 13,433 | ||||||
1,700 | Exedy Corp. | 41,527 | ||||||
3,076 | Faurecia | 115,433 | ||||||
2,300 | FCC Co., Ltd. | 54,361 | ||||||
1,000 | F-Tech, Inc. | 8,401 | ||||||
4,000 | Futaba Industrial Co., Ltd. | 19,965 | ||||||
1,400 | G-Tekt Corp. | 18,449 | ||||||
2,569 | Gud Holdings, Ltd. | 20,333 | ||||||
2,186 | Hella KGAA Hueck & Co. | 87,092 | ||||||
1,600 | Hi-Lex Corp. | 31,656 | ||||||
700 | H-One Co., Ltd. | 6,232 | ||||||
1,200 | Imasen Electric Industrial | 10,658 | ||||||
1,800 | Kasai Kogyo Co., Ltd. | 13,551 | ||||||
2,500 | Keihin Corp. | 41,599 | ||||||
1,600 | Koito Manufacturing Co., Ltd. | 81,631 | ||||||
31,203 | Kongsberg Automotive ASA* | 27,533 | ||||||
1,400 | KYB Co., Ltd. | 33,782 | ||||||
2,493 | Leoni AG | 86,390 | ||||||
3,233 | Linamar Corp. | 107,293 | ||||||
11,703 | Magna International, Inc., ADR | 531,902 | ||||||
6,366 | Martinrea International, Inc. | 50,648 | ||||||
2,000 | Mitsuba Corp. | 11,333 | ||||||
3,200 | Musashi Seimitsu Industry Co. L | 45,066 |
See accompanying notes to the financial statements.
4
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Auto Components, continued | ||||||||
4,400 | NGK Spark Plug Co., Ltd. | $ | 86,809 | |||||
9,700 | NHK SPRING Co., Ltd. | 84,953 | ||||||
600 | Nichirin Co., Ltd. | 10,310 | ||||||
3,600 | Nifco, Inc. | 84,991 | ||||||
4,000 | Nippon Seiki Co., Ltd. | 68,496 | ||||||
1,400 | Nissin Kogyo Co., Ltd. | 17,929 | ||||||
2,700 | NOK Corp. | 37,630 | ||||||
6,795 | Nokian Renkaat OYJ | 209,363 | ||||||
800 | Ohashi Technica, Inc. | 8,501 | ||||||
2,600 | Pacific Industrial Co., Ltd. | 34,446 | ||||||
1,800 | Piolax, Inc. | 35,773 | ||||||
2,839 | Plastic Omnium SA | 65,071 | ||||||
6,300 | Press Kogyo Co., Ltd. | 30,865 | ||||||
3,582 | PWR Holdings, Ltd. | 8,348 | ||||||
400 | Riken Corp. | 18,372 | ||||||
4,208 | Saf-Holland SA | 54,024 | ||||||
1,600 | Sanden Holdings Corp.* | 10,918 | ||||||
1,900 | Sanoh Industrial Co., Ltd. | 9,454 | ||||||
2,535 | Schaeffler AG | 21,612 | ||||||
600 | Shoei Co., Ltd. | 20,256 | ||||||
4,000 | Showa Corp. | 46,913 | ||||||
2,500 | Stanley Electric Co., Ltd. | 69,729 | ||||||
10,000 | Sumitomo Electric Industries, Ltd. | 132,029 | ||||||
2,900 | Sumitomo Riko Co., Ltd. | 23,979 | ||||||
9,500 | Sumitomo Rubber Industries, Ltd. | 113,077 | ||||||
300 | T RAD Co., Ltd. | 6,276 | ||||||
1,400 | Tachi-S Co., Ltd. | 18,248 | ||||||
800 | Taiho Kogyo Co., Ltd. | 7,011 | ||||||
3,900 | Tokai Rika Co., Ltd. | 64,216 | ||||||
2,500 | Topre Corp. | 49,430 | ||||||
7,500 | Toyo Tire & Rubber Co., Ltd. | 93,298 | ||||||
4,500 | Toyoda Gosei Co., Ltd. | 89,730 | ||||||
3,500 | Toyota Boshoku Corp. | 52,115 | ||||||
1,200 | Toyota Industries Corp. | 55,226 | ||||||
1,500 | TPR Co., Ltd. | 30,284 | ||||||
3,600 | TS Tech Co., Ltd. | 100,493 | ||||||
2,000 | Unipres Corp. | 33,757 | ||||||
2,847 | Valeo SA | 82,543 | ||||||
104,000 | Xinyi Glass Holdings, Ltd. | 114,214 | ||||||
6,500 | Yokohama Rubber Co., Ltd. (The) | 121,265 | ||||||
600 | Yorozu Corp. | 7,498 | ||||||
|
| |||||||
5,598,585 | ||||||||
|
| |||||||
Automobiles (2.9%): | ||||||||
7,641 | Bayerische Motoren Werke AG (BMW) | 618,738 | ||||||
17,987 | Daimler AG, Registered Shares | 945,567 | ||||||
1,253 | Ferrari NV | 124,598 | ||||||
34,520 | Fiat Chrysler Automobiles NV* | 501,810 | ||||||
11,800 | Fuji Heavy Industries, Ltd. | 251,938 | ||||||
21,000 | Honda Motor Co., Ltd. | 548,829 | ||||||
24,135 | IMMSI SpA* | 11,184 | ||||||
10,900 | Isuzu Motors, Ltd. | 152,209 | ||||||
15,500 | Mazda Motor Corp. | 159,463 | ||||||
13,300 | Mitsubishi Motors Corp. | 73,440 | ||||||
48,200 | Nissan Motor Co., Ltd. | 388,537 | ||||||
2,700 | Nissan Shatai Co., Ltd. | 23,796 | ||||||
14,678 | Piaggio & C SpA | 30,740 | ||||||
27,636 | PSA Peugeot Citroen SA | 587,385 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Automobiles, continued | ||||||||
3,686 | Renault SA | $ | 229,431 | |||||
2,800 | Suzuki Motor Corp. | 141,701 | ||||||
36,638 | Toyota Motor Corp. | 2,128,255 | ||||||
794 | Volkswagen AG | 126,491 | ||||||
8,800 | Yamaha Motor Co., Ltd. | 171,292 | ||||||
|
| |||||||
7,215,404 | ||||||||
|
| |||||||
Banks (9.3%): | ||||||||
3,000 | 77th Bank | 51,720 | ||||||
8,132 | ABN AMRO Group NV(a) | 190,453 | ||||||
17,829 | AIB Group plc | 74,937 | ||||||
500 | Aichi Bank, Ltd. (The) | 17,110 | ||||||
1,500 | Akita Bank, Ltd. (The) | 29,743 | ||||||
3,329 | Aktia Bank OYJ | 34,353 | ||||||
1,200 | Aomori Bank, Ltd. (The) | 30,308 | ||||||
700 | Aozora Bank, Ltd. | 20,760 | ||||||
32,444 | Australia & New Zealand Banking Group, Ltd. | 558,929 | ||||||
2,000 | Awa Bank, Ltd. (The) | 52,047 | ||||||
20,218 | Banca Popolare dell’Emilia Romarna | 77,959 | ||||||
25,559 | Banca Popolare di Sondrio SCARL | 76,952 | ||||||
78,539 | Banco Bilbao Vizcaya Argentaria SA | 414,238 | ||||||
75,804 | Banco Bpm SpA* | 171,038 | ||||||
106,975 | Banco Comercial Portugues SA, Class R* | 28,023 | ||||||
73,105 | Banco de Sabadell SA | 83,167 | ||||||
181,335 | Banco Santander SA | 818,226 | ||||||
19,203 | Bank Hapoalim BM | 121,916 | ||||||
31,180 | Bank LeumiLe-Israel Corp. | 188,990 | ||||||
23,503 | Bank of East Asia, Ltd. (The) | 74,394 | ||||||
2,674 | Bank of Georgia Group plc | 46,781 | ||||||
26,226 | Bank of Ireland Group plc | 145,534 | ||||||
900 | Bank of Iwate, Ltd. (The) | 29,102 | ||||||
1,900 | Bank of Kyoto, Ltd. (The) | 77,933 | ||||||
15,317 | Bank of Montreal | 1,000,965 | ||||||
500 | Bank of Nagoya, Ltd. (The) | 14,994 | ||||||
13,051 | Bank of Nova Scotia | 650,853 | ||||||
820 | Bank of Okinawa, Ltd. (The) | 23,606 | ||||||
12,981 | Bank of Queensland, Ltd. | 88,334 | ||||||
1,100 | Bank of Saga, Ltd. (The) | 17,659 | ||||||
2,000 | Bank of The Ryukyus, Ltd. | 20,590 | ||||||
23,866 | Bankia SA | 69,488 | ||||||
2,748 | Bankinter SA | 21,960 | ||||||
71 | Banque Cantonale de Geneve | 13,876 | ||||||
103 | Banque Cantonale Vaudoise, Registered Shares | 77,780 | ||||||
47,121 | Barclays plc, ADR | 355,292 | ||||||
14,732 | Bendigo & Adelaide Bank, Ltd. | 112,027 | ||||||
311 | Berner Kantonalbank AG | 61,637 | ||||||
12,167 | BNP Paribas SA | 547,905 | ||||||
57,542 | BOC Hong Kong Holdings, Ltd. | 212,543 | ||||||
6,760 | Canadian Imperial Bank of Commerce | 503,890 | ||||||
4,927 | Canadian Western Bank | 93,992 | ||||||
12,400 | Chiba Bank, Ltd. (The) | 68,768 | ||||||
4,300 | Chiba Kogyo Bank, Ltd. (The) | 14,122 | ||||||
6,200 | Chugoku Bank, Ltd. (The) | 52,084 | ||||||
700 | Chukyo Bank, Ltd. (The) | 13,596 | ||||||
3,800 | Chuo Mitsui Trust Holdings, Inc. | 138,335 | ||||||
1,097 | Comdirect Bank AG | 12,874 | ||||||
19,952 | Commerzbank AG* | 132,138 | ||||||
14,023 | Commonwealth Bank of Australia | 715,550 |
See accompanying notes to the financial statements.
5
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
19,900 | Concordia Financial Group, Ltd. | $ | 75,889 | |||||
10,693 | Credit Agricole SA | 114,999 | ||||||
5,165 | Credito Emiliano SpA | 29,776 | ||||||
348,864 | Credito Valtellinese SpA* | 29,392 | ||||||
55,579 | Criteria Caixacorp SA | 200,007 | ||||||
22,900 | CYBG plc | 52,525 | ||||||
16,000 | Dah Sing Banking Group, Ltd. | 28,256 | ||||||
5,600 | Dah Sing Financial Holdings, Ltd. | 27,603 | ||||||
1,500 | Daishi Hokuetsu Financial Group, Inc. | 41,766 | ||||||
2,845 | Danske Bank A/S | 56,382 | ||||||
7,100 | DBS Group Holdings, Ltd. | 122,702 | ||||||
10,728 | DnB NOR ASA | 172,195 | ||||||
3,100 | Ehime Bank, Ltd. (The) | 30,528 | ||||||
5,287 | Erste Group Bank AG | 176,140 | ||||||
6,500 | Fidea Holdings Co., Ltd. | 7,964 | ||||||
11,461 | Finecobank Banca Fineco SpA | 115,317 | ||||||
1,816 | First International Bank of Israel | 38,096 | ||||||
1,000 | Fukui Bank, Ltd. (The) | 14,453 | ||||||
2,600 | Fukuoka Financial Group, Inc. | 52,437 | ||||||
2,200 | Fukushima Bank, Ltd. (The)* | 7,995 | ||||||
8,100 | Gunma Bank, Ltd. (The) | 33,652 | ||||||
15,800 | Hachijuni Bank, Ltd. (The) | 64,475 | ||||||
9,105 | Hang Seng Bank, Ltd. | 203,378 | ||||||
25,589 | Heartland Group Holdings Npv* | 23,695 | ||||||
6,700 | Hiroshima Bank, Ltd. (The) | 35,363 | ||||||
1,000 | Hokkoku Bank, Ltd. (The) | 32,028 | ||||||
6,000 | Hokuhoku Financial Group, Inc. | 67,234 | ||||||
42,137 | HSBC Holdings plc, ADR | 1,732,252 | ||||||
9,400 | Hyakugo Bank, Ltd. (The) | 33,372 | ||||||
1,000 | Hyakujushi Bank, Ltd. (The) | 23,595 | ||||||
36,999 | ING Groep NV | 396,457 | ||||||
141,131 | Intesa Sanpaolo SpA | 312,743 | ||||||
24,232 | Isreal Discount Bank | 74,762 | ||||||
9,500 | Iyo Bank, Ltd. (The) | 49,847 | ||||||
6,200 | Jimoto Holdings, Inc. | 7,098 | ||||||
1,200 | Juroku Bank, Ltd. (The) | 24,936 | ||||||
2,965 | Jyske Bank A/S | 107,192 | ||||||
1,742 | Kansai Mirai Financial Group,Inc.* | 12,430 | ||||||
3,405 | KBC Group NV | 220,297 | ||||||
4,000 | Keiyo Bank, Ltd. (The) | 25,842 | ||||||
400 | Kita-Nippon Bank, Ltd. (The) | 8,169 | ||||||
3,800 | Kiyo Bank, Ltd. (The) | 53,840 | ||||||
13,590 | Kyushu Financial Group, Inc. | 51,300 | ||||||
2,296 | Laurentian Bank of Canada | 64,036 | ||||||
120,273 | Liberbank SA* | 59,994 | ||||||
888 | Liechtenstein Landesbank AG | 57,974 | ||||||
571,029 | Lloyds Banking Group plc | 377,264 | ||||||
83,348 | Lloyds TSB Group plc, ADR | 213,371 | ||||||
162 | Luzerner Kantonalbank AG | 75,934 | ||||||
24,670 | Mebuki Financial Group, Inc. | 65,132 | ||||||
19,666 | Mediobanca SpA | 166,269 | ||||||
700 | Michinoku Bank, Ltd. (The) | 10,931 | ||||||
123,900 | Mitsubishi UFJ Financial Group, Inc. | 611,052 | ||||||
800 | Miyazaki Bank, Ltd. (The) | 20,995 | ||||||
4,380 | Mizrahi Tefahot Bank, Ltd. | 74,215 | ||||||
259,200 | Mizuho Financial Group, Inc. | 404,037 | ||||||
1,300 | Musashino Bank, Ltd. (The) | 30,026 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
1,300 | Nanto Bank, Ltd. (The) | $ | 25,324 | |||||
32,205 | National Australia Bank, Ltd. | 546,368 | ||||||
9,441 | National Bank of Canada | 387,669 | ||||||
1,853 | Nedcor, Ltd. | 35,346 | ||||||
7,200 | Nishi-Nippon Holdings, Inc. | 63,210 | ||||||
14,029 | Nordea Bank AB | 118,386 | ||||||
8,600 | North Pacific Bank, Ltd. | 22,898 | ||||||
4,701 | Norwegian Finans Holding ASA* | 36,636 | ||||||
1,300 | Ogaki Kyoritsu Bank, Ltd. (The) | 25,936 | ||||||
24,309 | Oversea-Chinese Banking Corp., Ltd. | 199,718 | ||||||
7,718 | Raiffeisen International Bank-Holding AG | 196,547 | ||||||
22,100 | Resona Holdings, Inc. | 105,730 | ||||||
1,604 | Ringkjoebing Landbobank A/S | 83,825 | ||||||
10,304 | Royal Bank of Canada | 706,030 | ||||||
28,730 | Royal Bank of Scotland, ADR | 160,601 | ||||||
1,190 | San Ju San Financial Group, Inc. | 18,526 | ||||||
5,000 | San-In Godo Bank, Ltd. (The) | 34,774 | ||||||
11,600 | Senshu Ikeda Holdings, Inc. | 31,839 | ||||||
24,500 | Seven Bank, Ltd. | 69,886 | ||||||
2,300 | Shiga Bank, Ltd. (The) | 53,676 | ||||||
1,000 | Shikoku Bank, Ltd. (The) | 10,732 | ||||||
400 | Shimizu Bank, Ltd. (The) | 5,902 | ||||||
4,800 | Shinsei Bank, Ltd. | 56,820 | ||||||
7,400 | Shizuoka Bank, Ltd. (The) | 57,606 | ||||||
21,054 | Skandinaviska Enskilda Banken AB, Class A | 205,058 | ||||||
7,953 | Societe Generale | 252,465 | ||||||
3,307 | Spar Nord Bank A/S | 26,544 | ||||||
4,203 | Sparebank 1Sr-Bank ASA | 43,346 | ||||||
147 | St. Galler Kantonalbank AG | 67,490 | ||||||
56,216 | Standard Chartered plc | 434,465 | ||||||
13,500 | Sumitomo Mitsui Financial Group, Inc. | 445,248 | ||||||
1,500 | Suruga Bank, Ltd. | 5,504 | ||||||
1,082 | Svenska Handelsbanken AB | 12,354 | ||||||
17,088 | Svenska Handelsbanken AB, Class A | 189,399 | ||||||
11,980 | Swedbank AB, Class A | 267,205 | ||||||
3,351 | Sydbank A/S | 79,809 | ||||||
8,700 | Tochigi Bank, Ltd. (The) | 19,760 | ||||||
6,500 | Toho Bank, Ltd. (The) | 18,442 | ||||||
1,100 | Tokyo Ty Financial Group, Inc. | 17,111 | ||||||
7,500 | Tomony Holdings, Inc. | 27,661 | ||||||
19,576 | Toronto-Dominion Bank (The) | 973,319 | ||||||
2,100 | Towa Bank, Ltd. (The) | 14,172 | ||||||
6,200 | Tsukuba Bank, Ltd. | 12,228 | ||||||
48,370 | UBI Banca – Unione di Banche Italiane SCPA | 140,011 | ||||||
13,966 | Unicaja Banco SA(b) | 18,215 | ||||||
19,282 | Unicredit SpA | 218,704 | ||||||
15,627 | United Overseas Bank, Ltd. | 280,168 | ||||||
682 | Valiant Holding AG | 75,107 | ||||||
764 | Van Lanschot Kempen NV | 17,292 | ||||||
582 | Walliser Kantonalbank, Registered Shares | 66,955 | ||||||
36,785 | Westpac Banking Corp. | 648,653 | ||||||
1,600 | Yamagata Bank, Ltd. (The) | 30,610 | ||||||
7,200 | Yamaguchi Financial Group, Inc. | 68,829 | ||||||
1,800 | Yamanashi Chuo Bank, Ltd. (The) | 23,043 | ||||||
6 | Zuger Kantonalbank AG | 34,789 | ||||||
|
| |||||||
23,457,021 | ||||||||
|
|
See accompanying notes to the financial statements.
6
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Beverages (1.3%): | ||||||||
9,330 | A.G. Barr plc | $ | 93,781 | |||||
8,852 | Anheuser-Busch InBev NV | 585,765 | ||||||
2,300 | Asahi Breweries, Ltd. | 89,849 | ||||||
10,973 | Britvic plc | 111,397 | ||||||
19,109 | C&C Group plc | 59,650 | ||||||
1,375 | Carlsberg A/S, Class B | 146,313 | ||||||
11,116 | Coca-Cola Amatil, Ltd. | 64,106 | ||||||
2,200 | Coca-Cola Bottlers Japan Holdings, Inc. | 65,685 | ||||||
3,897 | Coca-Cola European Partners plc(c) | 179,229 | ||||||
3,906 | Coca-Cola HBC AG | 121,520 | ||||||
5,750 | Cott Corp. | 80,079 | ||||||
5,510 | Davide Campari – Milano SpA | 46,629 | ||||||
4,082 | Diageo plc, ADR | 578,827 | ||||||
4,304 | Fevertree Drinks plc | 119,780 | ||||||
2,618 | Heineken NV | 230,712 | ||||||
900 | ITO EN, Ltd. | 40,475 | ||||||
6,800 | Kirin Holdings Co., Ltd. | 143,056 | ||||||
109 | Laurent-Perrier | 11,860 | ||||||
938 | Olvi OYJ | 33,868 | ||||||
330 | Pernod Ricard SA | 54,178 | ||||||
376 | Remy Cointreau SA | 42,507 | ||||||
2,807 | Royal Unibrew A/S | 193,312 | ||||||
4,000 | Sapporo Breweries, Ltd. | 83,049 | ||||||
3,457 | Stock Spirits Group plc | 9,150 | ||||||
1,000 | Suntory Beverage & Food, Ltd. | 45,142 | ||||||
2,900 | Takara Holdings, Inc. | 35,076 | ||||||
2,119 | Treasury Wine Estates, Ltd. | 22,082 | ||||||
|
| |||||||
3,287,077 | ||||||||
|
| |||||||
Biotechnology (0.3%): | ||||||||
986 | Bavarian Nordic A/S*^ | 19,322 | ||||||
526 | Biogaia AB | 18,834 | ||||||
1,137 | Biotest AG | 30,617 | ||||||
2,219 | CSL, Ltd. | 289,731 | ||||||
225 | Galapagos NV* | 20,648 | ||||||
215 | Genmab A/S* | 35,241 | ||||||
634 | Genus plc | 17,327 | ||||||
2,522 | Grifols SA | 65,866 | ||||||
5,747 | Knight Therapeutics, Inc.* | 32,377 | ||||||
27,252 | Mesoblast, Ltd.* | 22,099 | ||||||
3,200 | Nordic Nanovector ASA* | 18,699 | ||||||
3,607 | Oxurion NV* | 14,956 | ||||||
1,008 | Swedish Orphan Biovitrum AB* | 21,933 | ||||||
1,188 | Vitrolife AB | 19,693 | ||||||
1,155 | Zealand Pharma A/S* | 14,701 | ||||||
|
| |||||||
642,044 | ||||||||
|
| |||||||
Building Products (1.0%): | ||||||||
1,100 | AICA Kogyo Co., Ltd. | 37,117 | ||||||
2,028 | Arbonia AG* | 22,254 | ||||||
5,600 | Asahi Glass Co., Ltd. | 173,787 | ||||||
1,735 | Assa Abloy AB, Class B | 31,038 | ||||||
20 | Belimo Holding AG, Registered Shares | 80,311 | ||||||
2,400 | Bunka Shutter Co., Ltd. | 15,581 | ||||||
1,100 | Central Glass Co., Ltd. | 21,960 | ||||||
631 | Centrotec Sustainable AG | 8,275 | ||||||
12,334 | Compagnie de Saint-Gobain SA | 410,485 | ||||||
1,300 | Daikin Industries, Ltd. | 136,819 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Building Products, continued | ||||||||
153 | dorma kaba Holding AG | $ | 92,214 | |||||
434 | Geberit AG, Registered Shares | 169,154 | ||||||
12,489 | Gwa Group, Ltd. | 24,447 | ||||||
2,938 | Inwido AB | 18,422 | ||||||
8,338 | Kingspan Group plc | 357,072 | ||||||
4,912 | Lindab International AB | 35,305 | ||||||
7,500 | Lixil Group Corp. | 93,650 | ||||||
600 | Maeda Kosen Co., Ltd. | 14,553 | ||||||
2,617 | Nibe Industrier AB, Class B | 26,947 | ||||||
4,000 | Nichias Corp. | 69,111 | ||||||
1,500 | Nichiha Corp. | 37,989 | ||||||
700 | Nihon Flush Co., Ltd. | 11,122 | ||||||
4,100 | Nippon Sheet Glass Co., Ltd. | 30,906 | ||||||
2,000 | Nitto Boseki Co., Ltd. | 32,962 | ||||||
2,401 | Nordic Waterproofing Holding AS(a) | 19,322 | ||||||
1,500 | Noritz Corp. | 21,416 | ||||||
1,400 | Okabe Co., Ltd. | 11,125 | ||||||
12,336 | Polypipe Group plc | 51,324 | ||||||
353 | Rockwool International A/S | 92,224 | ||||||
22 | Rockwool International A/S | 5,056 | ||||||
1,900 | Sankyo Tateyama, Inc. | 20,205 | ||||||
7,800 | Sanwa Holdings Corp. | 88,034 | ||||||
67 | Schweiter Technologies AG | 59,389 | ||||||
2,100 | Sekisui Jushi Corp. | 36,698 | ||||||
900 | Shin Nippon Air Technologies Co., Ltd. | 14,611 | ||||||
1,800 | Takara Standard Co., Ltd. | 27,151 | ||||||
1,690 | Tarkett SA | 33,770 | ||||||
2,000 | TOTO, Ltd. | 68,759 | ||||||
2,597 | Tyman plc | 7,770 | ||||||
4,586 | Uponor OYJ | 45,426 | ||||||
638 | Zehnder Group AG | 21,810 | ||||||
|
| |||||||
2,575,571 | ||||||||
|
| |||||||
Capital Markets (2.9%): | ||||||||
20,763 | 3i Group plc | 203,829 | ||||||
24,792 | ABG Sundal Collier Holding ASA | 13,054 | ||||||
3,200 | AGF Management, Ltd. | 11,300 | ||||||
1,600 | Aizawa Securities Co., Ltd. | 9,738 | ||||||
2,800 | Alaris Royalty Corp. | 34,851 | ||||||
1,655 | Altamir | 23,965 | ||||||
1,463 | Amundi SA(a) | 76,906 | ||||||
11,464 | Anima Holding SpA(a) | 42,322 | ||||||
8,369 | Ashmore Group plc | 38,795 | ||||||
1,066 | ASX, Ltd. | 45,039 | ||||||
851 | Avanza Bank Holding AB | 40,792 | ||||||
6,232 | Azimut Holding SpA | 68,278 | ||||||
2,819 | Banca Generali SpA | 58,428 | ||||||
521 | Bellevue Group AG | 10,525 | ||||||
4,094 | Binckbank NV | 28,560 | ||||||
4,346 | Bolsas y Mercados Espanoles | 120,862 | ||||||
25,002 | Brewin Dolphin Holdings plc | 102,235 | ||||||
86,000 | Bright Smart Securities & Commodities Group, Ltd. | 16,545 | ||||||
1,119 | Brookfield Asset Management, Inc., Class A | 42,914 | ||||||
1,983 | Bure Equity AB | 24,343 | ||||||
4,759 | Burford Capital, Ltd. | 99,941 | ||||||
6,165 | Canaccord Genuity Group, Inc. | 26,060 | ||||||
7,682 | CI Financial Corp. | 97,248 |
See accompanying notes to the financial statements.
7
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
112 | Cie Financiere Tradition SA | $ | 11,649 | |||||
10,072 | Close Brothers Group plc | 184,193 | ||||||
66,000 | Cosmopolitan International Holdings, Ltd.* | 12,806 | ||||||
26,778 | Credit Suisse Group AG | 295,218 | ||||||
29,100 | Daiwa Securities Group, Inc. | 148,399 | ||||||
29,286 | Deutsche Bank AG, Registered Shares | 233,675 | ||||||
10,467 | Deutsche Bank AG, Registered Shares | 85,306 | ||||||
1,174 | Deutsche Beteiligungs AG | 45,162 | ||||||
2,050 | Deutsche Boerse AG | 246,494 | ||||||
1,252 | Eastnine AB | 13,150 | ||||||
5,622 | EFG International AG | 33,004 | ||||||
258,000 | Emperor Capital Group, Ltd. | 11,664 | ||||||
2,588 | Euronext NV(a) | 148,610 | ||||||
2,000 | Fiera Capital Corp. | 16,542 | ||||||
2,078 | Flow Traders(a) | 66,364 | ||||||
6,269 | GAM Holding AG | 24,787 | ||||||
2,674 | Georgia Capital plc* | 34,795 | ||||||
969 | Gimv NV | 52,062 | ||||||
1,675 | Guardian Capital Group, Ltd., Class A | 27,070 | ||||||
142,000 | Guotai Junan International Hol | 22,672 | ||||||
67,243 | Haitong International Securities | 21,177 | ||||||
5,422 | Hargreaves Lansdown plc | 127,731 | ||||||
6,371 | Hong Kong Exchanges & Clearing, Ltd. | 182,841 | ||||||
4,000 | Ichiyoshi Securities Co., Ltd. | 29,130 | ||||||
22,233 | IG Group Holdings plc | 161,181 | ||||||
632 | IGM Financial, Inc. | 14,367 | ||||||
3,744 | Intermediate Capital Group plc | 44,414 | ||||||
25,804 | Investec plc | 143,950 | ||||||
15,236 | IOOF Holdings, Ltd. | 55,524 | ||||||
29,231 | Ip Group plc* | 40,227 | ||||||
1,700 | IwaiCosmo Holdings, Inc. | 18,193 | ||||||
1,400 | Jafco Co., Ltd. | 44,316 | ||||||
7,200 | Japan Exchange Group, Inc. | 115,646 | ||||||
3,572 | Julius Baer Group, Ltd. | 127,693 | ||||||
25,444 | Jupiter Fund Management plc | 95,703 | ||||||
5,800 | Kabu.com Securities Co., Ltd. | 19,831 | ||||||
453 | KAS Bank NV | 3,058 | ||||||
138,000 | Kingston Financial Group, Ltd. | 32,650 | ||||||
800 | Kyokuto Securities Co., Ltd. | 8,504 | ||||||
3,928 | London Stock Exchange Group plc | 202,674 | ||||||
3,369 | Macquarie Group, Ltd. | 257,740 | ||||||
3,760 | Magellan Financial Group, Ltd. | 62,413 | ||||||
81,859 | Man Group plc | 138,063 | ||||||
2,300 | Marusan Securities Co., Ltd. | 15,973 | ||||||
1,180,000 | Mason Group Holdings, Ltd.* | 19,367 | ||||||
2,000 | Matsui Securities Co., Ltd. | 20,974 | ||||||
3,000 | Mercuria Investment Co., Ltd. | 18,679 | ||||||
2,900 | Mito Securities Co., Ltd. | 6,766 | ||||||
3,035 | MLP SE | 15,346 | ||||||
7,700 | Monex Group, Inc. | 25,718 | ||||||
21,359 | Natixis | 100,765 | ||||||
4,265 | Navigator Global Investments, Ltd. | 12,613 | ||||||
40,800 | Nomura Holdings, Inc. | 155,584 | ||||||
9,500 | Okasan Securities Group, Inc. | 41,854 | ||||||
2,586 | Pacific Current Group, Ltd. | 9,821 | ||||||
226 | Partners Group Holding AG | 137,426 | ||||||
16,301 | Pendal Group, Ltd. | 91,000 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
2,749 | Perpetual, Ltd. | $ | 62,934 | |||||
11,593 | Platinum Asset Management, Ltd. | 39,684 | ||||||
2,595 | Polar Capital Holdings plc | 15,522 | ||||||
3,710 | Premier Asset Management Group plc | 8,473 | ||||||
92,552 | Quilter plc(a) | 138,842 | ||||||
1,547 | Rathbone Brothers plc | 45,986 | ||||||
9,785 | Ratos AB, Class B | 25,790 | ||||||
1,124 | Rothschild & Co. | 39,637 | ||||||
5,700 | SBI Holdings, Inc. | 111,277 | ||||||
1,324 | Schroders plc | 34,841 | ||||||
3,080 | Schroders plc | 95,507 | ||||||
9,000 | Singapore Exchange, Ltd. | 47,040 | ||||||
11,000 | Sparx Group Co., Ltd. | 18,695 | ||||||
11,000 | Sprott, Inc.^ | 20,711 | ||||||
14,023 | St. James Place plc | 167,990 | ||||||
900 | Swissquote Group Holding SA | 41,732 | ||||||
2,584 | Tamburi Investment Partners SP | 16,968 | ||||||
1,131 | TMX Group, Ltd. | 58,605 | ||||||
8,500 | Tokai Tokyo Financial Holdings, Inc. | 36,644 | ||||||
4,000 | Toyo Securities Co., Ltd. | 6,241 | ||||||
19,048 | Tullett Prebon plc | 72,842 | ||||||
40,066 | UBS Group AG | 500,347 | ||||||
3,019 | UBS Group AG | 37,375 | ||||||
92,000 | Value Partners Group, Ltd. | 63,204 | ||||||
1,793 | Vontobel Holding AG | 92,249 | ||||||
122 | Vp Bank AG, Registered Shares | 17,554 | ||||||
77 | VZ Holding AG | 20,757 | ||||||
|
| |||||||
7,406,511 | ||||||||
|
| |||||||
Chemicals (4.4%): | ||||||||
900 | Achilles Corp. | 15,196 | ||||||
5,100 | Adeka Corp. | 73,717 | ||||||
3,219 | Air Liquide SA | 398,474 | ||||||
6,000 | Air Water, Inc. | 90,157 | ||||||
1,821 | AkzoNobel NV | 146,357 | ||||||
700 | Arakawa Chemical Industries, Ltd. | 8,336 | ||||||
4,466 | Arkema SA | 381,062 | ||||||
19,200 | Asahi Kasei Corp. | 195,926 | ||||||
1,100 | ASAHI YUKIZAI Corp. | 14,493 | ||||||
15,764 | BASF SE | 1,090,729 | ||||||
6,811 | Borregaard ASA | 59,010 | ||||||
2,300 | Carlit Holdings Co., Ltd. | 15,177 | ||||||
26,200 | China Sunsine Chemical Holdings, Ltd. | 24,021 | ||||||
600 | Christian Hansen Holding A/S | 53,149 | ||||||
2,100 | Chugoku Marine Paints, Ltd. | 17,192 | ||||||
1,600 | Ci Takiron Corp. | 8,478 | ||||||
6,553 | Clariant AG | 120,960 | ||||||
4,087 | Corbion NV | 114,302 | ||||||
400 | Coremax Corp. | 1,179 | ||||||
1,981 | Covestro AG(a) | 97,991 | ||||||
2,800 | Croda International plc | 166,294 | ||||||
1,000 | Dai Nippon Toryo Co., Ltd. | 8,855 | ||||||
9,800 | Daicel Chemical Industries, Ltd. | 100,722 | ||||||
2,600 | Daiichi Kigenso Kagaku-Kogyo Co., Ltd. | 18,855 | ||||||
400 | Dainichiseika Color & Chemical | 10,010 | ||||||
5,100 | Dainippon Ink & Chemicals, Inc. | 155,045 | ||||||
5,600 | Denka Co., Ltd. | 157,634 | ||||||
800 | DKS Co., Ltd. | 20,118 |
See accompanying notes to the financial statements.
8
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
17,121 | DuluxGroup, Ltd. | $ | 79,088 | |||||
30,248 | Elementis plc | 69,867 | ||||||
132 | EMS-Chemie Holding AG | 62,880 | ||||||
8,516 | Ercros SA | 30,139 | ||||||
9,485 | Essentra plc | 41,389 | ||||||
60,321 | Evolva Holding SA* | 14,098 | ||||||
4,002 | Evonik Industries AG | 99,941 | ||||||
2,601 | Fuchs Petrolub AG | 107,206 | ||||||
679 | FUCHS Petrolub SE | 27,314 | ||||||
3,600 | Fujikura Kasei Co., Ltd. | 19,451 | ||||||
1,100 | Fujimori Kogyo Co., Ltd. | 29,467 | ||||||
1,400 | Fuso Chemical Co., Ltd. | 24,935 | ||||||
100 | Givaudan SA, Registered Shares | 232,036 | ||||||
29 | Gurit Holding AG | 25,644 | ||||||
835 | H&R GMBH & Co. KGAA | 5,825 | ||||||
1,900 | Harima Chemicals Group, Inc. | 15,962 | ||||||
4,570 | Hexpol AB | 36,218 | ||||||
2,600 | Hitachi Chemical Co., Ltd. | 38,837 | ||||||
700 | Hodogaya Chemical Co., Ltd. | 12,900 | ||||||
43,710 | Incitec Pivot, Ltd. | 100,954 | ||||||
0 | International Flavor & Fragrances, Inc. | 47 | ||||||
1,500 | Ishihara Sangyo Kaisha, Ltd.* | 14,584 | ||||||
10,087 | Israel Chemicals, Ltd. | 57,420 | ||||||
1,700 | JCU Corp. | 21,764 | ||||||
4,562 | Johnson Matthey plc | 162,742 | ||||||
700 | Jsp Corp. | 13,632 | ||||||
9,278 | K+S AG, Registered Shares | 167,084 | ||||||
2,000 | Kaneka Corp. | 71,482 | ||||||
1,100 | Kansai Paint Co., Ltd. | 21,114 | ||||||
5,000 | Kanto Denka Kogyo Co., Ltd. | 35,859 | ||||||
7,358 | Kemira OYJ | 83,257 | ||||||
800 | Kh Neochem Co., Ltd. | 16,576 | ||||||
1,500 | Koatsu Gas Kogyo Co., Ltd. | 11,770 | ||||||
3,148 | Koninklijke DSM NV | 256,106 | ||||||
1,000 | Konishi Co., Ltd. | 15,099 | ||||||
3,200 | Kumiai Chemical Industry Co., Ltd. | 18,807 | ||||||
11,300 | Kuraray Co., Ltd. | 158,553 | ||||||
600 | Kureha Corp. | 32,989 | ||||||
4,531 | Lanxess AG | 208,668 | ||||||
671 | Lenzing AG | 61,154 | ||||||
741 | Linde plc | 115,626 | ||||||
1,300 | Lintec Corp. | 27,906 | ||||||
2,350 | Methanex Corp. | 113,200 | ||||||
46,900 | Mitsubishi Chemical Holdings Corp. | 352,884 | ||||||
5,600 | Mitsubishi Gas Chemical Co., Inc. | 83,673 | ||||||
8,000 | Mitsui Chemicals, Inc. | 179,515 | ||||||
800 | Nihon Kagaku Sangyo Co., Ltd. | 7,302 | ||||||
2,300 | Nihon Nohyaku Co., Ltd. | 10,598 | ||||||
3,600 | Nihon Parkerizing Co., Ltd. | 41,574 | ||||||
600 | Nippon Chemical Industrial Co., Ltd. | 11,926 | ||||||
6,100 | Nippon Kayaku Co., Ltd. | 77,406 | ||||||
1,400 | Nippon Pillar Packing Co., Ltd. | 15,502 | ||||||
400 | Nippon Shokubai Co., Ltd. | 25,404 | ||||||
800 | Nippon Soda Co., Ltd. | 19,401 | ||||||
1,800 | Nissan Chemical Industries, Ltd. | 93,714 | ||||||
4,600 | Nitto Denko Corp. | 229,700 | ||||||
1,800 | NOF Corp. | 61,182 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
3,539 | Novozymes A/S, Class B | $ | 158,220 | |||||
6,786 | Nufarm, Ltd./Australia | 28,506 | ||||||
6,029 | Nutrien, Ltd. | 283,363 | ||||||
3,683 | OCI NV* | 74,747 | ||||||
500 | Okamoto Industries, Inc. | 26,209 | ||||||
600 | Okura Industrial Co., Ltd. | 10,062 | ||||||
8,136 | Orica, Ltd. | 98,824 | ||||||
1,000 | Osaka Organic Chemical Industry, Ltd. | 9,939 | ||||||
964 | Plastivaloire | 9,750 | ||||||
1,600 | Rasa Industries, Ltd. | 18,719 | ||||||
1,343 | Recticel SA | 9,812 | ||||||
2,800 | Riken Technos Corp. | 11,557 | ||||||
500 | Sakai Chemical Industry Co., Ltd. | 10,362 | ||||||
2,400 | Sakata Inx Corp. | 26,414 | ||||||
700 | Sanyo Chemical Industries, Ltd. | 32,518 | ||||||
900 | Sekisui Plastics Co., Ltd. | 7,625 | ||||||
1,100 | Shikoku Chemicals Corp. | 10,296 | ||||||
1,200 | Shin-Etsu Chemical Co., Ltd. | 92,462 | ||||||
1,800 | Shin-Etsu Polymer Co., Ltd. | 11,106 | ||||||
3,900 | Showa Denko K.K. | 114,410 | ||||||
1,740 | Sika AG | 221,233 | ||||||
1,754 | SOL SPA | 21,852 | ||||||
1,497 | Solvay SA | 149,072 | ||||||
400 | Stella Chemifa Corp. | 9,264 | ||||||
2,200 | Sumitomo Bakelite Co., Ltd. | 75,259 | ||||||
68,000 | Sumitomo Chemical Co., Ltd. | 332,589 | ||||||
300 | Sumitomo Seika Chemicals Co. Ltd. | 11,600 | ||||||
2,206 | Symrise AG | 162,999 | ||||||
17,365 | Synthomer plc | 78,802 | ||||||
2,000 | T Hasegawa Co., Ltd. | 28,301 | ||||||
1,200 | T&K Toka Co., Ltd. | 11,064 | ||||||
900 | Taiyo Holdings Co., Ltd. | 25,239 | ||||||
3,000 | Taiyo Nippon Sanso Corp. | 49,401 | ||||||
600 | Takasago International Corp. | 18,518 | ||||||
600 | Tayca Corp. | 8,917 | ||||||
9,600 | Teijin, Ltd. | 152,852 | ||||||
500 | Tenma Corp. | 8,339 | ||||||
1,223 | Tessenderlo Chemie NV* | 40,773 | ||||||
1,434 | Tikkurila OYJ | 19,756 | ||||||
3,700 | Toagosei Co., Ltd. | 41,112 | ||||||
1,600 | Tokai Carbon Co., Ltd. | 17,980 | ||||||
4,100 | Tokuyama Corp. | 89,883 | ||||||
600 | Tokyo Ohka Kogyo Co., Ltd. | 15,954 | ||||||
20,200 | Toray Industries, Inc. | 141,154 | ||||||
13,500 | Tosoh Corp. | 174,701 | ||||||
1,200 | Toyo Ink SC Holdings Co., Ltd. | 26,594 | ||||||
5,000 | Toyobo Co., Ltd. | 68,613 | ||||||
7,200 | Ube Industries, Ltd. | 145,125 | ||||||
3,116 | Umicore SA | 123,916 | ||||||
5,800 | Victrex plc | 169,139 | ||||||
1,157 | Wacker Chemie AG | 104,840 | ||||||
997 | Yara International ASA | 38,295 | ||||||
10,000 | Zeon Corp. | 90,769 | ||||||
|
| |||||||
11,251,616 | ||||||||
|
| |||||||
Commercial Services & Supplies (1.6%): | ||||||||
800 | AEON Delight Co., Ltd. | 26,597 | ||||||
17,026 | Aggreko plc | 159,094 |
See accompanying notes to the financial statements.
9
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Commercial Services & Supplies, continued | ||||||||
25,551 | Babcock International Group plc | $ | 159,340 | |||||
1,800 | Bell System24 Holdings, Inc. | 20,955 | ||||||
13,069 | Biffa plc(a) | 32,592 | ||||||
1,759 | Bilfinger SE | 51,268 | ||||||
13,431 | Bingo Industries, Ltd. | 17,468 | ||||||
1,670 | Black Diamond Group, Ltd.* | 2,557 | ||||||
14,490 | Brambles, Ltd. | 103,565 | ||||||
3,225 | Bravida Holding AB(a) | 22,292 | ||||||
432 | Cewe Stiftung & Co. KGAA | 30,701 | ||||||
49,900 | CITIC Envirotech, Ltd. | 13,928 | ||||||
76,899 | Cleanaway Waste Management, Ltd. | 90,244 | ||||||
10,948 | Collection House, Ltd. | 10,485 | ||||||
1,829 | Coor Service Management Holding AB(a) | 14,560 | ||||||
3,600 | CTS Co., Ltd. | 21,234 | ||||||
2,500 | Dai Nippon Printing Co., Ltd. | 52,025 | ||||||
1,000 | Daiseki Co., Ltd. | 20,570 | ||||||
4,203 | De La Rue plc | 22,546 | ||||||
20,752 | Downer EDI, Ltd. | 98,780 | ||||||
2,000 | Duskin Co., Ltd. | 43,715 | ||||||
8,557 | Edenred | 313,633 | ||||||
1,700 | EF-ON, Inc. | 13,067 | ||||||
9,528 | Elis SA^ | 157,976 | ||||||
79,627 | G4S plc | 199,249 | ||||||
435 | GL Events | 8,569 | ||||||
18,123 | HomeServe plc | 199,065 | ||||||
10,900 | Horizon North Logistics, Inc. | 14,374 | ||||||
9,361 | Interserve plc* | 1,271 | ||||||
3,639 | Intrum Justitia AB^ | 84,773 | ||||||
8,257 | ISS A/S | 230,526 | ||||||
1,800 | Itoki Corp. | 9,749 | ||||||
42,602 | IWG plc | 113,227 | ||||||
1,500 | Kokuyo Co., Ltd. | 21,869 | ||||||
400 | Kyodo Printing Co., Ltd. | 8,868 | ||||||
3,638 | Lassila & Tikanoja OYJ | 62,351 | ||||||
4,748 | Loomis AB | 153,718 | ||||||
700 | Matsuda Sangyo Co., Ltd. | 9,329 | ||||||
5,449 | Mears Group plc | 22,638 | ||||||
22,737 | Mitie Group plc | 32,093 | ||||||
1,400 | NAC Co., Ltd. | 13,126 | ||||||
15,900 | Nippon Parking Development Co., Ltd. | 20,704 | ||||||
1,600 | Okamura Corp. | 20,447 | ||||||
1,100 | Oyo Corp. | 11,082 | ||||||
2,100 | Park24 Co., Ltd. | 46,425 | ||||||
2,696 | PayPoint plc | 27,732 | ||||||
1,400 | Pilot Corp. | 67,481 | ||||||
1,200 | Prestige International, Inc. | 13,073 | ||||||
15,826 | Prosegur Compania de Seguridad SA | 80,181 | ||||||
2,400 | Relia, Inc. | 19,622 | ||||||
58,477 | Rentokil Initial plc | 250,224 | ||||||
1,100 | Rozetta Corp.* | 17,359 | ||||||
3,299 | RPS Group plc | 5,702 | ||||||
900 | Sato Holdings Corp. | 21,261 | ||||||
700 | SECOM Co., Ltd. | 57,802 | ||||||
6,430 | Securitas AB, Class B | 103,435 | ||||||
11,583 | Shanks Group plc | 4,856 | ||||||
1,765 | Societe BIC SA | 179,785 | ||||||
700 | Sohgo Security Services Co., Ltd. | 32,961 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Commercial Services & Supplies, continued | ||||||||
5,537 | Spie SA | $ | 73,024 | |||||
2,300 | Takeei Corp. | 13,330 | ||||||
2,256 | Tomra Systems ASA | 50,587 | ||||||
1,300 | Toppan Forms Co., Ltd. | 10,168 | ||||||
3,900 | Toppan Printing Co., Ltd. | 57,083 | ||||||
1,100 | Tosho Printing Co., Ltd. | 6,758 | ||||||
4,470 | Transcontinental, Inc. | 63,202 | ||||||
|
| |||||||
3,938,271 | ||||||||
|
| |||||||
Communications Equipment (0.3%): | ||||||||
2,792 | Adva Optical Networking Se* | 20,112 | ||||||
700 | Aiphone Co., Ltd. | 10,740 | ||||||
1,000 | Audiocodes, Ltd. | 9,880 | ||||||
700 | Denki Kogyo Co., Ltd. | 15,269 | ||||||
991 | Evs Broadcast Equipment SA | 26,316 | ||||||
2,297 | Gilat Satellite Networks, Ltd.* | 21,314 | ||||||
500 | Icom, Inc. | 8,989 | ||||||
46,965 | Nokia OYJ | 271,323 | ||||||
1,022 | Parrot SA* | 3,736 | ||||||
10,200 | Quarterhill, Inc. | 9,938 | ||||||
2,600 | Sierra Wireless, Inc.* | 34,915 | ||||||
26,263 | Spirent Communications plc | 39,541 | ||||||
12,465 | Telefonaktiebolaget LM Ericsson, Class B | 109,927 | ||||||
12,442 | Telit Communications plc* | 20,655 | ||||||
800 | Uniden Holdings Corp. | 14,299 | ||||||
12,200 | VTech Holdings, Ltd. | 100,857 | ||||||
|
| |||||||
717,811 | ||||||||
|
| |||||||
Construction & Engineering (1.9%): | ||||||||
4,013 | ACS Actividades de Construccion y Servicios SA | 154,253 | ||||||
3,353 | Aecon Group, Inc. | 43,257 | ||||||
783 | AF Gruppen ASA | 11,987 | ||||||
3,017 | Arcadis NV | 36,671 | ||||||
300 | Asanuma Corp. | 7,442 | ||||||
2,110 | Badger Daylighting, Ltd. | 49,852 | ||||||
19,504 | Balfour Beatty plc | 61,710 | ||||||
375 | Bauer AG | 5,228 | ||||||
16,800 | Boustead Singapore, Ltd. | 9,855 | ||||||
7,647 | Bouygues SA | 273,407 | ||||||
209 | Burkhalter Holding AG | 16,626 | ||||||
14,759 | Cardno, Ltd.* | 10,405 | ||||||
1,100 | Chudenko Corp. | 23,367 | ||||||
589 | CIE d’Entreprises CFE SA | 58,332 | ||||||
2,026 | Cimic Group, Ltd. | 61,927 | ||||||
621 | ComSys Holdings Corp. | 15,079 | ||||||
6,098 | Costain Group plc | 24,508 | ||||||
1,700 | CTI Engineering Co., Ltd. | 24,174 | ||||||
500 | Dai-Dan Co., Ltd. | 10,835 | ||||||
1,200 | Daiho Corp. | 38,561 | ||||||
1,800 | Daisue Construction Co., Ltd. | 15,960 | ||||||
4,435 | Eiffage SA | 370,984 | ||||||
2,783 | Elecnor SA | 42,000 | ||||||
44 | Electra, Ltd./Israel | 10,590 | ||||||
7,737 | Eltel AB*(a) | 11,201 | ||||||
37,002 | Empresas ICA SAB de C.V.* | 231 | ||||||
3,493 | Ferrovial SA | 70,439 | ||||||
1,664 | FLSmidth & Co. A/S | 74,778 | ||||||
1,782 | Fomento de Construcciones y Contratas SA* | 23,852 |
See accompanying notes to the financial statements.
10
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Construction & Engineering, continued | ||||||||
440 | Fudo TETRA Corp. | $ | 6,837 | |||||
200 | Fukuda Corp. | 7,373 | ||||||
6,974 | Galliford Try plc | 55,201 | ||||||
14,200 | Hazama Ando Corp. | 94,454 | ||||||
1,713 | Heijmans NV* | 15,620 | ||||||
600 | Hibiya Engineering, Ltd. | 10,072 | ||||||
373 | Hochtief AG | 50,267 | ||||||
110,000 | Hong Kong International Construction Investment Management Group Co., Ltd. | 33,754 | ||||||
600 | Ichiken Co., Ltd. | 11,280 | ||||||
1,093 | Implenia AG | 36,771 | ||||||
3,300 | JGC Corp. | 46,072 | ||||||
21,039 | John Laing Group plc(a) | 88,724 | ||||||
7,500 | Kajima Corp. | 100,550 | ||||||
3,000 | Kandenko Co., Ltd. | 28,931 | ||||||
400 | Kawada Technologies, Inc. | 25,688 | ||||||
5,690 | Keller Group plc | 35,498 | ||||||
3,564 | Kier Group plc | 18,534 | ||||||
2,800 | Kinden Corp. | 45,047 | ||||||
8,456 | Koninklijke BAM Groep NV | 24,181 | ||||||
4,556 | Koninklijke Boskalis Westminster NV | 112,761 | ||||||
1,600 | Kumagai Gumi Co., Ltd. | 47,818 | ||||||
1,300 | Kyowa Exeo Corp. | 30,314 | ||||||
1,300 | Kyudenko Corp. | 48,923 | ||||||
7,400 | Lian Beng Group, Ltd. | 2,515 | ||||||
5,300 | Maeda Corp. | 49,221 | ||||||
3,000 | Maeda Road Construction Co., Ltd. | 61,819 | ||||||
5,974 | Maire Tecnimont SpA | 22,068 | ||||||
3,300 | Mirait Holdings Corp. | 48,288 | ||||||
5,179 | Monadelphous Group, Ltd. | 50,217 | ||||||
1,922 | Morgan Sindall Group plc | 25,802 | ||||||
1,000 | Nichireki Co., Ltd. | 9,559 | ||||||
3,000 | Nippo Corp. | 57,392 | ||||||
1,600 | Nippon Densetsu Kogyo Co., Ltd. | 31,631 | ||||||
700 | Nippon Koei Co., Ltd. | 15,650 | ||||||
200 | Nippon Road Co., Ltd. (The) | 10,517 | ||||||
1,500 | Nishimatsu Construction Co., Ltd. | 33,858 | ||||||
27,352 | NRW Holdings, Ltd. | 31,104 | ||||||
11,600 | Obayashi Corp. | 104,173 | ||||||
4,863 | Obrascon Huarte Lain SA | 3,639 | ||||||
1,100 | Okumura Corp. | 31,870 | ||||||
8,600 | OSJB Holdings Corp. | 22,525 | ||||||
12,582 | Peab AB | 103,145 | ||||||
18,100 | Penta-Ocean Construction Co., Ltd. | 99,473 | ||||||
1,318 | Per Aarsleff Holding A/S | 40,254 | ||||||
2,500 | Raito Kogyo Co., Ltd. | 33,531 | ||||||
20,006 | Sacyr SA | 39,583 | ||||||
12,041 | Salini Impregilo SpA^ | 19,539 | ||||||
3,500 | Sanki Engineering Co., Ltd. | 36,052 | ||||||
1,700 | Seikitokyu Kogyo Co., Ltd. | 9,343 | ||||||
26,757 | Service Stream, Ltd. | 33,198 | ||||||
3,211 | Shapir Engineering And Indus | 9,913 | ||||||
11,913 | Shikun & Binui, Ltd.* | 20,249 | ||||||
8,500 | Shimizu Corp. | 69,865 | ||||||
1,500 | Shinnihon Corp. | 14,190 | ||||||
5,521 | Skanska AB, Class B | 88,200 | ||||||
2,500 | SNC-Lavalin Group, Inc. | 84,103 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Construction & Engineering, continued | ||||||||
881 | Strabag Se | $ | 25,891 | |||||
1,000 | Sumitomo Densetsu Co., Ltd. | 16,477 | ||||||
12,380 | Sumitomo Mitsui Construction | 75,048 | ||||||
2,479 | SwecoAB-B Shs | 55,217 | ||||||
700 | Taihei Dengyo Kaisha, Ltd. | 15,706 | ||||||
800 | Taikisha, Ltd. | 21,116 | ||||||
2,400 | TAISEI Corp. | 102,050 | ||||||
400 | Tekken Corp. | 9,226 | ||||||
900 | TOA Corp. | 10,710 | ||||||
1,630 | Tobishima Corp. | 20,815 | ||||||
4,700 | Toda Corp. | 29,082 | ||||||
400 | Toenec Corp. | 10,487 | ||||||
1,000 | Tokyo Energy & Systems, Inc. | 8,834 | ||||||
5,100 | Tokyu Construction Co., Ltd. | 46,161 | ||||||
1,100 | Totetsu Kogyo Co., Ltd. | 30,232 | ||||||
4,300 | Toyo Construction Co., Ltd. | 14,711 | ||||||
3,200 | Toyo Engineering Corp.* | 18,462 | ||||||
3,109 | Veidekke ASA | 34,940 | ||||||
3,994 | Vinci SA | 328,174 | ||||||
1,400 | Wakachiku Construction Co., Ltd. | 19,781 | ||||||
1,700 | Yahagi Construction Co., Ltd. | 10,841 | ||||||
7,664 | YIT OYJ | 44,733 | ||||||
1,200 | Yokogawa Bridge Holdings Corp. | 18,026 | ||||||
1,200 | Yurtec Corp. | 9,278 | ||||||
|
| |||||||
4,820,665 | ||||||||
|
| |||||||
Construction Materials (0.7%): | ||||||||
23,530 | Adelaide Brighton, Ltd. | 70,747 | ||||||
1,800 | Asia Pile Holdings Corp. | 10,470 | ||||||
34,094 | Boral, Ltd. | 118,595 | ||||||
3,157 | Brickworks, Ltd. | 36,969 | ||||||
2,325 | Buzzi Unicem SpA | 40,036 | ||||||
14,374 | CRH plc, ADR | 378,755 | ||||||
22,791 | CSR, Ltd. | 45,094 | ||||||
8,443 | Fletcher Building, Ltd.* | 27,635 | ||||||
1,160 | H+H International A/S, Class B* | 16,941 | ||||||
2,909 | HeidelbergCement AG | 177,884 | ||||||
22,895 | Ibstock plc(a) | 57,800 | ||||||
1,676 | Imerys SA | 80,176 | ||||||
5,016 | James Hardie Industries SE | 53,405 | ||||||
400 | Krosaki Harima Corp. | 23,997 | ||||||
5,132 | LafargeHolcim, Ltd., Registered Shares | 212,152 | ||||||
12,486 | Marshalls PLC | 73,780 | ||||||
2,500 | Nippon Concrete Industries Co., Ltd. | 5,792 | ||||||
500 | Shinagawa Refractories Co., Ltd. | 17,245 | ||||||
123 | Sto Se & Co. KGAA | 11,575 | ||||||
1,500 | Sumitomo Osaka Cement Co., Ltd. | 61,499 | ||||||
7,200 | Taiheiyo Cement Corp. | 221,629 | ||||||
2,600 | TYK Corp. | 8,696 | ||||||
1,196 | Vicat | 56,808 | ||||||
|
| |||||||
1,807,680 | ||||||||
|
| |||||||
Consumer Finance (0.3%): | ||||||||
3,600 | Aeon Credit Service Co., Ltd. | 64,678 | ||||||
15,300 | Aiful Corp.* | 36,443 | ||||||
96,000 | Allied Properties HK, Ltd. | 20,785 | ||||||
9,830 | Arrow Global Group plc | 22,036 | ||||||
6,358 | Axactor SE* | 13,807 | ||||||
1,360 | Cembra Money Bank AG | 107,996 |
See accompanying notes to the financial statements.
11
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Consumer Finance, continued | ||||||||
3,207 | Credit Corp. Group, Ltd. | $ | 42,365 | |||||
3,900 | Credit Saison Co., Ltd. | 45,485 | ||||||
18,226 | Eclipx Group, Ltd. | 31,243 | ||||||
213,600 | Enerchina Holdings, Ltd. | 13,251 | ||||||
18,254 | Flexigroup, Ltd. | 17,432 | ||||||
646 | Gruppo MutuiOnline SpA | 11,719 | ||||||
4,100 | Hitachi Capital Corp. | 85,627 | ||||||
5,740 | Hoist Finance AB(a) | 28,072 | ||||||
17,800 | Hong Leong Finance, Ltd. | 33,138 | ||||||
14,415 | International Personal Finance | 37,630 | ||||||
4,300 | J Trust Co., Ltd. | 16,079 | ||||||
1,800 | Jaccs Co., Ltd. | 29,363 | ||||||
8,298 | Money3 Corp., Ltd. | 9,650 | ||||||
15,200 | Orient Corp. | 18,401 | ||||||
4,742 | Provident Financial plc* | 34,752 | ||||||
4,452 | Resurs Holding AB(a) | 27,447 | ||||||
38,000 | Sun Hung Kai Properties, Ltd. | 17,904 | ||||||
|
| |||||||
765,303 | ||||||||
|
| |||||||
Containers & Packaging (0.7%): | ||||||||
11,159 | Amcor, Ltd. | 104,118 | ||||||
10,464 | BillerudKorsnas AB^ | 124,932 | ||||||
4,231 | Cascades, Inc. | 31,709 | ||||||
1,780 | CCL Industries, Inc. | 65,280 | ||||||
28,862 | DS Smith plc | 110,101 | ||||||
800 | FP Corp. | 48,739 | ||||||
1,900 | Fuji Seal International, Inc. | 66,533 | ||||||
1,000 | Hokkan Holdings, Ltd. | 15,963 | ||||||
5,634 | Huhtamaki OYJ^ | 174,985 | ||||||
2,589 | Intertape Polymer Group, Inc. | 32,092 | ||||||
314 | Mayr Melnhof Karton AG | 39,533 | ||||||
59,022 | Orora, Ltd. | 127,585 | ||||||
6,607 | Pact Group Holdings, Ltd. | 16,153 | ||||||
8,600 | Rengo Co., Ltd. | 67,756 | ||||||
17,522 | RPC Group plc | 145,074 | ||||||
16,255 | Smurfit Kappa Group plc | 431,614 | ||||||
600 | Tomoku Co., Ltd. | 9,205 | ||||||
3,400 | Toyo Seikan Kaisha, Ltd. | 77,570 | ||||||
15 | Vetropack Holding AG | 30,664 | ||||||
1,156 | Vidrala SA | 97,616 | ||||||
300 | Winpak, Ltd. | 10,495 | ||||||
|
| |||||||
1,827,717 | ||||||||
|
| |||||||
Distributors (0.2%): | ||||||||
14,747 | Bapcor, Ltd. | 61,160 | ||||||
3,100 | Canon Marketing Japan, Inc. | 54,819 | ||||||
500 | Chori Co., Ltd. | 7,575 | ||||||
5,572 | Connect Group plc | 3,038 | ||||||
1,438 | D’ieteren SA/NV | 54,113 | ||||||
1,000 | Doshisha Co., Ltd. | 16,007 | ||||||
1,600 | Happinet Corp. | 20,339 | ||||||
4,313 | Headlam Group plc | 22,520 | ||||||
29,210 | Inchcape plc | 204,399 | ||||||
1,000 | Jardine Cycle & Carriage, Ltd. | 25,821 | ||||||
7,157 | John Menzies plc | 46,659 | ||||||
400 | Paltac Corp. | 18,697 | ||||||
9,571 | Ruralco Holdings, Ltd. | 20,557 | ||||||
3,025 | Uni-Select, Inc. | 43,015 | ||||||
|
| |||||||
598,719 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Consumer Services (0.1%): | ||||||||
23,128 | Aa plc | $ | 22,077 | |||||
1,811 | Academedia AB*^(a) | 8,047 | ||||||
1,100 | Benesse Holdings, Inc. | 27,974 | ||||||
32,000 | China New Higher Education Group Limited(a) | 13,853 | ||||||
3,884 | Dignity plc | 34,466 | ||||||
23,577 | G8 Education, Ltd. | 46,982 | ||||||
3,291 | Idp Education, Ltd. | 22,872 | ||||||
6,026 | InvoCare, Ltd. | 43,727 | ||||||
1,800 | Japan Best Rescue System Co., Ltd. | 20,511 | ||||||
8,365 | Navitas, Ltd. | 29,805 | ||||||
300 | PIA Corp. | 10,332 | ||||||
700 | Studio Alice Co., Ltd. | 14,709 | ||||||
1,300 | Take And Give Needs Co., Ltd. | 20,182 | ||||||
|
| |||||||
315,537 | ||||||||
|
| |||||||
Diversified Financial Services (0.7%): | ||||||||
1,573 | Ackermans & Van Haaren NV | 236,795 | ||||||
657 | AKER ASA | 34,953 | ||||||
52,095 | AMP, Ltd. | 89,903 | ||||||
1,140 | Banca Ifis SpA | 20,095 | ||||||
5,100 | Banca Mediolanum SpA | 29,755 | ||||||
1,900 | Century Tokyo Leasing Corp. | 82,677 | ||||||
6,216 | Cerved Information Solutions S | 50,966 | ||||||
13,442 | Challenger, Ltd. | 89,829 | ||||||
14,100 | Ecn Capital Corp. | 35,637 | ||||||
2,300 | eGuarantee, Inc. | 20,447 | ||||||
20,244 | Element Fleet Management Corp. | 102,481 | ||||||
3,300 | Financial Products Group Co., Ltd. | 34,125 | ||||||
158,669 | First Pacific Co., Ltd. | 61,235 | ||||||
1,200 | Fuyo General Lease Co., Ltd. | 60,639 | ||||||
1,236,000 | G-Resources Group, Ltd.* | 7,684 | ||||||
1,800 | Ibj Leasing Co., Ltd. | 39,311 | ||||||
6,016 | IMF Bentham, Ltd. | 13,314 | ||||||
800 | Japan Investment Adviser Co., Ltd. | 22,723 | ||||||
4,600 | Japan Securities Finance Co., Ltd. | 22,977 | ||||||
23,000 | Mitsubishi UFJ Lease & Finance Co., Ltd. | 110,222 | ||||||
900 | NEC Capital Solutions, Ltd. | 12,612 | ||||||
16,085 | Ofx Group, Ltd. | 19,822 | ||||||
172 | Onex Corp. | 9,369 | ||||||
24,800 | ORIX Corp. | 360,385 | ||||||
4,352 | Pioneer Credit, Ltd. | 8,803 | ||||||
1,100 | Ricoh Leasing Co., Ltd. | 32,988 | ||||||
14,676 | Standard Life Aberdeen plc | 48,013 | ||||||
2,800 | Zenkoku Hosho Co., Ltd. | 87,037 | ||||||
|
| |||||||
1,744,797 | ||||||||
|
| |||||||
Diversified Telecommunication Services (2.4%): | ||||||||
26,000 | APT Satellite Holdings, Ltd. | 10,322 | ||||||
644 | BCE, Inc. | 25,444 | ||||||
974 | BCE, Inc. | 38,502 | ||||||
5,067 | Belgacom SA | 136,737 | ||||||
36,348 | Bezeq Israeli Telecommunication Corp., Ltd. (The) | 35,589 | ||||||
77,740 | BT Group plc | 235,285 | ||||||
5,384 | Cellnex Telecom SAU(a) | 137,516 | ||||||
24,609 | Chorus, Ltd. | 79,989 | ||||||
155,000 | CITIC Telecom International Holdings, Ltd. | 54,340 | ||||||
67,539 | Deutsche Telekom AG, Registered Shares | 1,147,104 | ||||||
4,161 | Elisa OYJ | 172,286 |
See accompanying notes to the financial statements.
12
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Telecommunication Services, continued | ||||||||
4,460 | Euskaltel SA(a) | $ | 35,723 | |||||
40,490 | France Telecom SA | 655,135 | ||||||
34,000 | Hkbn, Ltd. | 51,473 | ||||||
82,295 | HKT Trust & HKT, Ltd. | 118,495 | ||||||
1,538 | Iliad SA | 214,918 | ||||||
16,506 | Inmarsat plc | 79,360 | ||||||
2,100 | Internet Initiative Japan, Inc. | 47,218 | ||||||
46,232 | KCOM Group plc | 42,969 | ||||||
61,309 | Koninklijke (Royal) KPN NV | 179,165 | ||||||
2,835 | Masmovil Ibercom SA* | 63,127 | ||||||
3,000 | Nippon Telegraph & Telephone Corp. | 122,165 | ||||||
275,553 | PCCW, Ltd. | 158,536 | ||||||
9,797 | QSC AG | 14,198 | ||||||
37,800 | Singapore Telecommunications, Ltd. | 81,101 | ||||||
13,084 | Speedcast International, Ltd. | 26,849 | ||||||
2,262 | Sunrise Communications Group(a) | 199,269 | ||||||
6,021 | Superloop, Ltd.* | 6,444 | ||||||
580 | Swisscom AG, Registered Shares | 277,677 | ||||||
29,050 | Talktalk Telecom Group plc | 42,140 | ||||||
34,736 | Telecom Corp. of New Zealand, Ltd. | 96,447 | ||||||
337,063 | Telecom Italia SpA* | 186,701 | ||||||
19,343 | Telefonica Deutschland Holding AG | 75,675 | ||||||
38,812 | Telefonica SA | 327,538 | ||||||
4,768 | Telekom Austria AG | 36,271 | ||||||
5,872 | Telenor ASA | 113,430 | ||||||
38,292 | Telia Co AB | 181,808 | ||||||
34,103 | Telstra Corp., Ltd. | 68,441 | ||||||
14,183 | TPG Telecom, Ltd. | 64,317 | ||||||
6,450 | United Internet AG, Registered Shares | 282,117 | ||||||
600 | Vision, Inc.* | 20,527 | ||||||
28,323 | Vocus Communications, Ltd.* | 63,819 | ||||||
|
| |||||||
6,006,167 | ||||||||
|
| |||||||
Electric Utilities (1.4%): | ||||||||
2,033 | Acciona SA | 171,644 | ||||||
339 | Alpiq Holding AG* | 26,417 | ||||||
53,654 | AusNet Services | 58,785 | ||||||
768 | BKW AG | 53,766 | ||||||
3,200 | Chubu Electric Power Co., Inc. | 45,510 | ||||||
2,800 | Chugoku Electric Power Co., Inc. (The) | 36,309 | ||||||
12,000 | CK Infrastructure Holdings, Ltd. | 90,586 | ||||||
8,064 | CLP Holdings, Ltd. | 90,909 | ||||||
5,549 | Contact Energy, Ltd. | 21,986 | ||||||
18,599 | Electricite de France | 293,016 | ||||||
563 | Elia System Operator SA/NV | 37,588 | ||||||
4,746 | Endesa SA | 109,217 | ||||||
76,385 | Enel SpA | 440,610 | ||||||
1,737 | EVN AG | 25,000 | ||||||
2,853 | Fortis, Inc. | 95,177 | ||||||
9,318 | Fortum OYJ | 204,336 | ||||||
18,530 | Genesis Energy, Ltd. | 32,381 | ||||||
30,000 | HK Electric Investments, Ltd. | 30,232 | ||||||
7,700 | Hokkaido Electric Power Co., Inc. | 53,522 | ||||||
3,500 | Hokuriku Electric Power Co.* | 30,530 | ||||||
9,500 | Hongkong Electric Holdings, Ltd. | 65,959 | ||||||
3,000 | Hydro One, Ltd.(a) | 44,505 | ||||||
69,581 | Iberdrola SA | 556,673 | ||||||
23,542 | Infratil, Ltd. | 57,599 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electric Utilities, continued | ||||||||
3,500 | Kansai Electric Power Co., Inc. (The) | $ | 52,563 | |||||
3,800 | Kyushu Electric Power Co., Inc. | 45,191 | ||||||
9,445 | Mighty River Power, Ltd. | 23,059 | ||||||
1,925 | Okinawa Electric Power Co., Inc. | 37,371 | ||||||
673 | Orsted A/S(a) | 45,059 | ||||||
4,360 | Red Electrica Corporacion SA | 97,104 | ||||||
18,161 | Scottish & Southern Energy plc | 249,662 | ||||||
3,300 | Shikoku Electric Power Co., Inc. | 39,851 | ||||||
43,538 | Spark Infrastructure Group | 67,781 | ||||||
13,794 | Terna SpA | 78,293 | ||||||
3,900 | Tohoku Electric Power Co., Inc. | 51,269 | ||||||
13,100 | Tokyo Electric Power Co., Inc. (The)* | 77,480 | ||||||
505 | Verbund AG, Class A | 21,547 | ||||||
|
| |||||||
3,558,487 | ||||||||
|
| |||||||
Electrical Equipment (1.3%): | ||||||||
31,470 | ABB, Ltd. | 600,238 | ||||||
600 | Chiyoda Integre Co., Ltd. | 10,752 | ||||||
1,200 | Daihen Corp. | 23,920 | ||||||
500 | Denyo Co., Ltd. | 6,084 | ||||||
2,400 | Fuji Electric Holdings Co., Ltd. | 69,992 | ||||||
6,900 | Fujikura, Ltd. | 27,315 | ||||||
4,000 | Furukawa Electric Co., Ltd. (The) | 99,545 | ||||||
1,200 | Futaba Corp. | 17,184 | ||||||
5,200 | GS Yuasa Corp. | 105,692 | ||||||
400 | Hirakawa Hewtech Corp. | 3,643 | ||||||
815 | Huber & Suhner AG | 54,594 | ||||||
76 | Hyundai Electric & Energy Systems Co., Ltd.* | 1,520 | ||||||
29,500 | Johnson Electric Holdings, Ltd. | 59,930 | ||||||
245 | Kendrion NV | 5,855 | ||||||
3,563 | Legrand SA | 200,511 | ||||||
400 | Mabuchi Motor Co., Ltd. | 12,228 | ||||||
127,089 | Melrose Industries plc | 263,129 | ||||||
669 | Mersen | 17,888 | ||||||
14,300 | Mitsubishi Electric Corp. | 156,792 | ||||||
1,976 | Nexans SA | 54,703 | ||||||
1,000 | Nidec Corp. | 114,620 | ||||||
500 | Nippon Carbon Co., Ltd. | 18,103 | ||||||
2,700 | Nissin Electric Co., Ltd. | 19,669 | ||||||
2,100 | Nitto Kogyo Corp. | 33,342 | ||||||
821 | NKT Holding A/S*^ | 11,194 | ||||||
4,617 | Nordex Se*^ | 40,107 | ||||||
3,659 | OSRAM Licht AG | 158,838 | ||||||
17 | Phoenix Mecano AG | 8,701 | ||||||
6,311 | PNE Wind AG | 17,578 | ||||||
1,501 | Prysmian SpA | 29,100 | ||||||
400 | Sanyo Denki Co., Ltd. | 13,097 | ||||||
4,680 | Schneider Electric SA | 318,464 | ||||||
200 | SEC Carbon, Ltd. | 16,048 | ||||||
2,150 | Sgl Carbon Se*^ | 15,001 | ||||||
5,790 | Siemens Gamesa Renewable Energy* | 70,145 | ||||||
4,485 | Signify NV(a) | 105,260 | ||||||
1,000 | Sinfonia Technology Co., Ltd. | 12,241 | ||||||
280,000 | Solartech International Holding, Ltd.* | 2,853 | ||||||
190 | Somfy SA | 13,714 | ||||||
2,200 | SwCC Showa Holdings Co., Ltd. | 12,187 | ||||||
900 | Takaoka Toko Co., Ltd. | 11,230 | ||||||
4,000 | Tatsuta Electric Wire And Cable Co., Ltd. | 17,621 |
See accompanying notes to the financial statements.
13
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electrical Equipment, continued | ||||||||
2,597 | TKH Group NV | $ | 121,156 | |||||
600 | Toyo Tanso Co., Ltd. | 11,819 | ||||||
4,400 | Ushio, Inc. | 46,538 | ||||||
3,650 | Vestas Wind Systems A/S | 277,197 | ||||||
920 | XP Power, Ltd. | 24,670 | ||||||
|
| |||||||
3,332,008 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (1.9%): | ||||||||
1,300 | Ai Holdings Corp. | 22,811 | ||||||
4,460 | ALPS Electric Co., Ltd. | 86,150 | ||||||
506 | Also Holding AG, Registered Shares | 57,271 | ||||||
2,200 | Amano Corp. | 42,227 | ||||||
1,200 | Arisawa Manufacturing Co., Ltd. | 7,971 | ||||||
1,474 | Austria Technologie & Systemte | 26,070 | ||||||
1,800 | Azbil Corp. | 35,279 | ||||||
333 | Barco NV | 37,617 | ||||||
75 | Basler AG | 10,666 | ||||||
900 | Canon Electronics, Inc. | 15,684 | ||||||
5,004 | Celestica, Inc.* | 43,845 | ||||||
1,700 | Chino Corp. | 19,037 | ||||||
157 | Cicor Technologies, Ltd. | 6,305 | ||||||
13,600 | Citizen Holdings Co., Ltd. | 67,489 | ||||||
3,400 | CMK Corp. | 18,808 | ||||||
2,600 | Conexio Corp. | 32,312 | ||||||
46,000 | Cowell e Holdings, Inc. | 5,418 | ||||||
400 | Dai-ichi Seiko Co., Ltd. | 4,091 | ||||||
1,000 | Daiwabo Holdings Co., Ltd. | 46,798 | ||||||
545 | Datalogic SpA | 12,762 | ||||||
3,500 | Dexerials Corp. | 25,939 | ||||||
30,842 | Electrocomponents plc | 198,318 | ||||||
800 | Enplas Corp. | 19,750 | ||||||
1,300 | Espec Corp. | 22,396 | ||||||
3,469 | Esprinet SpA | 14,046 | ||||||
148,000 | FIH Mobile, Ltd.* | 15,404 | ||||||
7,452 | Fingerprint Cards AB* | 8,539 | ||||||
2,100 | Furuno Electric Co., Ltd. | 22,483 | ||||||
561 | Gooch & Housego plc | 8,506 | ||||||
400 | Hagiwara Electric Co., Ltd. | 10,174 | ||||||
500 | Hakuto Co., Ltd. | 5,103 | ||||||
12,033 | Halma plc | 208,264 | ||||||
400 | Hamamatsu Photonics K.K. | 13,536 | ||||||
1,034 | Hexagon AB, Class B | 47,753 | ||||||
400 | Hirose Electric Co., Ltd. | 39,593 | ||||||
1,500 | Hitachi High-Technologies Corp. | 46,795 | ||||||
19,800 | Hitachi, Ltd. | 526,393 | ||||||
1,200 | Hochiki Corp. | 12,466 | ||||||
2,000 | Horiba, Ltd. | 80,909 | ||||||
1,500 | Hosiden Corp. | 9,937 | ||||||
5,100 | IBIDEN Co., Ltd. | 71,292 | ||||||
91 | Inficon Holding AG | 46,192 | ||||||
2,823 | Ingenico Group | 159,645 | ||||||
1,000 | Iriso Electronics Co., Ltd. | 36,589 | ||||||
4,000 | Japan Aviation Electronics Industry, Ltd. | 45,898 | ||||||
2,000 | Japan Cash Machine Co., Ltd. | 17,114 | ||||||
21,200 | Japan Display, Inc.* | 14,026 | ||||||
1,679 | Jenoptik AG | 43,819 | ||||||
1,000 | Kaga Electronics Co., Ltd. | 18,179 | ||||||
400 | Keyence Corp. | 201,620 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
1,200 | Koa Corp. | $ | 13,955 | |||||
2,388 | Kudelski SA | 13,741 | ||||||
2,900 | Kyocera Corp. | 144,234 | ||||||
3,500 | Kyosan Electric Manufacturing Co., Ltd. | 13,312 | ||||||
684 | Lagercrantz Group AB, Class B | 6,661 | ||||||
26 | Lem Holding SA, Registered Shares | 27,747 | ||||||
1,400 | Macnica Fuji Electronics Holdings | 17,327 | ||||||
700 | Maruwa Co., Ltd./Aichi | 35,304 | ||||||
2,000 | Meiko Electronics Co., Ltd. | 32,546 | ||||||
2,366 | Micronic Mydata AB | 31,696 | ||||||
800 | Murata Manufacturing Co., Ltd. | 110,245 | ||||||
1,500 | Nagano Keiki Co., Ltd. | 10,316 | ||||||
267 | Nederland Apparatenfabriek | 12,599 | ||||||
1,300 | NF Corp. | 17,617 | ||||||
2,800 | Nichicon Corp. | 20,190 | ||||||
600 | NipponChemi-Con Corp. | 10,408 | ||||||
2,900 | Nippon Electric Glass Co., Ltd. | 70,523 | ||||||
3,400 | Nippon Signal Co., Ltd. | 27,514 | ||||||
600 | Nissha Printing | 7,085 | ||||||
600 | Nohmi Bosai, Ltd. | 9,978 | ||||||
3,600 | OKI Electric Industry Co., Ltd. | 42,386 | ||||||
2,600 | Omron Corp. | 93,725 | ||||||
1,200 | Optex Group Co., Ltd. | 18,769 | ||||||
13,505 | Opus Group AB | 7,307 | ||||||
3,000 | Osaki Electric Co., Ltd. | 18,243 | ||||||
3,519 | Oxford Instruments plc | 40,756 | ||||||
8,300 | Pricer AB | 8,720 | ||||||
2,039 | Renishaw plc | 110,189 | ||||||
1,400 | Ryoden Corp. | 17,972 | ||||||
600 | Ryosan Co., Ltd. | 15,899 | ||||||
600 | Ryoyo Electro Corp. | 8,402 | ||||||
900 | Sanshin Electronics Co., Ltd. | 16,145 | ||||||
700 | Shibaura Electronics Co., Ltd. | 22,209 | ||||||
900 | Shimadzu Corp. | 17,614 | ||||||
600 | Shinko Shoji Co., Ltd. | 9,642 | ||||||
2,000 | Siix Corp. | 25,775 | ||||||
600 | SMK Corp. | 11,839 | ||||||
3,455 | Spectris plc | 100,011 | ||||||
6,120 | Strix Group plc | 10,983 | ||||||
2,000 | Sumida Corp. | 22,722 | ||||||
1,800 | Sun-Wa Technos Corp. | 16,787 | ||||||
700 | Tachibana Eletech Co., Ltd. | 9,853 | ||||||
8,000 | Taiyo Yuden Co., Ltd. | 120,849 | ||||||
2,500 | Tamura Corp. | 12,013 | ||||||
3,700 | TDK Corp. | 263,311 | ||||||
1,800 | Terilogy Co., Ltd.* | 17,535 | ||||||
1,200 | Tokyo Electron Device, Ltd. | 18,702 | ||||||
5,000 | Topcon Corp. | 65,610 | ||||||
1,300 | Toyo Corp. | 9,613 | ||||||
3,485 | Tt Electronics plc | 8,703 | ||||||
1,100 | UKC Holdings Corp. | 18,279 | ||||||
200 | V Technology Co., Ltd. | 22,884 | ||||||
312 | Vaisala OYJ, Class A | 5,896 | ||||||
47,400 | Valuetronics Holdings, Ltd. | 22,787 | ||||||
6,300 | Venture Corp., Ltd. | 63,862 | ||||||
74,000 | Vstecs Holdings, Ltd. | 35,692 | ||||||
3,200 | Yaskawa Electric Corp. | 77,505 |
See accompanying notes to the financial statements.
14
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
2,200 | Yokogawa Electric Corp. | $ | 37,741 | |||||
1,700 | Yokowo Co., Ltd. | 21,999 | ||||||
|
| |||||||
4,691,216 | ||||||||
|
| |||||||
Energy Equipment & Services (0.6%): | ||||||||
5,393 | Aker Solutions ASA* | 24,834 | ||||||
7,314 | Aker Solutions ASA* | 11,005 | ||||||
1,137 | Bonheur ASA | 12,333 | ||||||
1,778 | Bourbon Corp.* | 6,986 | ||||||
2,991 | BW Offshore, Ltd.* | 11,070 | ||||||
5,101 | Calfrac Well Services, Ltd.* | 9,118 | ||||||
5,874 | Ces Energy Solutions Corp. | 13,555 | ||||||
40,341 | CGG SA* | 52,925 | ||||||
4,726 | Computer Modelling Group, Ltd. | 21,085 | ||||||
6,058 | Enerflex, Ltd. | 70,921 | ||||||
8,606 | Ensign Energy Services, Inc. | 30,200 | ||||||
106,730 | Ezion Holdings, Ltd.* | 3,610 | ||||||
4,488 | Fugro NV* | 38,531 | ||||||
6,704 | Hunting plc | 40,686 | ||||||
22,482 | John Wood Group plc | 143,925 | ||||||
12,946 | Kvaerner ASA* | 17,974 | ||||||
8,257 | Lamprell plc* | 6,360 | ||||||
4,500 | Mullen Group, Ltd. | 40,253 | ||||||
2,400 | North American Construction Group, Ltd. | 21,363 | ||||||
3,324 | Ocean Yield ASA | 22,712 | ||||||
3,553 | Odfjell Drilling, Ltd.* | 8,550 | ||||||
2,900 | Pason Systems, Inc. | 38,858 | ||||||
22,298 | Petrofac, Ltd. | 135,243 | ||||||
18,993 | PetroleumGeo-Services ASA* | 26,085 | ||||||
16,362 | Precision Drilling Corp.* | 28,409 | ||||||
398 | ProSafe SE* | 614 | ||||||
15,278 | Saipem SpA* | 56,961 | ||||||
9,766 | SBM Offshore NV | 144,562 | ||||||
174 | Schoeller-Blackman Oilfield Equipment AG | 11,450 | ||||||
8,377 | Secure Energy Services, Inc. | 43,020 | ||||||
3,900 | ShawCor, Ltd. | 47,371 | ||||||
2,400 | Shinko Plantech Co., Ltd. | 25,306 | ||||||
17,755 | Solstad Offshore ASA*^ | 3,564 | ||||||
3,710 | Spectrum ASA | 15,735 | ||||||
8,470 | Subsea 7 SA | 82,917 | ||||||
877 | Tecnicas Reunidas SA | 21,393 | ||||||
1,938 | Tenaris SA | 20,771 | ||||||
4,203 | TGS NOPEC Geophysical Co. ASA | 101,985 | ||||||
900 | Total Energy Services, Inc. | 6,442 | ||||||
400 | Toyo Kanetsu KK | 8,150 | ||||||
13,311 | Trican Well Service, Inc.* | 11,604 | ||||||
10,731 | Vallourec SA*^ | 19,842 | ||||||
10,270 | WorleyParsons, Ltd. | 82,580 | ||||||
|
| |||||||
1,540,858 | ||||||||
|
| |||||||
Entertainment (0.7%): | ||||||||
1,400 | Ateam, Inc. | 18,656 | ||||||
2,500 | Avex Group Holdings, Inc. | 31,988 | ||||||
5,101 | Borussia Dortmund GMBH & Co. KGaA | 46,467 | ||||||
2,600 | Capcom Co., Ltd. | 51,836 | ||||||
4,665 | Cineplex, Inc. | 86,943 | ||||||
64,925 | Cineworld Group plc | 217,255 | ||||||
2,000 | Colopl, Inc. | 13,810 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Entertainment, continued | ||||||||
2,160 | CTS Eventim AG & Co. KGaA | $ | 80,597 | |||||
1,600 | Daiichikosho Co., Ltd. | 75,631 | ||||||
4,200 | DeNA Co., Ltd. | 69,901 | ||||||
4,400 | DHX Media, Ltd.* | 7,221 | ||||||
21,093 | Entertainment One, Ltd. | 95,476 | ||||||
6,450 | Event Hospitality And Entertainment, Ltd. | 61,812 | ||||||
15,900 | Gungho Online Enetertainment, Inc. | 29,138 | ||||||
38,000 | Igg, Inc. | 51,591 | ||||||
594 | Kinepolis Group NV | 33,123 | ||||||
1,100 | Konami Corp. | 48,444 | ||||||
1,700 | Marvelous, Inc. | 12,061 | ||||||
5,300 | Nexon Co., Ltd.* | 67,715 | ||||||
200 | Nintendo Co., Ltd. | 52,849 | ||||||
36,000 | SMI Holdings Group, Ltd.* | 10,759 | ||||||
700 | Square Enix Holdings Co., Ltd. | 18,861 | ||||||
13,788 | Technicolor SA*^ | 14,968 | ||||||
400 | Toei Animation Co., Ltd. | 14,814 | ||||||
200 | Toei Co., Ltd. | 23,641 | ||||||
1,000 | Toho Co., Ltd. | 36,143 | ||||||
2,851 | UbiSoft Entertainment SA* | 228,690 | ||||||
8,284 | Village Roadshow, Ltd.* | 15,815 | ||||||
5,312 | Vivendi Universal SA | 129,050 | ||||||
|
| |||||||
1,645,255 | ||||||||
|
| |||||||
Food & Staples Retailing (1.9%): | ||||||||
5,600 | Aeon Co., Ltd. | 110,225 | ||||||
500 | Ain Holdings, Inc. | 35,692 | ||||||
800 | Albis Co., Ltd. | 17,626 | ||||||
3,200 | Alcanna, Inc. | 9,870 | ||||||
2,144 | Alimentation Couche-Tard, Inc. | 106,666 | ||||||
1,309 | Amsterdam Commodities NV | 26,100 | ||||||
2,400 | Arcs Co., Ltd. | 53,792 | ||||||
1,537 | Axfood AB | 26,356 | ||||||
1,200 | Axial Retailing, Inc. | 40,128 | ||||||
900 | Belc Co., Ltd. | 42,192 | ||||||
21,524 | Carrefour SA | 366,809 | ||||||
2,135 | Casino Guichard-Perrachon SA | 88,618 | ||||||
1,100 | Cawachi, Ltd. | 18,092 | ||||||
400 | Cocokara Fine, Inc. | 19,465 | ||||||
6,463 | Coles Group, Ltd.* | 53,432 | ||||||
2,636 | Colruyt SA | 187,756 | ||||||
200 | Cosmos Pharmaceutical Corp. | 33,609 | ||||||
1,300 | Create SD Holdings Co., Ltd. | 30,967 | ||||||
500 | Daikokutenbussan Co., Ltd. | 18,673 | ||||||
1,500 | Dairy Farm International Holdings, Ltd. | 13,547 | ||||||
24,356 | Distribuidora Internacional de Alimentacion SA^ | 12,791 | ||||||
800 | Eco’s Co., Ltd. | 14,759 | ||||||
3,691 | Empire Co., Ltd., Class A | 77,957 | ||||||
300 | FamilyMart Co., Ltd. | 37,906 | ||||||
900 | G-7 Holdings, Inc. | 18,271 | ||||||
1,600 | Heiwado Co., Ltd. | 36,656 | ||||||
1,831 | ICA Gruppen AB | 65,546 | ||||||
200 | Itochu-Shokuhin Co., Ltd. | 8,663 | ||||||
34,091 | J Sainsbury plc | 114,938 | ||||||
600 | Japan Meat Co., Ltd. | 9,235 | ||||||
580 | Kesko OYJ, Class A | 28,954 | ||||||
761 | Kesko OYJ, Class B | 41,023 | ||||||
600 | Kobe Bussan Co., Ltd. | 17,672 |
See accompanying notes to the financial statements.
15
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food & Staples Retailing, continued | ||||||||
15,087 | Koninklijke Ahold Delhaize NV | $ | 380,557 | |||||
400 | LAWSON, Inc. | 25,402 | ||||||
800 | Life Corp. | 16,518 | ||||||
1,111 | Loblaw Cos., Ltd. | 49,739 | ||||||
1,430 | Marr SpA | 33,754 | ||||||
54,594 | Metcash, Ltd. | 94,186 | ||||||
10,912 | METRO AG | 167,756 | ||||||
1,817 | Metro, Inc. | 63,016 | ||||||
600 | Ministop Co., Ltd. | 11,265 | ||||||
900 | Mitsubishi Shokuhin Co., Ltd. | 22,915 | ||||||
600 | Nihon Chouzai Co., Ltd. | 17,449 | ||||||
1,801 | North West Co., Inc. | 41,456 | ||||||
2,000 | Okuwa Co., Ltd. | 20,262 | ||||||
31,200 | Olam International, Ltd. | 37,799 | ||||||
1,200 | Qol Holdings Co., Ltd. | 18,103 | ||||||
1,094 | Rallye SA | 11,269 | ||||||
337 | Rami Levy Chain Stores Hashikm | 17,335 | ||||||
1,000 | Retail Partners Co., Ltd. | 10,152 | ||||||
600 | San-A Co., Ltd. | 22,798 | ||||||
7,200 | Seven & I Holdings Co., Ltd. | 313,548 | ||||||
28,900 | Sheng Siong Group, Ltd. | 22,489 | ||||||
6,398 | Shufersal, Ltd. | 41,958 | ||||||
1,454 | Sligro Food Group NV | 57,908 | ||||||
1,800 | Sogo Medical Holdings Co., Ltd. | 33,985 | ||||||
37,635 | Sonae SGPS SA | 34,877 | ||||||
500 | Sugi Holdings Co., Ltd. | 19,762 | ||||||
1,300 | Sundrug Co., Ltd. | 38,674 | ||||||
157,374 | Tesco plc | 381,282 | ||||||
400 | Tsuruha Holdings, Inc. | 34,316 | ||||||
3,100 | United Supermarkets Holdings | 33,859 | ||||||
2,200 | Valor Co., Ltd. | 53,291 | ||||||
700 | Watahan & Co., Ltd. | 14,310 | ||||||
1,000 | Welcia Holdings Co., Ltd. | 45,424 | ||||||
6,463 | Wesfarmers, Ltd.(c) | 146,740 | ||||||
1,793 | Weston (George), Ltd. | 118,285 | ||||||
68,290 | William Morrison Supermarkets plc | 185,065 | ||||||
7,199 | Woolworths, Ltd. | 149,138 | ||||||
800 | Yakuodo Co., Ltd. | 18,874 | ||||||
700 | Yamatane Corp. | 10,678 | ||||||
800 | Yamaya Corp. | 16,096 | ||||||
700 | Yaoko Co., Ltd. | 38,454 | ||||||
2,800 | Yokohama Reito Co., Ltd. | 23,224 | ||||||
|
| |||||||
4,677,954 | ||||||||
|
| |||||||
Food Products (2.7%): | ||||||||
3,191 | A2 Milk Co., Ltd.* | 23,590 | ||||||
4,938 | AAK AB | 68,323 | ||||||
364 | Agrana Beteiligungs AG | 6,697 | ||||||
2,600 | Ajinomoto Co., Inc. | 46,132 | ||||||
34,820 | Aryzta AG* | 38,687 | ||||||
2,381 | Associated British Foods plc | 61,915 | ||||||
772 | Atria OYJ | 5,829 | ||||||
5,111 | Austevoll Seafood ASA | 63,106 | ||||||
23,247 | Australian Agricultural Co., Ltd.* | 17,951 | ||||||
546 | Bakkafrost P/F | 26,730 | ||||||
33 | Barry Callebaut AG, Registered Shares | 51,338 | ||||||
6,130 | Bega Cheese, Ltd. | 21,302 | ||||||
125 | Bell AG | 38,825 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products, continued | ||||||||
3,394 | Bellamy’s Australia, Ltd.* | $ | 17,469 | |||||
854 | Bonduelle S.C.A. | 27,748 | ||||||
1,100 | Calbee, Inc. | 34,381 | ||||||
1 | Chocoladefabriken Lindt & Spruengli AG, Registered Shares | 74,560 | ||||||
800 | Chubu Shiryo Co., Ltd. | 8,848 | ||||||
12,278 | Cloetta AB | 33,769 | ||||||
10,412 | Costa Group Holdings, Ltd. | 54,401 | ||||||
3,432 | Cranswick plc | 114,752 | ||||||
11,722 | Dairy Crest Group plc | 62,975 | ||||||
4,569 | Danone SA | 321,978 | ||||||
16,123 | Devro plc | 32,827 | ||||||
500 | Dydo Drinco, Inc. | 26,298 | ||||||
2,372 | Ebro Foods SA | 47,291 | ||||||
8,443 | Elders, Ltd. | 42,032 | ||||||
111 | Emmi AG | 77,090 | ||||||
700 | Ezaki Glico Co., Ltd. | 35,361 | ||||||
16,300 | First Resources, Ltd. | 18,376 | ||||||
6,952 | FonterraCo-Operative Group, Ltd. | 21,636 | ||||||
1,616 | Forfarmers NV | 14,862 | ||||||
3,716 | Freedom Foods Group, Ltd. | 12,170 | ||||||
1,000 | Fuji Oil Co., Ltd. | 31,918 | ||||||
700 | Fujicco Co., Ltd. | 15,183 | ||||||
11,788 | Glanbia plc | 220,857 | ||||||
260,400 | Golden Agri-Resources, Ltd. | 46,689 | ||||||
11,957 | GrainCorp, Ltd. | 77,209 | ||||||
27,018 | Greencore Group plc | 61,282 | ||||||
3,373 | Grieg Seafood ASA | 39,685 | ||||||
1,119 | Hilton Food Group plc | 12,865 | ||||||
1,600 | Hokuto Corp. | 28,167 | ||||||
1,200 | House Foods Group, Inc. | 41,490 | ||||||
15,498 | Inghams Group, Ltd. | 45,072 | ||||||
3,700 | Itoham Yonekyu Holdings, Inc. | 22,453 | ||||||
47,400 | Japfa, Ltd. | 25,285 | ||||||
300 | J-Oil Mills, Inc. | 10,472 | ||||||
800 | Kagome Co., Ltd. | 20,843 | ||||||
400 | Kameda Seika Co., Ltd. | 18,127 | ||||||
700 | Kenko Mayonnaise Co., Ltd. | 12,309 | ||||||
1,567 | Kerry Group plc, Class A | 154,776 | ||||||
1,100 | Kewpie Corp. | 24,706 | ||||||
400 | Kikkoman Corp. | 21,469 | ||||||
900 | Kotobuki Spirits Co., Ltd. | 34,370 | ||||||
59 | KWS Saat SE | 17,573 | ||||||
147 | Lassonde Industries, Inc. | 21,454 | ||||||
3,154 | Leroy Seafood Group ASA | 24,168 | ||||||
5 | Lotus Bakeries | 12,310 | ||||||
3,549 | Maple Leaf Foods, Inc. | 71,059 | ||||||
3,528 | Marine Harvest | 74,318 | ||||||
1,200 | Marudai Food Co., Ltd. | 18,844 | ||||||
2,600 | Maruha Nichiro Corp. | 87,885 | ||||||
2,400 | Megmilk Snow Brand Co., Ltd. | 62,169 | ||||||
1,100 | Meiji Holdings Co., Ltd. | 89,646 | ||||||
800 | Mitsui Sugar Co., Ltd. | 20,256 | ||||||
700 | Morinaga & Co., Ltd. | 30,296 | ||||||
3,000 | Morinaga Milk Industry Co., Ltd. | 84,556 | ||||||
300 | Nakamuraya Co., Ltd. | 11,474 | ||||||
21,347 | Nestle SA, Registered Shares | 1,736,235 |
See accompanying notes to the financial statements.
16
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products, continued | ||||||||
4,900 | Nichirei Corp. | $ | 134,140 | |||||
800 | Nippon Beet Sugar Manufacturing Co., Ltd. | 13,133 | ||||||
2,800 | Nippon Flour Mills Co., Ltd. | 46,744 | ||||||
2,100 | Nippon Meat Packers, Inc. | 78,953 | ||||||
20,100 | Nippon Suisan Kaisha, Ltd. | 112,049 | ||||||
800 | Nisshin Oillio Group, Ltd. (The) | 22,771 | ||||||
2,300 | Nisshin Seifun Group, Inc. | 47,488 | ||||||
900 | Nissin Sugar Co., Ltd. | 16,958 | ||||||
984 | Norway Royal Salmon ASA | 20,374 | ||||||
326 | Orior AG | 26,479 | ||||||
2,710 | Orkla ASA, Class A | 21,325 | ||||||
11,559 | Parmalat SpA | 37,742 | ||||||
1,700 | Petra Foods, Ltd. | 1,634 | ||||||
51,099 | Premier Foods plc* | 21,395 | ||||||
988 | Premium Brands Holdings Corp. | 54,184 | ||||||
2,000 | Prima Meat Packers, Ltd. | 35,966 | ||||||
33,700 | PT Tiga Pilar Sejahtera Food Tbk* | 295 | ||||||
7,054 | Raisio Oyj,Class-V | 18,941 | ||||||
11,598 | Ridley Corp., Ltd. | 10,545 | ||||||
1,000 | Rock Field Co., Ltd. | 15,024 | ||||||
5,300 | Rogers Sugar, Inc. | 21,122 | ||||||
600 | S Foods, Inc. | 22,484 | ||||||
1,029 | Salmar ASA | 50,928 | ||||||
1,323 | Saputo, Inc. | 37,984 | ||||||
127 | Savencia SA | 8,114 | ||||||
3,496 | Scales Corp., Ltd. | 10,543 | ||||||
3,767 | Scandi Standard AB | 26,347 | ||||||
786 | Schouw & Co. | 58,532 | ||||||
2,304 | Select Harvests, Ltd. | 9,897 | ||||||
1,200 | Showa Sangyo Co., Ltd. | 32,658 | ||||||
306 | Sipef SA | 17,094 | ||||||
300 | Starzen Co., Ltd. | 10,307 | ||||||
1,353 | Strauss Group, Ltd. | 30,784 | ||||||
3,472 | Suedzucker AG | 44,990 | ||||||
9,961 | Tassal Group, Ltd. | 31,003 | ||||||
24,614 | Tate & Lyle plc | 206,613 | ||||||
700 | Toyo Suisan Kaisha, Ltd. | 24,432 | ||||||
58 | United International Enterprises | 11,830 | ||||||
432 | Vilmorin & CIE SA | 27,968 | ||||||
2,508 | Viscofan SA | 138,233 | ||||||
22,000 | Vitasoy International Holdings, Ltd. | 83,465 | ||||||
400 | Warabeya Nichiyo Holdings Co., Ltd. | 7,043 | ||||||
2,992 | Wessanen | 27,291 | ||||||
238,612 | WH Group, Ltd.(a) | 181,959 | ||||||
25,400 | Wilmar International, Ltd. | 58,208 | ||||||
200 | Yakult Honsha Co., Ltd. | 14,024 | ||||||
2,000 | Yamazaki Baking Co., Ltd. | 41,902 | ||||||
|
| |||||||
6,848,614 | ||||||||
|
| |||||||
Gas Utilities (0.4%): | ||||||||
1,900 | AltaGas, Ltd. | 19,348 | ||||||
12,578 | APA Group | 75,284 | ||||||
7,633 | Gas Natural SDG SA | 193,621 | ||||||
26,771 | Hong Kong & China Gas Co., Ltd. | 55,254 | ||||||
16,993 | Italgas SpA | 97,121 | ||||||
800 | K&O Energy Group, Inc. | 10,859 | ||||||
2,400 | Nippon Gas Co., Ltd. | 87,731 | ||||||
2,100 | Osaka Gas Co., Ltd. | 38,378 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Gas Utilities, continued | ||||||||
2,331 | Rubis SCA | $ | 124,641 | |||||
1,300 | Saibu Gas Co., Ltd. | 30,168 | ||||||
3,700 | Shizuoka Gas Co. Ltd. | 28,656 | ||||||
10,212 | Superior Plus Corp. | 72,419 | ||||||
800 | Toho Gas Co., Ltd. | 33,715 | ||||||
2,200 | Tokyo Gas Co., Ltd. | 55,645 | ||||||
800 | Valener, Inc. | 11,335 | ||||||
|
| |||||||
934,175 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (1.2%): | ||||||||
2,602 | Ambu A/S | 62,680 | ||||||
3,613 | Ansell, Ltd. | 56,072 | ||||||
11,514 | Arjo AB, Class B | 36,995 | ||||||
1,600 | Asahi Intecc Co., Ltd. | 68,113 | ||||||
1,767 | bioMerieux | 116,461 | ||||||
792 | Cochlear, Ltd. | 96,218 | ||||||
1,014 | Coloplast A/S, Class B | 94,213 | ||||||
251 | Coltene Holding AG | 21,525 | ||||||
1,992 | Consort Medical plc | 23,818 | ||||||
11,036 | Convatec Group plc(a) | 19,490 | ||||||
781 | DiaSorin SpA | 63,271 | ||||||
509 | Draegerwerk AG & Co. KGaA | 27,154 | ||||||
311 | Draegerwerk AG & Co. KGAA | 14,671 | ||||||
185 | Eckert & Ziegler AG | 13,039 | ||||||
2,223 | Elekta AB, Class B | 26,406 | ||||||
633 | Essilor International SA Compagnie Generale d’Optique | 79,919 | ||||||
4,164 | Fisher & Paykel Healthcare Corp., Ltd. | 36,095 | ||||||
8,277 | Getinge AB, Class B | 75,112 | ||||||
7,376 | GN Store Nord A/S | 275,772 | ||||||
405 | Guerbet | 24,304 | ||||||
800 | Hogy Medical Co., Ltd. | 22,843 | ||||||
2,000 | HOYA Corp. | 122,262 | ||||||
1,300 | JEOL, Ltd. | 19,508 | ||||||
6,713 | Koninklijke Philips Electronics NV | 236,554 | ||||||
3,787 | Koninklijke Philips Electronics NV, NY Shares, NYS | 132,962 | ||||||
500 | Mani, Inc. | 18,822 | ||||||
500 | Menicon Co., Ltd. | 12,684 | ||||||
1,500 | Nihon Kohden Corp. | 48,462 | ||||||
2,300 | Nikkiso Co., Ltd. | 19,116 | ||||||
8,900 | Nipro Corp. | 108,682 | ||||||
3,500 | Olympus Co., Ltd. | 107,038 | ||||||
900 | Paramount Bed Holdings Co., Ltd. | 37,249 | ||||||
1,192 | Sartorius AG | 148,832 | ||||||
564 | Sectra AB* | 12,022 | ||||||
13,222 | Smith & Nephew plc | 245,871 | ||||||
411 | Sonova Holding AG, Registered Shares | 67,041 | ||||||
360 | Stratec Se | 20,816 | ||||||
184 | Straumann Holding AG, Registered Shares | 116,430 | ||||||
800 | Sysmex Corp. | 38,603 | ||||||
1,600 | Terumo Corp. | 89,899 | ||||||
3,137 | William Demant Holding A/S* | 88,945 | ||||||
|
| |||||||
2,945,969 | ||||||||
|
| |||||||
Health Care Providers & Services (0.8%): | ||||||||
4,943 | Al Noor Hospitals Group plc | 20,234 | ||||||
2,700 | Alfresa Holdings Corp. | 69,862 | ||||||
3,417 | Amplifon SpA | 55,327 | ||||||
18,377 | Australian Pharmaceutical Industries, Ltd. | 17,870 | ||||||
1,100 | Bml, Inc. | 28,090 |
See accompanying notes to the financial statements.
17
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Providers & Services, continued | ||||||||
3,715 | CareTech Holdings plc | $ | 16,186 | |||||
6,200 | CRH Medical Corp.* | 18,986 | ||||||
4,556 | Ebos Group, Ltd. | 61,420 | ||||||
4,221 | Estia Health, Ltd. | 6,806 | ||||||
4,012 | Extendicare, Inc. | 18,664 | ||||||
2,001 | Fagron | 32,624 | ||||||
1,000 | FALCO Holdings Co., Ltd. | 13,514 | ||||||
6,326 | Fresenius Medical Care AG & Co., KGaA | 410,856 | ||||||
2,812 | Fresenius SE & Co. KGaA | 135,907 | ||||||
27,126 | Healius, Ltd. | 42,595 | ||||||
66,724 | Healthscope, Ltd. | 104,782 | ||||||
2,000 | Japan Lifeline Co., Ltd. | 25,420 | ||||||
1,000 | Japan Medical Dynamic Marketing, Inc. | 10,066 | ||||||
16,930 | Japara Healthcare, Ltd. | 13,360 | ||||||
2,739 | Korian-Medica | 97,290 | ||||||
225 | Lna Sante | 11,207 | ||||||
3,204 | Medical Facilities Corp. | 35,303 | ||||||
2,000 | Medipal Holdings Corp. | 43,269 | ||||||
7,584 | Metlifecare, Ltd. | 27,351 | ||||||
2,800 | Miraca Holdings, Inc. | 63,119 | ||||||
1,800 | N Field Co., Ltd. | 15,713 | ||||||
2,200 | Nichiigakkan Co., Ltd. | 20,552 | ||||||
1,110 | NMC Health plc | 38,796 | ||||||
17,940 | Oceania Healthcare, Ltd. | 12,843 | ||||||
11,311 | Oriola Corp. | 25,713 | ||||||
1,060 | Orpea | 107,933 | ||||||
24,900 | Raffles Medical Group, Ltd. | 20,041 | ||||||
1,806 | Ramsay Health Care, Ltd. | 73,416 | ||||||
873 | Rhoen-Klinikum AG | 22,006 | ||||||
3,746 | Ryman Healthcare, Ltd. | 26,910 | ||||||
2,200 | Ship Healthcare Holdings, Inc. | 81,680 | ||||||
59,044 | Sigma Healthcare, Ltd. | 23,601 | ||||||
1,900 | Solasto Corp. | 19,166 | ||||||
3,129 | Sonic Healthcare, Ltd. | 48,716 | ||||||
8,887 | Spire Healthcare Group plc(a) | 12,291 | ||||||
10,895 | Summerset Group Holdings, Ltd. | 46,624 | ||||||
800 | Suzuken Co., Ltd. | 41,065 | ||||||
1,800 | Toho Holdings Co., Ltd. | 43,830 | ||||||
2,400 | Tsukui Corp. | 18,114 | ||||||
2,900 | UDG Healthcare plc | 21,991 | ||||||
3,435 | Virtus Health, Ltd. | 10,675 | ||||||
2,800 | Vital Ksk Holdings, Inc. | 28,686 | ||||||
|
| |||||||
2,140,470 | ||||||||
|
| |||||||
Health Care Technology (0.1%): | ||||||||
14,160 | AGFA-Gevaert NV* | 54,092 | ||||||
2,052 | Ascom Holding AG | 28,433 | ||||||
857 | Compugroup Medical Se | 39,669 | ||||||
2,300 | EM Systems Co., Ltd. | 21,203 | ||||||
2,389 | Emis Group plc | 27,786 | ||||||
3,000 | M3, Inc. | 40,658 | ||||||
800 | Nnit A/S(a) | 22,523 | ||||||
1,213 | Raysearch Laboratories AB* | 13,237 | ||||||
300 | Software Service, Inc. | 22,003 | ||||||
|
| |||||||
269,604 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (2.3%): | ||||||||
3,022 | Accor SA | 128,139 | ||||||
36,400 | Accordia Golf Trust | 13,495 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
600 | AEON Fantasy Co., Ltd. | $ | 14,624 | |||||
1,000 | Arcland Service Holdings Co., Ltd. | 19,728 | ||||||
23,206 | Ardent Leisure Group, Ltd.* | 24,186 | ||||||
5,866 | Aristocrat Leisure, Ltd. | 89,569 | ||||||
4,300 | Atom Corp. | 37,191 | ||||||
7,557 | Autogrill SpA | 63,636 | ||||||
1,707 | Basic-Fit NV*(a) | 50,600 | ||||||
3,095 | Betsson AB* | 25,557 | ||||||
24,000 | Cafe de Coral Holdings, Ltd. | 58,075 | ||||||
1,830 | Carnival plc, ADR | 89,176 | ||||||
700 | Central Sports Co., Ltd. | 22,162 | ||||||
72,000 | Century City International Holdings, Ltd. | 6,537 | ||||||
485 | Cie des Alpes | 13,702 | ||||||
9,479 | Collins Foods, Ltd. | 41,277 | ||||||
2,000 | Colowide Co., Ltd. | 42,072 | ||||||
8,814 | Compass Group plc | 185,019 | ||||||
2,200 | Corporate Travel Management, Ltd. | 33,261 | ||||||
1,425 | Cox & Kings Financial Services, Ltd.* | 1,329 | ||||||
2,000 | Create Restaurants Holdings In | 21,261 | ||||||
7,191 | Crown, Ltd. | 60,055 | ||||||
1,951 | Domino’s Pizza Enterprises, Ltd. | 55,845 | ||||||
23,341 | Domino’s Pizza Group plc | 69,114 | ||||||
1,600 | Doutor Nichires Holdings Co., Ltd. | 29,395 | ||||||
6,304 | Elior Group(a) | 93,996 | ||||||
29,990 | Enterprise Inns plc* | 69,148 | ||||||
6,500 | Fairwood Holdings, Ltd. | 21,761 | ||||||
2,425 | Flight Centre, Ltd. | 73,290 | ||||||
800 | Fuji Kyuko Co., Ltd. | 23,410 | ||||||
600 | Fujita Kanko, Inc. | 15,099 | ||||||
557 | Fuller Smith & Turner plc, Class A | 6,312 | ||||||
17,010 | Galaxy Entertainment Group, Ltd. | 106,773 | ||||||
200 | Genki Sushi Co., Ltd. | 8,095 | ||||||
102,700 | Genting Singapore, Ltd. | 73,537 | ||||||
2,773 | Great Canadian Gaming Corp.* | 97,248 | ||||||
17,083 | Greene King plc | 114,954 | ||||||
8,283 | Greggs plc | 133,646 | ||||||
16,772 | GVC Holdings plc | 144,135 | ||||||
600 | Hiday Hidaka Corp. | 11,990 | ||||||
1,700 | HIS Co., Ltd. | 61,359 | ||||||
18,000 | Hongkong & Shanghai Hotels (The) | 25,469 | ||||||
11,300 | Hotel Grand Central, Ltd. | 10,358 | ||||||
400 | Ichibanya Co., Ltd. | 15,134 | ||||||
1,726 | Intercontinental Hotels Group plc, ADR | 94,222 | ||||||
900 | Intertain Group, Ltd. (The)* | 7,108 | ||||||
7,041 | JD Wetherspoon plc | 99,874 | ||||||
1,491 | Jpj Group plc* | 12,106 | ||||||
868 | Jumbo Interactive, Ltd. | 4,362 | ||||||
1,700 | Komeda Holdings Co., Ltd. | 33,439 | ||||||
1,900 | Koshidaka Holdings Co., Ltd. | 22,664 | ||||||
900 | Kourakuen Holdings Corp.* | 21,572 | ||||||
400 | Kura Corp. | 19,749 | ||||||
1,100 | Kyoritsu Maintenance Co., Ltd. | 47,921 | ||||||
70,000 | Macau Legend Development, Ltd. | 12,122 | ||||||
33,812 | Marston’s plc | 40,438 | ||||||
200 | Matsuya Foods Co., Ltd. | 6,611 | ||||||
36,000 | Melco International Development Ltd. | 72,584 | ||||||
5,571 | Melia Hotels International SA | 52,410 |
See accompanying notes to the financial statements.
18
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
45,260 | Merlin Entertainments plc(a) | $ | 183,147 | |||||
15,327 | MGM China Holdings, Ltd. | 25,801 | ||||||
6,833 | Millennium & Copthorne Hotels | 40,680 | ||||||
14,000 | Miramar Hotel & Investment | 27,213 | ||||||
10,745 | Mitchells & Butlers plc* | 35,194 | ||||||
410 | Mty Food Group, Inc. | 18,214 | ||||||
72,000 | NagaCorp, Ltd. | 76,927 | ||||||
8,615 | NetEnt AB* | 35,507 | ||||||
400 | Ohsho Food Service Corp. | 26,293 | ||||||
1,223 | Orascom Development Holding AG* | 18,539 | ||||||
200 | Oriental Land Co., Ltd. | 20,309 | ||||||
1,016 | Paddy Power Betfair plc | 82,620 | ||||||
2,258 | Paddy Power plc(c) | 184,964 | ||||||
2,702 | Pandox AB | 44,929 | ||||||
900 | Pizza Pizza Royalty Corp. | 5,901 | ||||||
10,182 | PlayTech plc | 49,756 | ||||||
12,439 | Rank Group plc | 21,844 | ||||||
30,000 | Regal Hotels International Holdings, Ltd. | 20,013 | ||||||
600 | Renaissance, Inc. | 11,202 | ||||||
4,200 | Resorttrust, Inc. | 62,014 | ||||||
1,092 | Restaurant Brands International, Inc. | 57,056 | ||||||
392 | Restaurant Brands International, Inc. | 20,502 | ||||||
6,416 | Restaurant Brands New Zealand, Ltd. | 35,831 | ||||||
33,738 | Restaurant Group plc (The) | 61,314 | ||||||
800 | Ringer Hut Co., Ltd. | 16,654 | ||||||
4,600 | Round One Corp. | 47,556 | ||||||
1,300 | Royal Holdings Co., Ltd. | 29,986 | ||||||
1,200 | Saint Marc Holdings Co., Ltd. | 26,642 | ||||||
1,300 | Saizeriya Co., Ltd. | 22,333 | ||||||
16,988 | Sands China, Ltd. | 73,571 | ||||||
2,943 | Scandic Hotels Group AB(a) | 25,995 | ||||||
44,000 | Shangri-La Asia, Ltd. | 64,834 | ||||||
56,868 | SJM Holdings, Ltd. | 52,432 | ||||||
1,162 | Skistar AB | 27,132 | ||||||
28,970 | Sky City Entertainment Group, Ltd. | 68,902 | ||||||
2,200 | Skylark Co., Ltd. | 34,888 | ||||||
1,707 | Sodexo SA | 174,558 | ||||||
24,479 | SSP Group plc | 201,621 | ||||||
27,111 | Star Entertainment Group, Ltd. (The) | 87,052 | ||||||
1,200 | Stars Group, Inc. (The)* | 19,815 | ||||||
500 | Sushiro Global Holdings, Ltd. | 27,212 | ||||||
35,219 | Tabcorp Holdings, Ltd. | 106,389 | ||||||
3,181 | Telepizza Group SA(a) | 21,452 | ||||||
581 | The Gym Group plc(a) | 2,024 | ||||||
50,634 | Thomas Cook Group plc | 19,693 | ||||||
4,500 | Tokyo Dome Corp. | 38,155 | ||||||
1,100 | Toridoll Holding Corp. | 18,243 | ||||||
400 | Tosho Co., Ltd. | 12,403 | ||||||
8,666 | TUI AG | 124,351 | ||||||
6,856 | Unibet Group plc | 63,327 | ||||||
2,777 | Whitbread plc | 161,630 | ||||||
41,297 | William Hill plc | 81,311 | ||||||
26,430 | Wynn Macau, Ltd. | 56,877 | ||||||
900 | Yossix Co., Ltd. | 22,977 | ||||||
3,500 | Zensho Holdings Co., Ltd. | 85,433 | ||||||
|
| |||||||
5,829,119 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables (1.9%): | ||||||||
1,604 | Bang & Olufsen A/S* | $ | 21,873 | |||||
37,154 | Barratt Developments plc | 219,274 | ||||||
7,834 | Bellway plc | 250,142 | ||||||
6,428 | Berkeley Group Holdings plc (The) | 285,071 | ||||||
1,566 | Bigben Interactive | 14,379 | ||||||
5,170 | Bonava AB^ | 66,761 | ||||||
7,123 | Bovis Homes Group plc | 78,259 | ||||||
3,865 | Breville Group, Ltd. | 29,012 | ||||||
2,200 | Casio Computer Co., Ltd. | 26,358 | ||||||
600 | Chofu Seisakusho Co., Ltd. | 11,350 | ||||||
1,800 | Cleanup Corp. | 10,446 | ||||||
1,900 | Corona Corp. | 18,532 | ||||||
9,695 | Countryside Properties plc(a) | 37,461 | ||||||
15,326 | Crest Nicholson Holdings plc | 63,886 | ||||||
2,921 | De’Longhi | 73,966 | ||||||
7,507 | Dfs Furniture plc | 17,353 | ||||||
1,000 | Dorel Industries, Inc. | 12,923 | ||||||
2,152 | Duni AB | 23,884 | ||||||
4,630 | Electrolux AB, Series B, B Shares | 98,151 | ||||||
2,700 | Es-Con Japan, Ltd. | 15,786 | ||||||
1,900 | First Juken Co., Ltd. | 20,632 | ||||||
2,053 | Fiskars OYJ Abp | 35,404 | ||||||
2,700 | FJ Next Co., Ltd. | 22,071 | ||||||
87 | Forbo Holding AG | 122,125 | ||||||
1,600 | Foster Electric Co., Ltd. | 18,351 | ||||||
2,600 | France Bed Holdings Co., Ltd. | 21,241 | ||||||
1,600 | Fuji Corp., Ltd. | 11,967 | ||||||
2,300 | Fujitsu General, Ltd. | 29,700 | ||||||
14,200 | Haseko Corp. | 148,684 | ||||||
1,200 | Hinokiya Group Co., Ltd. | 23,425 | ||||||
700 | Hoosiers Holdings | 3,975 | ||||||
187 | Hunter Douglas NV | 12,432 | ||||||
13,919 | Husqvarna AB, Class B | 103,545 | ||||||
3,200 | Iida Group Holdings Co., Ltd. | 55,918 | ||||||
5,228 | JM AB^ | 101,919 | ||||||
4,600 | Jvc Kenwood Corp. | 9,942 | ||||||
1,561 | Kaufman & Broad SA | 59,596 | ||||||
1,400 | KI-Star Real Estate Co., Ltd. | 20,803 | ||||||
1,300 | LEC, Inc. | 19,106 | ||||||
540 | Leifheit AG | 10,970 | ||||||
62,400 | Man Wah Holdings, Ltd. | 24,999 | ||||||
24,194 | McCarthy & Stone plc(a) | 42,565 | ||||||
10 | Metall Zug AG | 25,427 | ||||||
1,200 | Misawa Homes Co., Ltd. | 8,124 | ||||||
1,600 | Nihon Eslead Corp. | 21,229 | ||||||
4,500 | Nikon Corp. | 66,692 | ||||||
9,589 | Nobia AB | 53,235 | ||||||
39,400 | Panasonic Corp. | 353,572 | ||||||
5,699 | Persimmon plc | 139,601 | ||||||
31,200 | Pioneer Corp.* | 18,150 | ||||||
3,200 | Pressance Corp. | 37,867 | ||||||
15,445 | Redrow plc | 96,406 | ||||||
1,000 | Rinnai Corp. | 65,495 | ||||||
500 | Sangetsu Corp. | 9,021 | ||||||
1,048 | SEB SA | 134,853 | ||||||
13,000 | Sekisui Chemical Co., Ltd. | 192,378 | ||||||
10,400 | Sekisui House, Ltd. | 152,504 |
See accompanying notes to the financial statements.
19
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables, continued | ||||||||
3,000 | Sharp Corp. | $ | 30,490 | |||||
10,400 | Sony Corp. | 500,901 | ||||||
2,500 | Space Value Holdings Co., Ltd. | 21,501 | ||||||
2,200 | Starts Corp., Inc. | 48,653 | ||||||
6,900 | Sumitomo Forestry Co., Ltd. | 89,711 | ||||||
328 | Surteco SE | 8,368 | ||||||
1,100 | Tamron Co., Ltd. | 15,671 | ||||||
171,627 | Taylor Wimpey plc | 296,821 | ||||||
20,687 | Techtronic Industries Co., Ltd. | 109,047 | ||||||
2,790 | Telford Homes plc | 10,138 | ||||||
805 | The Vitec Group plc | 12,229 | ||||||
1,000 | Toa Corp./Hyogo | 9,028 | ||||||
400 | Token Corp. | 23,559 | ||||||
6,166 | Tomtom NV* | 55,513 | ||||||
2,000 | Zojirushi Corp. | 17,685 | ||||||
|
| |||||||
4,918,106 | ||||||||
|
| |||||||
Household Products (0.2%): | ||||||||
3,975 | Essity AB, Class B | 97,736 | ||||||
248 | Henkel AG & Co. KGaA | 24,386 | ||||||
2,800 | Lion Corp. | 57,763 | ||||||
14,255 | Mcbride plc | 22,654 | ||||||
1,600 | Pigeon Corp. | 69,096 | ||||||
5,635 | PZ Cussons plc | 15,232 | ||||||
2,279 | Reckitt Benckiser Group plc | 174,012 | ||||||
1,800 | Unicharm Corp. | 58,161 | ||||||
|
| |||||||
519,040 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.3%): | ||||||||
1,967 | Albioma SA | 42,654 | ||||||
4,859 | Boralex, Inc., Class A | 59,945 | ||||||
3,600 | Capital Power Corp. | 70,127 | ||||||
30,000 | China Everbright Greentech, Ltd.(a) | 21,383 | ||||||
25,298 | Drax Group plc | 115,221 | ||||||
5,259 | Edp Renovaveis SA | 46,872 | ||||||
1,300 | Electric Power Development Co., Ltd. | 30,796 | ||||||
1,162 | ERG SpA | 21,918 | ||||||
9,297 | Falck Renewables SpA | 24,928 | ||||||
54,874 | Infigen Energy* | 17,968 | ||||||
3,741 | Innergex Renewable Energy, Inc. | 34,368 | ||||||
1,207 | Kenon Holdings, Ltd. | 18,142 | ||||||
10,105 | Meridian Energy, Ltd. | 22,994 | ||||||
4,661 | Northland Power, Inc. | 74,099 | ||||||
2,000 | Polaris Infrastructure, Inc. | 15,092 | ||||||
1,917 | Scatec Solar ASA^(a) | 16,291 | ||||||
16,748 | Transalta Corp. | 68,587 | ||||||
1,200 | Transalta Renewables, Inc. | 9,116 | ||||||
4,427 | Uniper SE | 114,601 | ||||||
2,800 | West Holdings Corp. | 32,142 | ||||||
|
| |||||||
857,244 | ||||||||
|
| |||||||
Industrial Conglomerates (0.7%): | ||||||||
8,000 | Chevalier International Holdings Ltd. | 11,273 | ||||||
26,645 | Cir-Compagnie Industriali Riun | 28,312 | ||||||
12,930 | CK Hutchison Holdings, Ltd. | 123,570 | ||||||
1,493 | DCC plc | 113,477 | ||||||
2,000 | Guoco Group, Ltd. | 25,385 | ||||||
17,500 | Hopewell Holdings, Ltd. | 76,944 | ||||||
1,269 | Indus Holding AG | 56,639 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Industrial Conglomerates, continued | ||||||||
515 | Italmobiliare SpA | $ | 10,825 | |||||
1,500 | Katakura Industries Co., Ltd. | 15,191 | ||||||
1,800 | Keihan Electric Railway Co., Ltd. | 73,230 | ||||||
23,700 | Keppel Corp., Ltd. | 102,996 | ||||||
1,284 | LifcoAB-B Shs | 47,620 | ||||||
5,400 | Nisshinbo Holdings, Inc. | 41,137 | ||||||
1,487 | Nolato AB | 61,780 | ||||||
23,000 | NWS Holdings, Ltd. | 47,204 | ||||||
2,675 | Rheinmetall AG | 236,177 | ||||||
2,400 | Seibu Holdings, Inc. | 41,636 | ||||||
57,400 | SembCorp Industries, Ltd. | 107,219 | ||||||
70,000 | Shun Tak Holdings, Ltd. | 21,899 | ||||||
3,803 | Siemens AG, Registered Shares | 424,089 | ||||||
5,436 | Smiths Group plc | 94,103 | ||||||
5,400 | Tokai Holdings Corp. | 43,096 | ||||||
|
| |||||||
1,803,802 | ||||||||
|
| |||||||
Insurance (4.3%): | ||||||||
5,489 | Admiral Group plc | 142,664 | ||||||
34,241 | AEGON NV | 159,156 | ||||||
3,711 | Ageas NV | 166,695 | ||||||
67,040 | AIA Group, Ltd. | 551,525 | ||||||
4,109 | Alm Brand A/S | 31,437 | ||||||
700 | Anicom Holdings, Inc. | 23,186 | ||||||
554 | April SA | 12,647 | ||||||
5,560 | Asr Nederland NV | 219,428 | ||||||
20,632 | Assicurazioni Generali SpA | 345,198 | ||||||
1,203 | AUB Group, Ltd. | 10,530 | ||||||
78,834 | Aviva plc | 375,937 | ||||||
15,366 | AXA SA | 331,026 | ||||||
1,671 | Baloise Holding AG, Registered Shares | 230,737 | ||||||
25,009 | Beazley plc | 159,764 | ||||||
7,384 | Chesnara plc | 32,509 | ||||||
1,599 | Clal Insurance Enterprises Holdings, Ltd.* | 22,597 | ||||||
2,983 | CNP Assurances SA | 63,089 | ||||||
5,028 | Coface SA | 45,672 | ||||||
10,100 | Dai-ichi Life Insurance Co., Ltd. | 156,524 | ||||||
72,468 | Direct Line Insurance Group plc | 293,472 | ||||||
82 | E-L Financial Corp., Ltd. | 44,214 | ||||||
598 | Fairfax Financial Holdings, Ltd. | 263,286 | ||||||
268 | FBD Holdings plc | 2,529 | ||||||
1,983 | Gjensidige Forsikring ASA | 30,906 | ||||||
2,600 | Great-West Lifeco, Inc. | 53,676 | ||||||
578 | Grupo Catalana Occidente SA | 21,528 | ||||||
1,164 | Hannover Rueck SE | 156,885 | ||||||
5,987 | Harel Insurance Investments & | 39,265 | ||||||
15,099 | Hastings Group Holdings, Ltd.(a) | 35,820 | ||||||
283 | Helvetia Patria Holding AG | 165,719 | ||||||
4,798 | Hiscox, Ltd. | 98,824 | ||||||
506 | Idi Insurance Co., Ltd. | 25,998 | ||||||
4,219 | Industrial Alliance Insurance & Financial Services, Inc. | 134,668 | ||||||
16,103 | Insurance Australia Group, Ltd. | 79,372 | ||||||
400 | Intact Financial Corp. | 29,067 | ||||||
16,700 | Japan Post Holdings Co., Ltd. | 192,033 | ||||||
6,623 | Jardine Lloyd Thompson Group plc | 159,636 | ||||||
33,275 | JRP Group plc | 38,713 | ||||||
7,487 | Lancashire Holdings, Ltd. | 57,534 | ||||||
126,984 | Legal & General Group plc | 372,550 |
See accompanying notes to the financial statements.
20
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Insurance, continued | ||||||||
13,895 | Manulife Financial Corp. | $ | 197,170 | |||||
2,165 | Manulife Financial Corp. | 30,722 | ||||||
44,734 | MAPFRE SA | 118,558 | ||||||
26,388 | Medibank Private, Ltd. | 47,754 | ||||||
1,055 | Menora Mivtachim Holdings, Ltd. | 11,248 | ||||||
16,641 | Migdal Insurance & Financial Holding, Ltd. | 14,147 | ||||||
5,600 | MS&AD Insurance Group Holdings, Inc. | 158,980 | ||||||
1,640 | Muenchener Rueckversicherungs-Gesellschaft AG | 357,851 | ||||||
20,116 | NIB Holdings, Ltd. | 73,656 | ||||||
3,200 | NKSJ Holdings, Inc. | 108,030 | ||||||
5,901 | NN Group NV | 234,383 | ||||||
44,328 | Old Mutual, Ltd. | 65,873 | ||||||
19,541 | Phoenix Group Holdings plc | 140,304 | ||||||
7,577 | Phoenix Holdings, Ltd. (The) | 38,435 | ||||||
14,435 | Poste Italiane SpA(a) | 115,836 | ||||||
2,827 | Protector Forsikring ASA*^ | 15,680 | ||||||
2,590 | Prudential plc, ADR | 91,608 | ||||||
27,514 | QBE Insurance Group, Ltd. | 195,682 | ||||||
29,315 | RSA Insurance Group plc | 191,243 | ||||||
73,660 | Saga plc | 96,968 | ||||||
7,657 | Sampo OYJ, Class A | 336,565 | ||||||
5,232 | SCOR SA | 235,605 | ||||||
6,980 | Societa Cattolica di Assicuraz | 56,713 | ||||||
11,633 | Steadfast Group, Ltd. | 22,452 | ||||||
14,257 | Storebrand ASA | 101,232 | ||||||
8,920 | Sun Life Financial, Inc. | 296,055 | ||||||
13,517 | Suncorp-Metway, Ltd. | 120,213 | ||||||
641 | Swiss Life Holding AG, Registered Shares | 247,513 | ||||||
3,193 | Swiss Re AG | 293,499 | ||||||
10,600 | T&D Holdings, Inc. | 122,302 | ||||||
2,128 | Talanx AG | 72,593 | ||||||
3,600 | Tokio Marine Holdings, Inc. | 171,151 | ||||||
3,403 | Topdanmark A/S | 158,582 | ||||||
23 | Trisura Group, Ltd.* | 440 | ||||||
4,088 | Tryg A/S | 102,923 | ||||||
21,980 | Unipol Gruppo Finanziario SpA | 88,624 | ||||||
34,458 | UnipolSai SpA | 77,906 | ||||||
5,179 | Uniqa Insurance Group AG | 46,559 | ||||||
54 | Vaudoise Assurances Holding SA | 26,635 | ||||||
2,033 | Vienna Insurance Group Weiner Staeditische Versicherung AG | 47,177 | ||||||
1,796 | Wuestenrot & Wuerttembergische AG | 32,859 | ||||||
2,083 | Zurich Insurance Group AG | 622,631 | ||||||
|
| |||||||
10,960,373 | ||||||||
|
| |||||||
Interactive Media & Services (0.3%): | ||||||||
22,069 | Auto Trader Group plc(a) | 127,351 | ||||||
9,425 | Carsales.com, Ltd. | 73,093 | ||||||
1,200 | Dip Corp. | 19,847 | ||||||
10,396 | Domain Holdings Australia, Ltd. | 16,325 | ||||||
5,600 | Gree, Inc. | 22,088 | ||||||
1,200 | Gurunavi, Inc. | 7,378 | ||||||
800 | Itokuro, Inc.* | 22,619 | ||||||
3,100 | Kakaku.com, Inc. | 54,527 | ||||||
3,400 | Lifull Co., Ltd. | 22,834 | ||||||
3,000 | mixi, Inc. | 63,334 | ||||||
4,200 | Mti, Ltd. | 23,935 | ||||||
1,012 | REA Group, Ltd. | 52,717 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Interactive Media & Services, continued | ||||||||
29,220 | Rightmove plc | $ | 160,537 | |||||
1,046 | Scout24 AG(a) | 48,136 | ||||||
12,657 | Solocal Group* | 7,262 | ||||||
135 | Xing AG | 36,972 | ||||||
8,400 | Yahoo! Japan Corp. | 21,105 | ||||||
|
| |||||||
780,060 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.3%): | ||||||||
1,600 | Beenos, Inc. | 17,830 | ||||||
1,900 | Belluna Co., Ltd. | 17,118 | ||||||
18,446 | Boohoo Group plc* | 37,781 | ||||||
4,981 | Dustin Group AB(a) | 41,304 | ||||||
1,200 | Enigmo, Inc.* | 22,353 | ||||||
2,400 | Istyle, Inc. | 17,655 | ||||||
22,749 | Moneysupermarket.com Group plc | 79,641 | ||||||
5,503 | Ocado Group plc* | 55,159 | ||||||
7,306 | On The Beach Group plc(a) | 31,290 | ||||||
800 | Open Door, Inc.* | 18,572 | ||||||
9,400 | Rakuten, Inc. | 62,512 | ||||||
4,008 | Rocket Internet SE*(a) | 92,521 | ||||||
6,300 | Senshukai Co., Ltd.* | 15,011 | ||||||
1,900 | Start Today Co., Ltd. | 34,300 | ||||||
1,817 | Takkt AG | 28,287 | ||||||
19,250 | Trade Me Group, Ltd. | 82,204 | ||||||
2,580 | Webjet, Ltd. | 19,947 | ||||||
|
| |||||||
673,485 | ||||||||
|
| |||||||
IT Services (1.3%): | ||||||||
3,129 | Acando AB | 10,322 | ||||||
1,366 | AddNode Group AB | 15,933 | ||||||
370 | Allgeier SE | 10,714 | ||||||
1,611 | Alten SA | 133,734 | ||||||
9,025 | Altran Technologies SA | 72,502 | ||||||
3,748 | Amadeus IT Holding SA | 260,934 | ||||||
4,810 | Appen, Ltd. | 43,602 | ||||||
5,372 | ARQ Group, Ltd. | 7,402 | ||||||
5,628 | Atea ASA | 72,446 | ||||||
2,024 | Atos Origin SA | 164,658 | ||||||
637 | Aubay | 20,499 | ||||||
1,266 | Bechtle AG | 98,410 | ||||||
2,154 | Cancom Se | 70,719 | ||||||
2,335 | Capgemini SA | 230,492 | ||||||
1,045 | CGI Group, Inc., Class A* | 63,943 | ||||||
4,933 | Columbus A/S | 9,613 | ||||||
4,212 | Computacenter plc | 53,856 | ||||||
6,694 | Computershare, Ltd. | 81,027 | ||||||
800 | Comture Corp. | 17,450 | ||||||
1,100 | Densan System Co., Ltd. | 22,943 | ||||||
317 | Devoteam SA | 29,910 | ||||||
700 | DTS Corp. | 22,217 | ||||||
8,624 | Econocom Group SA/NV | 28,584 | ||||||
1,000 | E-Guardian, Inc. | 18,842 | ||||||
6,228 | Equiniti Group plc(a) | 17,111 | ||||||
3,891 | Fdm Group Holdings plc | 36,760 | ||||||
457 | Formula Systems 1985, Ltd. | 16,971 | ||||||
3,200 | Fujitsu, Ltd. | 200,639 | ||||||
6,665 | Global Dominion Access SA*(a) | 32,743 | ||||||
3,000 | GMO Internet, Inc. | 39,560 | ||||||
400 | Gmo Payment Gateway, Inc. | 16,819 |
See accompanying notes to the financial statements.
21
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services, continued | ||||||||
287 | Groupe Open | $ | 6,493 | |||||
6,538 | Indra Sistemas SA* | 61,618 | ||||||
600 | Infocom Corp. | 21,598 | ||||||
800 | Information Development Co., Ltd. | 9,106 | ||||||
700 | Information Services Internati | 17,650 | ||||||
2,776 | Iomart Group plc | 11,635 | ||||||
1,500 | IT Holdings Corp. | 59,611 | ||||||
2,400 | Itochu Techno-Solutions Corp. | 46,737 | ||||||
400 | Kanematsu Electronics, Ltd. | 11,951 | ||||||
1,915 | Knowit AB | 33,164 | ||||||
12,353 | Link Administration Holdings, Ltd. | 58,887 | ||||||
2,100 | Mamezou Holdings Co., Ltd. | 17,947 | ||||||
896 | Matrix It, Ltd. | 9,952 | ||||||
300 | Mitsubishi Research Institute | 8,594 | ||||||
9,872 | NCC Group plc | 22,017 | ||||||
700 | NEC Networks & System Integrat | 15,646 | ||||||
4,926 | Nextdc, Ltd.* | 21,228 | ||||||
3,000 | Nihon Unisys, Ltd. | 66,590 | ||||||
852 | Nomura Research Institute, Ltd. | 31,324 | ||||||
800 | NS Solutions Corp. | 19,151 | ||||||
1,100 | Nsd Co., Ltd. | 21,358 | ||||||
5,500 | NTT Data Corp. | 60,098 | ||||||
300 | OBIC Co., Ltd. | 22,962 | ||||||
4,539 | Ordina NV | 7,346 | ||||||
1,400 | Otsuka Corp. | 38,334 | ||||||
1,200 | Poletowin Pitcrew Holdings, Inc. | 10,194 | ||||||
663 | Reply SpA | 33,537 | ||||||
319 | Rp- SG Business Process Services* | 2,215 | ||||||
958 | Rp- SG Retail, Ltd.* | 2,217 | ||||||
800 | SCSK Corp. | 28,143 | ||||||
159 | Shopify, Inc., Class A* | 22,014 | ||||||
2,531 | Softcat plc | 18,894 | ||||||
1,500 | Softcreate Holdings Corp. | 17,969 | ||||||
700 | Sopra Steria Group | 64,252 | ||||||
2,600 | TDC Soft, Inc. | 19,196 | ||||||
1,400 | TechMatrix Corp. | 21,244 | ||||||
2,600 | Tecnos Japan, Inc. | 16,192 | ||||||
2,503 | The Citadel Group, Ltd. | 12,822 | ||||||
3,261 | Tieto OYJ | 88,218 | ||||||
500 | TKC Corp. | 17,652 | ||||||
500 | VeriServe Corp. | 21,230 | ||||||
1,500 | VINX Corp. | 17,867 | ||||||
1,140 | Wirecard AG | 173,521 | ||||||
590 | Worldline SA*(a) | 28,498 | ||||||
1,300 | Zuken, Inc. | 17,804 | ||||||
|
| |||||||
3,256,031 | ||||||||
|
| |||||||
Leisure Products (0.4%): | ||||||||
1,156 | Accell Group | 24,953 | ||||||
7,303 | Amer Sports OYJ | 321,357 | ||||||
406 | BRP, Inc. | 10,511 | ||||||
1,600 | Daikoku Denki Co., Ltd. | 21,706 | ||||||
2,500 | Furyu Corp. | 23,304 | ||||||
868 | Games Workshop Group plc | 33,498 | ||||||
800 | Globeride, Inc. | 18,988 | ||||||
72,000 | Goodbaby International Holdings, Ltd. | 22,551 | ||||||
1,200 | Heiwa Corp. | 24,525 | ||||||
700 | Kawai Musical Instruments Manufacturing Co., Ltd. | 19,103 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Leisure Products, continued | ||||||||
500 | Mars Group Holdings Corp. | $ | 10,004 | |||||
2,702 | Maytronics, Ltd. | 15,475 | ||||||
600 | Mizuno Corp. | 12,703 | ||||||
3,300 | Namco Bandai Holdings, Inc. | 147,256 | ||||||
26,132 | Photo-Me International plc | 29,637 | ||||||
1,200 | Sankyo Co., Ltd. | 45,447 | ||||||
3,600 | Sega Sammy Holdings, Inc. | 50,773 | ||||||
1,337 | Spin Master Corp.*(a) | 37,603 | ||||||
3,689 | Thule Group AB (The)(a) | 67,715 | ||||||
4,700 | Tomy Co., Ltd. | 46,720 | ||||||
385 | Trigano SA | 35,359 | ||||||
700 | Universal Entertainment Corp.* | 20,220 | ||||||
500 | Yamaha Corp. | 21,231 | ||||||
|
| |||||||
1,060,639 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.4%): | ||||||||
823 | AddLife AB | 19,000 | ||||||
1,512 | Biotage AB | 18,680 | ||||||
600 | Cmic Holdings Co., Ltd. | 9,351 | ||||||
1,200 | Eps Holdings, Inc. | 18,121 | ||||||
478 | Eurofins Scientific SE | 177,486 | ||||||
3,824 | Evotec AG* | 76,073 | ||||||
1,884 | Gerresheimer AG | 123,574 | ||||||
1,600 | Linical Co., Ltd. | 18,521 | ||||||
1,524 | Lonza Group AG, Registered Shares | 396,367 | ||||||
3,203 | Qiagen NV* | 110,343 | ||||||
876 | Sartorius Stedim Biotech | 87,395 | ||||||
185 | Siegfried Holding AG | 63,194 | ||||||
77 | Tecan Group AG | 14,930 | ||||||
|
| |||||||
1,133,035 | ||||||||
|
| |||||||
Machinery (3.8%): | ||||||||
6,065 | Aalberts Industries NV | 200,776 | ||||||
1,100 | AG Growth International, Inc. | 37,714 | ||||||
2,600 | Aichi Corp. | 13,782 | ||||||
2,000 | Aida Engineering, Ltd. | 12,995 | ||||||
4,185 | Alfa Laval AB | 89,392 | ||||||
1,607 | Alimak Group AB(a) | 19,981 | ||||||
900 | Alinco, Inc. | 7,807 | ||||||
789 | Alstom SA | 31,775 | ||||||
8,500 | AMADA Co., Ltd. | 75,822 | ||||||
2,790 | Andritz AG | 128,324 | ||||||
2,000 | Anest Iwata Corp. | 18,042 | ||||||
2,700 | Asahi Diamond Industrial Co., Ltd. | 14,902 | ||||||
3,946 | Atlas Copco AB, Class A | 94,324 | ||||||
2,774 | Atlas Copco AB, Class B | 60,853 | ||||||
1,149 | Ats Automation Tooling Systems, Inc.* | 12,113 | ||||||
1,300 | Bando Chemical Industries, Ltd. | 12,241 | ||||||
3,116 | Beijer Alma AB, Class B | 45,705 | ||||||
506 | Bobst Group SA | 35,091 | ||||||
12,886 | Bodycote plc | 119,430 | ||||||
337 | Bucher Industries AG | 90,955 | ||||||
87 | Burckhardt Compression Holding | 20,458 | ||||||
1,623 | Cargotec OYJ | 49,562 | ||||||
500 | Chugai Ro Co., Ltd. | 9,300 | ||||||
2,600 | CKD Corp. | 21,782 | ||||||
17,805 | CNH Industrial NV(c) | 160,161 | ||||||
2,050 | Concentric AB | 27,697 | ||||||
1,110 | Construcc y Aux de Ferrocarr SA | 45,864 |
See accompanying notes to the financial statements.
22
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
68 | Conzzeta AG | $ | 53,124 | |||||
234 | Daetwyler Holding AG | 29,795 | ||||||
900 | Daifuku Co., Ltd. | 40,576 | ||||||
1,900 | Daihatsu Diesel Manufacturing Co., Ltd. | 12,400 | ||||||
2,100 | Daiwa Industries, Ltd. | 21,399 | ||||||
7,304 | Deutz AG | 43,024 | ||||||
3,500 | DMG Mori Co., Ltd. | 39,069 | ||||||
2,668 | Duerr AG | 93,273 | ||||||
4,100 | Ebara Corp. | 91,252 | ||||||
3,946 | Epiroc AB, Class A* | 37,495 | ||||||
2,774 | Epiroc AB, Class B* | 24,845 | ||||||
1,500 | Exco Technologies, Ltd. | 9,923 | ||||||
500 | FANUC Corp. | 75,179 | ||||||
114 | Feintool InternationalHolding-REG | 8,722 | ||||||
19,282 | Fincantieri SpA | 20,311 | ||||||
1,579 | Fluidra SA* | 17,712 | ||||||
3,200 | Fuji Machine MFG. Co., Ltd. | 37,389 | ||||||
1,000 | Fukushima Industries Corp. | 32,237 | ||||||
1,700 | Furukawa Co., Ltd. | 19,285 | ||||||
6,888 | GEA Group AG | 177,597 | ||||||
303 | Georg Fischer AG | 241,824 | ||||||
2,900 | Glory, Ltd. | 64,988 | ||||||
2,253 | Haldex AB | 17,599 | ||||||
26,103 | Heidelberger Druckmaschinen AG*^ | 47,486 | ||||||
9,700 | Hino Motors, Ltd. | 91,101 | ||||||
400 | Hirata Corp. | 18,038 | ||||||
1,200 | Hisaka Works, Ltd. | 8,905 | ||||||
2,600 | Hitachi Construction Machinery Co., Ltd. | 60,230 | ||||||
12,300 | Hitachi Zosen Corp. | 37,142 | ||||||
500 | Hosokawa Micron Corp. | 18,876 | ||||||
72 | Hyundai Construction Equipment Co., Ltd.* | 2,738 | ||||||
2,700 | IHI Corp. | 74,122 | ||||||
17,676 | IMI plc | 211,999 | ||||||
614 | Industria Macchine Automatiche | 38,389 | ||||||
1,453 | Interpump Group SpA | 43,197 | ||||||
27 | Interroll Holding AG, Registered Shares | 39,857 | ||||||
1,300 | Iseki & Co., Ltd. | 18,482 | ||||||
3,200 | Japan Steel Works, Ltd. (The) | 51,073 | ||||||
8,700 | JTEKT Corp. | 96,291 | ||||||
2,600 | Juki Corp. | 26,583 | ||||||
3,751 | Jungheinrich AG | 97,870 | ||||||
609 | Kardex AG | 70,114 | ||||||
900 | Kato Works Co., Ltd. | 20,956 | ||||||
5,400 | Kawasaki Heavy Industries, Ltd. | 114,848 | ||||||
2,997 | Kion Group AG | 152,089 | ||||||
400 | Kitagawa Iron Works Co., Ltd. | 8,211 | ||||||
1,400 | Kito Corp. | 18,949 | ||||||
5,100 | Kitz Corp. | 39,456 | ||||||
572 | Koenig & Bauer AG | 23,917 | ||||||
13,400 | Komatsu, Ltd. | 285,481 | ||||||
138 | Komax Holding AG | 32,237 | ||||||
2,900 | Komori Corp. | 28,953 | ||||||
2,802 | Kone OYJ, Class B | 133,462 | ||||||
2,928 | Konecranes OYJ | 88,384 | ||||||
354 | Krones AG^ | 27,346 | ||||||
3,100 | Kubota Corp. | 43,657 | ||||||
1,800 | Kurita Water Industries, Ltd. | 43,248 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
1,000 | Kyokuto Kaihatsu Kogyo Co., Ltd. | $ | 12,755 | |||||
1,200 | Makino Milling Machine Co., Ltd. | 42,184 | ||||||
600 | Makita Corp. | 21,250 | ||||||
484 | MAN AG | 50,008 | ||||||
586 | Manitou Bf SA | 15,004 | ||||||
800 | Max Co., Ltd. | 9,989 | ||||||
2,600 | Meidensha Corp. | 32,998 | ||||||
400 | Metawater Co., Ltd. | 10,760 | ||||||
5,870 | Metso Corp. OYJ | 154,803 | ||||||
8,632 | Minebea Co., Ltd. | 123,973 | ||||||
3,500 | Misumi Group, Inc. | 73,055 | ||||||
4,300 | Mitsubishi Heavy Industries, Ltd. | 154,476 | ||||||
1,000 | Mitsubishi Logisnext Co., Ltd. | 9,614 | ||||||
2,900 | Mitsui Engineering & Shipbuilding Co., Ltd. | 27,044 | ||||||
22,736 | Morgan Advanced Materials plc | 76,202 | ||||||
1,500 | Morita Holdings Corp. | 24,691 | ||||||
2,100 | Nabtesco Corp. | 45,190 | ||||||
1,100 | Nachi-Fujikoshi Corp. | 37,906 | ||||||
2,000 | Namura Shipbuilding Co., Ltd. | 8,642 | ||||||
2,956 | NFI Group, Inc. | 73,716 | ||||||
4,300 | NGK Insulators, Ltd. | 57,974 | ||||||
1,305 | Nilfisk Holding A/S* | 46,240 | ||||||
1,000 | Nippon Sharyo, Ltd.* | 20,153 | ||||||
3,900 | Nippon Thompson Co., Ltd. | 17,250 | ||||||
700 | Nissei ASB Machine Co., Ltd. | 22,535 | ||||||
1,900 | Nissei Plastic Industrial Co., Ltd. | 15,738 | ||||||
500 | Nitto Kohki Co., Ltd. | 9,689 | ||||||
1,100 | Nittoku Engineering Co., Ltd. | 20,055 | ||||||
300 | Noritake Co., Ltd. | 12,286 | ||||||
2,186 | Norma Group SE | 108,082 | ||||||
1,000 | NS Tool Co., Ltd. | 20,570 | ||||||
14,000 | NSK, Ltd. | 120,034 | ||||||
34,000 | NTN Corp. | 97,601 | ||||||
700 | Obara Group, Inc. | 24,807 | ||||||
10,003 | OC Oerlikon Corp. AG | 112,714 | ||||||
700 | Oiles Corp. | 11,307 | ||||||
1,000 | Okuma Corp. | 47,525 | ||||||
400 | Organo Corp. | 9,455 | ||||||
3,000 | OSG Corp. | 58,938 | ||||||
2,177 | Outotec OYJ* | 7,638 | ||||||
755 | Palfinger AG | 19,226 | ||||||
432 | Pfeiffer Vacuum Technology AG | 53,761 | ||||||
4,300 | Punch Industry Co., Ltd. | 19,037 | ||||||
118 | Rational AG | 67,024 | ||||||
70 | Rieter Holding AG | 9,188 | ||||||
51,599 | Rotork plc | 163,112 | ||||||
1,800 | Ryobi, Ltd. | 43,539 | ||||||
18,878 | Sandvik AB | 270,263 | ||||||
2,300 | Savaria Corp. | 22,006 | ||||||
332 | Schindler Holding AG, Registered Shares | 64,592 | ||||||
18,300 | SembCorp Marine, Ltd. | 20,574 | ||||||
891 | Sfs Group AG | 69,480 | ||||||
1,200 | Shima Seiki Manufacturing, Ltd. | 34,479 | ||||||
4,000 | Shinmaywa Industries, Ltd. | 49,083 | ||||||
2,200 | Sintokogio, Ltd. | 17,906 | ||||||
3,528 | Skellerup Holdings, Ltd. | 4,787 | ||||||
7,796 | SKF AB, Class B | 118,777 |
See accompanying notes to the financial statements.
23
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
200 | SMC Corp. | $ | 59,748 | |||||
2,300 | Sodick Co., Ltd. | 14,550 | ||||||
2,119 | Spirax-Sarco Engineering plc | 168,689 | ||||||
891 | Stabilus SA | 55,922 | ||||||
1,600 | Star Micronics Co., Ltd. | 21,529 | ||||||
750 | Sulzer AG, Registered Shares | 59,407 | ||||||
1,700 | Sumitomo Heavy Industries, Ltd. | 50,124 | ||||||
14,200 | Sunningdale Tech, Ltd. | 14,917 | ||||||
2,800 | Tadano, Ltd. | 25,118 | ||||||
3,000 | Takeuchi Manufacturing Co., Ltd. | 45,767 | ||||||
3,400 | Takuma Co., Ltd. | 42,365 | ||||||
5,654 | Talgo SA*(a) | 34,578 | ||||||
2,500 | Techno Smart Corp. | 17,176 | ||||||
478 | Technotrans SE | 13,409 | ||||||
800 | Teikoku Electric Manufacturing Co., Ltd. | 9,456 | ||||||
4,200 | THK Co., Ltd. | 78,059 | ||||||
5,700 | Tocalo Co., Ltd. | 43,703 | ||||||
2,300 | Tokyo Keiki, Inc. | 19,373 | ||||||
1,400 | Torishima Pump Manufacturing Co., Ltd. | 11,777 | ||||||
1,000 | Toshiba Machine Co., Ltd. | 17,787 | ||||||
3,695 | Trelleborg AB | 58,322 | ||||||
366 | Troax Group AB | 10,556 | ||||||
2,700 | Tsubaki Nakashima Co., Ltd. | 39,449 | ||||||
1,400 | Tsubakimoto Chain Co. | 45,696 | ||||||
4,900 | Tsugami Corp. | 28,355 | ||||||
1,200 | Tsukishima Kikai Co., Ltd. | 13,913 | ||||||
7,579 | Valmet Corp. | 155,629 | ||||||
7,951 | Vesuvius plc | 51,089 | ||||||
5,758 | Volvo AB, Class A | 75,834 | ||||||
27,562 | Volvo AB, Class B | 362,602 | ||||||
689 | Vossloh AG^ | 33,490 | ||||||
1,071 | Wacker Neuson SE | 20,235 | ||||||
6,411 | Wartsila Corp. OYJ, Class B | 101,728 | ||||||
560 | Washtec AG | 38,707 | ||||||
1,192 | Weir Group plc (The) | 19,596 | ||||||
3,000 | Yamabiko Corp. | 27,658 | ||||||
5,060 | Zardoya Otis SA | 36,026 | ||||||
|
| |||||||
9,593,577 | ||||||||
|
| |||||||
Marine (0.3%): | ||||||||
41 | A.P. Moeller – Maersk A/S, Class A | 48,403 | ||||||
84 | A.P. Moeller – Maersk A/S, Class B | 106,031 | ||||||
3,578 | American Shipping Co. ASA | 13,761 | ||||||
556 | Clarkson plc | 13,441 | ||||||
1,333 | D/S Norden A/S* | 18,870 | ||||||
1,685 | DFDS A/S | 67,883 | ||||||
1,192 | Hapag-Lloyd AG(a) | 30,715 | ||||||
3,300 | Iino Kaiun Kaisha, Ltd. | 11,994 | ||||||
9,940 | Irish Continental Group | 48,085 | ||||||
3,700 | Kawasaki Kisen Kaisha, Ltd.* | 45,493 | ||||||
727 | Kuehne & Nagel International AG, Registered Shares | 93,757 | ||||||
3,600 | Mitsui O.S.K. Lines, Ltd. | 78,229 | ||||||
102,930 | MMA Offshore, Ltd.* | 11,234 | ||||||
3,900 | Nippon Yusen Kabushiki Kaisha | 60,438 | ||||||
600 | NS United Kaiun Kaisha, Ltd. | 16,277 | ||||||
92,000 | Pacific Basin Shipping, Ltd. | 17,544 | ||||||
89,000 | Sitc International Holdings Co., Ltd. | 83,397 | ||||||
1,962 | Stolt-Nielsen, Ltd. | 23,180 | ||||||
|
| |||||||
788,732 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media (1.6%): | ||||||||
1,267 | 4imprint Group plc | $ | 29,981 | |||||
5,715 | Aimia, Inc.* | 15,449 | ||||||
18,743 | Altice NV, Class A | 36,181 | ||||||
1,460 | Altice NV, Class B | 2,820 | ||||||
65 | Apg Sga SA | 21,860 | ||||||
14,475 | Arnoldo Mondadori Editore SpA* | 28,329 | ||||||
2,124 | Ascential plc | 10,181 | ||||||
4,886 | Atresmedia Corp. de Medios de Comuicacion SA | 24,282 | ||||||
2,057 | Axel Springer AG | 116,290 | ||||||
6,744 | Cairo Communication SpA | 26,470 | ||||||
2,000 | Carta Holdings, Inc. | 19,160 | ||||||
1,001 | Cogeco Communications, Inc. | 48,239 | ||||||
400 | Cogeco, Inc. | 17,067 | ||||||
5,394 | Corus Entertainment, Inc. | 18,810 | ||||||
1,600 | Cyberagent, Inc. | 62,486 | ||||||
6,163 | Daily Mail & General Trust plc | 45,070 | ||||||
1,300 | Dentsu, Inc. | 57,799 | ||||||
2,163 | Euromoney Institutional Investor plc | 31,719 | ||||||
8,672 | Eutelsat Communications SA^ | 171,473 | ||||||
1,700 | F@n Communications, Inc. | 8,359 | ||||||
800 | Fuji Media Holdings, Inc. | 10,957 | ||||||
4,000 | Hakuhodo DY Holdings, Inc. | 56,767 | ||||||
8,376 | HT&E, Ltd. | 9,325 | ||||||
19,049 | Informa plc | 152,726 | ||||||
3,200 | Intage Holdings, Inc. | 26,148 | ||||||
1,711 | Ipsos | 40,283 | ||||||
63,002 | ITE Group plc | 50,799 | ||||||
78,966 | ITV plc | 125,299 | ||||||
9,582 | Ive Group, Ltd. | 14,170 | ||||||
1,344 | JCDecaux SA | 37,608 | ||||||
2,300 | Kadokawa Dwango Corp. | 24,309 | ||||||
2,312 | Kin And Carta plc | 2,839 | ||||||
8,410 | Lagardere SCA | 211,424 | ||||||
1,449 | Liberty Global plc, Class A* | 30,922 | ||||||
3,548 | Liberty Global plc, Class C* | 73,230 | ||||||
2,546 | M6 Metropole Television SA | 40,865 | ||||||
1,300 | Macromill, Inc. | 16,765 | ||||||
11,389 | Mediaset Espana Comunicacion SA | 71,837 | ||||||
24,075 | Mediaset SpA*^ | 75,961 | ||||||
435 | Modern Times Group, Class B | 14,436 | ||||||
50,916 | Nine Entertainment Co. Holdings, Ltd. | 49,477 | ||||||
15,978 | Ooh!media, Ltd. | 38,478 | ||||||
7,451 | Pearson plc | 88,813 | ||||||
3,968 | Pearson plc, ADR | 47,378 | ||||||
10,671 | Promotora de Informaciones SA* | 21,388 | ||||||
5,840 | Publicis Groupe SA | 334,186 | ||||||
4,026 | Quebecor, Inc., Class B | 84,767 | ||||||
13,261 | Reach plc | 11,144 | ||||||
1,406 | RTL Group | 75,246 | ||||||
4,177 | Sanoma OYJ | 40,637 | ||||||
641 | Schibsted ASA, Class A | 21,406 | ||||||
435 | Schibsted ASA, Class B | 13,206 | ||||||
16,754 | SES Global, Class A | 320,860 | ||||||
60,999 | Seven West Media, Ltd.* | 23,623 | ||||||
7,456 | Shaw Communications, Inc. | 134,879 | ||||||
44,700 | Singapore Press Holdings, Ltd. | 76,825 | ||||||
18,618 | Sky Network Television, Ltd. | 23,072 |
See accompanying notes to the financial statements.
24
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media, continued | ||||||||
13,400 | SKY Perfect JSAT Holdings, Inc. | $ | 56,989 | |||||
4,175 | Societe Television Francaise 1 | 33,682 | ||||||
500 | SoldOut, Inc. | 16,582 | ||||||
44,663 | Southern Cross Media Group, Ltd. | 31,607 | ||||||
1,167 | Stroeer Media SE | 56,446 | ||||||
232 | Tamedia AG, Registered Shares | 24,942 | ||||||
1,586 | Telenet Group Holding NV | 73,616 | ||||||
15,000 | Television Broadcasts, Ltd. | 28,289 | ||||||
1,900 | Tokyo Broadcasting System Hold | 30,036 | ||||||
500 | TV Tokyo Holdings Corp. | 10,659 | ||||||
500 | Wowow, Inc. | 13,732 | ||||||
18,270 | WPP plc | 196,195 | ||||||
700 | Zenrin Co., Ltd. | 14,763 | ||||||
17,434 | Zon Multimedia Servicos de Telecommunicacoes e Multimedia SGPS SA | 105,505 | ||||||
|
| |||||||
3,977,123 | ||||||||
|
| |||||||
Metals & Mining (5.1%): | ||||||||
8,736 | Acacia Mining plc* | 20,399 | ||||||
7,920 | Acerinox SA | 78,597 | ||||||
3,214 | Agnico Eagle Mines, Ltd. | 129,846 | ||||||
400 | Aichi Steel Corp. | 12,586 | ||||||
16,681 | Alacer Gold Corp.* | 30,796 | ||||||
14,461 | Alamos Gold, Inc., Class A | 52,017 | ||||||
2,200 | Altius Minerals Corp. | 17,423 | ||||||
12,599 | Alumina, Ltd. | 20,222 | ||||||
2,182 | Amg Advanced Metallurgical Group N.V. | 69,807 | ||||||
34,264 | Anglo American plc | 757,327 | ||||||
6,845 | Antofagasta plc | 67,827 | ||||||
1,971 | Aperam SA | 51,744 | ||||||
11,577 | ArcelorMittal | 238,837 | ||||||
12,400 | Argonaut Gold, Inc.* | 14,171 | ||||||
1,100 | Asahi Holdings, Inc. | 22,491 | ||||||
8,215 | Asanko Gold, Inc.* | 5,236 | ||||||
63,720 | Aurelia Metals, Ltd.* | 30,511 | ||||||
1,731 | Aurubis AG | 85,706 | ||||||
18,280 | Ausdrill, Ltd. | 15,223 | ||||||
58,345 | B2Gold Corp.* | 170,547 | ||||||
28,800 | Barrick Gold Corp. | 388,852 | ||||||
2,708 | Bekaert NV | 65,046 | ||||||
35,937 | BHP Billiton, Ltd. | 866,851 | ||||||
10,342 | Billiton plc, ADR | 433,226 | ||||||
25,458 | BlueScope Steel, Ltd. | 196,458 | ||||||
9,186 | Boliden AB | 199,901 | ||||||
17,700 | Capstone Mining Corp.* | 7,910 | ||||||
73,572 | Centamin plc | 102,543 | ||||||
9,200 | Centerra Gold, Inc.* | 39,496 | ||||||
4,374 | Central Asia Metals plc | 12,113 | ||||||
16,254 | China Gold International Resources Corp., Ltd.* | 18,814 | ||||||
5,800 | Continental Gold, Inc.* | 9,560 | ||||||
1,300 | Daido Steel Co., Ltd. | 50,699 | ||||||
2,700 | Daiki Aluminium Industry Co., Ltd. | 13,852 | ||||||
9,900 | Detour Gold Corp.* | 83,624 | ||||||
3,000 | DOWA Mining Co. | 89,552 | ||||||
13,600 | Dundee Precious Metals, Inc.* | 35,868 | ||||||
7,762 | Eldorado Gold Corp.* | 22,746 | ||||||
3,600 | Endeavour Mining Corp.* | 58,919 | ||||||
11,400 | Endeavour Silver Corp.* | 24,554 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining, continued | ||||||||
539 | Eramet | $ | 37,271 | |||||
40,854 | Evolution Mining, Ltd. | 106,654 | ||||||
16,814 | EVRAZ plc | 102,974 | ||||||
22,438 | Ferrexpo plc | 55,443 | ||||||
10,709 | First Majestic Silver Corp.* | 62,920 | ||||||
8,602 | First Quantum Minerals, Ltd. | 69,572 | ||||||
86,302 | Fortescue Metals Group, Ltd. | 252,863 | ||||||
5,947 | Fortuna Silver Mines, Inc.* | 21,784 | ||||||
327 | Franco Nevada Corp. | �� | 22,946 | |||||
3,312 | Fresnillo plc | 36,193 | ||||||
217,124 | Glencore International plc | 800,709 | ||||||
1,100 | Godo Steel, Ltd. | 15,911 | ||||||
44,721 | Gold Road Resources, Ltd.* | 20,469 | ||||||
6,771 | Goldcorp, Inc. | 66,356 | ||||||
9,730 | Goldcorp, Inc. | 95,304 | ||||||
4,758 | Granges AB | 43,362 | ||||||
5,096 | Guyana Goldfields, Inc.* | 5,973 | ||||||
18,140 | Highland Gold Mining, Ltd. | 32,744 | ||||||
7,250 | Hill & Smith Holdings plc | 110,652 | ||||||
6,200 | Hitachi Metals, Ltd. | 64,393 | ||||||
15,125 | Hochschild Mining plc | 29,980 | ||||||
18,195 | Hudbay Minerals, Inc. | 86,110 | ||||||
12,542 | IAMGOLD Corp.* | 46,033 | ||||||
3,422 | Iluka Resources, Ltd. | 18,361 | ||||||
14,498 | Imdex, Ltd.* | 10,923 | ||||||
17,091 | Independence Group NL | 45,970 | ||||||
23,446 | Ivanhoe Mines, Ltd., Class A* | 40,708 | ||||||
6,400 | JFE Holdings, Inc. | 101,843 | ||||||
50,009 | Jupiter Mines, Ltd. | 8,792 | ||||||
14,214 | Kazakhmys plc | 96,386 | ||||||
84,792 | Kinross Gold Corp.* | 273,321 | ||||||
4,744 | Kirkland Lake Gold, Ltd. | 123,726 | ||||||
10,600 | Kobe Steel, Ltd. | 73,425 | ||||||
1,800 | Kyoei Steel, Ltd. | 26,974 | ||||||
800 | Labrador Iron Ore Royalty Corp. | 14,207 | ||||||
4,400 | Leagold Mining Corp.* | 5,577 | ||||||
17,782 | Lonmin plc* | 10,220 | ||||||
14,207 | Lucara Diamond Corp. | 15,404 | ||||||
42,535 | Lundin Mining Corp. | 175,749 | ||||||
54,377 | Lynas Corp., Ltd.* | 60,374 | ||||||
11,288 | MACA, Ltd. | 7,411 | ||||||
48,387 | Macmahon Holdings, Ltd.* | 7,301 | ||||||
4,545 | Major Drilling Group International, Inc.* | 15,316 | ||||||
176,000 | Midas Holdings, Ltd.*(c) | 4,650 | ||||||
10,123 | Mineral Resources, Ltd. | 110,269 | ||||||
4,300 | Mitsubishi Materials Corp. | 112,749 | ||||||
500 | Mitsubishi Steel Manufacturing Co., Ltd. | 7,270 | ||||||
4,200 | Mitsui Mining & Smelting Co., Ltd. | 86,059 | ||||||
52,117 | Mount Gibson Iron, Ltd. | 19,634 | ||||||
2,200 | Neturen Co., Ltd. | 16,739 | ||||||
17,856 | Nevsun Resources, Ltd.* | 78,357 | ||||||
27,410 | New Gold, Inc.* | 21,085 | ||||||
7,558 | Newcrest Mining, Ltd. | 116,416 | ||||||
6,200 | Nippon Denko Co., Ltd. | 12,171 | ||||||
37,000 | Nippon Light Metal Holdings Co. | 74,594 | ||||||
8,595 | Nippon Steel Corp. | 146,996 | ||||||
9,300 | Nippon Yakin Kogyo Co., Ltd. | 19,843 |
See accompanying notes to the financial statements.
25
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining, continued | ||||||||
200 | Nittetsu Mining Co., Ltd. | $ | 8,507 | |||||
32,791 | Norsk Hydro ASA | 148,517 | ||||||
25,339 | Northern Star Resources, Ltd. | 165,848 | ||||||
4,300 | Nyrstar NV*^ | 2,815 | ||||||
39,028 | OceanaGold Corp. | 142,388 | ||||||
21,175 | OM Holdings, Ltd. | 18,339 | ||||||
500 | Osaka Steel Co., Ltd. | 8,329 | ||||||
6,900 | Osisko Gold Royalties, Ltd. | 60,508 | ||||||
18,826 | Outokumpu OYJ^ | 68,671 | ||||||
17,375 | OZ Minerals, Ltd. | 107,663 | ||||||
900 | Pacific Metals Co., Ltd. | 22,006 | ||||||
7,442 | Pan American Silver Corp. | 108,659 | ||||||
73,744 | Perseus Mining, Ltd.* | 21,981 | ||||||
57,911 | Petra Diamonds, Ltd.* | 27,672 | ||||||
176,214 | Petropavlovsk plc* | 14,188 | ||||||
5,733 | Pretium Resources, Inc.* | 48,594 | ||||||
23,878 | Ramelius Resources, Ltd.* | 7,928 | ||||||
321 | Randgold Resources, Ltd.(c) | 26,552 | ||||||
30,571 | Regis Resources, Ltd. | 104,371 | ||||||
45,534 | Resolute Mining, Ltd. | 37,286 | ||||||
550 | Rio Tinto plc | 26,220 | ||||||
11,161 | Rio Tinto plc, Registered Shares, ADR | 541,085 | ||||||
5,809 | Rio Tinto, Ltd. | 321,225 | ||||||
6,000 | Sabina Gold & Silver Corp.* | 5,407 | ||||||
2,148 | Salzgitter AG | 62,919 | ||||||
11,858 | Sandfire Resources Nl | 55,776 | ||||||
9,442 | Sandstorm Gold, Ltd.* | 43,717 | ||||||
1,600 | Sanyo Special Steel Co., Ltd. | 33,633 | ||||||
29,450 | Saracen Mineral Holdings, Ltd.* | 61,154 | ||||||
21,718 | Schmolz + Bickenbach AG* | 11,920 | ||||||
16,210 | Semafo, Inc.* | 35,033 | ||||||
32,896 | Silver Lake Resources, Ltd.* | 12,976 | ||||||
7,261 | Sims Metal Management, Ltd. | 51,332 | ||||||
82,830 | South32, Ltd. | 195,379 | ||||||
4,092 | SSAB AB, Class A | 14,142 | ||||||
5,741 | SSAB AB, Class B | 16,112 | ||||||
4,935 | SSR Mining, Inc.* | 59,654 | ||||||
33,266 | St Barbara, Ltd. | 110,180 | ||||||
26,500 | Stornoway Diamond Corp.* | 3,786 | ||||||
4,200 | Sumitomo Metal & Mining Co., Ltd. | 111,723 | ||||||
14,391 | Syrah Resources, Ltd.* | 15,282 | ||||||
5,574 | Tahoe Resources, Inc.* | 20,295 | ||||||
9,084 | Tahoe Resources, Inc.* | 33,157 | ||||||
10,787 | Teck Cominco, Ltd., Class B | 232,255 | ||||||
7,385 | Teck Resources, Ltd., Class B | 159,073 | ||||||
9,775 | Teranga Gold Corp.* | 28,860 | ||||||
3,912 | ThyssenKrupp AG | 67,134 | ||||||
1,900 | Toho Titanium Co., Ltd. | 17,610 | ||||||
700 | Toho Zinc Co., Ltd. | 21,257 | ||||||
1,100 | Tokyo Rope Manufacturing Co. Ltd. | 9,375 | ||||||
1,500 | Tokyo Steel Manufacturing Co., Ltd. | 12,110 | ||||||
1,700 | Tokyo Tekko Co., Ltd. | 17,344 | ||||||
1,300 | Topy Industries, Ltd. | 26,544 | ||||||
4,685 | Torex Gold Resources, Inc.* | 44,585 | ||||||
9,694 | Trevali Mining Corp.* | 2,947 | ||||||
33,241 | Turquoise Hill Resources, Ltd.* | 54,793 | ||||||
1,500 | UACJ Corp. | 29,184 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining, continued | ||||||||
6,764 | Voestalpine AG | $ | 202,268 | |||||
14,139 | Western Areas, Ltd. | 19,727 | ||||||
12,239 | Westgold Resources, Ltd.* | 7,574 | ||||||
3,887 | Wheaton Precious Metals Corp. | 75,889 | ||||||
2,702 | Wheaton Precious Metals Corp. | 52,770 | ||||||
42,447 | Yamana Gold, Inc. | 99,820 | ||||||
1,600 | Yamato Kogyo Co., Ltd. | 37,295 | ||||||
800 | Yodogawa Steel Works, Ltd. | 15,990 | ||||||
|
| |||||||
12,984,666 | ||||||||
|
| |||||||
Multiline Retail (0.6%): | ||||||||
54,808 | B&m European Value Retail SA | 196,632 | ||||||
1,147 | Canadian Tire Corp., Class A | 119,944 | ||||||
53,885 | Debenhams plc | 3,536 | ||||||
2,909 | Dollarama, Inc. | 69,198 | ||||||
1,400 | Don Quijote Co., Ltd. | 86,861 | ||||||
15,946 | Europris ASA(a) | 42,510 | ||||||
500 | Fuji Co., Ltd./Ehime | 8,502 | ||||||
2,400 | H2O Retailing Corp. | 33,853 | ||||||
24,471 | Harvey Norman Holdings, Ltd. | 54,501 | ||||||
3,882 | Hudson’s Bay Co. | 20,732 | ||||||
6,600 | Isetan Mitsukoshi Holdings, Ltd. | 72,873 | ||||||
900 | Izumi Co., Ltd. | 42,075 | ||||||
4,300 | J. Front Retailing Co., Ltd. | 49,709 | ||||||
400 | Kintetsu Department Store Co., Ltd.* | 12,613 | ||||||
24,500 | Lifestyle International Holdings, Ltd. | 36,946 | ||||||
61,042 | Marks & Spencer Group plc | 192,362 | ||||||
1,300 | MARUI GROUP Co., Ltd. | 25,143 | ||||||
30,000 | Metro Holdings, Ltd. | 22,219 | ||||||
47,139 | Myer Holdings, Ltd.* | 13,775 | ||||||
1,643 | Next plc | 83,600 | ||||||
2,100 | Parco Co., Ltd. | 21,268 | ||||||
2,535 | Reject Shop, Ltd. (The) | 4,887 | ||||||
300 | Ryohin Keikaku Co., Ltd. | 73,020 | ||||||
600 | Sanyo Electric Railway Co., Ltd. | 12,378 | ||||||
800 | Seria Co., Ltd. | 27,416 | ||||||
4,000 | Takashimaya Co., Ltd. | 50,836 | ||||||
3,932 | Tokmanni Group Corp. | 32,325 | ||||||
4,000 | Wing On Company International, Ltd. | 12,913 | ||||||
|
| |||||||
1,422,627 | ||||||||
|
| |||||||
Multi-Utilities (0.9%): | ||||||||
3,187 | Acea SpA | 43,879 | ||||||
3,186 | AGL Energy, Ltd. | 46,091 | ||||||
4,285 | Algonquin Power & Utilities Corp. | 43,101 | ||||||
905 | Atco, Ltd. | 25,599 | ||||||
1,466 | Canadian Utilities, Ltd., Class A | 33,637 | ||||||
93,709 | Centrica plc | 161,113 | ||||||
40,123 | E.ON AG | 396,622 | ||||||
12,398 | Engie Group | 177,170 | ||||||
8,483 | Hera SpA | 25,835 | ||||||
23,167 | Iren SpA | 55,581 | ||||||
65,748 | ITL AEM SpA | 118,251 | ||||||
2,700 | Just Energy Group, Inc. | 8,921 | ||||||
98,500 | Keppel Infrastructure Trust | 34,978 | ||||||
3,070 | National Grid plc, ADR | 147,299 | ||||||
18,815 | Ren – Redes Energeticas Nacion | 52,434 | ||||||
26,786 | RWE AG | 582,236 |
See accompanying notes to the financial statements.
26
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Multi-Utilities, continued | ||||||||
7,455 | Suez Environnement Co. | $ | 98,246 | |||||
3,746 | Telecom Plus plc | 68,366 | ||||||
6,009 | Vector, Ltd. | 13,434 | ||||||
4,208 | Veolia Environnement SA | 86,303 | ||||||
|
| |||||||
2,219,096 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (6.3%): | ||||||||
9,181 | Advantage Oil & Gas, Ltd.* | 13,317 | ||||||
24,155 | Africa Oil Corp.* | 19,112 | ||||||
145,000 | Agritrade Resources, Ltd. | 25,029 | ||||||
2,005 | AKER BP ASA | 50,808 | ||||||
7,200 | Anglo Pacific Group plc | 13,598 | ||||||
18,944 | ARC Resources, Ltd. | 112,415 | ||||||
18,809 | Athabasca Oil Corp.* | 13,642 | ||||||
10,411 | Avance Gas Holding, Ltd.*(a) | 15,021 | ||||||
2,064 | Baytex Energy Corp.*^ | 3,633 | ||||||
25,572 | Baytex Energy Corp.* | 45,149 | ||||||
103,499 | Beach Energy, Ltd. | 97,706 | ||||||
1,167 | Bellatrix Exploration, Ltd.* | 539 | ||||||
17,741 | Birchcliff Energy, Ltd. | 39,511 | ||||||
15,440 | Bonavista Energy Corp. | 13,574 | ||||||
1,208 | Bonterra Energy Corp. | 5,717 | ||||||
48,547 | BP plc, ADR | 1,840,902 | ||||||
32,353 | BP plc | 204,098 | ||||||
173,000 | Brightoil Petroleum Holdings, Ltd.*(c) | 6,214 | ||||||
2,656 | BW LPG, Ltd.*(a) | 8,003 | ||||||
32,806 | Cairn Energy plc* | 62,594 | ||||||
12,816 | Caltex Australia, Ltd. | 229,949 | ||||||
5,227 | Cameco Corp. | 59,326 | ||||||
7,846 | Cameco Corp. | 88,979 | ||||||
16,028 | Canadian Natural Resources, Ltd. | 386,755 | ||||||
10,058 | Canadian Natural Resources, Ltd. | 242,718 | ||||||
3,012 | Cardinal Energy, Ltd. | 4,899 | ||||||
11,375 | Cenovus Energy, Inc. | 79,966 | ||||||
7,600 | Cenovus Energy, Inc. | 53,451 | ||||||
13,100 | China Aviation Oil Singapore Corp., Ltd. | 10,200 | ||||||
40,015 | Cooper Energy, Ltd.* | 12,552 | ||||||
3,700 | Cosmo Energy Holdings Co., Ltd. | 75,325 | ||||||
8,781 | Crescent Point Energy | 26,519 | ||||||
7,561 | Crescent Point Energy Corp. | 22,932 | ||||||
8,223 | Crew Energy, Inc.* | 5,181 | ||||||
854 | CropEnergies AG | 4,427 | ||||||
265 | Delek Group, Ltd. | 38,129 | ||||||
40,500 | Denison Mines Corp.* | 18,692 | ||||||
39,162 | Dno ASA | 57,149 | ||||||
9,137 | Enagas SA | 246,689 | ||||||
8,022 | Enbridge, Inc. | 249,240 | ||||||
9,837 | EnCana Corp. | 56,788 | ||||||
1,055 | EnCana Corp. | 6,098 | ||||||
17,700 | Enerplus Corp. | 137,710 | ||||||
43,854 | ENI SpA | 690,526 | ||||||
114,028 | EnQuest plc* | 31,646 | ||||||
1,390 | Etablissements Maurel et Prom SA*(c) | 5,102 | ||||||
7,625 | Euronav NV | 54,034 | ||||||
1,579 | Exmar NV* | 10,780 | ||||||
19,809 | Faroe Petroleum plc* | 37,047 | ||||||
12,674 | FLEX LNG, Ltd.*^ | 18,066 | ||||||
6,700 | Freehold Royalties, Ltd. | 40,593 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
1,400 | Frontera Energy Corp.* | $ | 13,723 | |||||
3,784 | Frontline, Ltd.* | 21,371 | ||||||
3,100 | Fuji Oil Co., Ltd. | 8,367 | ||||||
7,147 | Galp Energia SGPS SA | 113,158 | ||||||
734 | Gaztransport et Technigaz SA | 56,508 | ||||||
6,249 | Genel Energy plc* | 14,108 | ||||||
4,500 | Gibson Energy, Inc. | 61,582 | ||||||
19,607 | Gran Tierra Energy, Inc.* | 42,805 | ||||||
22,859 | Gulf Keystone Petroleum, Ltd.* | 52,584 | ||||||
4,281 | Hoegh Lng Holdings, Ltd. | 18,878 | ||||||
11,767 | Husky Energy, Inc. | 121,635 | ||||||
5,300 | Idemitsu Kosan Co., Ltd. | 174,708 | ||||||
2,500 | Imperial Oil, Ltd. | 63,352 | ||||||
1,542 | Imperial Oil, Ltd.^ | 39,043 | ||||||
13,700 | INPEX Corp. | 122,278 | ||||||
6,882 | Inter Pipeline, Ltd. | 97,508 | ||||||
2,244 | International Petroleum Corp.* | 7,151 | ||||||
3,600 | ITOCHU Enex Co., Ltd. | 31,721 | ||||||
1,000 | Japan Petroleum Exploration Co., Ltd. | 17,978 | ||||||
547 | Jerusalem Oil Exploration* | 30,925 | ||||||
69,100 | JX Holdings, Inc. | 362,228 | ||||||
30,773 | Karoon Gas Australia, Ltd.* | 18,221 | ||||||
7,300 | Kelt Exploration, Ltd.* | 24,815 | ||||||
7,446 | Keyera Corp. | 140,792 | ||||||
1,800 | Kinder Morgan Canada, Ltd.(a) | 21,007 | ||||||
3,106 | Koninklijke Vopak NV | 140,684 | ||||||
2,011 | Lundin Petroleum AB | 50,305 | ||||||
10,707 | MEG Energy Corp.* | 60,477 | ||||||
1,502 | Naphtha Israel Petroleum Corp.* | 9,590 | ||||||
3,817 | Neste Oil OYJ | 294,672 | ||||||
14,065 | New Hope Corp., Ltd. | 33,772 | ||||||
7,392 | New Zealand Refining Co., Ltd. (The) | 11,666 | ||||||
64,000 | NewOcean Energy Holdings, Ltd.* | 20,877 | ||||||
21,200 | Nippon Coke & Engineering Co., Ltd. | 17,645 | ||||||
7,654 | Nuvista Energy, Ltd.* | 22,878 | ||||||
32,810 | Obsidian Energy, Ltd.* | 12,259 | ||||||
104,047 | Oil Refineries, Ltd. | 49,716 | ||||||
21,604 | Oil Search, Ltd. | 108,920 | ||||||
2,596 | OMV AG | 113,527 | ||||||
31,128 | Ophir Energy plc* | 14,128 | ||||||
33,611 | Origin Energy, Ltd.* | 153,123 | ||||||
7,550 | Painted Pony Energy, Ltd.* | 8,241 | ||||||
1,307 | Paramount Resouces, Ltd., Class A* | 6,875 | ||||||
9,663 | Parex Resources, Inc.* | 115,744 | ||||||
5,800 | Parkland Fuel Corp. | 150,163 | ||||||
587 | Paz Oil Co., Ltd. | 88,695 | ||||||
1,584 | Pembina Pipeline Corp. | 46,997 | ||||||
40,966 | Pengrowth Energy Corp.* | 18,007 | ||||||
6,660 | Peyto Exploration & Development Corp. | 34,544 | ||||||
5,032 | Prairiesky Royalty, Ltd. | 65,140 | ||||||
61,033 | Premier Oil plc* | 51,773 | ||||||
11,035 | Repsol SA | 177,368 | ||||||
19,457 | Royal Dutch Shell plc, Class A, ADR | 1,133,759 | ||||||
16,231 | Royal Dutch Shell plc, Class B, ADR | 972,886 | ||||||
1,600 | Sala Corp. | 8,667 | ||||||
4,000 | San-Ai Oil Co., Ltd. | 39,706 | ||||||
26,303 | Santos, Ltd. | 101,495 | ||||||
27,521 | Saras SpA | 53,217 |
See accompanying notes to the financial statements.
27
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
36,000 | Savannah Petroleum plc* | $ | 12,127 | |||||
59,700 | Senex Energy, Ltd.* | 11,560 | ||||||
13,762 | Seven Generations Energy* | 112,314 | ||||||
400 | Sinanen Holdings Co., Ltd. | 8,745 | ||||||
12,876 | Snam SpA | 56,353 | ||||||
12,892 | Soco International plc | 11,173 | ||||||
21,115 | Statoil ASA | 450,611 | ||||||
12,179 | Stobart Group, Ltd. | 22,346 | ||||||
18,111 | Suncor Energy, Inc. | 506,564 | ||||||
9,784 | Suncor Energy, Inc. | 273,306 | ||||||
38,370 | Sundance Energy Australia, Ltd.* | 9,680 | ||||||
30,156 | Surge Energy, Inc. | 32,476 | ||||||
16,600 | Tamarack Valley Energy, Ltd.* | 28,700 | ||||||
13,400 | Tidewater Midstream and Infrastructure, Ltd. | 12,762 | ||||||
8,990 | Torc Oil & Gas, Ltd. | 28,781 | ||||||
1,559 | Torm PLC* | 10,485 | ||||||
30,861 | Total SA | 1,630,104 | ||||||
11,630 | Tourmaline Oil Corp. | 144,672 | ||||||
5,452 | Transcanada Corp. | 194,636 | ||||||
6,518 | TransGlobe Energy Corp. | 12,129 | ||||||
103,509 | Tullow Oil plc* | 235,498 | ||||||
3,072 | Verbio Vereinigte Bioenergie AG | 23,432 | ||||||
5,883 | Vermilion Energy, Inc. | 123,952 | ||||||
12,328 | Whitecap Resources, Inc. | 39,287 | ||||||
48,191 | Whitehaven Coal, Ltd. | 146,851 | ||||||
9,290 | Woodside Petroleum, Ltd. | 205,140 | ||||||
8,000 | Yangarra Resources, Ltd.* | 15,355 | ||||||
7,625 | Z Energy, Ltd. | 28,022 | ||||||
|
| |||||||
15,843,073 | ||||||||
|
| |||||||
Paper & Forest Products (0.7%): | ||||||||
1,344 | Ahlstrom-Munksjo OYJ^ | 18,650 | ||||||
2,718 | Altri SGPS SA | 18,006 | ||||||
5,029 | Canfor Corp.* | 60,901 | ||||||
2,751 | Canfor Pulp Products, Inc. | 32,669 | ||||||
600 | Daiken Corp. | 10,927 | ||||||
6,000 | Daio Paper Corp. | 68,984 | ||||||
11,027 | Ence Energia y Celulosa S.A | 69,265 | ||||||
378 | Hadera Paper, Ltd. | 26,737 | ||||||
6,700 | Hokuetsu Kishu Paper Co., Ltd. | 30,287 | ||||||
3,678 | Holmen AB, Class B | 72,851 | ||||||
4,627 | Interfor Corp.* | 48,880 | ||||||
8,945 | Metsa Board OYJ | 52,726 | ||||||
6,301 | Mondi plc | 130,362 | ||||||
5,731 | Navigator Co. SA (The) | 23,635 | ||||||
5,800 | Nippon Paper Industries Co., Ltd. | 103,578 | ||||||
2,421 | Norbord, Inc. | 64,383 | ||||||
400 | Norbord, Inc. | 10,636 | ||||||
22,000 | OYI Paper Co., Ltd. | 112,619 | ||||||
23,088 | Quintis, Ltd.*(c) | — | ||||||
307 | Semapa-Sociedade de Investimento E Gestao | 4,610 | ||||||
898 | Stella-Jones, Inc. | 26,058 | ||||||
11,332 | Stora Enso OYJ, Registered Shares | 131,187 | ||||||
7,616 | Svenska Cellulosa AB, Class B | 58,922 | ||||||
600 | Tokushu Tokai Paper Co., Ltd. | 22,395 | ||||||
13,480 | UPM-Kymmene OYJ | 342,714 | ||||||
3,166 | West Fraser Timber Co., Ltd. | 156,422 | ||||||
24,618 | Western Forest Products, Inc. | 34,086 | ||||||
|
| |||||||
1,732,490 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Personal Products (0.7%): | ||||||||
2,600 | Artnature, Inc. | $ | 15,143 | |||||
18,108 | Asaleo Care, Ltd. | 11,670 | ||||||
212 | Beiersdorf AG | 22,122 | ||||||
16,000 | Best World International, Ltd. | 30,913 | ||||||
498 | Blackmores, Ltd. | 42,780 | ||||||
1,100 | Ci:z Holdings Co., Ltd. | 59,079 | ||||||
300 | HABA Laboratories, Inc. | 19,470 | ||||||
800 | Jamieson Wellness, Inc. | 12,501 | ||||||
2,300 | Kao Corp. | 169,593 | ||||||
400 | KOSE Corp. | 63,446 | ||||||
861 | L’Oreal SA | 197,617 | ||||||
400 | Milbon Co., Ltd. | 16,379 | ||||||
1,000 | Noevir Holdings Co., Ltd. | 43,251 | ||||||
3,305 | Ontex Group NV | 67,602 | ||||||
1,486 | Oriflame Holding AG^ | 33,353 | ||||||
1,400 | Pola Orbis Holdings, Inc. | 37,510 | ||||||
1,400 | Shiseido Co., Ltd. | 87,001 | ||||||
8,564 | Unilever NV, NYS | 460,743 | ||||||
4,976 | Unilever plc, ADR | 259,996 | ||||||
1,300 | Ya-Man, Ltd. | 16,463 | ||||||
|
| |||||||
1,666,632 | ||||||||
|
| |||||||
Pharmaceuticals (2.9%): | ||||||||
287 | Alk-Abello A/S* | 42,491 | ||||||
25,941 | Alliance Pharma plc | 22,146 | ||||||
1,843 | Almirall SA | 28,065 | ||||||
1,900 | Aska Pharmaceutical Co., Ltd. | 19,065 | ||||||
9,300 | Astellas Pharma, Inc. | 118,369 | ||||||
15,563 | AstraZeneca plc, ADR | 591,083 | ||||||
10,700 | Aurora Cannabis, Inc.* | 53,147 | ||||||
1,145 | Bausch Health Cos., Inc.* | 21,148 | ||||||
8,600 | Bausch Health Cos., Inc.* | 159,084 | ||||||
5,724 | Bayer AG, Registered Shares | 396,854 | ||||||
693 | Boiron SA | 38,782 | ||||||
1,600 | Dainippon Sumitomo Pharma Co., Ltd. | 51,538 | ||||||
300 | Eisai Co., Ltd. | 23,362 | ||||||
19,981 | Faes Farma SA | 67,678 | ||||||
700 | Fuji Pharma Co., Ltd. | 11,350 | ||||||
500 | Fuso Pharmaceutical Industries. Ltd. | 11,696 | ||||||
9,143 | GlaxoSmithKline plc, ADR | 349,354 | ||||||
1,067 | GlaxoSmithKline plc | 20,248 | ||||||
1,632 | H. Lundbeck A/S | 71,581 | ||||||
4,000 | Haw Par Corp., Ltd. | 35,252 | ||||||
4,811 | Hikma Pharmaceuticals plc | 104,580 | ||||||
26,202 | Indivior plc* | 37,276 | ||||||
701 | Ipsen SA | 90,398 | ||||||
98,000 | Jacobson Pharma Corp., Ltd. | 21,471 | ||||||
500 | Jcr Pharmaceuticals Co., Ltd. | 20,870 | ||||||
1,000 | Kaken Pharmaceutical Co., Ltd. | 44,006 | ||||||
1,000 | Kissei Pharmaceutical Co., Ltd. | 25,454 | ||||||
1,700 | Kyorin Holdings, Inc. | 37,456 | ||||||
1,100 | Kyowa Hakko Kogyo Co., Ltd. | 20,673 | ||||||
98,378 | Mayne Pharma Group, Ltd.* | 53,683 | ||||||
884 | Merck KGaA | 91,198 | ||||||
2,500 | Mitsubishi Tanabe Pharma Corp. | 35,923 | ||||||
3,200 | Nichi-Iko Pharmaceutical Co., Ltd. | 47,218 | ||||||
16,906 | Novartis AG, Registered Shares | 1,448,560 | ||||||
9,411 | Novo Nordisk A/S, Class B | 432,689 |
See accompanying notes to the financial statements.
28
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Pharmaceuticals, continued | ||||||||
1,000 | Ono Pharmaceutical Co., Ltd. | $ | 20,241 | |||||
2,436 | Orexo AB* | 16,159 | ||||||
1,037 | Orion OYJ | 36,049 | ||||||
4,471 | Orion OYJ, Class B | 155,294 | ||||||
700 | Otsuka Holdings Co., Ltd. | 28,570 | ||||||
3,206 | Recipharm AB* | 41,095 | ||||||
3,141 | Recordati SpA | 109,011 | ||||||
4,031 | Roche Holding AG | 997,168 | ||||||
216 | Roche Holding AG | 52,888 | ||||||
600 | Rohto Pharmaceutical Co., Ltd. | 16,202 | ||||||
5,759 | Sanofi-Aventis SA | 497,620 | ||||||
1,600 | Santen Pharmaceutical Co., Ltd. | 22,901 | ||||||
1,200 | Sawai Pharmaceutical Co., Ltd. | 56,883 | ||||||
1,000 | Shionogi & Co., Ltd. | 56,711 | ||||||
400 | Taisho Pharmaceutical Holdings Co., Ltd. | 39,774 | ||||||
2,300 | Takeda Pharmacuetical Co., Ltd. | 78,051 | ||||||
3,519 | Teva Pharmaceutical Industries, Ltd.* | 54,620 | ||||||
800 | Torii Pharmaceutical Co., Ltd. | 17,712 | ||||||
600 | Towa Pharmaceutical Co., Ltd. | 42,250 | ||||||
1,400 | Tsumura & Co. | 39,302 | ||||||
1,020 | UCB SA | 83,147 | ||||||
46,000 | United Laboratories International Holdings, Ltd. | 24,481 | ||||||
37,691 | Vectura Group plc* | 33,563 | ||||||
1,353 | Vifor Pharma AG(c) | 146,912 | ||||||
116 | Virbac SA* | 15,130 | ||||||
|
| |||||||
7,325,482 | ||||||||
|
| |||||||
Professional Services (1.8%): | ||||||||
6,887 | Adecco SA, Registered Shares | 322,656 | ||||||
2,780 | AF AB | 50,466 | ||||||
1,162 | Akka Technologies SA | 58,429 | ||||||
3,728 | ALS, Ltd. | 17,798 | ||||||
9,096 | Applus Services SA | 100,636 | ||||||
1,000 | Baycurrent Consulting, Inc. | 20,726 | ||||||
1,800 | Benefit One, Inc. | 55,780 | ||||||
372 | Bertrandt AG | 29,180 | ||||||
6,858 | Bureau Veritas SA | 139,272 | ||||||
5,277 | Capita Group plc* | 7,498 | ||||||
1,100 | DKSH Holding, Ltd. | 76,079 | ||||||
900 | EN-Japan, Inc. | 27,519 | ||||||
11,350 | Experian plc | 275,816 | ||||||
1,200 | FULLCAST Holdings Co., Ltd. | 19,771 | ||||||
175 | Groupe Crit | 10,613 | ||||||
76,397 | Hays plc | 135,511 | ||||||
2,680 | Intertek Group plc | 163,132 | ||||||
2,270 | Intertrust NV(a) | 38,111 | ||||||
5,691 | Iph, Ltd. | 21,680 | ||||||
1,700 | IR Japan Holdings, Ltd. | 18,719 | ||||||
5,154 | McMillan Shakespeare, Ltd. | 50,483 | ||||||
1,100 | Meitec Corp. | 44,365 | ||||||
18,606 | Michael Page International plc | 106,430 | ||||||
3,497 | Morneau Shepell, Inc. | 64,150 | ||||||
1,400 | Nexyz Group Corp. | 23,283 | ||||||
2,500 | Nihon M&A Center, Inc. | 49,782 | ||||||
1,800 | Nomura Co., Ltd. | 41,207 | ||||||
3,000 | Outsourcing, Inc. | 29,182 | ||||||
2,000 | Pasona Group, Inc. | 20,683 | ||||||
1,700 | Persol Holdings Co., Ltd. | 24,970 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Professional Services, continued | ||||||||
5,320 | Randstad Holding NV | $ | 243,285 | |||||
4,900 | Recruit Holdings Co., Ltd. | 117,326 | ||||||
7,938 | Reed Elsevier plc | 163,013 | ||||||
5,236 | RELX plc, ADR | 107,443 | ||||||
3,973 | Ricardo plc | 31,589 | ||||||
6,390 | Robert Walters plc | 44,807 | ||||||
7,390 | Seek, Ltd. | 88,045 | ||||||
68 | SGS SA, Registered Shares | 153,267 | ||||||
2,100 | SIGMAXYZ, Inc. | 14,783 | ||||||
2,400 | Sms Co., Ltd. | 38,126 | ||||||
1,400 | Stantec, Inc. | 30,677 | ||||||
2,421 | Stantec, Inc. | 52,923 | ||||||
7,669 | SThree plc | 27,968 | ||||||
1,100 | Tanseisha Co., Ltd. | 10,975 | ||||||
1,200 | Technopro Holdings, Inc. | 49,023 | ||||||
2,255 | Teleperformance | 360,923 | ||||||
2,878 | Thomson Reuters Corp. | 139,036 | ||||||
900 | Trust Tech, Inc. | 22,432 | ||||||
1,100 | Ut Group Co., Ltd.* | 19,041 | ||||||
800 | Weathernews, Inc. | 20,582 | ||||||
10,253 | Wolters Kluwer NV | 605,391 | ||||||
1,000 | World Holdings Co., Ltd. | 19,365 | ||||||
1,200 | YAMADA Consulting Group Co., Ltd. | 18,267 | ||||||
3,100 | Yumeshin Holdings Co., Ltd. | 22,221 | ||||||
|
| |||||||
4,444,435 | ||||||||
|
| |||||||
Real Estate Management & Development (2.8%): | ||||||||
1,963 | Adler Real Estate AG | 29,332 | ||||||
585 | ADO Group, Ltd.* | 11,108 | ||||||
902 | ADO Properties SA(a) | 47,155 | ||||||
1,200 | AEON Mall Co., Ltd. | 19,201 | ||||||
3,164 | Airport City, Ltd.* | 38,917 | ||||||
770 | Allreal Holding AG | 119,927 | ||||||
2,762 | Alony Hetz Properties & Invest | 25,818 | ||||||
492 | Alrov Properties And Lodgings, Ltd. | 14,913 | ||||||
1,000 | Altus Group, Ltd. | 17,341 | ||||||
2,393 | Amot Investments, Ltd. | 11,628 | ||||||
7,650 | Aroundtown SA | 63,481 | ||||||
18,300 | Ascendas India Trust | 14,509 | ||||||
2,512 | Ashtrom Properties, Ltd. | 10,332 | ||||||
46,000 | Asia Standard International Group, Ltd. | 7,972 | ||||||
2,076 | Atrium Ljungberg AB, Class B | 35,666 | ||||||
5,538 | Aveo Group | 6,240 | ||||||
578 | Azrieli Group | 27,628 | ||||||
45 | Bayside Land Corp. | 19,135 | ||||||
210 | Big Shopping Centers, Ltd. | 11,796 | ||||||
3,700 | Bukit Sembawang Estates, Ltd. | 15,342 | ||||||
1,910 | CA Immobilien Anlagen AG | 60,339 | ||||||
31,474 | Capital & Counties Properties plc | 92,352 | ||||||
38,900 | CapitaLand, Ltd. | 88,495 | ||||||
2,300 | Castellum AB | 42,360 | ||||||
1,571 | Catena AB | 39,160 | ||||||
2,740 | Cedar Woods Properties, Ltd. | 9,785 | ||||||
18,000 | Chinese Estates Holdings, Ltd. | 19,458 | ||||||
41,300 | Chip Eng Seng Corp., Ltd. | 19,920 | ||||||
52,000 | Chuang’s Consortium International, Ltd. | 10,331 | ||||||
7,300 | City Developments, Ltd. | 43,332 | ||||||
8,424 | Citycon OYJ^ | 15,575 |
See accompanying notes to the financial statements.
29
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
22,430 | CK Asset Holdings, Ltd. | $ | 163,117 | |||||
3,803 | CLS Holdings plc | 10,175 | ||||||
72,500 | Cnqc International Holdings, Ltd. | 16,025 | ||||||
1,625 | Colliers International Group | 89,440 | ||||||
741 | Corestate Capital Holding SA | 25,731 | ||||||
11,583 | Countrywide plc* | 1,262 | ||||||
340,000 | CSI Properties, Ltd. | 13,480 | ||||||
168 | Daejan Holdings plc | 12,018 | ||||||
1,700 | Daibiru Corp. | 16,704 | ||||||
700 | Daito Trust Construction Co., Ltd. | 95,622 | ||||||
10,300 | Daiwa House Industry Co., Ltd. | 327,167 | ||||||
1,654 | Deutsche Euroshop AG | 48,058 | ||||||
3,980 | Deutsche Wohnen AG | 182,406 | ||||||
1,490 | Dic Asset AG | 15,481 | ||||||
3,441 | Dios Fastigheter AB | 21,913 | ||||||
2,900 | Dream Unlimited Corp.* | 14,532 | ||||||
34,000 | Emperor International Holdings | 8,017 | ||||||
2,667 | Entra ASA(a) | 35,445 | ||||||
1,853 | Fabege AB | 24,682 | ||||||
68,000 | Far East Consortium Internatio | 29,288 | ||||||
1,175 | Fastighets AB Balder* | 33,535 | ||||||
3,800 | First Capital Realty, Inc. | 52,476 | ||||||
1,529 | FirstService Corp. | 104,705 | ||||||
6,100 | Frasers Centrepoint, Ltd. | 7,381 | ||||||
1,100 | Goldcrest Co., Ltd. | 15,806 | ||||||
24,338 | Grainger Trust plc | 65,061 | ||||||
3,982 | Grand City Properties SA | 86,344 | ||||||
10,000 | Great Eagle Holdings, Ltd. | 42,725 | ||||||
17,100 | GuocoLand, Ltd. | 22,523 | ||||||
36,000 | Hang Lung Group, Ltd. | 91,467 | ||||||
38,984 | Hang Lung Properties, Ltd. | 74,311 | ||||||
1,200 | Heiwa Real Estate Co., Ltd. | 18,969 | ||||||
3,426 | Helical Bar plc | 13,917 | ||||||
711 | Hembla AB* | 11,901 | ||||||
4,837 | Hemfosa Fastigheter AB | 38,237 | ||||||
15,551 | Henderson Land Development Co., Ltd. | 77,097 | ||||||
223 | Hiag Immobilien AG | 26,464 | ||||||
37,840 | HKR International, Ltd. | 17,769 | ||||||
9,400 | Ho Bee Land, Ltd. | 16,348 | ||||||
18,500 | Hong Fok Corp., Ltd. | 9,218 | ||||||
11,500 | Hongkong Land Holdings, Ltd. | 72,495 | ||||||
2,896 | Hufvudstaden AB | 44,840 | ||||||
3,000 | Hulic Co., Ltd. | 26,849 | ||||||
11,000 | Hysan Development Co., Ltd. | 52,160 | ||||||
6,500 | Ichigo, Inc. | 18,710 | ||||||
1,650 | IMMOFINANZ AG | 39,509 | ||||||
9,306 | Industrial Buildings Corp., Ltd.* | 12,984 | ||||||
28 | Intershop Holdings AG | 13,912 | ||||||
2,000 | Invesque, Inc. | 14,140 | ||||||
1,400 | Keihanshin Building Co., Ltd. | 10,452 | ||||||
13,300 | Kenedix, Inc. | 57,438 | ||||||
24,725 | Kerry Properties, Ltd. | 84,008 | ||||||
21,647 | Klovern AB | 25,139 | ||||||
26,000 | Kowloon Development Co., Ltd. | 27,309 | ||||||
7,162 | Kungsleden AB | 50,897 | ||||||
11,400 | Lai Sun Development Co., Ltd. | 18,492 | ||||||
112,800 | Landing International Development, Ltd.* | 35,362 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
1,358 | LEG Immobilien AG | $ | 141,776 | |||||
9,489 | Lend Lease Group | 77,389 | ||||||
14,300 | Leopalace21 Corp. | 56,268 | ||||||
8,000 | Liu Chong Hing Investment, Ltd. | 12,402 | ||||||
4,644 | LSL Property Services plc | 12,970 | ||||||
578 | Melisron, Ltd. | 24,152 | ||||||
59,000 | Mingfa Group International Co., Ltd.* | 424 | ||||||
10,900 | Mitsubishi Estate Co., Ltd. | 170,837 | ||||||
4,100 | Mitsui Fudosan Co., Ltd. | 90,858 | ||||||
247 | Mobimo Holding AG, Registered Shares | 58,784 | ||||||
200 | Morguard Corp. | 25,789 | ||||||
112,351 | New World Development Co., Ltd. | 147,600 | ||||||
2,193 | Nexity SA | 98,974 | ||||||
800 | Nippon Commercial Development Co., Ltd. | 10,393 | ||||||
1,700 | Nisshin Fudosan Co. | 6,993 | ||||||
3,200 | Nomura Real Estate Holdings, Inc. | 58,393 | ||||||
4,837 | Nyfosa AB* | 23,347 | ||||||
1,200 | Open House Co., Ltd. | 40,920 | ||||||
17,900 | Oue, Ltd. | 18,768 | ||||||
48,000 | Oxley Holdings, Ltd. | 10,222 | ||||||
1,449 | Patrizia Immobilien AG | 27,679 | ||||||
2,600 | Polytec Asset Holdings, Ltd. | 225 | ||||||
31,000 | Prospect Co., Ltd. | 6,520 | ||||||
1,314 | PSP Swiss Property AG | 129,427 | ||||||
700 | Raysum Co., Ltd. | 6,119 | ||||||
2,300 | Relo Holdings, Inc. | 54,258 | ||||||
2,615 | S Immo AG | 43,599 | ||||||
1,200 | SAMTY Co., Ltd. | 13,752 | ||||||
9,229 | Savills plc | 82,915 | ||||||
7,103 | Servcorp, Ltd. | 15,205 | ||||||
2,600 | Shinoken Group Co., Ltd. | 15,954 | ||||||
100,800 | Sinarmas Land, Ltd. | 18,488 | ||||||
54,825 | Sino Land Co., Ltd. | 93,309 | ||||||
5,000 | Soundwill Holdings, Ltd. | 6,862 | ||||||
10,929 | St. Modwen Properties plc | 55,065 | ||||||
1,000 | Sumitomo Realty & Development Co., Ltd. | 36,529 | ||||||
1,493 | Summit Real Estate Holdings, Ltd. | 12,325 | ||||||
1,800 | Sun Frontier Fudousan Co., Ltd. | 17,591 | ||||||
13,921 | Sun Hung Kai Properties, Ltd. | 197,399 | ||||||
10,646 | Swire Pacific, Ltd., Class A | 111,847 | ||||||
17,500 | Swire Pacific, Ltd., Class B | 29,059 | ||||||
5,800 | Swire Properties, Ltd. | 20,269 | ||||||
2,643 | Swiss Prime Site AG | 214,222 | ||||||
3,756 | Tag Immobilien AG | 85,727 | ||||||
4,200 | Takara Leben Co., Ltd. | 11,482 | ||||||
3,359 | Tlg Immobilien AG | 93,269 | ||||||
4,500 | Toc Co., Ltd. | 29,865 | ||||||
6,400 | Tokyo Tatemono Co., Ltd. | 65,963 | ||||||
26,300 | Tokyu Fudosan Holdings Corp. | 130,573 | ||||||
2,400 | Tosei Corp. | 18,124 | ||||||
5,276 | Tricon Capital Group, Inc. | 37,454 | ||||||
6,860 | U & I Group plc | 18,204 | ||||||
213 | UBM Development AG | 8,151 | ||||||
22,100 | United Engineers, Ltd. | 41,040 | ||||||
1,200 | Unizo Holdings Co., Ltd. | 22,443 | ||||||
13,100 | UOL Group, Ltd. | 59,289 | ||||||
9,918 | Urban & Civic plc | 33,037 |
See accompanying notes to the financial statements.
30
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
6,654 | Villa World, Ltd. | $ | 8,227 | |||||
2,129 | Vonovia SE | 96,613 | ||||||
4,128 | Wallenstam AB | 38,281 | ||||||
18,324 | Wharf Holdings, Ltd. (The) | 47,540 | ||||||
10,000 | Wharf Real Estate Investment Co., Ltd. | 59,446 | ||||||
12,829 | Wheelock & Co., Ltd. | 72,865 | ||||||
8,400 | Wheelock Properties Singapore*(c) | 12,946 | ||||||
4,678 | Wihlborgs Fastigheter AB | 54,232 | ||||||
20,700 | Wing Tai Holdings, Ltd. | 29,275 | ||||||
17 | Zug Estates Holding AG | 28,996 | ||||||
|
| |||||||
6,968,980 | ||||||||
|
| |||||||
Road & Rail (1.4%): | ||||||||
43,226 | Aurizon Holdings, Ltd. | 130,275 | ||||||
5,353 | Canadian National Railway Co. | 396,711 | ||||||
883 | Canadian Pacific Railway, Ltd. | 156,838 | ||||||
600 | Central Japan Railway Co. | 127,511 | ||||||
1,200 | Chilled & Frozen Logistics Holdings Co., Ltd. | 13,249 | ||||||
44,100 | ComfortDelGro Corp., Ltd. | 69,272 | ||||||
3,352 | DSV A/S | 221,074 | ||||||
1,400 | East Japan Railway Co. | 124,455 | ||||||
8,727 | Europcar Groupe SA(a) | 78,398 | ||||||
79,447 | FirstGroup plc* | 84,317 | ||||||
300 | Fukuyama Transporting Co., Ltd. | 11,526 | ||||||
3,584 | Go-Ahead Group plc | 69,673 | ||||||
1,000 | Hamakyorex Co., Ltd. | 34,319 | ||||||
3,000 | Hankyu Hanshin Holdings, Inc. | 100,484 | ||||||
2,200 | Hitachi Transport System, Ltd. | 62,870 | ||||||
1,100 | Ichinen Holdings Co., Ltd. | 11,601 | ||||||
206 | Jungfraubahn Holding AG, Registered Shares | 26,302 | ||||||
2,500 | Keihin Electric Express Railway Co., Ltd. | 41,192 | ||||||
700 | Keio Corp. | 40,974 | ||||||
900 | Keisei Electric Railway Co., Ltd. | 28,022 | ||||||
1,500 | Kintetsu Corp. | 64,920 | ||||||
9,330 | MTR Corp., Ltd. | 49,106 | ||||||
2,700 | Nagoya Railroad Co., Ltd. | 71,620 | ||||||
2,400 | Nankai Electric Railway Co., Ltd. | 63,065 | ||||||
29,502 | National Express Group plc | 140,359 | ||||||
1,100 | Nippon Express Co., Ltd. | 61,118 | ||||||
3,300 | Nippon Konpo Unyu Soko Co., Ltd. | 78,728 | ||||||
2,100 | Nishi-Nippon Railroad Co., Ltd. | 52,593 | ||||||
3,683 | Nobina AB(a) | 24,938 | ||||||
8,429 | Northgate plc | 40,793 | ||||||
2,800 | Odakyu Electric Railway Co., Ltd. | 61,372 | ||||||
13,948 | Redde plc | 30,136 | ||||||
500 | Sakai Moving Service Co., Ltd. | 27,254 | ||||||
2,300 | Sankyu, Inc. | 103,478 | ||||||
4,000 | Seino Holdings Co., Ltd. | 52,164 | ||||||
11,100 | Senko Co., Ltd. | 83,790 | ||||||
823 | Sixt Leasing Se | 10,780 | ||||||
1,209 | Sixt SE | 95,703 | ||||||
1,659 | Sixt SE | 91,152 | ||||||
2,000 | Sotetsu Holdings, Inc. | 59,193 | ||||||
31,768 | Stagecoach Group plc | 53,557 | ||||||
169 | Stef S.A. | 14,910 | ||||||
6,961 | Tfi International, Inc. | 180,017 | ||||||
2,000 | Tobu Railway Co., Ltd. | 53,653 | ||||||
1,800 | Tokyu Corp. | 29,258 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Road & Rail, continued | ||||||||
300 | Tonami Holdings Co., Ltd. | $ | 15,387 | |||||
3,772 | Tourism Holdings, Ltd. | 13,046 | ||||||
600 | Trancom Co., Ltd. | 31,006 | ||||||
20,000 | Transport International Holdings, Ltd. | 55,100 | ||||||
700 | West Japan Railway Co. | 49,444 | ||||||
|
| |||||||
3,586,703 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (1.0%): | ||||||||
2,600 | Advantest Corp. | 52,387 | ||||||
31,300 | Aem Holdings, Ltd. | 18,740 | ||||||
1,000 | Aixtron SE* | 9,605 | ||||||
2,386 | ASM International NV | 98,189 | ||||||
14,619 | ASM Pacific Technology, Ltd. | 140,095 | ||||||
2,787 | ASML Holding NV, NYS | 433,713 | ||||||
4,404 | BE Semiconductor Industries NV | 92,440 | ||||||
3,163 | Dialog Semiconductor plc* | 82,214 | ||||||
500 | Disco Corp. | 57,716 | ||||||
439 | Elmos Semiconductor AG | 9,708 | ||||||
2,300 | Ferrotec Corp. | 16,629 | ||||||
438 | First Sensor AG | 10,667 | ||||||
17,569 | Infineon Technologies AG | 349,554 | ||||||
2,200 | Japan Material Co., Ltd. | 21,652 | ||||||
800 | Lasertec Corp. | 20,077 | ||||||
1,200 | Megachips Corp. | 25,138 | ||||||
1,090 | Melexis NV | 63,296 | ||||||
3,100 | Micronics Japan Co., Ltd. | 19,761 | ||||||
1,700 | MitsuiHigh-Tec, Inc. | 13,102 | ||||||
167,251 | Rec Silicon ASA* | 11,518 | ||||||
12,100 | Renesas Electronics Corp.* | 55,506 | ||||||
1,100 | ROHM Co., Ltd. | 69,505 | ||||||
1,600 | Sanken Electric Co., Ltd. | 29,663 | ||||||
2,300 | Screen Holdings Co., Ltd. | 97,166 | ||||||
700 | Shibaura Mechatronics Corp. | 21,758 | ||||||
300 | Shindengen Electric Manufacturing Co., Ltd. | 10,321 | ||||||
4,800 | Shinko Electric Industries Co., Ltd. | 30,275 | ||||||
992 | Siltronic AG | 82,035 | ||||||
285 | SMA Solar Technology AG | 5,414 | ||||||
474 | Soitec* | 27,377 | ||||||
8,416 | STMicroelectronics NV | 120,085 | ||||||
3,600 | SUMCO Corp. | 40,599 | ||||||
900 | Tokyo Electron, Ltd. | 103,270 | ||||||
1,400 | Tokyo Seimitsu Co., Ltd. | 35,672 | ||||||
2,300 | Towa Corp. | 12,107 | ||||||
2,312 | Tower Semiconductor, Ltd.* | 34,079 | ||||||
140 | U-Blox AG | 11,286 | ||||||
2,400 | ULVAC, Inc. | 68,991 | ||||||
51,000 | UMS Holdings, Ltd. | 21,132 | ||||||
2,000 | Yamaichi Electronics Co., Ltd. | 21,175 | ||||||
|
| |||||||
2,443,617 | ||||||||
|
| |||||||
Software (0.9%): | ||||||||
1,800 | Access Co., Ltd.* | 13,044 | ||||||
4,557 | Altium, Ltd. | 69,458 | ||||||
1,917 | Aveva Group plc | 58,903 | ||||||
3,461 | Bittium OYJ^ | 30,245 | ||||||
14,854 | BlackBerry, Ltd.* | 105,665 | ||||||
6,852 | Bravura Solutions, Ltd. | 17,875 | ||||||
1,100 | Computer Engineering & Consulting, Ltd. | 18,164 | ||||||
301 | Constellation Software, Inc. | 192,698 |
See accompanying notes to the financial statements.
31
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Software, continued | ||||||||
700 | Cresco, Ltd. | $ | 18,404 | |||||
460 | Dassault Systemes SA | 54,303 | ||||||
1,064 | Descartes Systems Group, Inc.* | 28,153 | ||||||
600 | Enghouse Systems, Ltd. | 29,191 | ||||||
500 | Fuji Soft, Inc. | 18,805 | ||||||
1,400 | Fukui Computer Holdings, Inc. | 17,483 | ||||||
1,403 | Gemalto NV* | 81,410 | ||||||
900 | Gunosy, Inc.* | 22,777 | ||||||
13,353 | Hansen Technology, Ltd. | 32,621 | ||||||
916 | Hilan, Ltd. | 21,561 | ||||||
4,400 | Infomart Corp. | 40,625 | ||||||
13,965 | Infomedia, Ltd. | 11,619 | ||||||
6,854 | IRESS, Ltd. | 53,668 | ||||||
9,063 | Isentia Group, Ltd. | 1,787 | ||||||
400 | Kinaxis, Inc.* | 19,311 | ||||||
1,361 | Lectra | 28,337 | ||||||
172 | Linedata Services | 6,207 | ||||||
1,195 | Magic Software Enterprises, Ltd. | 9,220 | ||||||
9,927 | Micro Focus International plc, ADR | 170,844 | ||||||
16,397 | Myob Group, Ltd. | 38,631 | ||||||
695 | Nemetschek Se | 76,276 | ||||||
546 | NICE Systems, Ltd.* | 59,194 | ||||||
3,485 | Open Text Corp. | 113,611 | ||||||
700 | Oracle Corp. | 44,296 | ||||||
2,053 | Rib Software Se | 27,794 | ||||||
16,033 | Sage Group plc | 122,733 | ||||||
2,059 | SAP AG | 205,069 | ||||||
2,800 | Scala, Inc. | 19,097 | ||||||
2,151 | SimCorp A/S | 147,483 | ||||||
998 | Software AG | 36,111 | ||||||
500 | SRA Holdings | 11,850 | ||||||
2,800 | Systena Corp. | 32,264 | ||||||
8,525 | Technology One, Ltd. | 36,979 | ||||||
1,257 | Temenos Group AG | 151,545 | ||||||
1,300 | Trend Micro, Inc. | 70,366 | ||||||
8,732 | Vista Group International, Ltd. | 21,976 | ||||||
|
| |||||||
2,387,653 | ||||||||
|
| |||||||
Specialty Retail (1.5%): | ||||||||
400 | ABC-Mart, Inc. | 22,157 | ||||||
16,866 | Accent Group, Ltd. | 14,252 | ||||||
10,400 | Adairs, Ltd. | 13,774 | ||||||
2,400 | Adastria Co., Ltd. | 40,733 | ||||||
900 | Alpen Co., Ltd. | 13,780 | ||||||
7,932 | AMA Group, Ltd. | 4,836 | ||||||
2,600 | Aoki Holdings, Inc. | 30,777 | ||||||
2,200 | Aoyama Trading Co., Ltd. | 52,538 | ||||||
1,900 | Arcland Sakamoto Co., Ltd. | 23,189 | ||||||
700 | Autobacs Seven Co., Ltd. | 11,649 | ||||||
1,813 | Autocanada, Inc. | 15,075 | ||||||
11,649 | Automotive Holdings Group, Ltd. | 12,796 | ||||||
19,633 | Bca Marketplace plc | 55,059 | ||||||
4,300 | BIC Camera, Inc. | 54,311 | ||||||
6,038 | Bilia AB, Class A | 56,557 | ||||||
3,245 | Byggmax Group AB | 11,706 | ||||||
30,561 | Card Factory PLC | 67,333 | ||||||
3,919 | Ceconomy AG | 14,100 | ||||||
800 | Chiyoda Co., Ltd. | 12,848 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
18,000 | Chow Sang Sang Holdings International, Ltd. | $ | 26,617 | |||||
31,200 | Chow Tai Fook Jewellery Group, Ltd. | 25,910 | ||||||
2,205 | Clas Ohlson AB | 19,230 | ||||||
4,700 | DCM Holdings Co., Ltd. | 49,319 | ||||||
57,797 | Dixons Carphone plc | 88,226 | ||||||
1,884 | Dufry AG, Registered Shares | 179,004 | ||||||
5,850 | Dunelm Group plc | 40,245 | ||||||
4,900 | Edion Corp. | 48,154 | ||||||
230,000 | Emperor Watch & Jewellery, Ltd. | 6,748 | ||||||
77,300 | Esprit Holdings, Ltd.* | 15,348 | ||||||
400 | Fast Retailing Co., Ltd. | 204,642 | ||||||
104 | Fenix Outdoor International AG | 10,079 | ||||||
665 | Fielmann AG | 41,088 | ||||||
2,300 | Geo Holdings Corp. | 34,760 | ||||||
130,000 | Giordano International, Ltd. | 61,468 | ||||||
1,946 | Grandvision BV(a) | 42,663 | ||||||
3,237 | Greencross, Ltd. | 12,400 | ||||||
878 | Groupe FNAC SA* | 57,245 | ||||||
13,359 | Halfords Group plc | 43,372 | ||||||
5,546 | Hennes & Mauritz AB, Class B^ | 78,815 | ||||||
300 | Hikari Tsushin, Inc. | 47,199 | ||||||
2,200 | Honeys Holdings Co., Ltd. | 15,491 | ||||||
483 | Hornbach Baumarkt AG | 9,423 | ||||||
721 | Hornbach Holding AG & Co. KGaA | 34,028 | ||||||
22,000 | I.T, Ltd. | 11,549 | ||||||
5,100 | Idom, Inc. | 16,826 | ||||||
4,686 | Industria de Diseno Textil SA | 119,444 | ||||||
7,909 | JBHi-Fi, Ltd. | 123,300 | ||||||
27,079 | JD Sports Fashion plc | 119,963 | ||||||
700 | Jin Co., Ltd. | 36,791 | ||||||
1,500 | Joshin Denki Co., Ltd. | 32,774 | ||||||
3,370 | KappAhl AB | 6,602 | ||||||
8,824 | Kathmandu Holdings, Ltd. | 16,176 | ||||||
1,700 | Keiyo Co., Ltd. | 8,126 | ||||||
71,499 | Kingfisher plc | 189,129 | ||||||
900 | Kohnan Shoji Co., Ltd. | 21,985 | ||||||
5,100 | Kojima Co., Ltd.* | 22,039 | ||||||
1,800 | Komehyo Co., Ltd. | 17,772 | ||||||
1,600 | Komeri Co., Ltd. | 34,278 | ||||||
6,600 | K’s Holding Corp. | 64,699 | ||||||
2,366 | Leon’s Furniture, Ltd. | 26,052 | ||||||
300 | Lixil Viva Corp. | 4,226 | ||||||
25,750 | L’occitane International SA | 46,815 | ||||||
19,046 | Lookers plc | 22,364 | ||||||
20,000 | Luk Fook Holdings International, Ltd. | 57,105 | ||||||
2,347 | Matas A/S | 20,930 | ||||||
1,681 | Mekonomen AB | 17,345 | ||||||
2,955 | Mobilezone Holding AG | 32,953 | ||||||
2,608 | Motus Holdings, Ltd.* | 15,994 | ||||||
3,966 | Nick Scali, Ltd. | 14,746 | ||||||
1,900 | Nishimatsuya Chain Co., Ltd. | 15,487 | ||||||
400 | Nitori Co., Ltd. | 49,693 | ||||||
2,300 | Nojima Corp. | 46,067 | ||||||
40,000 | Oriental Watch Holdings | 10,378 | ||||||
700 | Pal Group Holdings Co., Ltd. | 17,219 | ||||||
76,677 | Pendragon plc | 21,986 | ||||||
19,618 | Pets At Home Group plc | 28,869 |
See accompanying notes to the financial statements.
32
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
3,511 | Premier Investments, Ltd. | $ | 36,368 | |||||
2,700 | Right On Co., Ltd. | 20,923 | ||||||
58,000 | SA SA International Holdings, Ltd. | 21,754 | ||||||
1,000 | Sanrio Co., Ltd. | 19,450 | ||||||
1,300 | Shimachu Co., Ltd. | 35,199 | ||||||
800 | Shimamura Co., Ltd. | 61,498 | ||||||
2,900 | Sleep Country Canada Holdings, Inc.(a) | 42,427 | ||||||
9,000 | Sports Direct International* | 27,154 | ||||||
8,650 | Super Retail Group, Ltd. | 42,847 | ||||||
3,968 | Supergroup plc | 23,658 | ||||||
900 | T-Gaia Corp. | 16,953 | ||||||
1,300 | United Arrows, Ltd. | 41,539 | ||||||
2,400 | USS Co., Ltd. | 40,061 | ||||||
240 | Valora Holding AG | 52,652 | ||||||
8,200 | VT Holdings Co., Ltd. | 30,767 | ||||||
4,080 | WHSmith plc | 89,108 | ||||||
700 | Xebio Holdings Co., Ltd. | 8,026 | ||||||
1,990 | XXL ASA^(a) | 6,049 | ||||||
10,200 | Yamada Denki Co., Ltd. | 48,877 | ||||||
400 | Yellow Hat, Ltd. | 9,605 | ||||||
|
| |||||||
3,683,541 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.6%): | ||||||||
6,400 | Brother Industries, Ltd. | 93,954 | ||||||
7,800 | Canon, Inc. | 214,954 | ||||||
400 | EIZO Corp. | 14,758 | ||||||
900 | Elecom Co., Ltd. | 22,850 | ||||||
2,700 | Fujifilm Holdings Corp. | 104,204 | ||||||
1,300 | Fujitsu Frontech, Ltd. | 12,533 | ||||||
1,900 | Hitachi Maxell, Ltd. | 25,164 | ||||||
2,200 | I-O Data Device, Inc. | 21,332 | ||||||
14,600 | Konica Minolta Holdings, Inc. | 131,059 | ||||||
6,508 | Logitech International SA | 203,570 | ||||||
4,900 | Mcj Co., Ltd. | 29,820 | ||||||
5,200 | NEC Corp. | 155,698 | ||||||
1,935 | Neopost | 52,831 | ||||||
1,300 | Noritsu Koki Co., Ltd. | 17,578 | ||||||
13,100 | Ricoh Co., Ltd. | 128,139 | ||||||
600 | Roland Dg Corp. | 11,581 | ||||||
2,197 | S&T AG | 39,842 | ||||||
7,600 | Seiko Epson Corp. | 106,653 | ||||||
1,800 | Toshiba Tec Corp. | 41,845 | ||||||
4,400 | Wacom Co., Ltd. | 18,415 | ||||||
315 | Wincor Nixdorf AG | 20,688 | ||||||
|
| |||||||
1,467,468 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.3%): | ||||||||
936 | Adidas AG | 195,570 | ||||||
1,537 | Aritzia, Inc.* | 18,467 | ||||||
1,500 | ASICS Corp. | 19,015 | ||||||
1,700 | Atsugi Co., Ltd. | 14,770 | ||||||
287 | Bijou Brigitte AG | 11,002 | ||||||
1,383 | Brunello Cucinelli SpA | 47,525 | ||||||
6,313 | Burberry Group plc | 138,872 | ||||||
408 | Canada Goose Holdings, Inc.* | 17,838 | ||||||
3,580 | Compagnie Financiere Richemont SA | 230,171 | ||||||
485 | Delta-Galil Industries, Ltd. | 12,019 | ||||||
1,500 | Descente, Ltd. | 24,423 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Textiles, Apparel & Luxury Goods, continued | ||||||||
829 | Fox Wizel, Ltd. | $ | 18,852 | |||||
900 | Fujibo Holdings, Inc. | 20,122 | ||||||
1,250 | Gerry Weber International AG* | 3,286 | ||||||
2,382 | Gildan Activewear, Inc. | 72,317 | ||||||
280,000 | Global Brands Group Holdings, Ltd.* | 12,624 | ||||||
900 | Gunze, Ltd. | 33,972 | ||||||
189 | Hermes International SA | 104,512 | ||||||
2,775 | Hugo Boss AG | 171,122 | ||||||
465 | IC Group A/S | 2,607 | ||||||
2,800 | Japan Wool Textile Co., Ltd. (The) | 21,231 | ||||||
420 | Kering | 196,539 | ||||||
700 | Kurabo Industries, Ltd. | 15,918 | ||||||
399,238 | Li & Fung, Ltd. | 62,858 | ||||||
2,443 | LVMH Moet Hennessy Louis Vuitton SA | 717,767 | ||||||
5,170 | Moncler SpA | 172,736 | ||||||
1,495 | New Wave Group AB | 7,995 | ||||||
5,000 | Onward Holdings Co., Ltd. | 26,740 | ||||||
9,893 | Ovs SpA*(a) | 12,448 | ||||||
44,000 | Pacific Textiles Holdings, Ltd. | 39,075 | ||||||
2,465 | Pandora A/S | 100,287 | ||||||
6,400 | Prada SpA | 20,917 | ||||||
99 | Puma SE | 48,485 | ||||||
1,469 | Salvatore Ferragamo Italia SpA | 29,811 | ||||||
73,200 | Samsonite International SA(a) | 206,663 | ||||||
500 | Sanyo Shokai, Ltd. | 8,226 | ||||||
1,800 | Seiko Holdings Corp. | 34,377 | ||||||
2,500 | Seiren Co., Ltd. | 41,079 | ||||||
28,000 | Stella International Holdings, Ltd. | 33,279 | ||||||
167 | Swatch Group AG (The), Class B | 48,875 | ||||||
953 | Swatch Group AG (The), Registered Shares | 55,264 | ||||||
1,909 | Ted Baker plc | 37,573 | ||||||
60,000 | Texwinca Holdings, Ltd. | 19,578 | ||||||
404 | Tod’s SpA^ | 19,080 | ||||||
3,200 | Tsi Holdings Co., Ltd. | 20,706 | ||||||
2,700 | Unitika, Ltd.* | 11,346 | ||||||
2,000 | Wacoal Holdings Corp. | 51,650 | ||||||
45,514 | Yue Yuen Industrial Holdings, Ltd. | 145,248 | ||||||
|
| |||||||
3,374,837 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.2%): | ||||||||
2,831 | Aareal Bank AG | 87,486 | ||||||
7,720 | Deutsche Pfandbriefbank AG(a) | 77,291 | ||||||
615 | Equitable Group, Inc. | �� | 26,636 | |||||
1,100 | Firm Capital Mortgage Investment Corp. | 10,597 | ||||||
2,026 | Genworth MI Canada, Inc. | 59,667 | ||||||
16,190 | Genworth Mortgage Insurance AU | 24,872 | ||||||
3,512 | Home Capital Group, Inc.* | 37,050 | ||||||
3,730 | MyState, Ltd. | 11,952 | ||||||
15,593 | Onesavings Bank plc | 69,336 | ||||||
14,878 | Paragon Group of Cos. plc (The) | 72,943 | ||||||
3,600 | Timbercreek Financial Corp.^ | 23,077 | ||||||
|
| |||||||
500,907 | ||||||||
|
| |||||||
Tobacco (0.5%): | ||||||||
24,850 | British American Tobacco plc | 792,325 | ||||||
8,782 | Imperial Tobacco Group plc, Class A | 265,527 | ||||||
5,700 | Japan Tobacco, Inc. | 135,251 | ||||||
3,118 | Scandinavian Tobacco Group A/S(a) | 37,573 | ||||||
2,105 | Swedish Match AB, Class B | 83,035 | ||||||
|
| |||||||
1,313,711 | ||||||||
|
|
See accompanying notes to the financial statements.
33
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Trading Companies & Distributors (1.8%): | ||||||||
2,637 | AddTech AB, Class B | $ | 47,049 | |||||
4,451 | Ahlsell AB(a) | 26,144 | ||||||
1,000 | Alconix Corp. | 9,765 | ||||||
14,372 | Ashtead Group plc | 297,719 | ||||||
1,271 | B&b Tools AB | 12,143 | ||||||
653 | BayWa AG | 15,391 | ||||||
2,337 | Beijer Ref AB | 38,407 | ||||||
12,500 | BOC Aviation, Ltd.(a) | 91,972 | ||||||
537 | Bossard Holding AG | 76,882 | ||||||
5,520 | Brenntag AG | 238,206 | ||||||
4,067 | Bunzl plc | 122,352 | ||||||
4,000 | CanWel Building Materials Group, Ltd. | 13,363 | ||||||
70,000 | China Strategic Holdings, Ltd.* | 454 | ||||||
3,143 | Cramo OYJ | 53,602 | ||||||
400 | Daiichi Jitsugyo Co., Ltd. | 12,788 | ||||||
8,787 | Diploma plc | 134,953 | ||||||
3,513 | Ferguson plc | 224,958 | ||||||
1,100 | Finning International, Inc. | 19,179 | ||||||
6,615 | Grafton Group plc | 54,043 | ||||||
1,700 | Hanwa Co., Ltd. | 44,123 | ||||||
32,140 | Howden Joinery Group plc | 177,726 | ||||||
1,598 | Imcd Group NV | 102,038 | ||||||
900 | Inaba Denki Sangyo Co., Ltd. | 33,829 | ||||||
1,800 | Inabata & Co., Ltd. | 22,758 | ||||||
3,231 | Indutrade AB | 75,166 | ||||||
10,600 | ITOCHU Corp. | 178,803 | ||||||
2,600 | Iwatani Corp. | 86,644 | ||||||
616 | Jacquet Metal Service | 10,859 | ||||||
800 | Jalux, Inc. | 18,424 | ||||||
500 | Japan Pulp & Paper Co., Ltd. | 19,074 | ||||||
700 | Kamei Corp. | 7,970 | ||||||
900 | Kanaden Corp. | 9,484 | ||||||
1,700 | Kanamoto Co., Ltd. | 45,139 | ||||||
4,800 | Kanematsu Corp. | 58,087 | ||||||
5,365 | Kloeckner & Co. SE | 37,230 | ||||||
14,200 | Marubeni Corp. | 98,829 | ||||||
1,100 | Mitani Corp. | 55,363 | ||||||
13,700 | Mitsubishi Corp. | 373,963 | ||||||
16,800 | Mitsui & Co., Ltd. | 260,404 | ||||||
1,271 | Momentum Group AB, Class B | 11,643 | ||||||
1,800 | MonotaRo Co., Ltd. | 43,901 | ||||||
2,600 | Nagase & Co., Ltd. | 35,686 | ||||||
600 | Nichiden Corp. | 8,701 | ||||||
1,100 | Nippon Steel & Sumikin Bussan | 45,708 | ||||||
1,200 | Nishio Rent All Co., Ltd. | 35,841 | ||||||
700 | Onoken Co., Ltd. | 10,258 | ||||||
7,777 | Ramirent OYJ | 48,538 | ||||||
4,501 | Reece, Ltd. | 31,536 | ||||||
14,913 | Rexel SA | 158,990 | ||||||
3,492 | Richelieu Hardware, Ltd. | 58,047 | ||||||
2,804 | Russel Metals, Inc. | 43,816 | ||||||
693 | Scope Metals Group, Ltd. | 17,106 | ||||||
600 | Senshu Electric Co., Ltd. | 15,151 | ||||||
4,146 | Seven Group Holdings, Ltd. | 41,465 | ||||||
12,209 | SIG plc | 16,992 | ||||||
21,100 | Sojitz Corp. | 72,796 | ||||||
164 | Solar A/S | 7,119 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Trading Companies & Distributors, continued | ||||||||
17,864 | Speedy Hire plc | $ | 13,554 | |||||
3,300 | SRG Takamiya Co., Ltd. | 22,896 | ||||||
10,200 | Sumitomo Corp. | 143,911 | ||||||
600 | Tomoe Engineering Co., Ltd. | 13,218 | ||||||
2,572 | Toromont Industries, Ltd. | 102,240 | ||||||
2,100 | Toyota Tsushu Corp. | 61,771 | ||||||
13,568 | Travis Perkins plc | 184,073 | ||||||
1,000 | Trusco Nakayama Corp. | 26,216 | ||||||
800 | Wajax Corp. | 9,717 | ||||||
2,700 | Wakita & Co., Ltd. | 27,313 | ||||||
3,800 | Yamazen Corp. | 35,382 | ||||||
800 | Yuasa Trading Co., Ltd. | 22,827 | ||||||
|
| |||||||
4,571,695 | ||||||||
|
| |||||||
Transportation Infrastructure (0.6%): | ||||||||
833 | Aena SA(a) | 129,137 | ||||||
496 | Aeroports de Paris | 93,769 | ||||||
1,197 | Ansaldo Sts SpA | 17,408 | ||||||
6,220 | Atlantia SpA | 128,787 | ||||||
12,050 | Atlas Arteria, Ltd. | 53,117 | ||||||
10,655 | Auckland International Airport, Ltd. | 51,129 | ||||||
21,398 | BBA Aviation plc | 59,334 | ||||||
4,570 | Enav SpA(a) | 22,211 | ||||||
788 | Flughafen Zuerich AG | 130,195 | ||||||
1,452 | Fraport AG | 103,772 | ||||||
3,270 | Groupe Eurotunnel SA | 43,878 | ||||||
2,440 | Hamburger Hafen und Logistik AG | 48,401 | ||||||
182,200 | Hutchison Port Holdings Trust | 44,521 | ||||||
4,263 | James Fisher & Sons plc | 93,921 | ||||||
400 | Japan Airport Terminal Co., Ltd. | 13,816 | ||||||
1,500 | Kamigumi Co., Ltd. | 30,611 | ||||||
2,100 | Mitsubishi Logistics Corp. | 47,570 | ||||||
400 | Nissin Corp. | 6,547 | ||||||
55,275 | Qube Holdings, Ltd. | 98,861 | ||||||
15,500 | SATS, Ltd. | 53,131 | ||||||
12,600 | Sia Engineering Co., Ltd. | 20,999 | ||||||
1,641 | SIAS SpA | 22,628 | ||||||
3,800 | Sumitomo Warehouse Co., Ltd. (The) | 46,521 | ||||||
9,817 | Sydney Airport | 46,524 | ||||||
10,962 | Transurban Group | 89,976 | ||||||
2,729 | Westshore Terminals Investment Corp. | 41,145 | ||||||
|
| |||||||
1,537,909 | ||||||||
|
| |||||||
Water Utilities (0.1%): | ||||||||
15,034 | Pennon Group plc | 132,553 | ||||||
5,341 | Severn Trent plc | 123,377 | ||||||
45,000 | Siic Environment Holdings, Ltd. | 9,080 | ||||||
11,516 | United Utilities Group plc | 107,821 | ||||||
|
| |||||||
372,831 | ||||||||
|
| |||||||
Wireless Telecommunication Services (1.1%): | ||||||||
3,670 | Cellcom Israel, Ltd.* | 21,752 | ||||||
1,292 | Drillisch AG | 65,714 | ||||||
7,390 | Freenet AG | 143,307 | ||||||
88,000 | Hutchison Telecommunications Holdings, Ltd. | 32,755 | ||||||
27,900 | KDDI Corp. | 664,950 | ||||||
13,000 | M1, Ltd. | 19,925 | ||||||
3,522 | Millicom International Cellular SA, SDR | 223,613 | ||||||
2,104 | Mobistar SA | 41,480 |
See accompanying notes to the financial statements.
34
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Wireless Telecommunication Services, continued | ||||||||
10,600 | NTT DoCoMo, Inc. | $ | 238,055 | |||||
1,000 | Okinawa Cellular Telephone Co. | 32,747 | ||||||
5,106 | Partner Communications Co.* | 25,041 | ||||||
1,708 | Rogers Communications, Inc., Class B | 87,552 | ||||||
35,000 | Smartone Telecommunications Ho | 38,808 | ||||||
4,700 | SoftBank Group Corp. | 309,842 | ||||||
21,800 | StarHub, Ltd. | 27,920 | ||||||
11,993 | Tele2 AB | 153,329 | ||||||
322,083 | Vodafone Group plc | 625,753 | ||||||
|
| |||||||
2,752,543 | ||||||||
|
| |||||||
Total Common Stocks (Cost $270,349,088) | 250,208,595 | |||||||
|
| |||||||
Preferred Stocks (0.4%): | ||||||||
Automobiles (0.4%): | ||||||||
1,600 | Bayerische Motoren Werke AG (BMW), 6.47%, 5/17/19 | 113,856 | ||||||
2,667 | Porsche Automobil Holding SE, 3.41%, 6/28/19 | 157,868 | ||||||
4,515 | Volkswagen AG, 2.85%, 5/15/19 | 718,391 | ||||||
|
| |||||||
990,115 | ||||||||
|
| |||||||
Household Products (0.0%)†: | ||||||||
425 | Henkel AG & Co. KGaA, 1.88%, 4/9/19 | 46,403 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $1,307,187) | 1,036,518 | |||||||
|
| |||||||
Warrant (0.0%)†: | ||||||||
Energy Equipment & Services (0.0%)†: | ||||||||
64,038 | Ezion Holdings, Ltd. | — | ||||||
|
| |||||||
Total Warrant (Cost $—) | — | |||||||
|
| |||||||
Rights (0.0%)†: | ||||||||
Aerospace & Defense (0.0%)†: | ||||||||
1,164,858 | Rolls-Royce Holdings plc, Expires on 1/08/19* | 1,485 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.0%)†: | ||||||||
23,554 | Gvc Holdings — CVR, Expires on 1/07/19* | 3,250 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.0%)†: | ||||||||
11,035 | Repsol SA, Expires on 1/10/19* | 5,057 | ||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Rights, continued | ||||||||
Paper & Forest Products (0.0%)†: | ||||||||
561 | Long Chen Paper Co., Ltd., Expires on 1/08/19* | $ | — | |||||
|
| |||||||
Pharmaceuticals (0.0%)†: | ||||||||
10,450 | Faes Farma SA, Expires on 1/02/19* | 1,226 | ||||||
|
| |||||||
Total Rights (Cost $8,059) | 11,018 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.2%): | ||||||||
504,165 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(d) | 504,165 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $504,165) | 504,165 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (0.5%) | ||||||||
Miscellaneous Investments (0.5%) | ||||||||
1,265,015 | Short-Term Investments(e) | 1,265,015 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 1,265,015 | ||||||
|
| |||||||
Total Investment Securities | 253,025,311 | |||||||
Net other assets (liabilities) — 0.0% | 18,555 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 253,043,866 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
CVR—Contingency Valued Rights
NYS—New York Shares
SDR—Swedish Depository Receipt
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $1,199,479. |
† | Represents less than 0.05%. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(b) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 0.01% of the net assets of the fund. |
(c) | Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 0.34% of the net assets of the Fund. |
(d) | The rate represents the effective yield at December 31, 2018. |
(e) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Amounts shown as “—” are either $0 or rounds to less than $1.
See accompanying notes to the financial statements.
35
AZL DFA International Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
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 December 31, 2018:
(Unaudited)
Country | Percentage | |||
Australia | 6.1 | % | ||
Austria | 0.6 | % | ||
Belgium | 1.1 | % | ||
Bermuda | 0.1 | % | ||
Cambodia | — | %^ | ||
Canada | 8.6 | % | ||
Cayman Islands | — | %^ | ||
China | 0.1 | % | ||
Colombia | — | %^ | ||
Denmark | 1.6 | % | ||
Egypt | — | %^ | ||
European Community | — | %^ | ||
Faroe Islands | — | %^ | ||
Finland | 1.7 | % | ||
France | 7.5 | % | ||
Germany | 7.5 | % | ||
Hong Kong | 2.6 | % | ||
India | — | %^ | ||
Indonesia | — | %^ | ||
Ireland (Republic of) | 1.1 | % | ||
Isle of Man | 0.1 | % | ||
Israel | 0.7 | % | ||
IT | — | %^ | ||
Italy | 2.6 | % | ||
Japan | 23.6 | % |
Country | Percentage | |||
Jersey | — | %^ | ||
Liechtenstein | — | %^ | ||
Luxembourg | 0.5 | % | ||
Macau | — | %^ | ||
Malta | — | %^ | ||
Mexico | — | %^ | ||
Monaco | — | %^ | ||
Netherlands | 3.0 | % | ||
New Zealand | 0.4 | % | ||
Norway | 0.9 | % | ||
Peru | — | %^ | ||
Portugal | 0.2 | % | ||
Republic of Korea (South) | — | %^ | ||
Russian Federation | — | %^ | ||
Singapore | 1.1 | % | ||
South Africa | — | %^ | ||
Spain | 2.6 | % | ||
Sweden | 2.7 | % | ||
Switzerland | 6.7 | % | ||
Taiwan, Province Of China | — | %^ | ||
United Arab Emirates | — | %^ | ||
United Kingdom | 15.3 | % | ||
United States | 1.0 | % | ||
|
| |||
100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
See accompanying notes to the financial statements.
36
AZL DFA International Core Equity Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 273,433,514 | |||
|
| ||||
Investment securities, at value(a) | $ | 253,025,311 | |||
Cash | 4,097 | ||||
Foreign currency, at value (cost $164,056) | 164,658 | ||||
Interest and dividends receivable | 290,999 | ||||
Receivable for investments sold | 135,136 | ||||
Reclaims receivable | 908,148 | ||||
Prepaid expenses | 23,019 | ||||
|
| ||||
Total Assets | 254,551,368 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 23,928 | ||||
Payable for collateral received on loaned securities | 1,265,015 | ||||
Manager fees payable | 160,200 | ||||
Administration fees payable | 1,672 | ||||
Distribution fees payable | 53,400 | ||||
Other accrued liabilities | 3,287 | ||||
|
| ||||
Total Liabilities | 1,507,502 | ||||
|
| ||||
Net Assets | $ | 253,043,866 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 261,236,828 | |||
Total distributable earnings/(losses) | (8,192,962 | ) | |||
|
| ||||
Net Assets | $ | 253,043,866 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 27,496,910 | ||||
Net Asset Value (offering and redemption price per share) | $ | 9.20 | |||
|
|
(a) | Includes securities on loan of $1,199,479. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 7,569,760 | |||
Interest | 785 | ||||
Income from securities lending | 34,347 | ||||
Foreign withholding tax | (817,204 | ) | |||
|
| ||||
Total Investment Income | 6,787,688 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,296,620 | ||||
Administration fees | 281,552 | ||||
Distribution fees | 604,372 | ||||
Custodian fees | 68,922 | ||||
Administrative and compliance services fees | 3,616 | ||||
Transfer agent fees | 4,751 | ||||
Trustee fees | 10,908 | ||||
Professional fees | 10,720 | ||||
Shareholder reports | 2,764 | ||||
Other expenses | 45,931 | ||||
|
| ||||
Total expenses before reductions | 3,330,156 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (483,503 | ) | |||
|
| ||||
Net expenses | 2,846,653 | ||||
|
| ||||
Net Investment Income/(Loss) | 3,941,035 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 9,116,493 | ||||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (59,004,774 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (49,888,281 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (45,947,246 | ) | ||
|
|
See accompanying notes to the financial statements.
37
AZL DFA International Core Equity Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 3,941,035 | $ | 3,805,179 | ||||||
Net realized gains/(losses) on investments | 9,116,493 | 2,741,170 | ||||||||
Change in unrealized appreciation/depreciation on investments | (59,004,774 | ) | 53,201,724 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (45,947,246 | ) | 59,748,073 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (5,579,837 | ) | (3,321,065 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (5,579,837 | ) | (3,321,065 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 59,206,671 | 1,518,775 | ||||||||
Proceeds from dividends reinvested | 5,579,836 | 3,321,065 | ||||||||
Value of shares redeemed | (19,174,409 | ) | (55,005,008 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | 45,612,098 | (50,165,168 | ) | |||||||
|
|
|
| |||||||
Change in net assets | (5,914,985 | ) | 6,261,840 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 258,958,851 | 252,697,011 | ||||||||
|
|
|
| |||||||
End of period | $ | 253,043,866 | $ | 258,958,851 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 6,025,192 | 145,766 | ||||||||
Dividends reinvested | 543,844 | 304,685 | ||||||||
Shares redeemed | (1,661,236 | ) | (5,286,375 | ) | ||||||
|
|
|
| |||||||
Change in shares | 4,907,800 | (4,835,924 | ) | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
38
AZL DFA International Core Equity Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | April 27, 2015 to December 31, 2015(a) | |||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.46 | $ | 9.21 | $ | 9.03 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Investment Activities: | ||||||||||||||||||||
Net Investment Income/(Loss) | 0.17 | 0.19 | 0.11 | 0.08 | ||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (2.16 | ) | 2.21 | 0.17 | (1.05 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total from Investment Activities | (1.99 | ) | 2.40 | 0.28 | (0.97 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||
Net Investment Income | (0.21 | ) | (0.15 | ) | (0.10 | ) | — | |||||||||||||
Net Realized Gains | (0.06 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Dividends | (0.27 | ) | (0.15 | ) | (0.10 | ) | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net Asset Value, End of Period | $ | 9.20 | $ | 11.46 | $ | 9.21 | $ | 9.03 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Return(b) | (17.65 | )% | 26.09 | % | 3.17 | % | (9.70 | )%(c) | ||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 253,044 | $ | 258,959 | $ | 252,697 | $ | 170,273 | ||||||||||||
Net Investment Income/(Loss)(d) | 1.63 | % | 1.48 | % | 1.62 | % | 1.19 | % | ||||||||||||
Expenses Before Reductions(d)(e) | 1.38 | % | 1.41 | % | 1.39 | % | 1.39 | % | ||||||||||||
Expenses Net of Reductions(d) | 1.18 | % | 1.21 | % | 1.19 | % | 1.19 | % | ||||||||||||
Portfolio Turnover Rate | 20 | % | 4 | % | 11 | % | 4 | %(c) |
(a) | For the period April 27, 2015 (commencement of share class) to December 31, 2015. |
(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.
39
AZL DFA International Core Equity Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL DFA International Core Equity Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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.
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 Fund of Funds Trust.
40
AZL DFA International Core Equity Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $3,388 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $1,261,871 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (3,321,065 | ) | ||
From net realized gains | — | ||||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (3,321,065 | ) | ||
|
|
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 Dimensional Fund Advisors LP (“DFA”), DFA 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 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 to limit the annual
41
AZL DFA International Core Equity Fund
Notes to the Financial Statements
December 31, 2018
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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL DFA International Core Equity Fund | 0.95 | % | 1.39 | % |
* | The Manager voluntarily reduced the management fee to 0.75% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $1,920 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
42
AZL DFA International Core Equity Fund
Notes to the Financial Statements
December 31, 2018
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.
For the year ended December 31, 2018, 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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Common Stocks | |||||||||||||||
Aerospace & Defense | $ | 152,951 | $ | 2,591,332 | $ | 2,744,283 | |||||||||
Airlines | 91,499 | 1,024,387 | 1,115,886 | ||||||||||||
Auto Components | 689,843 | 4,908,742 | 5,598,585 | ||||||||||||
Automobiles | 124,598 | 7,090,806 | 7,215,404 | ||||||||||||
Banks | 6,865,965 | 16,591,056 | 23,457,021 | ||||||||||||
Beverages | 658,906 | 2,628,171 | 3,287,077 | ||||||||||||
Biotechnology | 32,377 | 609,667 | 642,044 | ||||||||||||
Capital Markets | 472,349 | 6,934,162 | 7,406,511 | ||||||||||||
Chemicals | 512,236 | 10,739,380 | 11,251,616 | ||||||||||||
Commercial Services & Supplies | 80,133 | 3,858,138 | 3,938,271 | ||||||||||||
Communications Equipment | 54,733 | 663,078 | 717,811 | ||||||||||||
Construction & Engineering | 177,443 | 4,643,222 | 4,820,665 | ||||||||||||
Construction Materials | 378,755 | 1,428,925 | 1,807,680 | ||||||||||||
Containers & Packaging | 139,576 | 1,688,141 | 1,827,717 | ||||||||||||
Distributors | 43,015 | 555,704 | 598,719 | ||||||||||||
Diversified Financial Services | 147,487 | 1,597,310 | 1,744,797 | ||||||||||||
Diversified Telecommunication Services | 63,946 | 5,942,221 | 6,006,167 | ||||||||||||
Electric Utilities | 139,682 | 3,418,805 | 3,558,487 | ||||||||||||
Electronic Equipment, Instruments & Components | 43,845 | 4,647,371 | 4,691,216 | ||||||||||||
Energy Equipment & Services | 382,199 | 1,158,659 | 1,540,858 | ||||||||||||
Entertainment | 104,923 | 1,540,332 | 1,645,255 | ||||||||||||
Food & Staples Retailing | 520,421 | 4,157,533 | 4,677,954 | ||||||||||||
Food Products | 206,098 | 6,642,516 | 6,848,614 | ||||||||||||
Gas Utilities | 103,102 | 831,073 | 934,175 | ||||||||||||
Health Care Equipment & Supplies | 132,962 | 2,813,007 | 2,945,969 | ||||||||||||
Health Care Providers & Services | 177,735 | 1,962,735 | 2,140,470 | ||||||||||||
Hotels, Restaurants & Leisure | 434,757 | 5,394,362 | 5,829,119 | ||||||||||||
Household Durables | 12,923 | 4,905,183 | 4,918,106 | ||||||||||||
Independent Power and Renewable Electricity Producers | 331,334 | 525,910 | 857,244 | ||||||||||||
Insurance | 1,281,210 | 9,679,163 | 10,960,373 | ||||||||||||
IT Services | 88,172 | 3,167,859 | 3,256,031 | ||||||||||||
Leisure Products | 48,114 | 1,012,525 | 1,060,639 | ||||||||||||
Life Sciences Tools & Services | 110,343 | 1,022,692 | 1,133,035 | ||||||||||||
Machinery | 155,472 | 9,438,105 | 9,593,577 | ||||||||||||
Media | 470,741 | 3,506,382 | 3,977,123 | ||||||||||||
Metals & Mining | 4,641,978 | 8,342,688 | 12,984,666 | ||||||||||||
Multiline Retail | 209,874 | 1,212,753 | 1,422,627 | ||||||||||||
Multi-Utilities | 258,557 | 1,960,539 | 2,219,096 | ||||||||||||
Oil, Gas & Consumable Fuels | 8,421,260 | 7,421,813 | 15,843,073 | ||||||||||||
Paper & Forest Products | 434,035 | 1,298,455 | 1,732,490 | ||||||||||||
Personal Products | 733,240 | 933,392 | 1,666,632 | ||||||||||||
Pharmaceuticals | 1,173,816 | 6,151,666 | 7,325,482 | ||||||||||||
Professional Services | 394,229 | 4,050,206 | 4,444,435 | ||||||||||||
Real Estate Management & Development | 379,648 | 6,589,332 | 6,968,980 | ||||||||||||
Road & Rail | 733,566 | 2,853,137 | 3,586,703 | ||||||||||||
Semiconductors & Semiconductor Equipment | 467,792 | 1,975,825 | 2,443,617 |
43
AZL DFA International Core Equity Fund
Notes to the Financial Statements
December 31, 2018
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Software | $ | 659,473 | $ | 1,728,180 | $ | 2,387,653 | |||||||||
Specialty Retail | 99,548 | 3,583,993 | 3,683,541 | ||||||||||||
Technology Hardware, Storage & Peripherals | 203,570 | 1,263,898 | 1,467,468 | ||||||||||||
Textiles, Apparel & Luxury Goods | 108,622 | 3,266,215 | 3,374,837 | ||||||||||||
Thrifts & Mortgage Finance | 157,027 | 343,880 | 500,907 | ||||||||||||
Trading Companies & Distributors | 246,362 | 4,325,333 | 4,571,695 | ||||||||||||
Transportation Infrastructure | 41,145 | 1,496,764 | 1,537,909 | ||||||||||||
Wireless Telecommunication Services | 87,552 | 2,664,991 | 2,752,543 | ||||||||||||
All Other Common Stocks+ | — | 14,545,742 | 14,545,742 | ||||||||||||
Preferred Stocks | — | 1,036,518 | 1,036,518 | ||||||||||||
Warrant | — | — | # | — | |||||||||||
Rights | 3,250 | 7,768 | 11,018 | ||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 1,265,015 | 1,265,015 | ||||||||||||
Unaffiliated Investment Company | 504,165 | — | 504,165 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total Investments | $ | 35,388,554 | $ | 217,636,757 | $ | 253,025,311 | |||||||||
|
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|
|
|
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
# | Represents the interest in securities that were determined to have a value of zero at December 31, 2018. |
5. Security Purchases and Sales
For the year ended December 31, 2018, 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 International Core Equity Fund | $ | 91,622,916 | $ | 49,344,171 |
6. Investment Risks
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.
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 December 31, 2018 is $273,704,179. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 19,138,621 | ||
Unrealized (depreciation) | (39,817,489 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | (20,678,868 | ) | |
|
|
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA International Core Equity Fund | $ | 5,579,837 | $ | — | $ | 5,579,837 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
44
AZL DFA International Core Equity Fund
Notes to the Financial Statements
December 31, 2018
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA International Core Equity Fund | $ | 3,321,065 | $ | — | $ | 3,321,065 |
(a) | Total distributions paid may differ from the 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 DFA International Core Equity Fund | $ | 4,021,179 | $ | 8,467,836 | $ | — | $ | (20,681,977 | ) | $ | (8,192,962 | ) |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and mark-to-market of passive foreign investment companies. |
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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership in excess of 80% 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.
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL DFA International Core Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL DFA International Core Equity Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
46
Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 0.01% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $1,243,462.
47
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 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-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 calling800-SEC-0330.
48
Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
49
Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
50
The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
51
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
52
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
53
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® DFA U.S. Core Equity Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 26
Page 26
Statements of Changes in Net Assets
Page 27
Page 28
Notes to the Financial Statements
Page 29
Report of Independent Registered Public Accounting Firm
Page 34
Other Federal Income Tax Information
Page 35
Page 36
Approval of Investment Advisory and Subadvisory Agreements
Page 37
Information about the Board of Trustees and Officers
Page 40
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 U.S. Core Equity Fund (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® DFA U.S. Core Equity Fund and Dimensional Fund Advisors LP serves as Subadviser to the Fund.
|
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® DFA U.S. Core Equity Fund (the “Fund”) returned-7.52%. That compared to a-5.24% total return for its benchmark, the Russell 3000® Index1.
U.S. equities began the year rallying to record highs. However, concerns about U.S. trade protectionism, rising yields and fears of an overheated economy drove an increase in volatility near the end of the first quarter—annualized realized volatility in the S&P 500 Index2 was 19% for the quarter compared to just 6.6% for 2017. These factors dragged equity markets downwards despite strong employment data, relatively high consumer confidence and healthy macroeconomic data.
Strong U.S. economic data and corporate earnings poweredmid-year gains, but those increases were offset by sharp declines in the energy and information technology sectors during the fourth quarter, when a decline in crude oil prices proved a major setback to the energy sector. Trade tensions and a possible slowdown in economic growth both weighed heavily on investor confidence.
The U.S. Federal Reserve Board raised interest rates four times in 2018 in response to improving economic conditions, however communicated a more hawkish tone for the coming year.
In general,large-cap stocks outperformed theirsmall-cap counterparts for the period. Growth stocks outperformed value among both large- andsmall-cap companies.
The Fund underperformed its benchmark for the12-month period. The Fund’s emphasis onsmall-cap stocks detracted from relative performance, as small-caps underperformedlarge-cap stocks during the year. The Fund’s emphasis on value stocks also detracted, as value stocks underperformed growth during the period.*
Conversely, the Fund’s greater emphasis on stocks with higher profitability added to relative performance, as higher-profitability stocks outperformed lower-profitability stocks.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
1
AZL® DFA U.S. Core Equity Fund (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek long-term capital appreciation. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in equity securities of U.S. companies.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmarks and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | Since Inception (4/27/15) | ||||||||||
AZL®DFA U.S. Core Equity Fund | -7.52 | % | 8.37 | % | 5.25 | % | ||||||
Russell 3000®Index | -5.24 | % | 8.97 | % | 6.37 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®DFA U.S. Core Equity Fund | 1.10 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.54% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 1.20% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Russell 3000® Index, which is an unmanaged broad capitalization index of the top 3,000 U.S. stocks by market capitalization and covers 98% of the U.S. equity investable universe. The index does not reflect the deduction of fees associated with a mutual fund, such as investment fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL DFA U.S. Core Equity 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL DFA U.S. Core Equity Fund | $ | 1,000.00 | $ | 899.40 | $ | 4.02 | 0.84 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL DFA U.S. Core Equity Fund | $ | 1,000.00 | $ | 1,020.97 | $ | 4.28 | 0.84 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Information Technology | 19.2 | % | |||
Financials | 14.7 | ||||
Industrials | 13.6 | ||||
Consumer Discretionary | 13.3 | ||||
Health Care | 12.3 | ||||
Telecommunication Services | 7.6 | ||||
Consumer Staples | 7.1 | ||||
Energy | 4.4 | ||||
Materials | 4.0 | ||||
Utilities | 3.1 | ||||
Real Estate | 0.3 | ||||
|
| ||||
Total Common Stocks | 99.6 | ||||
Rights | — | ^ | |||
Short-Term Securities Held as Collateral for Securities on Loan | 6.8 | ||||
Money Markets | 0.3 | ||||
|
| ||||
Total Investment Securities | 106.7 | ||||
Net other assets (liabilities) | (6.7 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (99.6%): | ||||||||
Aerospace & Defense (2.4%): | ||||||||
1,674 | AAR Corp. | $ | 62,507 | |||||
3,216 | Aerojet Rocketdyne Holdings, Inc.*^ | 113,300 | ||||||
572 | AeroVironment, Inc.* | 38,867 | ||||||
7,585 | Arconic, Inc. | 127,883 | ||||||
712 | Astronics Corp.* | 21,680 | ||||||
415 | Astronics Corp., Class B* | 12,620 | ||||||
1,481 | Axon Enterprise, Inc.* | 64,794 | ||||||
7,209 | Boeing Co. (The) | 2,324,902 | ||||||
3,571 | BWX Technologies, Inc. | 136,519 | ||||||
685 | CPI Aerostructures, Inc.* | 4,363 | ||||||
1,202 | Cubic Corp. | 64,595 | ||||||
2,238 | Curtiss-Wright Corp. | 228,545 | ||||||
625 | Ducommun, Inc.* | 22,700 | ||||||
2,101 | Engility Holdings, Inc.* | 59,794 | ||||||
1,504 | Esterline Technologies Corp.* | 182,661 | ||||||
4,613 | General Dynamics Corp. | 725,210 | ||||||
3,011 | Harris Corp. | 405,431 | ||||||
1,287 | HEICO Corp.^ | 99,717 | ||||||
2,107 | HEICO Corp., Class A | 132,741 | ||||||
4,315 | Hexcel Corp. | 247,422 | ||||||
1,376 | Huntington Ingalls Industries, Inc. | 261,867 | ||||||
4,471 | Kratos Defense & Security Solutions, Inc.*^ | 62,996 | ||||||
1,421 | L3 Technologies, Inc. | 246,771 | ||||||
3,841 | Lockheed Martin Corp. | 1,005,727 | ||||||
2,078 | Mercury Computer Systems, Inc.*^ | 98,269 | ||||||
1,808 | Moog, Inc., Class A | 140,084 | ||||||
343 | National Presto Industries, Inc. | 40,104 | ||||||
2,851 | Northrop Grumman Corp. | 698,210 | ||||||
4,443 | Raytheon Co. | 681,334 | ||||||
2,910 | Spirit AeroSystems Holdings, Inc., Class A | 209,782 | ||||||
597 | Teledyne Technologies, Inc.* | 123,621 | ||||||
7,277 | Textron, Inc. | 334,669 | ||||||
2,316 | The KEYW Holding Corp.*^ | 15,494 | ||||||
1,212 | TransDigm Group, Inc.* | 412,153 | ||||||
2,979 | Triumph Group, Inc.^ | 34,259 | ||||||
14,618 | United Technologies Corp. | 1,556,525 | ||||||
741 | Vectrus, Inc.* | 15,991 | ||||||
6,897 | WESCO Aircraft Holdings, Inc.* | 54,486 | ||||||
|
| |||||||
11,068,593 | ||||||||
|
| |||||||
Air Freight & Logistics (0.8%): | ||||||||
4,941 | Air Transport Services Group, Inc.* | 112,704 | ||||||
1,400 | Atlas Air Worldwide Holdings, Inc.* | 59,066 | ||||||
4,457 | C.H. Robinson Worldwide, Inc. | 374,789 | ||||||
1,026 | Echo Global Logistics, Inc.* | 20,859 | ||||||
4,728 | Expeditors International of Washington, Inc. | 321,930 | ||||||
5,100 | FedEx Corp. | 822,783 | ||||||
1,779 | Forward Air Corp. | 97,578 | ||||||
1,993 | Hub Group, Inc.* | 73,881 | ||||||
3,266 | Radiant Logistics, Inc.* | 13,881 | ||||||
13,551 | United Parcel Service, Inc., Class B | 1,321,628 | ||||||
5,560 | XPO Logistics, Inc.* | 317,142 | ||||||
|
| |||||||
3,536,241 | ||||||||
|
| |||||||
Airlines (0.9%): | ||||||||
5,917 | Alaska Air Group, Inc. | 360,049 | ||||||
998 | Allegiant Travel Co. | 100,020 | ||||||
6,467 | American Airlines Group, Inc.^ | 207,655 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Airlines, continued | ||||||||
1,537 | Copa Holdings SA, Class A | $ | 120,977 | |||||
19,129 | Delta Air Lines, Inc. | 954,538 | ||||||
4,108 | Hawaiian Holdings, Inc.^ | 108,492 | ||||||
16,454 | JetBlue Airways Corp.* | 264,251 | ||||||
2,917 | SkyWest, Inc. | 129,719 | ||||||
14,136 | Southwest Airlines Co. | 657,041 | ||||||
4,475 | Spirit Airlines, Inc.* | 259,192 | ||||||
11,261 | United Continental Holdings, Inc.* | 942,884 | ||||||
|
| |||||||
4,104,818 | ||||||||
|
| |||||||
Auto Components (0.7%): | ||||||||
1,838 | Adient plc | 27,680 | ||||||
5,496 | American Axle & Manufacturing Holdings, Inc.*^ | 61,006 | ||||||
5,936 | Aptiv plc | 365,480 | ||||||
3,249 | Autoliv, Inc.^ | 228,177 | ||||||
6,472 | BorgWarner, Inc. | 224,837 | ||||||
4,411 | Cooper Tire & Rubber Co. | 142,608 | ||||||
1,256 | Cooper-Standard Holding, Inc.* | 78,023 | ||||||
11,930 | Dana Holding Corp. | 162,606 | ||||||
2,123 | Delphi Technologies plc^ | 30,401 | ||||||
1,595 | Dorman Products, Inc.*^ | 143,582 | ||||||
2,274 | Fox Factory Holding Corp.* | 133,870 | ||||||
1,259 | Garrett Motion, Inc.* | 15,536 | ||||||
15,474 | Gentex Corp. | 312,730 | ||||||
2,720 | Gentherm, Inc.*^ | 108,746 | ||||||
12,827 | Goodyear Tire & Rubber Co. | 261,799 | ||||||
1,365 | Horizon Global Corp.* | 1,952 | ||||||
1,483 | LCI Industries^ | 99,064 | ||||||
3,870 | Lear Corp. | 475,468 | ||||||
3,637 | Modine Manufacturing Co.* | 39,316 | ||||||
1,190 | Motorcar Parts of America, Inc.*^ | 19,802 | ||||||
1,436 | Standard Motor Products, Inc. | 69,545 | ||||||
1,582 | Stoneridge, Inc.* | 38,996 | ||||||
275 | Strattec Security Corp. | 7,920 | ||||||
3,917 | Tenneco, Inc. | 107,287 | ||||||
1,187 | Tower International, Inc. | 28,251 | ||||||
3,249 | Veoneer, Inc.*^ | 76,579 | ||||||
2,073 | Visteon Corp.*^ | 124,960 | ||||||
1,621 | VOXX International Corp.*^ | 6,419 | ||||||
|
| |||||||
3,392,640 | ||||||||
|
| |||||||
Automobiles (0.5%): | ||||||||
89,280 | Ford Motor Co. | 682,992 | ||||||
34,459 | General Motors Co. | 1,152,654 | ||||||
7,220 | Harley-Davidson, Inc.^ | 246,346 | ||||||
429 | Tesla Motors, Inc.*^ | 142,771 | ||||||
3,270 | Thor Industries, Inc.^ | 170,040 | ||||||
1,652 | Winnebago Industries, Inc. | 39,995 | ||||||
|
| |||||||
2,434,798 | ||||||||
|
| |||||||
Banks (6.4%): | ||||||||
1,278 | 1st Source Corp. | 51,555 | ||||||
1,429 | Access National Corp. | 30,481 | ||||||
504 | ACNB Corp. | 19,782 | ||||||
661 | American National Bankshares, Inc. | 19,374 | ||||||
587 | American River Bankshares | 8,101 | ||||||
2,615 | Ameris Bancorp | 82,817 | ||||||
704 | Ames National Corp. | 17,896 | ||||||
931 | Arrow Financial Corp.^ | 29,811 |
See accompanying notes to the financial statements.
4
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
5,524 | Associated Banc-Corp. | $ | 109,320 | |||||
1,160 | Atlantic Capital Bancshares, Inc.* | 18,989 | ||||||
2,876 | Banc of California, Inc.^ | 38,280 | ||||||
1,939 | BancFirst Corp. | 96,756 | ||||||
2,831 | Bancorp, Inc. (The)* | 22,535 | ||||||
2,523 | BancorpSouth Bank^ | 65,951 | ||||||
114,320 | Bank of America Corp. | 2,816,844 | ||||||
899 | Bank of Commerce Holdings | 9,853 | ||||||
1,889 | Bank of Hawaii Corp.^ | 127,167 | ||||||
902 | Bank of Marin Bancorp | 37,198 | ||||||
2,324 | Bank of Nt Butterfield & Son, Ltd. (The) | 72,857 | ||||||
4,810 | Bank OZK^ | 109,812 | ||||||
2,950 | BankUnited, Inc. | 88,323 | ||||||
2,031 | Banner Corp. | 108,618 | ||||||
1,189 | Bar Harbor Bankshares | 26,669 | ||||||
7,791 | BB&T Corp. | 337,505 | ||||||
842 | BCB Bancorp, Inc. | 8,816 | ||||||
3,234 | Berkshire Hills Bancorp, Inc. | 87,221 | ||||||
1,112 | Blue Hills BanCorp, Inc. | 23,730 | ||||||
1,780 | BOK Financial Corp. | 130,527 | ||||||
5,245 | Boston Private Financial Holdings, Inc. | 55,440 | ||||||
668 | Bridge Bancorp, Inc. | 17,027 | ||||||
5,107 | Brookline Bancorp, Inc. | 70,579 | ||||||
1,162 | Bryn Mawr Bank Corp. | 39,973 | ||||||
74 | C&F Financial Corp. | 3,938 | ||||||
4,903 | Cadence Bancorp | 82,272 | ||||||
843 | Camden National Corp. | 30,323 | ||||||
1,309 | Capital City Bank Group, Inc. | 30,382 | ||||||
1,092 | Carolina Financial Corp. | 32,312 | ||||||
3,399 | Cathay General Bancorp | 113,968 | ||||||
350 | Cbtx, Inc. | 10,290 | ||||||
4,369 | Centerstate Banks, Inc. | 91,924 | ||||||
2,402 | Central Pacific Financial Corp. | 58,489 | ||||||
933 | Central Valley Community Bancorp | 17,606 | ||||||
273 | Century Bancorp, Inc. | 18,490 | ||||||
2,990 | Chemical Financial Corp.^ | 109,464 | ||||||
377 | Chemung Financial Corp. | 15,574 | ||||||
2,299 | CIT Group, Inc. | 87,983 | ||||||
26,999 | Citigroup, Inc. | 1,405,567 | ||||||
943 | Citizens & Northern Corp.^ | 24,923 | ||||||
5,861 | Citizens Financial Group, Inc. | 174,248 | ||||||
552 | Citizens Holding Co. | 11,476 | ||||||
904 | City Holding Co.^ | 61,101 | ||||||
938 | Civista Bancshares, Inc. | 16,340 | ||||||
735 | CNB Financial Corp. | 16,868 | ||||||
81 | Codorus Valley Bancorp, Inc. | 1,721 | ||||||
56 | Colony Bankcorp, Inc. | 818 | ||||||
3,826 | Columbia Banking System, Inc. | 138,846 | ||||||
2,543 | Comerica, Inc. | 174,679 | ||||||
3,083 | Commerce Bancshares, Inc.^ | 173,789 | ||||||
1,393 | Community Bank System, Inc.^ | 81,212 | ||||||
1,325 | Community Trust Bancorp, Inc. | 52,483 | ||||||
2,266 | ConnectOne Bancorp, Inc. | 41,853 | ||||||
1,451 | Cullen/Frost Bankers, Inc. | 127,601 | ||||||
2,643 | Customers Bancorp, Inc.* | 48,103 | ||||||
5,350 | CVB Financial Corp.^ | 108,231 | ||||||
408 | DNB Financial Corp. | 11,016 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
1,882 | Eagle Bancorp, Inc.* | $ | 91,672 | |||||
4,316 | East West Bancorp, Inc. | 187,875 | ||||||
1,229 | Enterprise Financial Services Corp. | 46,247 | ||||||
682 | Equity Bancshares, Inc.* | 24,041 | ||||||
312 | Evans Bancorp, Inc. | 10,143 | ||||||
13,238 | F.N.B. Corp. | 130,262 | ||||||
1,329 | Farmers National Banc Corp. | 16,931 | ||||||
1,542 | FB Financial Corp.^ | 54,001 | ||||||
1,935 | FCB Financial Holdings, Inc.* | 64,977 | ||||||
1,636 | Fidelity Southern Corp. | 42,569 | ||||||
11,829 | Fifth Third Bancorp | 278,336 | ||||||
1,053 | Financial Institutions, Inc. | 27,062 | ||||||
2,206 | First Bancorp | 72,048 | ||||||
16,004 | First Bancorp | 137,634 | ||||||
814 | First Bancorp, Inc. | 21,408 | ||||||
611 | First Bancshares, Inc. (The) | 18,483 | ||||||
2,931 | First Busey Corp. | 71,927 | ||||||
664 | First Business Financial Services, Inc. | 12,955 | ||||||
592 | First Citizens BancShares, Inc., Class A | 223,214 | ||||||
5,424 | First Commonwealth Financial Corp. | 65,522 | ||||||
1,419 | First Community Bankshares^ | 44,670 | ||||||
5,037 | First Financial Bancorp | 119,478 | ||||||
2,266 | First Financial Bankshares, Inc.^ | 130,726 | ||||||
420 | First Financial Corp. | 16,863 | ||||||
733 | First Financial Northwest, Inc. | 11,340 | ||||||
1,996 | First Foundation, Inc.* | 25,669 | ||||||
1,512 | First Hawaiian, Inc. | 34,035 | ||||||
11,600 | First Horizon National Corp.^ | 152,656 | ||||||
1,244 | First Interstate BancSystem, Class A | 45,481 | ||||||
2,451 | First Merchants Corp. | 83,996 | ||||||
660 | FirstMid-Illinois Bancshares, Inc. | 21,067 | ||||||
4,022 | First Midwest Bancorp, Inc. | 79,676 | ||||||
1,573 | First of Long Island Corp. (The) | 31,381 | ||||||
2,517 | First Republic Bank | 218,727 | ||||||
2,253 | Flushing Financial Corp. | 48,507 | ||||||
322 | Franklin Financial Network, Inc.*^ | 8,491 | ||||||
5,044 | Fulton Financial Corp.^ | 78,081 | ||||||
1,315 | German American Bancorp, Inc. | 36,518 | ||||||
3,017 | Glacier Bancorp, Inc.^ | 119,534 | ||||||
1,035 | Great Southern Bancorp, Inc. | 47,641 | ||||||
3,353 | Great Western Bancorp, Inc. | 104,781 | ||||||
3,020 | Green BanCorp, Inc. | 51,763 | ||||||
1,174 | Guaranty Bancorp | 24,361 | ||||||
4,107 | Hancock Holding Co. | 142,308 | ||||||
2,408 | Hanmi Financial Corp. | 47,438 | ||||||
40 | Hawthorn Bancshares, Inc. | 841 | ||||||
1,853 | Heartland Financial USA, Inc.^ | 81,439 | ||||||
3,063 | Heritage Financial Corp. | 91,032 | ||||||
2,010 | Hertiage Commerce Corp. | 22,793 | ||||||
5,680 | Hilltop Holdings, Inc. | 101,274 | ||||||
4,922 | Home Bancshares, Inc.^ | 80,425 | ||||||
1,540 | Hometrust Bancshares, Inc. | 40,317 | ||||||
6,189 | Hope BanCorp, Inc. | 73,402 | ||||||
2,112 | Horizon Bancorp | 33,327 | ||||||
17,399 | Huntington Bancshares, Inc.^ | 207,396 | ||||||
1,730 | IBERIABANK Corp. | 111,204 | ||||||
673 | Independent Bank Corp. | 47,319 |
See accompanying notes to the financial statements.
5
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
855 | Independent Bank Corp. | $ | 17,972 | |||||
1,543 | Independent Bank Group, Inc.^ | 70,623 | ||||||
3,359 | International Bancshares Corp. | 115,550 | ||||||
10,187 | Investors Bancorp, Inc. | 105,945 | ||||||
50,233 | JPMorgan Chase & Co. | 4,903,744 | ||||||
9,622 | KeyCorp | 142,213 | ||||||
2,859 | Lakeland Bancorp, Inc. | 42,342 | ||||||
1,656 | Lakeland Financial Corp. | 66,505 | ||||||
478 | Landmark Bancorp, Inc. | 10,949 | ||||||
712 | LCNB Corp. | 10,787 | ||||||
2,409 | LegacyTexas Financial Group, Inc.^ | 77,305 | ||||||
2,207 | Live Oak Bancshares, Inc.^ | 32,686 | ||||||
2,041 | M&T Bank Corp. | 292,128 | ||||||
2,571 | Macatawa Bank Corp. | 24,733 | ||||||
2,620 | MB Financial, Inc. | 103,831 | ||||||
1,869 | MBT Financial Corp. | 17,382 | ||||||
1,293 | Mercantile Bank Corp. | 36,540 | ||||||
2,295 | Midland States BanCorp, Inc. | 51,270 | ||||||
638 | MidWestone Financial Group, Inc. | 15,842 | ||||||
570 | MutualFirst Financial, Inc. | 15,145 | ||||||
1,805 | National Bank Holdings Corp. | 55,720 | ||||||
514 | National Bankshares, Inc. | 18,725 | ||||||
806 | National Commerce Corp.* | 29,016 | ||||||
2,353 | NBT Bancorp, Inc.^ | 81,390 | ||||||
373 | Nicolet Bankshares, Inc.*^ | 18,202 | ||||||
510 | Northrim Bancorp, Inc. | 16,764 | ||||||
511 | Norwood Financial Corp. | 16,863 | ||||||
3,309 | OFG Bancorp | 54,466 | ||||||
440 | Ohio Valley Banc Corp. | 15,572 | ||||||
819 | Old Line Bancshares, Inc. | 21,556 | ||||||
7,959 | Old National Bancorp | 122,569 | ||||||
2,225 | Old Second Bancorp, Inc. | 28,925 | ||||||
1,951 | Opus Bank | 38,220 | ||||||
638 | Orrstown Financial Services, Inc. | 11,618 | ||||||
1,205 | Pacific Mercantile Bancorp* | 8,616 | ||||||
3,086 | Pacific Premier Bancorp, Inc.* | 78,755 | ||||||
2,447 | PacWest Bancorp | 81,436 | ||||||
784 | Park National Corp.^ | 66,601 | ||||||
1,165 | Peapack-Gladstone Financial Corp. | 29,335 | ||||||
364 | Penns Woods Bancorp, Inc. | 14,647 | ||||||
608 | Peoples Bancorp of NC | 14,872 | ||||||
1,361 | Peoples Bancorp, Inc. | 40,966 | ||||||
7,396 | People’s United Financial, Inc. | 106,724 | ||||||
749 | People’s Utah BanCorp | 22,582 | ||||||
2,297 | Pinnacle Financial Partners, Inc. | 105,892 | ||||||
5,024 | PNC Financial Services Group, Inc. | 587,355 | ||||||
3,717 | Popular, Inc. | 175,517 | ||||||
878 | Preferred Bank Los Angeles | 38,061 | ||||||
945 | Premier Financial Bancorp, Inc. | 14,090 | ||||||
2,332 | Prosperity Bancshares, Inc.^ | 145,284 | ||||||
606 | QCR Holdings, Inc. | 19,447 | ||||||
487 | Rbb BanCorp | 8,557 | ||||||
17,681 | Regions Financial Corp. | 236,572 | ||||||
2,630 | Renasant Co. | 79,373 | ||||||
1,417 | Republic Bancorp, Inc., Class A | 54,866 | ||||||
2,423 | S & T Bancorp, Inc. | 91,686 | ||||||
148 | Salisbury Bancorp, Inc. | 5,355 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
1,838 | Sandy Spring Bancorp, Inc. | $ | 57,603 | |||||
1,879 | Seacoast Banking Corp.* | 48,892 | ||||||
1,252 | Select Bancorp, Inc.* | 15,500 | ||||||
3,029 | ServisFirst Bancshares, Inc.^ | 96,534 | ||||||
1,113 | Shore Bancshares, Inc. | 16,183 | ||||||
1,028 | Sierra Bancorp | 24,703 | ||||||
933 | Signature Bank | 95,922 | ||||||
4,534 | Simmons First National Corp., Class A | 109,405 | ||||||
1,131 | South State Corp. | 67,803 | ||||||
2,003 | Southern National Bancorp | 26,480 | ||||||
2,264 | Southside Bancshares, Inc.^ | 71,882 | ||||||
1,709 | State Bank Financial Corp. | 36,897 | ||||||
9,153 | Sterling Bancorp^ | 151,116 | ||||||
1,432 | Stock Yards Bancorp, Inc.^ | 46,970 | ||||||
557 | Summit Financial Group, Inc. | 10,756 | ||||||
4,384 | SunTrust Banks, Inc. | 221,129 | ||||||
1,716 | SVB Financial Group* | 325,903 | ||||||
5,664 | Synovus Financial Corp. | 181,191 | ||||||
8,535 | TCF Financial Corp. | 166,347 | ||||||
1,633 | Texas Capital Bancshares, Inc.* | 83,430 | ||||||
1,121 | Tompkins Financial Corp.^ | 84,086 | ||||||
3,776 | TowneBank^ | 90,435 | ||||||
1,726 | TriCo Bancshares | 58,322 | ||||||
2,154 | Tristate Capital Holdings, Inc.*^ | 41,917 | ||||||
1,501 | Triumph BanCorp, Inc.* | 44,580 | ||||||
3,028 | Trustmark Corp. | 86,086 | ||||||
98 | Two River Bancorp | 1,495 | ||||||
20,825 | U.S. Bancorp | 951,702 | ||||||
2,075 | UMB Financial Corp.^ | 126,513 | ||||||
6,312 | Umpqua Holdings Corp.^ | 100,361 | ||||||
2,948 | Union Bankshares Corp. | 83,222 | ||||||
4,048 | United Bankshares, Inc.^ | 125,933 | ||||||
4,642 | United Community Banks, Inc. | 99,617 | ||||||
1,190 | United Security Bancshares | 11,400 | ||||||
42 | Unity Bancorp, Inc. | 872 | ||||||
1,914 | Univest Corp. | 41,285 | ||||||
8,196 | Valley National Bancorp^ | 72,780 | ||||||
1,496 | Veritex Holdings, Inc.* | 31,984 | ||||||
1,113 | Washington Trust Bancorp | 52,901 | ||||||
2,517 | Webster Financial Corp. | 124,063 | ||||||
67,901 | Wells Fargo & Co. | 3,128,877 | ||||||
3,156 | WesBanco, Inc. | 115,794 | ||||||
1,062 | West Bancorp | 20,274 | ||||||
1,687 | Westamerica Bancorp^ | 93,932 | ||||||
4,770 | Western Alliance Bancorp* | 188,367 | ||||||
2,102 | Wintrust Financial Corp. | 139,762 | ||||||
2,669 | Zions Bancorp^ | 108,735 | ||||||
|
| |||||||
28,956,589 | ||||||||
|
| |||||||
Beverages (1.7%): | ||||||||
466 | Boston Beer Co., Inc. (The), Class A*^ | 112,231 | ||||||
1,635 | Brown-Forman Corp., Class A | 77,532 | ||||||
5,493 | Brown-Forman Corp., Class B | 261,357 | ||||||
545 | Coca-Cola Bottling Co. Consolidated | 96,672 | ||||||
65,850 | Coca-Cola Co. (The) | 3,117,997 | ||||||
1,620 | Constellation Brands, Inc., Class C | 260,528 | ||||||
787 | Craft Brewers Alliance, Inc.* | 11,262 | ||||||
5,609 | Keurig Dr Pepper, Inc. | 143,815 |
See accompanying notes to the financial statements.
6
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Beverages, continued | ||||||||
615 | MGP Ingredients, Inc.^ | $ | 35,086 | |||||
3,243 | Molson Coors Brewing Co., Class B | 182,127 | ||||||
5,703 | Monster Beverage Corp.* | 280,702 | ||||||
1,132 | National Beverage Corp. | 81,244 | ||||||
27,782 | PepsiCo, Inc. | 3,069,355 | ||||||
876 | Primo Water Corp.* | 12,273 | ||||||
|
| |||||||
7,742,181 | ||||||||
|
| |||||||
Biotechnology (2.3%): | ||||||||
21,107 | AbbVie, Inc. | 1,945,854 | ||||||
3,743 | Achillion Pharmaceuticals, Inc.* | 5,951 | ||||||
3,866 | Acorda Therapeutics, Inc.*^ | 60,232 | ||||||
436 | Agios Pharmaceuticals, Inc.*^ | 20,104 | ||||||
1,589 | Alder Biopharmaceuticals, Inc.*^ | 16,287 | ||||||
1,278 | Alexion Pharmaceuticals, Inc.* | 124,426 | ||||||
1,012 | Alkermes plc* | 29,864 | ||||||
838 | Alnylam Pharmaceuticals, Inc.* | 61,099 | ||||||
2,354 | AMAG Pharmaceuticals, Inc.* | 35,757 | ||||||
11,115 | Amgen, Inc. | 2,163,756 | ||||||
1,924 | Amicus Therapeutics, Inc.* | 18,432 | ||||||
324 | Anaptysbio, Inc.* | 20,668 | ||||||
1,084 | Aptevo Therapeutics, Inc.* | 1,377 | ||||||
2,151 | Arena Pharmaceuticals, Inc.* | 83,781 | ||||||
1,907 | Atara Biotherapeutics, Inc.* | 66,249 | ||||||
2,471 | Audentes Therapeutics, Inc.* | 52,682 | ||||||
3,770 | Biogen Idec, Inc.* | 1,134,468 | ||||||
1,108 | BioMarin Pharmaceutical, Inc.* | 94,346 | ||||||
506 | Bluebird Bio, Inc.*^ | 50,195 | ||||||
14,276 | Celgene Corp.* | 914,949 | ||||||
356 | Clovis Oncology, Inc.*^ | 6,394 | ||||||
718 | Concert Pharmaceuticals, Inc.* | 9,011 | ||||||
1,545 | Deciphera Pharmaceuticals, Inc.*^ | 32,430 | ||||||
233 | Eagle Pharmaceuticals, Inc.* | 9,388 | ||||||
1,249 | Emergent Biosolutions, Inc.* | 74,041 | ||||||
1,013 | Enanta Pharmaceuticals, Inc.* | 71,751 | ||||||
785 | Exact Sciences Corp.*^ | 49,534 | ||||||
4,865 | Exelixis, Inc.* | 95,695 | ||||||
544 | Fibrogen, Inc.* | 25,176 | ||||||
2,400 | Five Prime Therapeutics, Inc.* | 22,320 | ||||||
1,432 | G1 Therapeutics, Inc.* | 27,423 | ||||||
23,378 | Gilead Sciences, Inc. | 1,462,294 | ||||||
1,929 | Global Blood Therapeutics, Inc.*^ | 79,185 | ||||||
779 | Glycomimetics Industries*^ | 7,377 | ||||||
2,000 | Halozyme Therapeutics, Inc.* | 29,260 | ||||||
966 | Incyte Corp.* | 61,428 | ||||||
1,821 | Insmed, Inc.*^ | 23,892 | ||||||
2,177 | Intellia Therapeutics, Inc.* | 29,716 | ||||||
945 | Ionis Pharmaceuticals, Inc.*^ | 51,087 | ||||||
2,043 | Iovance Biotherapeutics, Inc.* | 18,081 | ||||||
1,605 | Karyopharm Therapeutics, Inc.*^ | 15,039 | ||||||
526 | Ligand Pharmaceuticals, Inc., Class B* | 71,378 | ||||||
1,449 | Macrogenics, Inc.* | 18,402 | ||||||
2,391 | Mimedx Group, Inc.* | 4,280 | ||||||
4,868 | Momenta Pharmaceuticals, Inc.* | 53,743 | ||||||
3,689 | Myriad Genetics, Inc.* | 107,239 | ||||||
1,067 | Neurocrine Biosciences, Inc.* | 76,194 | ||||||
10,235 | OPKO Health, Inc.* | 30,807 | ||||||
9,565 | PDL BioPharma, Inc.*^ | 27,739 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Biotechnology, continued | ||||||||
1,720 | Prothena Corp. plc* | $ | 17,716 | |||||
1,098 | Regeneron Pharmaceuticals, Inc.* | 410,103 | ||||||
1,233 | Regenxbio, Inc.* | 51,724 | ||||||
1,271 | Repligen Corp.* | 67,033 | ||||||
1,882 | Retrophin, Inc.*^ | 42,590 | ||||||
1,053 | Rhythm Pharmaceuticals, Inc.*^ | 28,305 | ||||||
6,888 | Sanagamo Therapeutics, Inc.*^ | 79,074 | ||||||
1,210 | Seattle Genetics, Inc.* | 68,559 | ||||||
2,797 | United Therapeutics Corp.* | 304,593 | ||||||
841 | Vertex Pharmaceuticals, Inc.* | 139,362 | ||||||
1,496 | Xencor, Inc.* | 54,095 | ||||||
|
| |||||||
10,753,935 | ||||||||
|
| |||||||
Building Products (0.6%): | ||||||||
3,264 | A.O. Smith Corp. | 139,373 | ||||||
3,058 | AAON, Inc.^ | 107,213 | ||||||
2,557 | Advanced Drainage Systems, Inc. | 62,007 | ||||||
2,889 | Allegion plc^ | 230,282 | ||||||
1,083 | American Woodmark Corp.* | 60,301 | ||||||
1,885 | Apogee Enterprises, Inc.^ | 56,267 | ||||||
1,778 | Armstrong Flooring, Inc.* | 21,052 | ||||||
2,857 | Armstrong World Industries, Inc. | 166,306 | ||||||
7,785 | Builders FirstSource, Inc.* | 84,934 | ||||||
2,571 | Continental Building Products, Inc.* | 65,432 | ||||||
889 | Csw Industrials, Inc.* | 42,983 | ||||||
4,434 | Fortune Brands Home & Security, Inc. | 168,448 | ||||||
1,576 | Gibraltar Industries, Inc.* | 56,090 | ||||||
2,893 | Griffon Corp. | 30,232 | ||||||
1,209 | Insteel Industries, Inc. | 29,355 | ||||||
1,115 | Jeld-Wen Holding, Inc.*^ | 15,844 | ||||||
7,904 | Johnson Controls International plc | 234,353 | ||||||
1,070 | Lennox International, Inc. | 234,180 | ||||||
6,980 | Masco Corp. | 204,095 | ||||||
1,451 | Masonite International Corp.* | 65,048 | ||||||
3,362 | NCI Building Systems, Inc.* | 24,375 | ||||||
5,086 | Owens Corning, Inc. | 223,682 | ||||||
1,648 | Patrick Industries, Inc.* | 48,797 | ||||||
3,615 | PGT, Inc.* | 57,298 | ||||||
1,925 | Quanex Building Products Corp.^ | 26,161 | ||||||
2,098 | Resideo Technologies, Inc.* | 43,114 | ||||||
2,112 | Simpson Manufacturing Co., Inc. | 114,323 | ||||||
2,846 | Trex Co., Inc.* | 168,939 | ||||||
3,399 | Universal Forest Products, Inc. | 88,238 | ||||||
7,225 | USG Corp. | 308,218 | ||||||
|
| |||||||
3,176,940 | ||||||||
|
| |||||||
Capital Markets (2.5%): | ||||||||
1,453 | Affiliated Managers Group, Inc. | 141,580 | ||||||
2,626 | Ameriprise Financial, Inc. | 274,076 | ||||||
1,834 | Ares Management Corp., Class A | 32,609 | ||||||
2,502 | Artisan Partners Asset Management, Inc., Class A | 55,319 | ||||||
10,685 | Bank of New York Mellon Corp. (The) | 502,943 | ||||||
14,937 | BGC Partners, Inc., Class A | 77,224 | ||||||
1,444 | BlackRock, Inc., Class A | 567,232 | ||||||
2,377 | Blucora, Inc.* | 63,323 | ||||||
3,965 | BrightSphere Investment Group plc | 42,346 | ||||||
1,779 | CBOE Holdings, Inc. | 174,040 | ||||||
11,820 | Charles Schwab Corp. (The) | 490,885 |
See accompanying notes to the financial statements.
7
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
2,686 | CME Group, Inc. | $ | 505,290 | |||||
2,934 | Cohen & Steers, Inc.^ | 100,695 | ||||||
190 | Diamond Hill Investment Group | 28,396 | ||||||
2,917 | Donnelley Financial Solutions, Inc.* | 40,926 | ||||||
5,873 | E*TRADE Financial Corp. | 257,707 | ||||||
3,982 | Eaton Vance Corp. | 140,087 | ||||||
1,120 | FactSet Research Systems, Inc. | 224,146 | ||||||
6,954 | Federated Investors, Inc., Class B^ | 184,629 | ||||||
5,134 | Franklin Resources, Inc. | 152,274 | ||||||
3,237 | Gain Capital Holdings, Inc.^ | 19,940 | ||||||
388 | GAMCO Investors, Inc., Class A | 6,553 | ||||||
4,352 | Goldman Sachs Group, Inc. (The) | 727,002 | ||||||
1,743 | Greenhill & Co., Inc. | 42,529 | ||||||
211 | Hennessy Advisors, Inc. | 2,112 | ||||||
1,166 | Houlihan Lokey, Inc. | 42,909 | ||||||
5,199 | Interactive Brokers Group, Inc., Class A | 284,125 | ||||||
4,301 | Intercontinental Exchange, Inc. | 323,994 | ||||||
597 | INTL FCStone, Inc.* | 21,838 | ||||||
13,284 | Invesco, Ltd.^ | 222,374 | ||||||
2,572 | Investment Technology Group, Inc. | 77,777 | ||||||
4,134 | Janus Henderson Group plc | 85,657 | ||||||
10,552 | Ladenburg Thalmann Financial Services, Inc. | 24,586 | ||||||
3,497 | Lazard, Ltd., Class A | 129,074 | ||||||
2,912 | Legg Mason, Inc. | 74,285 | ||||||
6,569 | LPL Financial Holdings, Inc. | 401,235 | ||||||
937 | MarketAxess Holdings, Inc. | 197,997 | ||||||
1,429 | Moelis & Co., Class A | 49,129 | ||||||
2,716 | Moody’s Corp. | 380,349 | ||||||
18,789 | Morgan Stanley | 744,984 | ||||||
2,489 | Morningstar, Inc. | 273,392 | ||||||
2,721 | MSCI, Inc., Class A | 401,157 | ||||||
5,365 | NASDAQ OMX Group, Inc. (The) | 437,623 | ||||||
3,367 | Northern Trust Corp. | 281,448 | ||||||
1,024 | Oppenheimer Holdings, Class A | 26,163 | ||||||
784 | Piper Jaffray Cos., Inc. | 51,619 | ||||||
940 | PJT Partners, Inc. | 36,434 | ||||||
1,113 | Pzena Investment Management, Inc. | 9,627 | ||||||
4,478 | Raymond James Financial, Inc. | 333,208 | ||||||
4,992 | S&P Global, Inc. | 848,340 | ||||||
3,335 | SEI Investments Co. | 154,077 | ||||||
660 | Silvercrest Asset Management Group, Inc., Class A | 8,732 | ||||||
2,672 | State Street Corp. | 168,523 | ||||||
2,637 | Stifel Financial Corp. | 109,225 | ||||||
4,497 | T. Rowe Price Group, Inc. | 415,163 | ||||||
2,299 | TD Ameritrade Holding Corp. | 112,559 | ||||||
1,429 | Virtu Financial, Inc.^ | 36,811 | ||||||
438 | Virtus Investment Partners, Inc.^ | 34,790 | ||||||
5,362 | Waddell & Reed Financial, Inc., Class A^ | 96,945 | ||||||
425 | Westwood Holdings, Inc. | 14,450 | ||||||
7,874 | WisdomTree Investments, Inc. | 52,362 | ||||||
|
| |||||||
11,816,824 | ||||||||
|
| |||||||
Chemicals (2.4%): | ||||||||
2,746 | AdvanSix, Inc.* | 66,838 | ||||||
1,955 | Air Products & Chemicals, Inc. | 312,898 | ||||||
905 | Albemarle Corp. | 69,748 | ||||||
1,157 | American Vanguard Corp. | 17,575 | ||||||
2,194 | Ashland Global Holdings, Inc. | 155,686 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
3,752 | Axalta Coating Systems, Ltd.* | $ | 87,872 | |||||
1,138 | Balchem Corp. | 89,162 | ||||||
2,532 | Cabot Corp. | 108,724 | ||||||
3,943 | Celanese Corp., Series A | 354,752 | ||||||
4,613 | CF Industries Holdings, Inc. | 200,712 | ||||||
310 | Chase Corp. | 31,016 | ||||||
4,033 | Chemours Co. (The) | 113,811 | ||||||
578 | Core Molding Technologies, Inc.^ | 4,110 | ||||||
24,644 | DowDuPont, Inc. | 1,317,962 | ||||||
6,938 | Eastman Chemical Co. | 507,237 | ||||||
3,888 | Ecolab, Inc. | 572,897 | ||||||
5,990 | Ferro Corp.* | 93,923 | ||||||
2,310 | FMC Corp. | 170,848 | ||||||
3,222 | Futurefuel Corp. | 51,101 | ||||||
3,313 | GCP Applied Technologies, Inc.*^ | 81,334 | ||||||
1,438 | H.B. Fuller Co. | 61,359 | ||||||
9,602 | Huntsman Corp. | 185,223 | ||||||
2,062 | Ingevity Corp.* | 172,569 | ||||||
1,620 | Innophos Holdings, Inc. | 39,739 | ||||||
1,433 | Innospec, Inc. | 88,502 | ||||||
1,701 | International Flavor & Fragrances, Inc. | 228,393 | ||||||
14,982 | Intrepid Potash, Inc.* | 38,953 | ||||||
783 | Koppers Holdings, Inc.* | 13,342 | ||||||
2,348 | Kraton Performance Polymers, Inc.* | 51,280 | ||||||
4,741 | Kronos Worldwide, Inc.^ | 54,616 | ||||||
7,814 | Linde plc | 1,219,296 | ||||||
1,233 | LSB Industries, Inc.*^ | 6,806 | ||||||
7,315 | LyondellBasell Industries NV, Class A | 608,315 | ||||||
1,816 | Minerals Technologies, Inc. | 93,233 | ||||||
5,492 | Mosaic Co. (The) | 160,421 | ||||||
703 | NewMarket Corp.^ | 289,699 | ||||||
7,103 | Olin Corp. | 142,841 | ||||||
2,346 | Omnova Solutions, Inc.* | 17,196 | ||||||
14,316 | Platform Speciality Products Corp.* | 147,884 | ||||||
5,368 | PolyOne Corp. | 153,525 | ||||||
4,717 | PPG Industries, Inc. | 482,219 | ||||||
1,630 | PQ Group Holdings, Inc.* | 24,140 | ||||||
368 | Quaker Chemical Corp. | 65,397 | ||||||
3,631 | Rayonier Advanced Materials, Inc.^ | 38,670 | ||||||
3,781 | RPM International, Inc. | 222,247 | ||||||
2,600 | ScottsMiracle-Gro Co. (The)^ | 159,796 | ||||||
1,975 | Sensient Technologies Corp.^ | 110,304 | ||||||
1,707 | Sherwin Williams Co. | 671,636 | ||||||
1,689 | Stepan Co. | 124,986 | ||||||
1,627 | Trecora Resources*^ | 12,691 | ||||||
1,070 | Tredegar Corp. | 16,970 | ||||||
3,102 | Trinseo SA | 142,010 | ||||||
4,906 | Tronox, Ltd., Class A | 38,169 | ||||||
6,023 | Valvoline, Inc. | 116,545 | ||||||
3,026 | W.R. Grace & Co. | 196,418 | ||||||
1,636 | Westlake Chemical Corp. | 108,254 | ||||||
|
| |||||||
10,711,850 | ||||||||
|
| |||||||
Commercial Services & Supplies (1.1%): | ||||||||
3,793 | ABM Industries, Inc.^ | 121,793 | ||||||
9,093 | ACCO Brands Corp. | 61,651 | ||||||
3,173 | Advanced Disposal Services, Inc.* | 75,962 | ||||||
4,271 | ARC Document Solutions, Inc.* | 8,756 |
See accompanying notes to the financial statements.
8
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Commercial Services & Supplies, continued | ||||||||
2,684 | Brady Corp., Class A | $ | 116,647 | |||||
2,036 | Brink’s Co. (The)^ | 131,627 | ||||||
1,886 | Casella Waste Systems, Inc.* | 53,732 | ||||||
2,003 | CECO Environmental Corp.* | 13,520 | ||||||
1,412 | Cimpress NV* | 146,029 | ||||||
2,280 | Cintas Corp. | 383,017 | ||||||
5,206 | Civeo Corp.* | 7,445 | ||||||
3,774 | Clean Harbors, Inc.* | 186,247 | ||||||
6,839 | Copart, Inc.* | 326,767 | ||||||
7,746 | Covanta Holding Corp.^ | 103,951 | ||||||
3,160 | Deluxe Corp. | 121,470 | ||||||
1,613 | Ennis, Inc. | 31,050 | ||||||
2,517 | Essendant, Inc. | 31,664 | ||||||
2,148 | Healthcare Services Group, Inc.^ | 86,307 | ||||||
1,042 | Heritage-Crystal Clean, Inc.* | 23,976 | ||||||
3,470 | Herman Miller, Inc. | 104,968 | ||||||
2,671 | HNI Corp. | 94,634 | ||||||
4,002 | Interface, Inc. | 57,029 | ||||||
5,118 | KAR Auction Services, Inc. | 244,231 | ||||||
2,829 | Kimball International, Inc., Class B | 40,144 | ||||||
3,654 | Knoll, Inc. | 60,218 | ||||||
1,417 | LSC Communications, Inc. | 9,919 | ||||||
1,875 | Matthews International Corp., Class A | 76,163 | ||||||
2,011 | McGrath Rentcorp | 103,526 | ||||||
2,762 | Mobile Mini, Inc. | 87,694 | ||||||
1,035 | MSA Safety, Inc. | 97,569 | ||||||
1,003 | Multi-Color Corp.^ | 35,195 | ||||||
1,552 | NL Industries, Inc.* | 5,448 | ||||||
1,763 | PICO Holdings, Inc.* | 16,114 | ||||||
8,238 | Pitney Bowes, Inc. | 48,687 | ||||||
2,606 | Quad Graphics, Inc. | 32,106 | ||||||
5,773 | Republic Services, Inc., Class A | 416,175 | ||||||
6,606 | Rollins, Inc.^ | 238,477 | ||||||
2,114 | RR Donnelley & Sons Co.^ | 8,371 | ||||||
1,467 | SP Plus Corp.* | 43,335 | ||||||
5,403 | Steelcase, Inc., Class A | 80,126 | ||||||
1,563 | Stericycle, Inc.*^ | 57,346 | ||||||
1,534 | Team, Inc.* | 22,473 | ||||||
2,396 | Tetra Tech, Inc. | 124,041 | ||||||
542 | UniFirst Corp. | 77,544 | ||||||
709 | US Ecology, Inc. | 44,653 | ||||||
1,003 | Viad Corp. | 50,240 | ||||||
824 | Vse Corp. | 24,646 | ||||||
9,161 | Waste Management, Inc. | 815,236 | ||||||
|
| |||||||
5,147,919 | ||||||||
|
| |||||||
Communications Equipment (1.2%): | ||||||||
1,772 | Acacia Communications, Inc.* | 67,336 | ||||||
2,109 | ADTRAN, Inc. | 22,651 | ||||||
752 | Applied Optoelectronics, Inc.*^ | 11,603 | ||||||
976 | Arista Networks, Inc.* | 205,643 | ||||||
8,194 | ARRIS International plc* | 250,491 | ||||||
1,000 | Black Box Corp.* | 1,080 | ||||||
1,829 | CalAmp Corp.* | 23,795 | ||||||
2,202 | Calix, Inc.* | 21,470 | ||||||
4,939 | Ciena Corp.* | 167,481 | ||||||
59,474 | Cisco Systems, Inc. | 2,577,008 | ||||||
6,102 | CommScope Holding Co., Inc.* | 100,012 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Communications Equipment, continued | ||||||||
316 | Communications Systems, Inc. | $ | 641 | |||||
1,822 | Comtech Telecommunications Corp. | 44,347 | ||||||
1,262 | Digi International, Inc.* | 12,734 | ||||||
1,548 | EchoStar Corp., Class A* | 56,843 | ||||||
1,189 | EMCORE Corp.* | 4,994 | ||||||
2,598 | Extreme Networks, Inc.* | 15,848 | ||||||
1,778 | F5 Networks, Inc.* | 288,089 | ||||||
5,961 | Finisar Corp.*^ | 128,758 | ||||||
7,060 | Harmonic, Inc.* | 33,323 | ||||||
7,816 | Infinera Corp.*^ | 31,186 | ||||||
2,491 | InterDigital, Inc. | 165,477 | ||||||
10,987 | Juniper Networks, Inc. | 295,660 | ||||||
909 | KVH Industries, Inc.* | 9,354 | ||||||
1,533 | Lumentum Holdings, Inc.* | 64,401 | ||||||
3,350 | Motorola Solutions, Inc. | 385,384 | ||||||
1,304 | NETGEAR, Inc.* | 67,847 | ||||||
3,156 | NetScout Systems, Inc.*^ | 74,576 | ||||||
360 | Palo Alto Networks, Inc.* | 67,806 | ||||||
1,949 | Plantronics, Inc. | 64,512 | ||||||
591 | Quantenna Communications, Inc.* | 8,481 | ||||||
3,679 | Ribbon Communications, Inc.* | 17,733 | ||||||
2,348 | Ubiquiti Networks, Inc. | 233,415 | ||||||
2,004 | ViaSat, Inc.*^ | 118,136 | ||||||
8,628 | Viavi Solutions, Inc.* | 86,711 | ||||||
|
| |||||||
5,724,826 | ||||||||
|
| |||||||
Construction & Engineering (0.4%): | ||||||||
5,468 | Aecom Technology Corp.* | 144,902 | ||||||
800 | Aegion Corp.*^ | 13,056 | ||||||
2,172 | Ameresco, Inc., Class A* | 30,625 | ||||||
1,719 | Arcosa, Inc.* | 47,599 | ||||||
1,245 | Argan, Inc. | 47,111 | ||||||
2,532 | Comfort Systems USA, Inc. | 110,598 | ||||||
2,025 | Dycom Industries, Inc.*^ | 109,431 | ||||||
2,804 | EMCOR Group, Inc. | 167,370 | ||||||
2,848 | Fluor Corp. | 91,706 | ||||||
1,914 | Granite Construction, Inc.^ | 77,096 | ||||||
5,343 | Great Lakes Dredge & Dock Co.* | 35,371 | ||||||
1,221 | IES Holdings, Inc.* | 18,987 | ||||||
2,447 | Jacobs Engineering Group, Inc. | 143,052 | ||||||
8,226 | KBR, Inc. | 124,871 | ||||||
3,504 | MasTec, Inc.*^ | 142,122 | ||||||
1,578 | MYR Group, Inc.* | 44,452 | ||||||
574 | NV5 Holdings, Inc.* | 34,756 | ||||||
2,101 | Orion Marine Group, Inc.* | 9,013 | ||||||
4,194 | Primoris Services Corp. | 80,231 | ||||||
5,039 | Quanta Services, Inc. | 151,673 | ||||||
2,791 | Tutor Perini Corp.*^ | 44,572 | ||||||
928 | Valmont Industries, Inc. | 102,962 | ||||||
1,311 | Williams Industrial Services Group, Inc.*^ | 3,068 | ||||||
3,970 | Willscot Corp.* | 37,397 | ||||||
|
| |||||||
1,812,021 | ||||||||
|
| |||||||
Construction Materials (0.1%): | ||||||||
1,483 | Eagle Materials, Inc., Class A | 90,507 | ||||||
1,291 | Martin Marietta Materials, Inc.^ | 221,885 | ||||||
5,185 | Summit Materials, Inc., Class A*^ | 64,294 | ||||||
1,308 | U.S. Concrete, Inc.*^ | 46,146 |
See accompanying notes to the financial statements.
9
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Construction Materials, continued | ||||||||
353 | U.S. Lime & Minerals, Inc. | $ | 25,063 | |||||
2,021 | Vulcan Materials Co. | 199,675 | ||||||
|
| |||||||
647,570 | ||||||||
|
| |||||||
Consumer Finance (1.0%): | ||||||||
20,883 | Ally Financial, Inc. | 473,209 | ||||||
13,510 | American Express Co. | 1,287,772 | ||||||
144 | Asta Funding, Inc. | 613 | ||||||
6,037 | Capital One Financial Corp. | 456,337 | ||||||
1,912 | Consumer Portfolio Services, Inc.* | 5,755 | ||||||
600 | Credit Acceptance Corp.*^ | 229,056 | ||||||
9,534 | Discover Financial Services | 562,315 | ||||||
2,110 | Encore Capital Group, Inc.*^ | 49,585 | ||||||
1,910 | Enova International, Inc.* | 37,169 | ||||||
3,948 | EZCORP, Inc., Class A*^ | 30,518 | ||||||
1,945 | Firstcash, Inc. | 140,721 | ||||||
1,425 | Green Dot Corp., Class A* | 113,316 | ||||||
27,156 | LendingClub Corp.*^ | 71,420 | ||||||
14,392 | Navient Corp. | 126,794 | ||||||
2,128 | Nelnet, Inc., Class A | 111,380 | ||||||
750 | Nicholas Financial, Inc.* | 7,800 | ||||||
5,999 | Onemain Holdings, Inc.* | 145,716 | ||||||
2,661 | PRA Group, Inc.*^ | 64,849 | ||||||
960 | Regional Mgmt Corp.* | 23,088 | ||||||
10,164 | Santander Consumer USA Holdings, Inc.^ | 178,785 | ||||||
22,527 | SLM Corp.* | 187,199 | ||||||
16,752 | Synchrony Financial | 393,002 | ||||||
505 | World Acceptance Corp.*^ | 51,641 | ||||||
|
| |||||||
4,748,040 | ||||||||
|
| |||||||
Containers & Packaging (0.8%): | ||||||||
2,903 | AptarGroup, Inc. | 273,085 | ||||||
3,181 | Avery Dennison Corp. | 285,749 | ||||||
8,374 | Ball Corp. | 385,038 | ||||||
4,255 | Bemis Co., Inc. | 195,305 | ||||||
4,116 | Berry Global Group, Inc.* | 195,633 | ||||||
5,242 | Crown Holdings, Inc.*^ | 217,910 | ||||||
23,359 | Graphic Packaging Holding Co.^ | 248,540 | ||||||
1,930 | Greif, Inc., Class A | 71,622 | ||||||
1,110 | Greif, Inc., Class B | 49,284 | ||||||
7,729 | International Paper Co. | 311,942 | ||||||
2,608 | Myers Industries, Inc. | 39,407 | ||||||
9,463 | Owens-Illinois, Inc.*^ | 163,142 | ||||||
3,330 | Packaging Corp. of America | 277,922 | ||||||
3,591 | Sealed Air Corp. | 125,110 | ||||||
8,448 | Silgan Holdings, Inc. | 199,542 | ||||||
5,379 | Sonoco Products Co.^ | 285,786 | ||||||
538 | UFP Technologies, Inc.* | 16,162 | ||||||
4,190 | WestRock Co. | 158,214 | ||||||
|
| |||||||
3,499,393 | ||||||||
|
| |||||||
Distributors (0.2%): | ||||||||
2,074 | Core Markt Holdngs Co., Inc. | 48,221 | ||||||
4,308 | Genuine Parts Co. | 413,654 | ||||||
9,671 | LKQ Corp.* | 229,493 | ||||||
1,711 | Pool Corp. | 254,340 | ||||||
811 | Weyco Group, Inc. | 23,657 | ||||||
|
| |||||||
969,365 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Consumer Services (0.4%): | ||||||||
1,744 | Adtalem Global Education, Inc.* | $ | 82,526 | |||||
1,304 | American Public Education, Inc.* | 37,112 | ||||||
2,817 | Bright Horizons Family Solutions, Inc.* | 313,955 | ||||||
5,222 | Career Education Corp.* | 59,635 | ||||||
1,464 | Carriage Services, Inc.^ | 22,692 | ||||||
467 | Chegg, Inc.* | 13,272 | ||||||
506 | Collectors Universe, Inc. | 5,748 | ||||||
1,726 | Frontdoor, Inc.* | 45,929 | ||||||
185 | Graham Holdings Co., Class B | 118,507 | ||||||
2,721 | Grand Canyon Education, Inc.* | 261,597 | ||||||
8,744 | H&R Block, Inc. | 221,835 | ||||||
5,384 | Houghton Mifflin Harcourt Co.* | 47,702 | ||||||
2,988 | K12, Inc.* | 74,073 | ||||||
3,406 | Laureate Education, Inc.* | 51,907 | ||||||
482 | Liberty Tax, Inc. | 5,654 | ||||||
1,309 | Regis Corp.* | 22,188 | ||||||
6,510 | Service Corp. International^ | 262,093 | ||||||
3,452 | ServiceMaster Global Holdings, Inc.* | 126,826 | ||||||
2,193 | Sotheby’s* | 87,150 | ||||||
1,425 | Strategic Education, Inc. | 161,624 | ||||||
1,696 | Universal Technical Institute, Inc.* | 6,190 | ||||||
1,419 | Weight Watchers International, Inc.* | 54,702 | ||||||
|
| |||||||
2,082,917 | ||||||||
|
| |||||||
Diversified Financial Services (1.1%): | ||||||||
24,317 | Berkshire Hathaway, Inc., Class B* | 4,965,045 | ||||||
3,604 | Cannae Holdings, Inc.* | 61,700 | ||||||
6,246 | Jefferies Financial Group, Inc. | 108,431 | ||||||
827 | Marlin Business Services, Inc. | 18,467 | ||||||
4,869 | On Deck Capital, Inc.* | 28,727 | ||||||
2,777 | Voya Financial, Inc. | 111,469 | ||||||
|
| |||||||
5,293,839 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.9%): | ||||||||
124,561 | AT&T, Inc. | 3,554,971 | ||||||
1,019 | ATN International, Inc. | 72,889 | ||||||
33,697 | CenturyLink, Inc. | 510,510 | ||||||
3,035 | Cincinnati Bell, Inc.* | 23,612 | ||||||
2,223 | Cogent Communications Group, Inc. | 100,502 | ||||||
4,558 | Consolidated Communications Holdings, Inc.^ | 45,033 | ||||||
1,573 | Frontier Communications Corp.*^ | 3,744 | ||||||
1,994 | IDT Corp. | 12,343 | ||||||
2,626 | Intelsat S.A.* | 56,170 | ||||||
5,557 | Iridium Communications, Inc.* | 102,527 | ||||||
4,045 | Orbcomm, Inc.*^ | 33,412 | ||||||
398 | Pdvwireless, Inc.* | 14,881 | ||||||
76,120 | Verizon Communications, Inc. | 4,279,465 | ||||||
9,821 | Vonage Holdings Corp.* | 85,737 | ||||||
7,609 | Zayo Group Holdings, Inc.* | 173,790 | ||||||
|
| |||||||
9,069,586 | ||||||||
|
| |||||||
Electric Utilities (1.5%): | ||||||||
1,218 | ALLETE, Inc. | 92,836 | ||||||
4,190 | Alliant Energy Corp. | 177,028 | ||||||
5,589 | American Electric Power Co., Inc. | 417,722 | ||||||
1,163 | Avangrid, Inc.^ | 58,255 | ||||||
8,111 | Duke Energy Corp. | 699,979 | ||||||
4,082 | Edison International | 231,735 | ||||||
1,593 | El Paso Electric Co. | 79,857 |
See accompanying notes to the financial statements.
10
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electric Utilities, continued | ||||||||
2,217 | Entergy Corp. | $ | 190,817 | |||||
6,713 | Evergy, Inc. | 381,097 | ||||||
4,208 | Eversource Energy | 273,688 | ||||||
14,171 | Exelon Corp. | 639,112 | ||||||
9,633 | FirstEnergy Corp. | 361,719 | ||||||
1,272 | Genie Energy, Ltd., Class B | 7,670 | ||||||
4,681 | Hawaiian Electric Industries, Inc. | 171,418 | ||||||
2,156 | IDA Corp., Inc. | 200,637 | ||||||
1,626 | MGE Energy, Inc. | 97,495 | ||||||
5,567 | NextEra Energy, Inc. | 967,656 | ||||||
4,707 | OGE Energy Corp. | 184,467 | ||||||
1,672 | Otter Tail Power Co. | 82,998 | ||||||
6,161 | PG&E Corp.* | 146,324 | ||||||
2,368 | Pinnacle West Capital Corp. | 201,754 | ||||||
3,355 | PNM Resources, Inc. | 137,857 | ||||||
3,421 | Portland General Electric Co. | 156,853 | ||||||
11,330 | PPL Corp. | 320,979 | ||||||
10,893 | Southern Co. (The) | 478,421 | ||||||
7,949 | Xcel Energy, Inc. | 391,647 | ||||||
|
| |||||||
7,150,021 | ||||||||
|
| |||||||
Electrical Equipment (0.7%): | ||||||||
908 | Acuity Brands, Inc. | 104,375 | ||||||
926 | Allied Motion Technologies, Inc. | 41,383 | ||||||
4,662 | AMETEK, Inc. | 315,617 | ||||||
2,063 | Atkore International Group, Inc.* | 40,930 | ||||||
1,175 | AZZ, Inc. | 47,423 | ||||||
5,801 | Babcock & Wilcox Enterprises, Inc.* | 2,265 | ||||||
5,686 | Eaton Corp. plc | 390,401 | ||||||
10,332 | Emerson Electric Co. | 617,337 | ||||||
1,159 | Encore Wire Corp. | 58,159 | ||||||
2,195 | EnerSys | 170,354 | ||||||
4,065 | Generac Holdings, Inc.* | 202,031 | ||||||
2,129 | Hubbell, Inc. | 211,495 | ||||||
1,831 | LSI Industries, Inc. | 5,804 | ||||||
5,836 | nVent Electric plc | 131,077 | ||||||
606 | Powell Industries, Inc. | 15,156 | ||||||
415 | Power Solutions International, Inc.* | 3,839 | ||||||
400 | Preformed Line Products Co. | 21,700 | ||||||
2,269 | Regal-Beloit Corp. | 158,943 | ||||||
2,440 | Rockwell Automation, Inc. | 367,171 | ||||||
5,452 | Sensata Technologies Holding plc*^ | 244,467 | ||||||
5,268 | Sunrun, Inc.* | 57,369 | ||||||
1,298 | Thermon Group Holdings, Inc.* | 26,323 | ||||||
1,704 | Tpi Composites, Inc.* | 41,884 | ||||||
|
| |||||||
3,275,503 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (1.3%): | ||||||||
5,250 | Amphenol Corp., Class A | 425,355 | ||||||
1,693 | Anixter International, Inc.* | 91,947 | ||||||
2,934 | Arrow Electronics, Inc.* | 202,299 | ||||||
3,685 | Avnet, Inc. | 133,029 | ||||||
6,994 | AVX Corp. | 106,659 | ||||||
1,734 | Badger Meter, Inc.^ | 85,330 | ||||||
550 | Bel Fuse, Inc., Class B | 10,131 | ||||||
2,425 | Belden, Inc.^ | 101,292 | ||||||
3,078 | Benchmark Electronics, Inc. | 65,192 | ||||||
4,776 | CDW Corp. | 387,095 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
4,036 | Cognex Corp.^ | $ | 156,072 | |||||
687 | Coherent, Inc.* | 72,623 | ||||||
1,318 | Control4 Corp.* | 23,197 | ||||||
11,758 | Corning, Inc. | 355,209 | ||||||
1,576 | CTS Corp. | 40,803 | ||||||
1,747 | CUI Global, Inc.* | 2,149 | ||||||
2,838 | Daktronics, Inc.^ | 21,001 | ||||||
1,977 | Dolby Laboratories, Inc., Class A | 122,258 | ||||||
2,339 | Electro Scientific Industries, Inc.* | 70,076 | ||||||
876 | ePlus, Inc.* | 62,345 | ||||||
2,177 | Fabrinet* | 111,702 | ||||||
1,007 | FARO Technologies, Inc.* | 40,924 | ||||||
10,405 | Fitbit, Inc., Class A* | 51,713 | ||||||
25,202 | Flextronics International, Ltd.* | 191,787 | ||||||
2,876 | FLIR Systems, Inc. | 125,221 | ||||||
640 | Frequency Electronics, Inc.* | 6,784 | ||||||
3,548 | II-VI, Inc.* | 115,168 | ||||||
1,676 | Insight Enterprises, Inc.* | 68,297 | ||||||
1,107 | IPG Photonics Corp.*^ | 125,412 | ||||||
949 | Itron, Inc.* | 44,878 | ||||||
12,717 | Jabil, Inc. | 315,254 | ||||||
3,410 | KEMET Corp. | 59,811 | ||||||
2,507 | Keysight Technologies, Inc.* | 155,635 | ||||||
1,603 | Kimball Electronics, Inc.* | 24,830 | ||||||
5,037 | Knowles Corp.* | 67,042 | ||||||
725 | Littlelfuse, Inc. | 124,323 | ||||||
2,290 | Methode Electronics, Inc., Class A | 53,334 | ||||||
915 | MTS Systems Corp. | 36,719 | ||||||
1,715 | National Instruments Corp. | 77,827 | ||||||
1,955 | Novanta, Inc.* | 123,165 | ||||||
894 | OSI Systems, Inc.*^ | 65,530 | ||||||
953 | Park Electrochemical Corp. | 17,221 | ||||||
1,445 | PC Connection, Inc.^ | 42,960 | ||||||
1,087 | PCM, Inc.* | 19,142 | ||||||
1,291 | Plexus Corp.* | 65,944 | ||||||
993 | Rogers Corp.*^ | 98,367 | ||||||
4,140 | Sanmina Corp.* | 99,608 | ||||||
1,757 | ScanSource, Inc.* | 60,406 | ||||||
3,334 | SYNNEX Corp. | 269,521 | ||||||
5,693 | TE Connectivity, Ltd. | 430,562 | ||||||
1,453 | Tech Data Corp.* | 118,870 | ||||||
2,596 | Trimble Navigation, Ltd.* | 85,434 | ||||||
6,321 | TTM Technologies, Inc.*^ | 61,503 | ||||||
7,620 | Vishay Intertechnology, Inc. | 137,236 | ||||||
1,868 | Zebra Technologies Corp., Class A* | 297,442 | ||||||
|
| |||||||
6,323,634 | ||||||||
|
| |||||||
Energy Equipment & Services (0.6%): | ||||||||
2,515 | Apergy Corp.* | 68,106 | ||||||
7,479 | Archrock, Inc. | 56,018 | ||||||
3,651 | Baker Hughes, a GE Co. | 78,497 | ||||||
3,019 | Bristow Group, Inc.*^ | 7,336 | ||||||
3,800 | C&J Energy Services, Inc.* | 51,300 | ||||||
1,913 | Core Laboratories NV | 114,130 | ||||||
10,172 | Diamond Offshore Drilling, Inc.* | 96,024 | ||||||
2,169 | Dril-Quip, Inc.*^ | 65,135 | ||||||
21,694 | Ensco plc, Class A, ADR^ | 77,231 | ||||||
1,558 | Era Group, Inc.* | 13,617 |
See accompanying notes to the financial statements.
11
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Energy Equipment & Services, continued | ||||||||
2,010 | Exterran Corp.* | $ | 35,577 | |||||
6,125 | Forum Energy Technologies, Inc.* | 25,296 | ||||||
8,225 | Frank’s International NV* | 42,935 | ||||||
1,859 | Frank’s International NV*^ | 9,704 | ||||||
760 | Geospace Technologies Corp.* | 7,836 | ||||||
1,086 | Gulf Island Fabrication, Inc.*^ | 7,841 | ||||||
5,991 | Halliburton Co. | 159,242 | ||||||
7,826 | Helix Energy Solutions Group, Inc.*^ | 42,339 | ||||||
2,127 | Helmerich & Payne, Inc. | 101,968 | ||||||
6,510 | Keane Group, Inc.* | 53,252 | ||||||
892 | KLX Energy Services Holdings, Inc.* | 20,917 | ||||||
1,436 | Mammoth Energy Services, Inc. | 25,819 | ||||||
1,750 | Matrix Service Co.* | 31,395 | ||||||
6,284 | McDermott International, Inc.*^ | 41,097 | ||||||
17,995 | Nabors Industries, Ltd.^ | 35,990 | ||||||
6,124 | National-Oilwell Varco, Inc. | 157,388 | ||||||
935 | Natural Gas Services Group* | 15,371 | ||||||
4,799 | Newpark Resources, Inc.* | 32,969 | ||||||
12,057 | Noble Corp. plc*^ | 31,589 | ||||||
4,818 | Oceaneering International, Inc.* | 58,298 | ||||||
3,066 | Oil States International, Inc.*^ | 43,782 | ||||||
6,531 | Patterson-UTI Energy, Inc. | 67,596 | ||||||
974 | PHI, Inc.*^ | 1,802 | ||||||
3,744 | Pioneer Energy Services Corp.* | 4,605 | ||||||
6,172 | Propetro Holding Corp.* | 76,039 | ||||||
5,837 | Rowan Cos. plc, Class A* | 48,972 | ||||||
4,475 | RPC, Inc.^ | 44,168 | ||||||
10,044 | Schlumberger, Ltd. | 362,387 | ||||||
1,291 | SEACOR Holdings, Inc.* | 47,767 | ||||||
493 | SEACOR Marine Holdings, Inc.* | 5,798 | ||||||
3,974 | Select Energy Services, Inc.*^ | 25,116 | ||||||
6,258 | Superior Energy Services, Inc.* | 20,964 | ||||||
7,361 | Technipfmc plc | 144,128 | ||||||
4,086 | TETRA Technologies, Inc.* | 6,864 | ||||||
825 | Tidewater, Inc.* | 15,782 | ||||||
14,584 | Transocean, Ltd.* | 101,213 | ||||||
4,546 | U.S. Silica Holdings, Inc.^ | 46,278 | ||||||
2,800 | Unit Corp.*^ | 39,984 | ||||||
|
| |||||||
2,667,462 | ||||||||
|
| |||||||
Entertainment (1.4%): | ||||||||
5,134 | Activision Blizzard, Inc. | 239,090 | ||||||
3,433 | AMC Entertainment Holdings, Inc., Class A^ | 42,157 | ||||||
7,978 | Cinemark Holdings, Inc.^ | 285,612 | ||||||
4,365 | Electronic Arts, Inc.* | 344,442 | ||||||
1,834 | Eros International plc*^ | 15,204 | ||||||
2,858 | Imax Corp.*^ | 53,759 | ||||||
247 | Liberty Braves Group, Class A* | 6,160 | ||||||
527 | Liberty Braves Group, Class C* | 13,117 | ||||||
619 | Liberty Media Group, Class A*^ | 18,397 | ||||||
1,318 | Liberty Media Group, Class C* | 40,463 | ||||||
2,111 | Lions Gate Entertainment Corp., Class A | 33,987 | ||||||
2,411 | Lions Gate Entertainment Corp., Class B | 35,876 | ||||||
5,662 | Live Nation, Inc.*^ | 278,854 | ||||||
540 | Madison Square Garden Co. (The), Class A* | 144,558 | ||||||
977 | Marcus Corp. | 38,592 | ||||||
2,535 | Netflix, Inc.* | 678,518 | ||||||
1,419 | Reading International, Inc., Class A* | 20,632 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Entertainment, continued | ||||||||
294 | Rosetta Stone, Inc.* | $ | 4,822 | |||||
1,231 | Take-Two Interactive Software, Inc.* | 126,719 | ||||||
23,830 | Twenty-First Century Fox, Inc. | 1,146,700 | ||||||
8,290 | Twenty-First Century Fox, Inc., Class B | 396,096 | ||||||
442 | Viacom, Inc., Class A | 12,292 | ||||||
12,859 | Viacom, Inc., Class B | 330,476 | ||||||
19,720 | Walt Disney Co. (The) | 2,162,298 | ||||||
1,692 | World Wrestling Entertainment, Inc., Class A^ | 126,426 | ||||||
31,714 | Zynga, Inc.* | 124,636 | ||||||
|
| |||||||
6,719,883 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.0%)†: | ||||||||
4,047 | Alexander & Baldwin, Inc.* | 74,384 | ||||||
|
| |||||||
Food & Staples Retailing (1.5%): | ||||||||
2,460 | Casey’s General Stores, Inc.^ | 315,224 | ||||||
7,460 | Costco Wholesale Corp. | 1,519,677 | ||||||
1,267 | Ingles Markets, Inc., Class A | 34,488 | ||||||
25,624 | Kroger Co. (The) | 704,660 | ||||||
1,720 | Natural Grocers by Vitamin Cottage, Inc.* | 26,368 | ||||||
1,409 | Performance Food Group Co.* | 45,468 | ||||||
1,384 | PriceSmart, Inc. | 81,794 | ||||||
37,281 | Rite Aid Corp.* | 26,406 | ||||||
5,242 | Smart & Final Stores, Inc.*^ | 24,847 | ||||||
3,281 | SpartanNash Co. | 56,368 | ||||||
5,794 | Sprouts Farmers Market, Inc.* | 136,217 | ||||||
10,507 | Sysco Corp. | 658,369 | ||||||
1,610 | The Andersons, Inc. | 48,123 | ||||||
1,143 | The Chefs’ Warehouse, Inc.*^ | 36,553 | ||||||
3,347 | United Natural Foods, Inc.* | 35,445 | ||||||
3,790 | US Foods Holding Corp.* | 119,916 | ||||||
738 | Village Super Market, Inc., Class A^ | 19,734 | ||||||
10,994 | Walgreens Boots Alliance, Inc. | 751,220 | ||||||
24,608 | Wal-Mart Stores, Inc. | 2,292,235 | ||||||
2,107 | Weis Markets, Inc.^ | 100,672 | ||||||
|
| |||||||
7,033,784 | ||||||||
|
| |||||||
Food Products (1.4%): | ||||||||
8,183 | Archer-Daniels-Midland Co. | 335,258 | ||||||
3,898 | B&G Foods, Inc.^ | 112,691 | ||||||
3,004 | Bunge, Ltd. | 160,534 | ||||||
808 | Calavo Growers, Inc.^ | 58,952 | ||||||
1,799 | Cal-Maine Foods, Inc.^ | 76,098 | ||||||
5,711 | Campbell Soup Co. | 188,406 | ||||||
7,343 | Conagra Brands, Inc. | 156,846 | ||||||
4,717 | Darling International, Inc.* | 90,755 | ||||||
5,447 | Dean Foods Co.^ | 20,753 | ||||||
1,004 | Farmer Brothers Co.* | 23,423 | ||||||
7,961 | Flowers Foods, Inc.^ | 147,040 | ||||||
2,396 | Fresh Del Monte Produce, Inc. | 67,735 | ||||||
12,311 | General Mills, Inc. | 479,389 | ||||||
3,802 | Hain Celestial Group, Inc.*^ | 60,300 | ||||||
3,160 | Hershey Co. (The) | 338,689 | ||||||
6,832 | Hormel Foods Corp.^ | 291,590 | ||||||
7,644 | Hostess Brands, Inc.*^ | 83,625 | ||||||
3,197 | Ingredion, Inc. | 292,206 | ||||||
576 | J & J Snack Foods Corp. | 83,284 | ||||||
3,414 | JM Smucker Co. (The)^ | 319,175 | ||||||
300 | John B Sanfilippo And Son, Inc.^ | 16,698 | ||||||
5,585 | Kellogg Co. | 318,401 |
See accompanying notes to the financial statements.
12
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products, continued | ||||||||
6,403 | Kraft Heinz Co. (The) | $ | 275,585 | |||||
3,086 | Lamb Weston Holdings, Inc. | 227,006 | ||||||
1,462 | Lancaster Colony Corp. | 258,569 | ||||||
1,028 | Landec Corp.* | 12,172 | ||||||
2,458 | McCormick & Co. | 342,252 | ||||||
389 | McCormick & Co., Inc. | 53,997 | ||||||
11,410 | Mondelez International, Inc., Class A | 456,742 | ||||||
4,222 | Pilgrim’s Pride Corp.* | 65,483 | ||||||
3,793 | Post Holdings, Inc.*^ | 338,070 | ||||||
1,626 | Sanderson Farms, Inc.^ | 161,446 | ||||||
29 | Seaboard Corp. | 102,602 | ||||||
677 | Seneca Foods Corp., Class A* | 19,105 | ||||||
3,045 | Simply Good Foods Co. (The)* | 57,551 | ||||||
1,789 | Tootsie Roll Industries, Inc.^ | 59,753 | ||||||
3,024 | TreeHouse Foods, Inc.* | 153,347 | ||||||
6,728 | Tyson Foods, Inc., Class A | 359,275 | ||||||
|
| |||||||
6,664,803 | ||||||||
|
| |||||||
Gas Utilities (0.3%): | ||||||||
1,751 | Atmos Energy Corp. | 162,353 | ||||||
900 | Chesapeake Utilities Corp. | 73,170 | ||||||
3,236 | National Fuel Gas Co. | 165,618 | ||||||
3,660 | New Jersey Resources Corp. | 167,152 | ||||||
1,663 | Northwest Natural Holding Co.^ | 100,545 | ||||||
2,227 | ONE Gas, Inc. | 177,269 | ||||||
232 | RGC Resources, Inc. | 6,951 | ||||||
2,958 | South Jersey Industries, Inc.^ | 82,232 | ||||||
2,550 | Southwest Gas Corp. | 195,075 | ||||||
2,233 | Spire, Inc. | 165,421 | ||||||
3,695 | UGI Corp. | 197,129 | ||||||
|
| |||||||
1,492,915 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (2.2%): | ||||||||
11,299 | Abbott Laboratories | 817,258 | ||||||
886 | ABIOMED, Inc.* | 287,985 | ||||||
2,269 | Accuray, Inc.* | 7,737 | ||||||
1,170 | Align Technology, Inc.* | 245,033 | ||||||
2,726 | AngioDynamics, Inc.* | 54,874 | ||||||
955 | Anika Therapeutics, Inc.* | 32,098 | ||||||
115 | Atrion Corp. | 85,224 | ||||||
1,897 | Avanos Medical, Inc.*^ | 84,967 | ||||||
4,834 | Baxter International, Inc. | 318,174 | ||||||
1,987 | Becton, Dickinson & Co. | 447,711 | ||||||
7,099 | Boston Scientific Corp.* | 250,879 | ||||||
2,008 | Cantel Medical Corp. | 149,496 | ||||||
1,289 | CONMED Corp. | 82,754 | ||||||
841 | Cooper Cos., Inc. (The) | 214,035 | ||||||
1,619 | CryoLife, Inc.* | 45,947 | ||||||
4,428 | Danaher Corp. | 456,615 | ||||||
4,082 | Dentsply Sirona, Inc. | 151,891 | ||||||
693 | DexCom, Inc.* | 83,021 | ||||||
2,985 | Edwards Lifesciences Corp.* | 457,212 | ||||||
1,966 | Globus Medical, Inc., Class A* | 85,088 | ||||||
2,246 | Haemonetics Corp.* | 224,712 | ||||||
392 | Heska Corp.*^ | 33,751 | ||||||
1,867 | Hill-Rom Holdings, Inc. | 165,323 | ||||||
8,684 | Hologic, Inc.* | 356,912 | ||||||
508 | ICU Medical, Inc.* | 116,652 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
1,958 | IDEXX Laboratories, Inc.* | $ | 364,227 | |||||
433 | Inogen, Inc.* | 53,766 | ||||||
489 | Insulet Corp.*^ | 38,787 | ||||||
1,457 | Integer Holdings Corp.* | 111,111 | ||||||
1,042 | Integra LifeSciences Holdings Corp.* | 46,994 | ||||||
962 | Intuitive Surgical, Inc.* | 460,722 | ||||||
2,327 | Invacare Corp.^ | 10,006 | ||||||
1,705 | Lantheus Holdings, Inc.* | 26,683 | ||||||
809 | LeMaitre Vascular, Inc. | 19,125 | ||||||
1,168 | LivaNova plc* | 106,837 | ||||||
2,417 | Masimo Corp.* | 259,513 | ||||||
9,563 | Medtronic plc | 869,851 | ||||||
3,164 | Meridian Bioscience, Inc. | 54,927 | ||||||
1,466 | Merit Medical Systems, Inc.*^ | 81,817 | ||||||
1,935 | Natus Medical, Inc.* | 65,848 | ||||||
804 | Neogen Corp.* | 45,828 | ||||||
1,986 | NuVasive, Inc.* | 98,426 | ||||||
481 | Nuvectra Corp.* | 7,860 | ||||||
2,205 | OraSure Technologies, Inc.* | 25,754 | ||||||
1,074 | Orthofix Medical, Inc.* | 56,374 | ||||||
700 | Quidel Corp.* | 34,174 | ||||||
2,926 | ResMed, Inc. | 333,184 | ||||||
3,310 | RTI Surgical, Inc.* | 12,247 | ||||||
624 | SeaSpine Holdings Corp.* | 11,382 | ||||||
1,207 | STERIS plc | 128,968 | ||||||
4,559 | Stryker Corp. | 714,624 | ||||||
750 | Teleflex, Inc. | 193,860 | ||||||
227 | Utah Medical Products, Inc. | 18,859 | ||||||
1,961 | Varex Imaging Corp.* | 46,436 | ||||||
2,117 | Varian Medical Systems, Inc.* | 239,877 | ||||||
1,157 | West Pharmaceutical Services, Inc. | �� | 113,421 | |||||
1,714 | Zimmer Holdings, Inc. | 177,776 | ||||||
|
| |||||||
10,084,613 | ||||||||
|
| |||||||
Health Care Providers & Services (3.0%): | ||||||||
4,796 | Acadia Healthcare Co., Inc.*^ | 123,305 | ||||||
1,958 | Aceto Corp. | 1,645 | ||||||
634 | Addus HomeCare Corp.* | 43,036 | ||||||
801 | Amedisys, Inc.*^ | 93,805 | ||||||
2,339 | AmerisourceBergen Corp. | 174,022 | ||||||
2,711 | AMN Healthcare Services, Inc.*^ | 153,605 | ||||||
3,391 | Anthem, Inc. | 890,578 | ||||||
724 | BioTelemetry, Inc.* | 43,237 | ||||||
9,264 | Brookdale Senior Living, Inc.* | 62,069 | ||||||
7,103 | Cardinal Health, Inc. | 316,794 | ||||||
2,823 | Centene Corp.* | 325,492 | ||||||
785 | Chemed Corp. | 222,375 | ||||||
7,960 | Cigna Corp. | 1,511,763 | ||||||
1,442 | Civitas Solutions, Inc.* | 25,249 | ||||||
7,171 | Community Health Systems, Inc.*^ | 20,222 | ||||||
1,253 | CorVel Corp.* | 77,335 | ||||||
1,177 | Cross Country Healthcare, Inc.* | 8,627 | ||||||
19,735 | CVS Health Corp. | 1,293,037 | ||||||
5,046 | DaVita, Inc.* | 259,667 | ||||||
4,148 | Diplomat Pharmacy, Inc.*^ | 55,832 | ||||||
6,210 | Encompass Health Corp. | 383,157 | ||||||
3,058 | Ensign Group, Inc. (The) | 118,620 | ||||||
784 | Five Star Quality Care, Inc.* | 365 |
See accompanying notes to the financial statements.
13
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Providers & Services, continued | ||||||||
2,639 | Hanger Orthopedic Group, Inc.* | $ | 50,009 | |||||
4,541 | HCA Healthcare, Inc. | 565,127 | ||||||
1,272 | HealthEquity, Inc.* | 75,875 | ||||||
3,972 | Henry Schein, Inc.*^ | 311,881 | ||||||
1,947 | Humana, Inc. | 557,777 | ||||||
2,629 | InfuSystems Holdings, Inc.* | 9,044 | ||||||
3,021 | Laboratory Corp. of America Holdings* | 381,734 | ||||||
925 | LHC Group, Inc.* | 86,839 | ||||||
1,471 | Magellan Health Services, Inc.* | 83,685 | ||||||
4,579 | McKesson Corp. | 505,842 | ||||||
3,346 | MEDNAX, Inc.* | 110,418 | ||||||
1,107 | Molina Healthcare, Inc.*^ | 128,656 | ||||||
1,075 | National Healthcare Corp. | 84,334 | ||||||
1,219 | National Research Corp. | 46,493 | ||||||
4,172 | Owens & Minor, Inc. | 26,409 | ||||||
4,695 | Patterson Cos., Inc. | 92,304 | ||||||
2,269 | Premier, Inc., Class A* | 84,747 | ||||||
835 | Providence Service Corp.* | 50,117 | ||||||
4,641 | Quest Diagnostics, Inc. | 386,456 | ||||||
2,518 | RadNet, Inc.* | 25,608 | ||||||
9,791 | Select Medical Holdings Corp.* | 150,292 | ||||||
2,133 | Surgery Partners, Inc.*^ | 20,882 | ||||||
3,992 | Tenet Healthcare Corp.*^ | 68,423 | ||||||
2,040 | Tivity Health, Inc.* | 50,612 | ||||||
1,240 | Triple-S Management Corp., Class B* | 21,564 | ||||||
937 | U.S. Physical Therapy, Inc.^ | 95,902 | ||||||
12,465 | UnitedHealth Group, Inc. | 3,105,280 | ||||||
4,318 | Universal Health Services, Inc., Class B | 503,306 | ||||||
969 | WellCare Health Plans, Inc.* | 228,771 | ||||||
|
| |||||||
14,112,224 | ||||||||
|
| |||||||
Health Care Technology (0.2%): | ||||||||
8,903 | Allscripts Healthcare Solutions, Inc.*^ | 85,825 | ||||||
1,052 | athenahealth, Inc.* | 138,790 | ||||||
4,643 | Cerner Corp.* | 243,479 | ||||||
339 | Computer Programs & Systems, Inc. | 8,509 | ||||||
4,037 | Evolent Health, Inc., Class A*^ | 80,538 | ||||||
1,357 | HealthStream, Inc. | 32,772 | ||||||
4,954 | HMS Holdings Corp.* | 139,356 | ||||||
644 | Medidata Solutions, Inc.*^ | 43,418 | ||||||
2,464 | NextGen Healthcare, Inc.* | 37,330 | ||||||
1,095 | Omnicell, Inc.* | 67,058 | ||||||
1,047 | Simulations Plus, Inc. | 20,835 | ||||||
1,142 | Veeva Systems, Inc., Class A* | 102,003 | ||||||
|
| |||||||
999,913 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (2.5%): | ||||||||
10,056 | Aramark Holdings Corp. | 291,322 | ||||||
2,451 | BBX Capital Corp. | 14,044 | ||||||
4,464 | Belmond, Ltd., Class A* | 111,734 | ||||||
6 | Biglari Holdings, Inc., Class A* | 3,526 | ||||||
67 | Biglari Holdings, Inc., Class B* | 7,610 | ||||||
1,927 | BJ’s Restaurants, Inc.^ | 97,448 | ||||||
3,939 | Bloomin’ Brands, Inc. | 70,469 | ||||||
3,028 | Bojangles’, Inc.* | 48,690 | ||||||
2,887 | Brinker International, Inc. | 126,970 | ||||||
4,600 | Caesars Entertainment Corp.* | 31,234 | ||||||
4,851 | Carnival Corp., Class A | 239,155 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
2,943 | Carrols Restaurant Group, Inc.* | $ | 28,959 | |||||
1,723 | Century Casinos, Inc.* | 12,733 | ||||||
2,158 | Cheesecake Factory, Inc. (The) | 93,895 | ||||||
140 | Chipotle Mexican Grill, Inc.* | 60,451 | ||||||
2,653 | Choice Hotels International, Inc.^ | 189,902 | ||||||
194 | Churchill Downs, Inc. | 47,324 | ||||||
1,178 | Chuy’s Holdings, Inc.*^ | 20,898 | ||||||
1,626 | Cracker Barrel Old Country Store, Inc. | 259,932 | ||||||
3,164 | Darden Restaurants, Inc. | 315,957 | ||||||
2,412 | Dave & Buster’s Entertainment, Inc.^ | 107,479 | ||||||
1,574 | Del Frisco’s Restaurant Group, Inc.*^ | 11,254 | ||||||
2,144 | del Taco Restaurants, Inc.* | 21,419 | ||||||
4,156 | Denny’s Corp.* | 67,369 | ||||||
1,327 | DineEquity, Inc.^ | 89,360 | ||||||
864 | Domino’s Pizza, Inc. | 214,263 | ||||||
3,886 | Dunkin’ Brands Group, Inc. | 249,170 | ||||||
1,288 | El Pollo Loco Holdings, Inc.* | 19,539 | ||||||
1,112 | Eldorado Resorts, Inc.*^ | 40,266 | ||||||
1,277 | Fiesta Restaurant Group, Inc.* | 19,806 | ||||||
624 | Habit Restaurants, Inc. (The), Class A*^ | 6,552 | ||||||
2,724 | Hilton Grand Vacations, Inc.* | 71,886 | ||||||
3,896 | Hilton Worldwide Holdings, Inc. | 279,733 | ||||||
1,051 | Hyatt Hotels Corp., Class A | 71,048 | ||||||
6,233 | International Game Technology plc^ | 91,189 | ||||||
1,202 | Jack in the Box, Inc. | 93,311 | ||||||
8,964 | Las Vegas Sands Corp. | 466,576 | ||||||
2,136 | Luby’s, Inc.* | 2,563 | ||||||
3,634 | Marriott International, Inc., Class A | 394,507 | ||||||
2,283 | Marriott Vacations Worldwide Corp. | 160,974 | ||||||
10,643 | McDonald’s Corp. | 1,889,879 | ||||||
22,640 | MGM Resorts International | 549,246 | ||||||
341 | Nathans Famous, Inc.^ | 22,659 | ||||||
5,162 | Norwegian Cruise Line Holdings, Ltd.* | 218,817 | ||||||
1,596 | Papa John’s International, Inc. | 63,537 | ||||||
2,376 | Penn National Gaming, Inc.* | 44,740 | ||||||
4,017 | Planet Fitness, Inc.*^ | 215,392 | ||||||
3,664 | Playa Hotels & Resorts NV* | 26,344 | ||||||
763 | Potbelly Corp.*^ | 6,142 | ||||||
1,501 | Red Lion Hotels Corp.*^ | 12,308 | ||||||
878 | Red Robin Gourmet Burgers*^ | 23,460 | ||||||
1,400 | Red Rock Resorts, Inc. | 28,434 | ||||||
2,194 | Royal Caribbean Cruises, Ltd. | 214,551 | ||||||
2,527 | Ruth’s Hospitality Group, Inc. | 57,439 | ||||||
3,394 | Scientific Games Corp., Class A*^ | 60,685 | ||||||
548 | SeaWorld Entertainment, Inc.* | 12,105 | ||||||
4,011 | Six Flags Entertainment Corp.^ | 223,132 | ||||||
2,826 | Speedway Motorsports, Inc. | 45,979 | ||||||
26,882 | Starbucks Corp. | 1,731,201 | ||||||
3,432 | Texas Roadhouse, Inc. | 204,890 | ||||||
1,604 | Town Sports International Holdings, Inc.* | 10,266 | ||||||
866 | Vail Resorts, Inc.^ | 182,570 | ||||||
13,365 | Wendy’s Co. (The) | 208,628 | ||||||
1,298 | Wingstop, Inc. | 83,319 | ||||||
3,177 | Wyndham Hotels & Resorts, Inc. | 144,140 | ||||||
3,177 | Wyndham Worldwide Corp. | 113,864 | ||||||
2,056 | Wynn Resorts, Ltd. | 203,359 | ||||||
4,534 | Yum! Brands, Inc. | 416,765 | ||||||
|
| |||||||
11,564,368 | ||||||||
|
|
See accompanying notes to the financial statements.
14
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables (0.8%): | ||||||||
1,886 | Beazer Homes USA, Inc.* | $ | 17,879 | |||||
611 | Cavco Industries, Inc.* | 79,662 | ||||||
1,150 | Century Communities, Inc.* | 19,849 | ||||||
10,883 | D.R. Horton, Inc. | 377,204 | ||||||
1,137 | Dixie Group, Inc. (The)* | 799 | ||||||
1,910 | Ethan Allen Interiors, Inc.^ | 33,597 | ||||||
431 | Flexsteel Industries, Inc. | 9,516 | ||||||
5,443 | Garmin, Ltd. | 344,651 | ||||||
2,761 | GoPro, Inc., Class A*^ | 11,707 | ||||||
2,219 | Green Brick Partners, Inc.* | 16,066 | ||||||
911 | Helen of Troy, Ltd.* | 119,505 | ||||||
500 | Hooker Furniture Corp. | 13,170 | ||||||
1,333 | Installed Building Products, Inc.* | 44,909 | ||||||
931 | iRobot Corp.*^ | 77,962 | ||||||
4,827 | KB Home | 92,196 | ||||||
3,931 | La-Z-Boy, Inc. | 108,928 | ||||||
4,024 | Leggett & Platt, Inc.^ | 144,220 | ||||||
3,994 | Lennar Corp., Class A | 156,365 | ||||||
119 | Lennar Corp., Class B | 3,728 | ||||||
1,206 | LGI Homes, Inc.*^ | 54,535 | ||||||
1,627 | Libbey, Inc.^ | 6,313 | ||||||
1,017 | Lifetime Brands, Inc. | 10,201 | ||||||
3,335 | M.D.C. Holdings, Inc. | 93,747 | ||||||
1,880 | M/I Homes, Inc.* | 39,518 | ||||||
3,168 | Meritage Corp.* | 116,329 | ||||||
1,006 | Mohawk Industries, Inc.* | 117,662 | ||||||
2,791 | Newell Brands, Inc. | 51,885 | ||||||
150 | NVR, Inc.* | 365,549 | ||||||
9,250 | PulteGroup, Inc.^ | 240,408 | ||||||
2,607 | Skyline Corp. | 38,297 | ||||||
5,496 | Taylor Morrison Home Corp., Class A* | 87,386 | ||||||
2,586 | Tempur Sealy International, Inc.*^ | 107,060 | ||||||
2,183 | Toll Brothers, Inc. | 71,886 | ||||||
2,508 | TopBuild Corp.* | 112,860 | ||||||
7,853 | TRI Pointe Homes, Inc.*^ | 85,833 | ||||||
2,153 | Tupperware Brands Corp. | 67,970 | ||||||
718 | Universal Electronics, Inc.*^ | 18,151 | ||||||
3,485 | Whirlpool Corp. | 372,442 | ||||||
2,147 | William Lyon Homes, Class A* | 22,951 | ||||||
1,918 | Zagg, Inc.*^ | 18,758 | ||||||
|
| |||||||
3,771,654 | ||||||||
|
| |||||||
Household Products (1.3%): | ||||||||
2,899 | Central Garden & Pet Co., Class A* | 90,594 | ||||||
6,367 | Church & Dwight Co., Inc. | 418,694 | ||||||
3,732 | Clorox Co. (The) | 575,250 | ||||||
11,563 | Colgate-Palmolive Co. | 688,230 | ||||||
2,293 | Energizer Holdings, Inc. | 103,529 | ||||||
5,191 | Kimberly-Clark Corp. | 591,463 | ||||||
333 | Oil-Dri Corp. | 8,825 | ||||||
582 | Orchids Paper Products Co.* | 547 | ||||||
34,072 | Procter & Gamble Co. (The) | 3,131,898 | ||||||
1,973 | Spectrum Brands Holdings, Inc.^ | 83,359 | ||||||
698 | WD-40 Co.^ | 127,915 | ||||||
|
| |||||||
5,820,304 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Independent Power and Renewable Electricity Producers (0.2%): | ||||||||
15,393 | AES Corp. (The) | $ | 222,583 | |||||
5,810 | Atlantic Power Corp.* | 12,608 | ||||||
5,140 | Atlantica Yield plc | 100,744 | ||||||
1,323 | Clearway Energy, Inc., Class A | 22,385 | ||||||
2,753 | Clearway Energy, Inc., Class C | 47,489 | ||||||
6,120 | NRG Energy, Inc. | 242,352 | ||||||
2,758 | Ormat Technologies, Inc.^ | 144,243 | ||||||
3,788 | Pattern Energy Group, Inc. | 70,533 | ||||||
7,499 | Vistra Energy Corp.* | 171,652 | ||||||
|
| |||||||
1,034,589 | ||||||||
|
| |||||||
Industrial Conglomerates (1.0%): | ||||||||
11,715 | 3M Co., Class C | 2,232,175 | ||||||
1,602 | Carlisle Cos., Inc. | 161,033 | ||||||
53,601 | General Electric Co. | 405,760 | ||||||
12,593 | Honeywell International, Inc. | 1,663,787 | ||||||
1,736 | Raven Industries, Inc. | 62,826 | ||||||
876 | Roper Industries, Inc. | 233,472 | ||||||
|
| |||||||
4,759,053 | ||||||||
|
| |||||||
Insurance (3.2%): | ||||||||
12,674 | Aflac, Inc. | 577,427 | ||||||
333 | Alleghany Corp. | 207,566 | ||||||
4,705 | Allstate Corp. (The) | 388,774 | ||||||
4,095 | AMBAC Financial Group, Inc.* | 70,598 | ||||||
3,511 | American Equity Investment Life Holding Co. | 98,097 | ||||||
1,597 | American Financial Group, Inc. | 144,576 | ||||||
9,027 | American International Group, Inc. | 355,754 | ||||||
409 | American National Insurance Co. | 52,041 | ||||||
1,307 | Amerisafe, Inc. | 74,094 | ||||||
3,717 | Aon plc | 540,303 | ||||||
5,730 | Arch Capital Group, Ltd.* | 153,106 | ||||||
1,501 | Argo Group International Holdings, Ltd. | 100,942 | ||||||
5,479 | Arthur J. Gallagher & Co. | 403,802 | ||||||
2,735 | Aspen Insurance Holdings, Ltd. | 114,843 | ||||||
1,955 | Assurant, Inc. | 174,855 | ||||||
4,165 | Assured Guaranty, Ltd. | 159,436 | ||||||
1,196 | Athene Holding, Ltd.* | 47,637 | ||||||
2,351 | Axis Capital Holdings, Ltd. | 121,406 | ||||||
1,029 | Brighthouse Financial, Inc.* | 31,364 | ||||||
8,628 | Brown & Brown, Inc. | 237,788 | ||||||
4,915 | Chubb, Ltd. | 634,919 | ||||||
2,852 | Cincinnati Financial Corp. | 220,802 | ||||||
2,176 | Citizens, Inc.* | 16,364 | ||||||
1,199 | CNA Financial Corp. | 52,936 | ||||||
2,354 | Crawford & Co. | 21,186 | ||||||
2,915 | Crawford & Co., Class A | 25,944 | ||||||
1,631 | Donegal Group, Inc., Class A | 22,255 | ||||||
1,100 | eHealth, Inc.* | 42,262 | ||||||
1,546 | EMC Insurance Group, Inc. | 49,240 | ||||||
1,993 | Employers Holdings, Inc. | 83,646 | ||||||
447 | Enstar Group, Ltd.*^ | 74,904 | ||||||
1,364 | Erie Indemnity Co., Class A | 181,835 | ||||||
748 | Everest Re Group, Ltd. | 162,884 | ||||||
1,025 | FBL Financial Group, Inc., Class A | 67,291 | ||||||
1,054 | FedNat Holding Co. | 20,996 | ||||||
4,594 | First American Financial Corp. | 205,076 | ||||||
8,665 | FNF Group | 272,428 |
See accompanying notes to the financial statements.
15
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Insurance, continued | ||||||||
21,335 | Genworth Financial, Inc., Class A* | $ | 99,421 | |||||
695 | Global Indemnity, Ltd. | 25,180 | ||||||
2,383 | Greenlight Capital Re, Ltd.*^ | 20,541 | ||||||
1,469 | Hallmark Financial Services, Inc.* | 15,704 | ||||||
1,690 | Hanover Insurance Group, Inc. (The) | 197,341 | ||||||
7,229 | Hartford Financial Services Group, Inc. (The) | 321,329 | ||||||
397 | HCI Group, Inc.^ | 20,172 | ||||||
387 | Heritage Insurance Holdings, Inc. | 5,697 | ||||||
2,388 | Horace Mann Educators Corp. | 89,431 | ||||||
1,317 | Independence Holding Co. | 46,358 | ||||||
153 | Investors Title Co. | 27,032 | ||||||
1,436 | James River Group Holdings | 52,471 | ||||||
2,876 | Kemper Corp. | 190,909 | ||||||
3,599 | Lincoln National Corp. | 184,665 | ||||||
5,372 | Loews Corp. | 244,533 | ||||||
5,556 | Maiden Holdings, Ltd. | 9,167 | ||||||
301 | Markel Corp.* | 312,453 | ||||||
9,423 | Marsh & McLennan Cos., Inc. | 751,485 | ||||||
2,503 | Mercury General Corp.^ | 129,430 | ||||||
8,570 | MetLife, Inc. | 351,884 | ||||||
4,959 | National General Holdings Corp. | 120,057 | ||||||
262 | National Western Life Group, Inc., Class A | 78,783 | ||||||
1,307 | Navigators Group, Inc. | 90,823 | ||||||
9,717 | Old Republic International Corp. | 199,879 | ||||||
3,086 | Primerica, Inc. | 301,533 | ||||||
9,299 | Principal Financial Group, Inc.^ | 410,737 | ||||||
3,011 | ProAssurance Corp. | 122,126 | ||||||
6,434 | Progressive Corp. (The) | 388,163 | ||||||
4,383 | Prudential Financial, Inc. | 357,434 | ||||||
1,023 | Reinsurance Group of America, Inc. | 143,455 | ||||||
1,433 | RenaissanceRe Holdings, Ltd. | 191,592 | ||||||
1,252 | RLI Corp.^ | 86,375 | ||||||
854 | Safety Insurance Group, Inc. | 69,866 | ||||||
2,398 | Selective Insurance Group, Inc. | 146,134 | ||||||
2,664 | State Auto Financial Corp. | 90,683 | ||||||
1,761 | Stewart Information Services Corp. | 72,905 | ||||||
5,145 | Third Point Reinsurance, Ltd.* | 49,598 | ||||||
1,767 | Tiptree Financial, Inc., Class A^ | 9,878 | ||||||
1,775 | Torchmark Corp. | 132,291 | ||||||
6,065 | Travelers Cos., Inc. (The) | 726,284 | ||||||
1,438 | United Fire Group, Inc. | 79,737 | ||||||
2,794 | United Insurance Holdings Co.^ | 46,436 | ||||||
3,169 | Universal Insurance Holdings, Inc. | 120,168 | ||||||
3,102 | UnumProvident Corp. | 91,137 | ||||||
2,928 | W.R. Berkley Corp. | 216,408 | ||||||
140 | White Mountains Insurance Group, Ltd. | 120,077 | ||||||
911 | Willis Towers Watson plc | 138,344 | ||||||
|
| |||||||
13,905,483 | ||||||||
|
| |||||||
Interactive Media & Services (2.3%): | ||||||||
2,621 | Alphabet, Inc., Class A* | 2,738,840 | ||||||
2,779 | Alphabet, Inc., Class C* | 2,877,960 | ||||||
1,229 | Cargurus, Inc.* | 41,454 | ||||||
3,783 | Cars.com, Inc.*^ | 81,335 | ||||||
2,881 | DHI Group, Inc.* | 4,379 | ||||||
30,727 | Facebook, Inc., Class A* | 4,028,003 | ||||||
583 | IAC/InterActiveCorp.* | 106,712 | ||||||
5,384 | Liberty TripAdvisor Holdings, Inc., Class A* | 85,552 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Interactive Media & Services, continued | ||||||||
1,146 | Match Group, Inc. | $ | 49,014 | |||||
2,297 | The Meet Group, Inc. (The)*^ | 10,635 | ||||||
1,344 | Travelzoo, Inc.* | 13,212 | ||||||
2,514 | TripAdvisor, Inc.*^ | 135,605 | ||||||
6,966 | Truecar, Inc.* | 63,112 | ||||||
4,951 | Twitter, Inc.* | 142,292 | ||||||
2,068 | Yelp, Inc.* | 72,359 | ||||||
664 | Zedge, Inc., Class B* | 1,625 | ||||||
1,125 | Zillow Group, Inc., Class A* | 35,359 | ||||||
1,598 | Zillow Group, Inc., Class C*^ | 50,465 | ||||||
|
| |||||||
10,537,913 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (2.9%): | ||||||||
2,093 | 1-800 Flowers.com, Inc., Class A* | 25,597 | ||||||
6,857 | Amazon.com, Inc.* | 10,299,008 | ||||||
824 | Booking Holdings, Inc.* | 1,419,274 | ||||||
14,947 | eBay, Inc.* | 419,562 | ||||||
1,658 | Expedia, Inc. | 186,774 | ||||||
185 | FTD Cos., Inc.* | 274 | ||||||
4,200 | Groupon, Inc.* | 13,440 | ||||||
1,546 | GrubHub, Inc.*^ | 118,748 | ||||||
1,546 | Leaf Group, Ltd.* | 10,590 | ||||||
2,098 | Liberty Expedia Holdings, Class A* | 82,053 | ||||||
1,736 | Liquidity Services, Inc.* | 10,711 | ||||||
1,637 | Nutri/System, Inc. | 71,832 | ||||||
820 | Overstock.com, Inc.*^ | 11,136 | ||||||
1,164 | PetMed Express, Inc. | 27,075 | ||||||
4,088 | Quotient Technology, Inc.*^ | 43,660 | ||||||
8,810 | Qurate Retail, Inc.* | 171,971 | ||||||
1,959 | Shutterfly, Inc.*^ | 78,869 | ||||||
981 | Shutterstock, Inc.^ | 35,326 | ||||||
585 | Stamps.com, Inc.* | 91,049 | ||||||
1,332 | Wayfair, Inc., Class A*^ | 119,987 | ||||||
|
| |||||||
13,236,936 | ||||||||
|
| |||||||
IT Services (5.0%): | ||||||||
12,605 | Accenture plc, Class C | 1,777,432 | ||||||
3,546 | Akamai Technologies, Inc.* | 216,590 | ||||||
1,762 | Alliance Data Systems Corp. | 264,441 | ||||||
4,258 | Amdocs, Ltd. | 249,434 | ||||||
8,958 | Automatic Data Processing, Inc. | 1,174,572 | ||||||
3,092 | Black Knight, Inc.* | 139,326 | ||||||
6,581 | Booz Allen Hamilton Holding Corp. | 296,606 | ||||||
4,071 | Broadridge Financial Solutions, Inc. | 391,834 | ||||||
1,304 | CACI International, Inc., Class A* | 187,815 | ||||||
1,432 | Carbonite, Inc.*^ | 36,172 | ||||||
3,491 | Cardtronics plc* | 90,766 | ||||||
687 | Cass Information Systems, Inc.^ | 36,356 | ||||||
5,920 | Cognizant Technology Solutions Corp., Class A | 375,802 | ||||||
6,347 | Conduent, Inc.* | 67,469 | ||||||
4,094 | CoreLogic, Inc.* | 136,821 | ||||||
2,608 | CSG Systems International, Inc. | 82,856 | ||||||
4,493 | DXC Technology Co. | 238,893 | ||||||
513 | Endurance International Group Holdings, Inc.*^ | 3,411 | ||||||
796 | Epam Systems, Inc.* | 92,344 | ||||||
2,653 | Euronet Worldwide, Inc.* | 271,614 | ||||||
2,060 | Evertec, Inc. | 59,122 | ||||||
1,620 | Exlservice Holdings, Inc.* | 85,244 | ||||||
4,243 | Fidelity National Information Services, Inc. | 435,120 |
See accompanying notes to the financial statements.
16
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services, continued | ||||||||
2,423 | First Data Corp., Class A* | $ | 40,973 | |||||
8,057 | Fiserv, Inc.* | 592,109 | ||||||
1,827 | FleetCor Technologies, Inc.* | 339,310 | ||||||
609 | Gartner, Inc.* | 77,855 | ||||||
6,266 | Genpact, Ltd. | 169,119 | ||||||
2,488 | Global Payments, Inc. | 256,587 | ||||||
1,451 | GoDaddy, Inc., Class A* | 95,215 | ||||||
2,548 | GTT Communications, Inc.*^ | 60,286 | ||||||
1,357 | Hackett Group, Inc. (The) | 21,726 | ||||||
821 | Internap Corp.*^ | 3,407 | ||||||
18,535 | International Business Machines Corp. | 2,106,872 | ||||||
2,142 | Jack Henry & Associates, Inc. | 271,006 | ||||||
3,495 | Leidos Holdings, Inc. | 184,256 | ||||||
2,160 | Limelight Networks, Inc.* | 5,054 | ||||||
3,417 | LiveRamp Holdings, Inc.* | 131,999 | ||||||
1,614 | Luxoft Holding, Inc.*^ | 49,098 | ||||||
1,640 | ManTech International Corp., Class A | 85,764 | ||||||
17,732 | MasterCard, Inc., Class A | 3,345,141 | ||||||
3,278 | Maximus, Inc. | 213,365 | ||||||
2,787 | MoneyGram International, Inc.* | 5,574 | ||||||
3,759 | NIC, Inc. | 46,912 | ||||||
839 | Okta, Inc.*^ | 53,528 | ||||||
6,919 | Paychex, Inc. | 450,773 | ||||||
9,832 | PayPal Holdings, Inc.* | 826,773 | ||||||
2,322 | Perficient, Inc.* | 51,688 | ||||||
1,985 | Perspecta, Inc. | 34,182 | ||||||
840 | PFSweb, Inc.* | 4,309 | ||||||
1,556 | Presidio, Inc. | 20,306 | ||||||
6,698 | Sabre Corp. | 144,945 | ||||||
1,901 | Science Applications International Corp. | 121,094 | ||||||
3,035 | Servicesource International, Inc.* | 3,278 | ||||||
3,966 | Steel Connect, Inc.* | 6,861 | ||||||
3,283 | Sykes Enterprises, Inc.* | 81,189 | ||||||
5,211 | Teradata Corp.*^ | 199,894 | ||||||
4,702 | Total System Services, Inc. | 382,226 | ||||||
5,685 | Travelport Worldwide, Ltd. | 88,800 | ||||||
2,975 | TTEC Holdings, Inc. | 84,996 | ||||||
3,021 | Unisys Corp.* | 35,134 | ||||||
2,288 | VeriSign, Inc.* | 339,288 | ||||||
2,275 | Virtusa Corp.* | 96,892 | ||||||
28,222 | Visa, Inc., Class A | 3,723,610 | ||||||
9,515 | Western Union Co. | 162,326 | ||||||
1,662 | WEX, Inc.* | 232,780 | ||||||
2,321 | Worldpay, Inc., Class A* | 177,394 | ||||||
|
| |||||||
22,133,934 | ||||||||
|
| |||||||
Leisure Products (0.2%): | ||||||||
3,430 | Acushnet Holdings Corp.^ | 72,270 | ||||||
3,582 | American Outdoor Brands Corp.* | 46,065 | ||||||
4,134 | Brunswick Corp. | 192,024 | ||||||
5,856 | Callaway Golf Co. | 89,597 | ||||||
658 | Escalade, Inc.^ | 7,534 | ||||||
3,448 | Hasbro, Inc.^ | 280,149 | ||||||
503 | Johnson Outdoors, Inc., Class A | 29,546 | ||||||
531 | Malibu Boats, Inc.* | 18,479 | ||||||
662 | Marine Products Corp. | 11,194 | ||||||
6,035 | Mattel, Inc.*^ | 60,290 | ||||||
1,932 | Nautilus Group, Inc.* | 21,059 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Leisure Products, continued | ||||||||
2,101 | Polaris Industries, Inc.^ | $ | 161,105 | |||||
2,859 | Vista Outdoor, Inc.* | 32,450 | ||||||
|
| |||||||
1,021,762 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.9%): | ||||||||
2,828 | Agilent Technologies, Inc. | 190,777 | ||||||
731 | Bio-Rad Laboratories, Inc., Class A* | 169,753 | ||||||
1,154 | Bio-Techne Corp. | 167,007 | ||||||
7,817 | Bruker Corp. | 232,712 | ||||||
2,131 | Cambrex Corp.*^ | 80,467 | ||||||
3,244 | Charles River Laboratories International, Inc.* | 367,156 | ||||||
1,979 | Harvard Bioscience, Inc.* | 6,293 | ||||||
1,139 | Illumina, Inc.* | 341,620 | ||||||
2,752 | IQVIA Holdings, Inc.* | 319,700 | ||||||
2,457 | Luminex Corp. | 56,781 | ||||||
1,845 | Medpace Holdings, Inc.* | 97,656 | ||||||
828 | Mettler-Toledo International, Inc.* | 468,299 | ||||||
1,400 | Neogenomics, Inc.* | 17,654 | ||||||
1,490 | PerkinElmer, Inc. | 117,040 | ||||||
1,655 | PRA Health Sciences, Inc.* | 152,194 | ||||||
2,622 | Syneos Health, Inc.* | 103,176 | ||||||
3,969 | Thermo Fisher Scientific, Inc. | 888,222 | ||||||
1,749 | Waters Corp.* | 329,949 | ||||||
|
| |||||||
4,106,456 | ||||||||
|
| |||||||
Machinery (2.8%): | ||||||||
2,898 | Actuant Corp., Class A | 60,829 | ||||||
3,733 | AGCO Corp. | 207,816 | ||||||
652 | Alamo Group, Inc. | 50,413 | ||||||
737 | Albany International Corp., Class A | 46,011 | ||||||
6,349 | Allison Transmission Holdings, Inc. | 278,785 | ||||||
2,614 | Altra Industrial Motion Corp. | 65,742 | ||||||
1,445 | ARC Group Worldwide, Inc.* | 1,445 | ||||||
2,124 | Astec Industries, Inc. | 64,124 | ||||||
2,702 | Barnes Group, Inc. | 144,881 | ||||||
837 | Blue Bird Corp.* | 15,225 | ||||||
2,517 | Briggs & Stratton Corp. | 32,922 | ||||||
10,638 | Caterpillar, Inc. | 1,351,770 | ||||||
2,289 | Chart Industries, Inc.*^ | 148,854 | ||||||
1,284 | CIRCOR International, Inc.* | 27,349 | ||||||
4,064 | Colfax Corp.* | 84,938 | ||||||
1,526 | Columbus McKinnon Corp. | 45,994 | ||||||
2,706 | Commercial Vehicle Group, Inc.* | 15,424 | ||||||
1,945 | Crane Co. | 140,390 | ||||||
3,047 | Cummins, Inc. | 407,201 | ||||||
5,524 | Deere & Co. | 824,015 | ||||||
4,360 | Donaldson Co., Inc. | 189,180 | ||||||
1,324 | Douglas Dynamics, Inc. | 47,518 | ||||||
5,031 | Dover Corp. | 356,949 | ||||||
1,120 | EnPro Industries, Inc. | 67,312 | ||||||
1,435 | ESCO Technologies, Inc. | 94,638 | ||||||
4,059 | Federal Signal Corp. | 80,774 | ||||||
3,108 | Flowserve Corp.^ | 118,166 | ||||||
3,574 | Fortive Corp. | 241,817 | ||||||
2,760 | Franklin Electric Co., Inc. | 118,349 | ||||||
694 | FreightCar America, Inc.*^ | 4,643 | ||||||
2,740 | Gardner Denver Holdings, Inc.* | 56,033 | ||||||
889 | Gencor Industries, Inc.* | 9,752 | ||||||
1,203 | Global Brass & Copper Holdings, Inc. | 30,255 |
See accompanying notes to the financial statements.
17
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
1,617 | Gorman-Rupp Co. (The) | $ | 52,407 | |||||
4,423 | Graco, Inc. | 185,103 | ||||||
1,612 | Greenbrier Cos, Inc.^ | 63,738 | ||||||
4,803 | Harsco Corp.* | 95,388 | ||||||
3,220 | Hillenbrand, Inc. | 122,135 | ||||||
490 | Hurco Cos, Inc. | 17,493 | ||||||
896 | Hyster-Yale Materials Handling, Inc., Class A | 55,516 | ||||||
1,615 | IDEX Corp. | 203,910 | ||||||
6,126 | Illinois Tool Works, Inc. | 776,103 | ||||||
4,692 | Ingersoll-Rand plc | 428,051 | ||||||
4,926 | ITT, Inc. | 237,778 | ||||||
1,662 | John Bean Technologies Corp. | 119,348 | ||||||
598 | Kadant, Inc. | 48,713 | ||||||
4,352 | Kennametal, Inc. | 144,835 | ||||||
787 | L.B. Foster Co., Class A* | 12,513 | ||||||
1,806 | Lincoln Electric Holdings, Inc. | 142,403 | ||||||
539 | Lindsay Corp. | 51,879 | ||||||
774 | Lydall, Inc.* | 15,720 | ||||||
1,213 | Manitex International, Inc.* | 6,890 | ||||||
2,529 | Manitowoc Co., Inc. (The)*^ | 37,353 | ||||||
5,860 | Meritor, Inc.* | 99,093 | ||||||
1,601 | Middleby Corp. (The)*^ | 164,471 | ||||||
4,873 | Milacron Holdings Corp.* | 57,940 | ||||||
3,785 | Mueller Industries, Inc. | 88,418 | ||||||
7,183 | Mueller Water Products, Inc., Class A | 65,365 | ||||||
4,067 | Navistar International Corp.* | 105,539 | ||||||
1,258 | NN, Inc.^ | 8,441 | ||||||
1,555 | Nordson Corp. | 185,589 | ||||||
158 | Omega Flex, Inc. | 8,543 | ||||||
3,290 | OshKosh Corp. | 201,710 | ||||||
7,112 | PACCAR, Inc. | 406,380 | ||||||
2,022 | Parker Hannifin Corp. | 301,561 | ||||||
1,058 | Park-Ohio Holdings Corp. | 32,470 | ||||||
5,836 | Pentair plc | 220,484 | ||||||
976 | Proto Labs, Inc.*^ | 110,083 | ||||||
660 | RBC Bearings, Inc.* | 86,526 | ||||||
1,886 | REV Group, Inc. | 14,164 | ||||||
5,156 | Rexnord Corp.* | 118,330 | ||||||
2,202 | Snap-On, Inc.^ | 319,929 | ||||||
612 | Spartan Motors, Inc. | 4,425 | ||||||
2,829 | SPX Corp.* | 79,240 | ||||||
2,504 | SPX FLOW, Inc.* | 76,172 | ||||||
775 | Standex International Corp. | 52,065 | ||||||
1,547 | Stanley Black & Decker, Inc. | 185,238 | ||||||
1,370 | Sun Hydraulics Corp.^ | 45,470 | ||||||
1,093 | Tennant Co. | 56,956 | ||||||
3,523 | Terex Corp. | 97,129 | ||||||
3,355 | Timken Co. | 125,209 | ||||||
3,046 | Titan International, Inc. | 14,194 | ||||||
3,651 | Toro Co. | 204,018 | ||||||
2,913 | TriMas Corp.* | 79,496 | ||||||
5,158 | Trinity Industries, Inc.^ | 106,203 | ||||||
4,006 | Wabash National Corp. | 52,398 | ||||||
1,380 | WABCO Holdings, Inc.* | 148,129 | ||||||
1,503 | Wabtec Corp.^ | 105,586 | ||||||
1,415 | Watts Water Technologies, Inc., Class A | 91,310 | ||||||
6,694 | Welbilt, Inc.*^ | 74,370 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
2,272 | Woodward, Inc. | $ | 168,787 | |||||
4,252 | Xylem, Inc.^ | 283,693 | ||||||
|
| |||||||
12,891,914 | ||||||||
|
| |||||||
Marine (0.1%): | ||||||||
7,028 | Costamare, Inc. | 30,853 | ||||||
1,680 | Eagle Bulk Shipping, Inc.*^ | 7,745 | ||||||
1,300 | Genco Shipping & Trading, Ltd.* | 10,257 | ||||||
1,331 | Golden Ocean Group, Ltd. | 8,199 | ||||||
2,348 | Kirby Corp.*^ | 158,161 | ||||||
3,233 | Matson, Inc. | 103,521 | ||||||
1,478 | Scorpio Bulkers, Inc.^ | 8,173 | ||||||
|
| |||||||
326,909 | ||||||||
|
| |||||||
Media (1.8%): | ||||||||
1,468 | A.H. Belo Corp., Class A | 4,947 | ||||||
6,959 | Altice USA, Inc.^ | 114,963 | ||||||
2,029 | AMC Networks, Inc., Class A*^ | 111,352 | ||||||
270 | Cable One, Inc. | 221,427 | ||||||
182 | CBS Corp., Class A | 7,981 | ||||||
7,322 | CBS Corp., Class B | 320,118 | ||||||
2,930 | Charter Communications, Inc., Class A* | 834,962 | ||||||
1,661 | Clear Channel Outdoor Holdings, Inc., Class A | 8,621 | ||||||
88,885 | Comcast Corp., Class A | 3,026,533 | ||||||
2,952 | comScore, Inc.* | 42,597 | ||||||
5,271 | Discovery Communications, Inc., Class A*^ | 130,405 | ||||||
9,189 | Discovery Communications, Inc., Class C* | 212,082 | ||||||
4,242 | DISH Network Corp., Class A* | 105,923 | ||||||
4,131 | E.W. Scripps Co. (The), Class A^ | 64,981 | ||||||
4,691 | Emerald Expositions Events, Inc. | 57,887 | ||||||
8,164 | Entercom Communications Corp. | 46,616 | ||||||
4,792 | Entravision Communications Corp., Class A | 13,945 | ||||||
6,638 | Gannett Co., Inc.^ | 56,622 | ||||||
4,760 | GCI Liberty, Inc., Class A* | 195,922 | ||||||
4,886 | Gray Television, Inc.* | 72,020 | ||||||
472 | Harte-Hanks, Inc.* | 1,142 | ||||||
13,729 | Interpublic Group of Cos., Inc. (The) | 283,229 | ||||||
3,028 | John Wiley & Sons, Inc., Class A | 142,225 | ||||||
192 | John Wiley & Sons, Inc., Class B | 8,989 | ||||||
563 | Liberty Broadband Corp., Class A*^ | 40,429 | ||||||
2,655 | Liberty Broadband Corp., Class C* | 191,240 | ||||||
3,100 | Liberty Latin America, Ltd.* | 45,167 | ||||||
1,489 | Liberty Latin America, Ltd.*^ | 21,561 | ||||||
2,477 | Liberty SiriusXM Group, Class A* | 91,154 | ||||||
5,273 | Liberty SiriusXM Group, Class C* | 194,996 | ||||||
2,502 | Marchex, Inc., Class B | 6,630 | ||||||
1,649 | Meredith Corp. | 85,649 | ||||||
3,759 | MSG Networks, Inc., Class A*^ | 88,562 | ||||||
3,726 | National CineMedia, Inc. | 24,144 | ||||||
3,971 | New Media Investment Group, Inc. | 45,944 | ||||||
3,530 | New York Times Co. (The), Class A^ | 78,684 | ||||||
9,481 | News Corp., Class A | 107,609 | ||||||
2,563 | News Corp., Class B | 29,603 | ||||||
2,981 | Nexstar Broadcasting Group, Inc., Class A^ | 234,426 | ||||||
6,406 | Omnicom Group, Inc.^ | 469,175 | ||||||
1,853 | Scholastic Corp. | 74,602 | ||||||
5,191 | Sinclair Broadcast Group, Inc., Class A | 136,731 | ||||||
24,685 | Sirius XM Holdings, Inc.^ | 140,951 |
See accompanying notes to the financial statements.
18
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media, continued | ||||||||
1,895 | TechTarget, Inc.*^ | $ | 23,138 | |||||
11,352 | Tegna, Inc. | 123,396 | ||||||
933 | Tribune Publishing Co.*^ | 10,580 | ||||||
|
| |||||||
8,349,860 | ||||||||
|
| |||||||
Metals & Mining (0.6%): | ||||||||
16,272 | AK Steel Holding Corp.*^ | 36,612 | ||||||
5,563 | Alcoa Corp.* | 147,865 | ||||||
4,528 | Allegheny Technologies, Inc.*^ | 98,575 | ||||||
799 | Ampco-Pittsburgh Corp.* | 2,477 | ||||||
2,296 | Carpenter Technology Corp. | 81,761 | ||||||
4,968 | Century Aluminum Co.* | 36,316 | ||||||
10,120 | Cleveland-Cliffs, Inc.*^ | 77,823 | ||||||
12,366 | Coeur d’Alene Mines Corp.*^ | 55,276 | ||||||
6,147 | Commercial Metals Co. | 98,475 | ||||||
1,902 | Compass Minerals International, Inc.^ | 79,294 | ||||||
7,323 | Ferroglobe plc(a) | 11,644 | ||||||
9,823 | Ferroglobe Unit* | — | ||||||
33,112 | Freeport-McMoRan Copper & Gold, Inc. | 341,384 | ||||||
2,945 | Gold Resource Corp. | 11,780 | ||||||
943 | Haynes International, Inc. | 24,895 | ||||||
23,972 | Hecla Mining Co.^ | 56,574 | ||||||
151 | Kaiser Aluminum Corp.^ | 13,483 | ||||||
1,359 | Materion Corp. | 61,141 | ||||||
12,309 | McEwen Mining, Inc. | 22,402 | ||||||
7,907 | Newmont Mining Corp. | 273,978 | ||||||
6,254 | Nucor Corp. | 324,020 | ||||||
700 | Olympic Steel, Inc. | 9,989 | ||||||
2,353 | Reliance Steel & Aluminum Co. | 167,463 | ||||||
2,119 | Royal Gold, Inc. | 181,492 | ||||||
1,500 | Ryerson Holding Corp.* | 9,510 | ||||||
1,365 | Schnitzer Steel Industries, Inc., Class A | 29,416 | ||||||
1,772 | Southern Copper Corp.^ | 54,524 | ||||||
11,019 | Steel Dynamics, Inc. | 331,011 | ||||||
3,673 | SunCoke Energy, Inc.* | 31,404 | ||||||
701 | Synalloy Corp. | 11,630 | ||||||
2,052 | TimkenSteel Corp.*^ | 17,934 | ||||||
7,131 | United States Steel Corp.^ | 130,069 | ||||||
548 | Universal Stainless & Alloy Products, Inc.* | 8,883 | ||||||
4,099 | Warrior Met Coal, Inc.^ | 98,827 | ||||||
2,898 | Worthington Industries, Inc. | 100,966 | ||||||
|
| |||||||
3,038,893 | ||||||||
|
| |||||||
Multiline Retail (0.7%): | ||||||||
3,725 | Big Lots, Inc.^ | 107,727 | ||||||
1,948 | Dillard’s, Inc., Class A^ | 117,484 | ||||||
5,093 | Dollar General Corp. | 550,451 | ||||||
4,239 | Dollar Tree, Inc.* | 382,866 | ||||||
18,758 | J.C. Penney Co., Inc.*^ | 19,508 | ||||||
9,977 | Kohl’s Corp. | 661,875 | ||||||
15,105 | Macy’s, Inc. | 449,827 | ||||||
4,797 | Nordstrom, Inc.^ | 223,588 | ||||||
2,557 | Ollie’s Bargain Outlet Holdings, Inc.*^ | 170,066 | ||||||
11,357 | Target Corp. | 750,585 | ||||||
|
| |||||||
3,433,977 | ||||||||
|
| |||||||
Multi-Utilities (0.9%): | ||||||||
5,044 | Ameren Corp. | 329,020 | ||||||
2,841 | Avista Corp. | 120,686 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Multi-Utilities, continued | ||||||||
1,784 | Black Hills Corp.^ | $ | 112,000 | |||||
9,831 | CenterPoint Energy, Inc. | 277,529 | ||||||
6,283 | CMS Energy Corp. | 311,951 | ||||||
3,650 | Consolidated Edison, Inc. | 279,079 | ||||||
9,528 | Dominion Energy, Inc. | 680,870 | ||||||
3,156 | DTE Energy Co. | 348,107 | ||||||
7,317 | MDU Resources Group, Inc. | 174,437 | ||||||
6,403 | NiSource, Inc. | 162,316 | ||||||
2,365 | NorthWestern Corp. | 140,576 | ||||||
5,413 | Public Service Enterprise Group, Inc. | 281,747 | ||||||
3,103 | SCANA Corp. | 148,261 | ||||||
2,131 | Sempra Energy^ | 230,553 | ||||||
844 | Unitil Corp. | 42,740 | ||||||
4,645 | Vectren Corp. | 334,347 | ||||||
4,178 | WEC Energy Group, Inc. | 289,368 | ||||||
|
| |||||||
4,263,587 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (3.8%): | ||||||||
7,900 | Abraxas Petroleum Corp.* | 8,611 | ||||||
332 | Adams Resources & Energy, Inc. | 12,852 | ||||||
5,292 | Anadarko Petroleum Corp. | 232,001 | ||||||
7,652 | Antero Resources Corp.*^ | 71,852 | ||||||
6,173 | Apache Corp.^ | 162,041 | ||||||
1,256 | Arch Coal, Inc.^ | 104,235 | ||||||
1,149 | Bonanza Creek Energy, Inc.* | 23,750 | ||||||
4,519 | Cabot Oil & Gas Corp. | 101,000 | ||||||
275 | California Resources Corp.*^ | 4,686 | ||||||
15,767 | Callon Petroleum Co.*^ | 102,328 | ||||||
7,100 | Carrizo Oil & Gas, Inc.*^ | 80,159 | ||||||
6,243 | Centennial Resources Development*^ | 68,798 | ||||||
5,373 | Cheniere Energy, Inc.* | 318,028 | ||||||
26,735 | Chesapeake Energy Corp.* | 56,144 | ||||||
20,054 | Chevron Corp. | 2,181,675 | ||||||
1,737 | Cimarex Energy Co. | 107,086 | ||||||
7,534 | Clean Energy Fuel Corp.* | 12,958 | ||||||
3,508 | Cloud Peak Energy, Inc.*^ | 1,285 | ||||||
6,619 | CNX Resources Corp.* | 75,589 | ||||||
3,437 | Concho Resources, Inc.* | 353,289 | ||||||
15,410 | ConocoPhillips Co. | 960,814 | ||||||
1,244 | CONSOL Energy, Inc.* | 39,447 | ||||||
1,423 | Contango Oil & Gas Co.*^ | 4,625 | ||||||
1,170 | Continental Resources, Inc.* | 47,022 | ||||||
2,823 | CVR Energy, Inc. | 97,337 | ||||||
5,134 | Delek US Holdings, Inc. | 166,906 | ||||||
35,565 | Denbury Resources, Inc.* | 60,816 | ||||||
7,602 | Devon Energy Corp. | 171,349 | ||||||
8,860 | DHT Holdings, Inc.^ | 34,731 | ||||||
3,772 | Diamondback Energy, Inc. | 349,664 | ||||||
107 | Dorian LPG, Ltd.* | 624 | ||||||
15,555 | Eclipse Resources Corp.* | 16,333 | ||||||
5,391 | Enlink Midstream LLC^ | 51,161 | ||||||
7,378 | EOG Resources, Inc. | 643,435 | ||||||
8,400 | EP Energy Corp., Class A* | 5,880 | ||||||
3,515 | EQT Corp. | 66,398 | ||||||
2,812 | Equitrans Midstream Corp.* | 56,296 | ||||||
5,493 | Extraction Oil & Gas, Inc.* | 23,565 | ||||||
54,022 | Exxon Mobil Corp. | 3,683,759 | ||||||
4,505 | Gaslog, Ltd.^ | 74,153 |
See accompanying notes to the financial statements.
19
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
2,514 | Green Plains Renewable Energy, Inc.^ | $ | 32,959 | |||||
8,600 | Gulfport Energy Corp.*^ | 56,330 | ||||||
5,897 | Halcon Resources Corp.*^ | 10,025 | ||||||
2,222 | Hallador Energy Co. | 11,266 | ||||||
5,198 | Hess Corp. | 210,519 | ||||||
10,617 | HighPoint Resources Corp.* | 26,436 | ||||||
8,952 | HollyFrontier Corp. | 457,626 | ||||||
1,180 | International Seaways, Inc.* | 19,871 | ||||||
23,597 | Kinder Morgan, Inc. | 362,922 | ||||||
17,233 | Kosmos Energy, Ltd.* | 70,138 | ||||||
12,195 | Laredo Petroleum Holdings, Inc.*^ | 44,146 | ||||||
14,759 | Marathon Oil Corp. | 211,644 | ||||||
17,760 | Marathon Petroleum Corp. | 1,048,018 | ||||||
6,316 | Matador Resources Co.*^ | 98,087 | ||||||
6,993 | Murphy Oil Corp. | 163,566 | ||||||
6,701 | Newfield Exploration Co.* | 98,237 | ||||||
7,953 | Noble Energy, Inc. | 149,198 | ||||||
11,184 | Oasis Petroleum, Inc.*^ | 61,848 | ||||||
11,152 | Occidental Petroleum Corp. | 684,510 | ||||||
6,386 | ONEOK, Inc. | 344,525 | ||||||
2,263 | Pacific Ethanol, Inc.* | 1,948 | ||||||
1,401 | Panhandle Oil & Gas, Inc., Class A | 21,716 | ||||||
1,717 | PAR Pacific Holdings, Inc.* | 24,347 | ||||||
5,375 | Parsley Energy, Inc., Class A* | 85,893 | ||||||
6,440 | PBF Energy, Inc., Class A | 210,395 | ||||||
3,182 | PDC Energy, Inc.* | 94,696 | ||||||
4,173 | Peabody Energy Corp. | 127,193 | ||||||
3,770 | Phillips 66 | 324,786 | ||||||
2,484 | Pioneer Natural Resources Co. | 326,696 | ||||||
6 | PrimeEnergy Corp.* | 416 | ||||||
11,578 | QEP Resources, Inc.* | 65,184 | ||||||
4,715 | Range Resources Corp.^ | 45,123 | ||||||
3,344 | Renewable Energy Group, Inc.*^ | 85,941 | ||||||
374 | REX American Resources Corp.* | 25,473 | ||||||
1,820 | Ring Energy, Inc.* | 9,246 | ||||||
11,997 | Scorpio Tankers, Inc.^ | 21,115 | ||||||
3,967 | SemGroup Corp., Class A^ | 54,665 | ||||||
5,342 | Ship Finance International^ | 56,251 | ||||||
6,397 | SM Energy Co. | 99,026 | ||||||
11,084 | Southwestern Energy Co.* | 37,796 | ||||||
11,996 | SRC Energy, Inc.* | 56,381 | ||||||
2,144 | Talos Energy, Inc.* | 34,990 | ||||||
3,165 | Targa Resources Corp. | 114,003 | ||||||
6,407 | Teekay Shipping Corp.^ | 21,399 | ||||||
3,637 | Ultra Petroleum Corp.* | 2,764 | ||||||
7,754 | Valero Energy Corp. | 581,317 | ||||||
6,207 | Whiting Petroleum Corp.* | 140,837 | ||||||
2,629 | Wildhorse Resource Development Corp.* | 37,095 | ||||||
6,939 | Williams Cos., Inc. (The) | 153,005 | ||||||
4,114 | World Fuel Services Corp. | 88,081 | ||||||
13,673 | WPX Energy, Inc.* | 155,189 | ||||||
|
| |||||||
17,897,520 | ||||||||
|
| |||||||
Paper & Forest Products (0.1%): | ||||||||
2,511 | Boise Cascade Co. | 59,887 | ||||||
1,659 | Clearwater Paper Corp.* | 40,430 | ||||||
3,283 | Domtar Corp. | 115,332 | ||||||
7,047 | Louisiana-Pacific Corp. | 156,585 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Paper & Forest Products, continued | ||||||||
5,575 | Mercer International, Inc. | $ | 58,203 | |||||
1,286 | Neenah Paper, Inc. | 75,771 | ||||||
700 | P.H. Glatfelter Co.^ | 6,832 | ||||||
5,870 | Resolute Forest Products | 46,549 | ||||||
1,565 | Schweitzer-Mauduit International, Inc. | 39,203 | ||||||
2,251 | Verso Corp.* | 50,422 | ||||||
|
| |||||||
649,214 | ||||||||
|
| |||||||
Personal Products (0.4%): | ||||||||
22,998 | Avon Products, Inc.* | 34,957 | ||||||
9,981 | Coty, Inc., Class A^ | 65,475 | ||||||
2,453 | Edgewell Personal Care Co.* | 91,620 | ||||||
4,081 | Estee Lauder Co., Inc. (The), Class A | 530,939 | ||||||
5,910 | Herbalife, Ltd.*^ | 348,395 | ||||||
1,355 | Inter Parfums, Inc. | 88,847 | ||||||
923 | Medifast, Inc. | 115,393 | ||||||
1,236 | Natures Sunshine Products, Inc.* | 10,073 | ||||||
3,177 | Nu Skin Enterprises, Inc., Class A | 194,845 | ||||||
2,385 | Revlon, Inc.* | 60,078 | ||||||
340 | United-Guardian, Inc. | 6,236 | ||||||
1,364 | Usana Health Sciences, Inc.* | 160,584 | ||||||
|
| |||||||
1,707,442 | ||||||||
|
| |||||||
Pharmaceuticals (3.7%): | ||||||||
4,368 | Akorn, Inc.* | 14,808 | ||||||
3,430 | Allergan plc | 458,454 | ||||||
2,984 | Amneal Pharmaceuticals, Inc.*^ | 40,374 | ||||||
2,003 | Amphastar Pharmaceuticals, Inc.*^ | 39,860 | ||||||
900 | ANI Pharmaceuticals, Inc.* | 40,518 | ||||||
12,668 | Bristol-Myers Squibb Co. | 658,483 | ||||||
6,427 | Catalent, Inc.* | 200,394 | ||||||
4,376 | Corcept Therapeutics, Inc.*^ | 58,463 | ||||||
1,468 | Cumberland Pharmaceuticals, Inc.* | 9,248 | ||||||
1,054 | Cymabay Therapeutics, Inc.* | 8,295 | ||||||
13,932 | Eli Lilly & Co. | 1,612,211 | ||||||
8,827 | Endo International plc* | 64,437 | ||||||
5,527 | Horizon Pharma plc* | 107,998 | ||||||
3,292 | Innoviva, Inc.*^ | 57,445 | ||||||
2,219 | Intra-Cellular Therapies, Inc.* | 25,274 | ||||||
1,011 | Jazz Pharmaceuticals plc* | 125,324 | ||||||
40,142 | Johnson & Johnson Co. | 5,180,324 | ||||||
2,281 | Lannett Co., Inc.*^ | 11,314 | ||||||
42 | Lipocine, Inc.* | 55 | ||||||
4,828 | Mallinckrodt plc* | 76,282 | ||||||
36,994 | Merck & Co., Inc. | 2,826,712 | ||||||
3,816 | Mylan NV* | 104,558 | ||||||
1,317 | Otonomy, Inc.* | 2,436 | ||||||
2,153 | Perrigo Co. plc | 83,429 | ||||||
98,421 | Pfizer, Inc. | 4,296,076 | ||||||
793 | Phibro Animal Health Corp., Class A | 25,503 | ||||||
2,480 | Prestige Brands Holdings, Inc.*^ | 76,582 | ||||||
1,789 | Supernus Pharmaceuticals, Inc.*^ | 59,431 | ||||||
923 | Taro Pharmaceutical Industries, Ltd. | 78,123 | ||||||
9,791 | Zoetis, Inc. | 837,522 | ||||||
2,097 | Zogenix, Inc.*^ | 76,457 | ||||||
|
| |||||||
17,256,390 | ||||||||
|
| |||||||
Professional Services (0.7%): | ||||||||
3,098 | ASGN, Inc.* | 168,841 | ||||||
494 | Barrett Business Services, Inc. | 28,282 |
See accompanying notes to the financial statements.
20
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Professional Services, continued | ||||||||
3,154 | CBIZ, Inc.* | $ | 62,134 | |||||
304 | CoStar Group, Inc.* | 102,551 | ||||||
456 | CRA International, Inc. | 19,403 | ||||||
1,775 | Dun & Bradstreet Corp. | 253,364 | ||||||
3,281 | Equifax, Inc. | 305,560 | ||||||
2,728 | Exponent, Inc. | 138,337 | ||||||
825 | Forrester Research, Inc. | 36,878 | ||||||
2,551 | FTI Consulting, Inc.* | 169,999 | ||||||
1,205 | Heidrick & Struggles International, Inc. | 37,584 | ||||||
466 | Hill International, Inc.* | 1,435 | ||||||
1,763 | Huron Consulting Group, Inc.* | 90,460 | ||||||
1,472 | ICF International, Inc. | 95,356 | ||||||
3,095 | InnerWorkings, Inc.*^ | 11,575 | ||||||
1,948 | Insperity, Inc. | 181,865 | ||||||
2,223 | Kelly Services, Inc., Class A | 45,527 | ||||||
2,263 | Kforce, Inc. | 69,972 | ||||||
2,258 | Korn/Ferry International | 89,281 | ||||||
3,573 | ManpowerGroup, Inc. | 231,530 | ||||||
659 | Mistras Group, Inc.* | 9,476 | ||||||
3,651 | Navigant Consulting, Inc. | 87,807 | ||||||
7,090 | Nielsen Holdings plc | 165,410 | ||||||
2,125 | Resources Connection, Inc. | 30,175 | ||||||
3,340 | Robert Half International, Inc. | 191,048 | ||||||
2,853 | TransUnion | 162,050 | ||||||
2,994 | TriNet Group, Inc.* | 125,598 | ||||||
2,213 | Trueblue, Inc.* | 49,239 | ||||||
4,020 | Verisk Analytics, Inc.* | 438,341 | ||||||
840 | Volt Information Sciences, Inc.* | 1,806 | ||||||
1,028 | Wageworks, Inc.* | 27,920 | ||||||
633 | Willdan Group, Inc.*^ | 22,142 | ||||||
|
| |||||||
3,450,946 | ||||||||
|
| |||||||
Real Estate Management & Development (0.3%): | ||||||||
400 | Altisource Portfolio Solutions* | 8,996 | ||||||
10,433 | CBRE Group, Inc., Class A* | 417,737 | ||||||
339 | Consolidated-Tomoka Land Co. | 17,798 | ||||||
279 | Forestar Group, Inc.* | 3,864 | ||||||
232 | FRP Holdings, Inc.* | 10,674 | ||||||
318 | Griffin Industrial Realty, Inc. | 10,144 | ||||||
2,632 | HFF, Inc., Class A | 87,277 | ||||||
1,280 | Howard Hughes Corp. (The)* | 124,954 | ||||||
1,295 | Jones Lang LaSalle, Inc. | 163,947 | ||||||
5,360 | Kennedy-Wilson Holdings, Inc. | 97,391 | ||||||
2,112 | Marcus & Millichap, Inc.* | 72,505 | ||||||
6,929 | Newmark Group, Inc. | 55,571 | ||||||
997 | Rafael Holdings, Inc., Class B* | 7,906 | ||||||
988 | RE/MAX Holdings, Inc., Class A | 30,381 | ||||||
7,526 | Realogy Holdings Corp.^ | 110,482 | ||||||
1,447 | Tejon Ranch Co.* | 23,991 | ||||||
1,038 | The RMR Group, Inc., Class A | 55,097 | ||||||
3,157 | The St. Joe Co.*^ | 41,578 | ||||||
|
| |||||||
1,340,293 | ||||||||
|
| |||||||
Road & Rail (1.3%): | ||||||||
566 | AMERCO, Inc. | 185,710 | ||||||
1,475 | ArcBest Corp. | 50,534 | ||||||
3,967 | Avis Budget Group, Inc.* | 89,178 | ||||||
1,699 | Covenant Transportation Group, Inc., Class A* | 32,621 | ||||||
13,194 | CSX Corp. | 819,743 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Road & Rail, continued | ||||||||
1,672 | Genesee & Wyoming, Inc., Class A* | $ | 123,761 | |||||
4,879 | Heartland Express, Inc.^ | 89,286 | ||||||
4,231 | Hertz Global Holdings, Inc.*^ | 57,753 | ||||||
3,215 | J.B. Hunt Transport Services, Inc. | 299,124 | ||||||
3,063 | Kansas City Southern | 292,363 | ||||||
3,490 | Knight-Swift Transportation Holdings, Inc.^ | 87,494 | ||||||
2,480 | Landstar System, Inc. | 237,262 | ||||||
2,223 | Marten Transport, Ltd. | 35,990 | ||||||
6,083 | Norfolk Southern Corp. | 909,652 | ||||||
2,720 | Old Dominion Freight Line, Inc. | 335,893 | ||||||
400 | P.A.M. Transportation SVCS* | 15,764 | ||||||
2,916 | Roadrunner Transportation System, Inc.* | 1,447 | ||||||
3,706 | Ryder System, Inc. | 178,444 | ||||||
1,912 | Saia, Inc.* | 106,728 | ||||||
12,859 | Union Pacific Corp. | 1,777,499 | ||||||
2,010 | Universal Truckload Services, Inc. | 36,361 | ||||||
1,023 | USA Truck, Inc.*^ | 15,314 | ||||||
4,896 | Werner Enterprises, Inc.^ | 144,628 | ||||||
1,829 | YRC Worldwide, Inc.*^ | 5,761 | ||||||
|
| |||||||
5,928,310 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.6%): | ||||||||
2,441 | Advanced Energy Industries, Inc.* | 104,792 | ||||||
10,055 | Advanced Micro Devices, Inc.*^ | 185,615 | ||||||
2,031 | Alpha & Omega Semiconductor, Ltd.* | 20,696 | ||||||
1,392 | Ambarella, Inc.* | 48,692 | ||||||
17,158 | Amkor Technology, Inc.* | 112,556 | ||||||
2,339 | Analog Devices, Inc. | 200,756 | ||||||
16,074 | Applied Materials, Inc. | 526,263 | ||||||
1,615 | Axcelis Technologies, Inc.* | 28,747 | ||||||
1,701 | AXT, Inc.*^ | 7,399 | ||||||
3,701 | Broadcom, Inc. | 941,090 | ||||||
3,367 | Brooks Automation, Inc. | 88,148 | ||||||
997 | Cabot Microelectronics Corp. | 95,064 | ||||||
437 | CEVA, Inc.* | 9,653 | ||||||
3,276 | Cirrus Logic, Inc.*^ | 108,698 | ||||||
2,261 | Cohu, Inc. | 36,334 | ||||||
3,350 | Cree, Inc.*^ | 143,296 | ||||||
9,588 | Cypress Semiconductor Corp. | 121,959 | ||||||
3,151 | Diodes, Inc.* | 101,651 | ||||||
7,419 | Entegris, Inc. | 206,953 | ||||||
3,383 | First Solar, Inc.*^ | 143,625 | ||||||
3,971 | FormFactor, Inc.* | 55,951 | ||||||
1,314 | GSI Technology, Inc.* | 6,754 | ||||||
975 | Inphi Corp.*^ | 31,346 | ||||||
3,317 | Integrated Device Technology, Inc.* | 160,642 | ||||||
94,998 | Intel Corp. | 4,458,257 | ||||||
4,648 | KLA-Tencor Corp. | 415,950 | ||||||
2,537 | Kulicke & Soffa Industries, Inc. | 51,425 | ||||||
2,529 | Lam Research Corp. | 344,374 | ||||||
4,922 | Lattice Semiconductor Corp.* | 34,060 | ||||||
740 | MA-COM Technology Solutions Holdings, Inc.* | 10,737 | ||||||
11,227 | Marvell Technology Group, Ltd. | 181,765 | ||||||
5,668 | Maxim Integrated Products, Inc. | 288,218 | ||||||
3,353 | MaxLinear, Inc., Class A* | 59,013 | ||||||
3,257 | Microchip Technology, Inc.^ | 234,243 | ||||||
32,552 | Micron Technology, Inc.* | 1,032,875 | ||||||
2,866 | MKS Instruments, Inc. | 185,172 |
See accompanying notes to the financial statements.
21
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
793 | Monolithic Power Systems, Inc. | $ | 92,186 | |||||
1,348 | Nanometrics, Inc.*^ | 36,841 | ||||||
1,500 | Neophotonics Corp.* | 9,720 | ||||||
150 | NVE Corp.^ | 13,131 | ||||||
9,799 | NVIDIA Corp. | 1,308,167 | ||||||
14,154 | ON Semiconductor Corp.* | 233,683 | ||||||
1,438 | PDF Solutions, Inc.*^ | 12,122 | ||||||
5,010 | Photronics, Inc.* | 48,497 | ||||||
1,260 | Power Integrations, Inc.^ | 76,835 | ||||||
1,918 | Qorvo, Inc.* | 116,480 | ||||||
6,173 | QUALCOMM, Inc. | 351,305 | ||||||
8,280 | Rambus, Inc.* | 63,508 | ||||||
1,554 | Rudolph Technologies, Inc.* | 31,810 | ||||||
2,464 | Semtech Corp.* | 113,024 | ||||||
867 | Silicon Laboratories, Inc.* | 68,328 | ||||||
5,510 | Skyworks Solutions, Inc. | 369,280 | ||||||
754 | SMART Global Holdings, Inc.*^ | 22,394 | ||||||
2,143 | Solaredge Technologies, Inc.*^ | 75,219 | ||||||
2,209 | Synaptics, Inc.*^ | 82,197 | ||||||
4,497 | Teradyne, Inc. | 141,116 | ||||||
19,651 | Texas Instruments, Inc. | 1,857,021 | ||||||
1,678 | Ultra Clean Holdings, Inc.* | 14,213 | ||||||
782 | Universal Display Corp.^ | 73,172 | ||||||
3,598 | Veeco Instruments, Inc.* | 26,661 | ||||||
4,855 | Versum Materials, Inc. | 134,581 | ||||||
5,209 | Xilinx, Inc. | 443,651 | ||||||
3,667 | Xperi Corp.^ | 67,436 | ||||||
|
| |||||||
16,665,347 | ||||||||
|
| |||||||
Software (4.6%): | ||||||||
3,116 | ACI Worldwide, Inc.* | 86,220 | ||||||
5,352 | Adobe Systems, Inc.* | 1,210,836 | ||||||
1,009 | American Software, Inc., Class A | 10,544 | ||||||
988 | ANSYS, Inc.* | 141,225 | ||||||
3,599 | Aspen Technology, Inc.* | 295,766 | ||||||
1,764 | Autodesk, Inc.* | 226,868 | ||||||
2,272 | Aware, Inc.* | 8,202 | ||||||
1,769 | Blackbaud, Inc.^ | 111,270 | ||||||
794 | Bottomline Technologies, Inc.* | 38,112 | ||||||
6,502 | Cadence Design Systems, Inc.* | 282,707 | ||||||
3,648 | CDK Global, Inc. | 174,666 | ||||||
4,211 | Citrix Systems, Inc. | 431,459 | ||||||
505 | CommVault Systems, Inc.* | 29,840 | ||||||
1,380 | Ebix, Inc. | 58,733 | ||||||
699 | Ellie Mae, Inc.*^ | 43,918 | ||||||
990 | Envestnet, Inc.*^ | 48,698 | ||||||
1,083 | Evolving Systems, Inc.* | 1,283 | ||||||
1,055 | Fair Isaac Corp.* | 197,285 | ||||||
1,784 | FireEye, Inc.* | 28,919 | ||||||
1,444 | Fortinet, Inc.* | 101,701 | ||||||
977 | Globant SA* | 55,025 | ||||||
1,126 | Guidewire Software, Inc.* | 90,339 | ||||||
385 | HubSpot, Inc.* | 48,406 | ||||||
5,148 | Intuit, Inc. | 1,013,384 | ||||||
2,946 | j2 Global, Inc.^ | 204,393 | ||||||
1,431 | LogMeIn, Inc.^ | 116,727 | ||||||
2,898 | Manhattan Associates, Inc.*^ | 122,788 | ||||||
111,164 | Microsoft Corp. | 11,290,928 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Software, continued | ||||||||
430 | MicroStrategy, Inc., Class A* | $ | 54,933 | |||||
1,803 | Monotype Imaging Holdings, Inc. | 27,983 | ||||||
600 | New Relic, Inc.* | 48,582 | ||||||
8,426 | Nuance Communications, Inc.* | 111,476 | ||||||
1,722 | OneSpan, Inc.* | 22,300 | ||||||
29,456 | Oracle Corp. | 1,329,938 | ||||||
2,127 | Paycom Software, Inc.* | 260,451 | ||||||
963 | Pegasystems, Inc. | 46,060 | ||||||
2,433 | Progress Software Corp. | 86,347 | ||||||
393 | PTC, Inc.* | 32,580 | ||||||
1,224 | Qualys, Inc.* | 91,482 | ||||||
752 | Qumu Corp.* | 1,429 | ||||||
2,745 | RealNetworks, Inc.* | 6,341 | ||||||
1,867 | RealPage, Inc.*^ | 89,971 | ||||||
3,102 | Red Hat, Inc.* | 544,835 | ||||||
737 | Rubicon Project, Inc.* | 2,749 | ||||||
2,640 | Salesforce.com, Inc.* | 361,601 | ||||||
1,200 | Sapiens International Corp. NV | 13,236 | ||||||
2,393 | SeaChange International, Inc.* | 3,015 | ||||||
574 | ServiceNow, Inc.* | 102,201 | ||||||
967 | Splunk, Inc.* | 101,390 | ||||||
4,018 | SS&C Technologies Holdings, Inc. | 181,252 | ||||||
2,577 | Symantec Corp. | 48,692 | ||||||
2,279 | Synchronoss Technologies, Inc.*^ | 13,993 | ||||||
1,545 | Synopsys, Inc.* | 130,151 | ||||||
766 | Tableau Software, Inc., Class A* | 91,920 | ||||||
3,390 | Telaria, Inc.* | 9,255 | ||||||
454 | The Trade Desk, Inc.*^ | 52,691 | ||||||
7,428 | TiVo Corp. | 69,897 | ||||||
547 | Tyler Technologies, Inc.* | 101,644 | ||||||
200 | Ultimate Software Group, Inc. (The)* | 48,974 | ||||||
2,230 | Verint Systems, Inc.* | 94,351 | ||||||
742 | VMware, Inc., Class A | 101,750 | ||||||
494 | Workday, Inc., Class A* | 78,882 | ||||||
|
| |||||||
20,832,594 | ||||||||
|
| |||||||
Specialty Retail (3.4%): | ||||||||
3,417 | Aaron’s, Inc. | 143,685 | ||||||
4,015 | Abercrombie & Fitch Co., Class A^ | 80,501 | ||||||
2,444 | Advance Auto Parts, Inc. | 384,832 | ||||||
13,744 | American Eagle Outfitters, Inc. | 265,672 | ||||||
492 | America’s Car Mart, Inc.* | 35,645 | ||||||
1,809 | Asbury Automotive Group, Inc.* | 120,588 | ||||||
9,258 | Ascena Retail Group, Inc.*^ | 23,238 | ||||||
2,292 | At Home Group, Inc.* | 42,769 | ||||||
5,934 | AutoNation, Inc.* | 211,844 | ||||||
600 | AutoZone, Inc.* | 503,004 | ||||||
3,164 | Barnes & Noble Education, Inc.* | 12,688 | ||||||
5,007 | Barnes & Noble, Inc.^ | 35,500 | ||||||
9,785 | Bed Bath & Beyond, Inc.^ | 110,766 | ||||||
5,789 | Best Buy Co., Inc. | 306,585 | ||||||
1,657 | Big 5 Sporting Goods Corp.^ | 4,292 | ||||||
1,519 | Boot Barn Holdings, Inc.*^ | 25,869 | ||||||
583 | Build-A-Bear Workshop, Inc.* | 2,303 | ||||||
1,808 | Burlington Stores, Inc.* | 294,107 | ||||||
1,772 | Caleres, Inc. | 49,315 | ||||||
6,188 | CarMax, Inc.*^ | 388,173 | ||||||
1,987 | Cato Corp., Class A^ | 28,354 |
See accompanying notes to the financial statements.
22
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
7,822 | Chico’s FAS, Inc.^ | $ | 43,960 | |||||
988 | Children’s Place Retail Stores, Inc. (The) | 89,009 | ||||||
881 | Citi Trends, Inc. | 17,964 | ||||||
1,572 | Conn’s, Inc.* | 29,648 | ||||||
1,097 | Destination Maternity Corp.* | 3,115 | ||||||
2,864 | Destination XL Group, Inc.*^ | 6,215 | ||||||
4,900 | Dick’s Sporting Goods, Inc.^ | 152,880 | ||||||
3,425 | DSW, Inc., Class A | 84,598 | ||||||
6,313 | Express, Inc.*^ | 32,259 | ||||||
2,499 | Five Below, Inc.* | 255,698 | ||||||
6,511 | Foot Locker, Inc. | 346,385 | ||||||
2,397 | Francesca’s Holdings Corp.*^ | 2,327 | ||||||
3,938 | GameStop Corp., Class A^ | 49,698 | ||||||
16,270 | Gap, Inc. (The)^ | 419,115 | ||||||
1,571 | Genesco, Inc.* | 69,595 | ||||||
1,200 | Group 1 Automotive, Inc.^ | 63,264 | ||||||
4,368 | Guess?, Inc. | 90,723 | ||||||
1,166 | Haverty Furniture Cos., Inc.^ | 21,897 | ||||||
1,874 | Hibbett Sports, Inc.*^ | 26,798 | ||||||
21,779 | Home Depot, Inc. (The) | 3,742,067 | ||||||
1,036 | Kirkland’s, Inc.*^ | 9,873 | ||||||
4,361 | L Brands, Inc. | 111,947 | ||||||
1,518 | Lithia Motors, Inc., Class A | 115,869 | ||||||
16,503 | Lowe’s Cos., Inc. | 1,524,217 | ||||||
1,427 | MarineMax, Inc.*^ | 26,128 | ||||||
7,372 | Michaels Cos., Inc. (The)*^ | 99,817 | ||||||
1,920 | Monro Muffler Brake, Inc.^ | 132,000 | ||||||
2,552 | Murphy U.S.A., Inc.*^ | 195,585 | ||||||
1,200 | National Vision Holdings, Inc.* | 33,804 | ||||||
25,092 | Office Depot, Inc. | 64,737 | ||||||
1,773 | O’Reilly Automotive, Inc.* | 610,497 | ||||||
5,666 | Party City Holdco, Inc.*^ | 56,547 | ||||||
3,939 | Penske Automotive Group, Inc.^ | 158,820 | ||||||
170 | Pier 1 Imports, Inc.^ | 52 | ||||||
900 | Rent-A-Center, Inc.* | 14,571 | ||||||
1,042 | Restoration Hardware, Inc.* | 124,852 | ||||||
7,685 | Ross Stores, Inc. | 639,392 | ||||||
4,842 | RTW Retailwinds, Inc.*^ | 13,703 | ||||||
5,608 | Sally Beauty Holdings, Inc.*^ | 95,616 | ||||||
600 | Shoe Carnival, Inc.^ | 20,106 | ||||||
3,863 | Signet Jewelers, Ltd. | 122,728 | ||||||
2,056 | Sleep Number Corp.*^ | 65,237 | ||||||
3,293 | Sonic Automotive, Inc., Class A^ | 45,312 | ||||||
1,606 | Sportsman’s Warehouse Holdings, Inc.* | 7,034 | ||||||
289 | Tandy Leather Factory, Inc.* | 1,642 | ||||||
2,860 | The Tile Shop Holdings, Inc.^ | 15,673 | ||||||
3,992 | Tiffany & Co. | 321,396 | ||||||
854 | Tilly’s, Inc. | 9,274 | ||||||
27,742 | TJX Cos., Inc. (The) | 1,241,177 | ||||||
3,647 | Tractor Supply Co. | 304,306 | ||||||
1,946 | Ulta Salon, Cosmetics & Fragrance, Inc.* | 476,459 | ||||||
8,221 | Urban Outfitters, Inc.* | 272,937 | ||||||
1,993 | Vitamin Shoppe, Inc.* | 9,447 | ||||||
5,095 | Williams-Sonoma, Inc. | 257,043 | ||||||
285 | Winmark Corp. | 45,315 | ||||||
2,204 | Zumiez, Inc.*^ | 42,251 | ||||||
|
| |||||||
15,902,309 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Technology Hardware, Storage & Peripherals (3.5%): | ||||||||
6,315 | 3D Systems Corp.* | $ | 64,224 | |||||
86,321 | Apple, Inc. | 13,616,276 | ||||||
728 | Astro-Med, Inc. | 13,650 | ||||||
2,354 | Avid Technology, Inc.*^ | 11,182 | ||||||
2,472 | Cray, Inc.*^ | 53,370 | ||||||
3,700 | Dell Technologies, Inc., Class C* | 180,819 | ||||||
2,278 | Diebold, Inc. | 5,672 | ||||||
3,516 | Electronics for Imaging, Inc.*^ | 87,197 | ||||||
13,649 | Hewlett Packard Enterprise Co. | 180,303 | ||||||
22,329 | HP, Inc. | 456,851 | ||||||
7,166 | NCR Corp.*^ | 165,391 | ||||||
9,540 | NetApp, Inc. | 569,252 | ||||||
2,304 | Pure Storage, Inc., Class A* | 37,048 | ||||||
8,455 | Seagate Technology plc | 326,278 | ||||||
2,522 | Stratasys, Ltd.* | 45,421 | ||||||
2,313 | Super Micro Computer, Inc.* | 31,919 | ||||||
6,156 | Western Digital Corp. | 227,587 | ||||||
7,974 | Xerox Corp. | 157,566 | ||||||
|
| |||||||
16,230,006 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.0%): | ||||||||
2,618 | Carter’s, Inc.^ | 213,681 | ||||||
1,828 | Columbia Sportswear Co. | 153,717 | ||||||
4,393 | Crocs, Inc.* | 114,130 | ||||||
810 | Culp, Inc. | 15,309 | ||||||
1,758 | Deckers Outdoor Corp.* | 224,936 | ||||||
3,440 | Fossil Group, Inc.* | 54,111 | ||||||
2,480 | G-III Apparel Group, Ltd.* | 69,167 | ||||||
11,489 | Hanesbrands, Inc.^ | 143,957 | ||||||
3,598 | Lululemon Athletica, Inc.* | 437,553 | ||||||
5,725 | Michael Kors Holdings, Ltd.* | 217,092 | ||||||
1,551 | Movado Group, Inc. | 49,043 | ||||||
20,970 | Nike, Inc., Class B | 1,554,717 | ||||||
1,259 | Oxford Industries, Inc. | 89,439 | ||||||
1,151 | PVH Corp. | 106,985 | ||||||
1,477 | Ralph Lauren Corp. | 152,810 | ||||||
570 | Rocky Brands, Inc. | 14,820 | ||||||
3,577 | Sequential Brands Group, Inc.* | 2,862 | ||||||
7,159 | Skechers U.S.A., Inc., Class A* | 163,870 | ||||||
2,686 | Steven Madden, Ltd. | 81,278 | ||||||
700 | Superior Uniform Group, Inc. | 12,355 | ||||||
8,939 | Tapestry, Inc. | 301,691 | ||||||
3,746 | Under Armour, Inc., Class C*^ | 60,573 | ||||||
1,027 | Unifi, Inc.* | 23,457 | ||||||
802 | Vera Bradley, Inc.* | 6,873 | ||||||
5,997 | VF Corp. | 427,826 | ||||||
3,237 | Wolverine World Wide, Inc. | 103,228 | ||||||
|
| |||||||
4,795,480 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.5%): | ||||||||
4,484 | Axos Financial, Inc.*^ | 112,907 | ||||||
1,591 | BankFinancial Corp. | 23,785 | ||||||
4,285 | Beneficial Bancorp, Inc. | 61,233 | ||||||
311 | BSB Bancorp, Inc.* | 8,727 | ||||||
7,721 | Capitol Federal Financial, Inc. | 98,597 | ||||||
2,791 | Dime Community Bancshares | 47,391 | ||||||
855 | ESSA Bancorp, Inc. | 13,347 | ||||||
4,321 | Essent Group, Ltd.* | 147,692 | ||||||
403 | Federal Agricultural Mortgage Corp. | 24,357 |
See accompanying notes to the financial statements.
23
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Thrifts & Mortgage Finance, continued | ||||||||
408 | First Capital, Inc. | $ | 16,206 | |||||
1,544 | First Defiance Financial Corp. | 37,843 | ||||||
3,346 | Flagstar Bancorp, Inc.* | 88,334 | ||||||
8 | Greene County Bancorp, Inc. | 249 | ||||||
155 | Hingham Institution for Savings | 30,650 | ||||||
1,670 | HomeStreet, Inc.* | 35,454 | ||||||
687 | HopFed Bancorp, Inc. | 9,130 | ||||||
413 | IF Bancorp, Inc. | 8,310 | ||||||
966 | Impac Mortgage Holdings, Inc.* | 3,651 | ||||||
5,948 | Kearny Financial Corp. | 76,253 | ||||||
1,249 | Kentucky First Federal Bancorp | 8,631 | ||||||
750 | Lake Shore Bancorp, Inc. | 11,100 | ||||||
194 | LendingTree, Inc.*^ | 42,597 | ||||||
3,570 | Meridian Bancorp, Inc. | 51,122 | ||||||
1,452 | Meta Financial Group, Inc. | 28,154 | ||||||
19,071 | MGIC Investment Corp.* | 199,482 | ||||||
3,118 | Mr Cooper Group, Inc.*^ | 36,387 | ||||||
7,598 | New York Community Bancorp, Inc. | 71,497 | ||||||
3,378 | NMI Holdings, Inc., Class A* | 60,297 | ||||||
1,311 | Northeast Community Bancorp, Inc. | 14,552 | ||||||
2,984 | Northfield Bancorp, Inc. | 40,433 | ||||||
5,417 | Northwest Bancshares, Inc.^ | 91,764 | ||||||
3,167 | Oceanfirst Financial Corp.^ | 71,289 | ||||||
503 | Oconee Federal Financial Corp.^ | 12,525 | ||||||
6,975 | Ocwen Financial Corp.* | 9,347 | ||||||
3,358 | Oritani Financial Corp.^ | 49,531 | ||||||
1,218 | PennyMac Financial Services, Inc. | 25,895 | ||||||
679 | Provident Financial Holdings, Inc. | 10,525 | ||||||
4,874 | Provident Financial Services, Inc. | 117,610 | ||||||
6,456 | Radian Group, Inc. | 105,620 | ||||||
420 | Riverview Bancorp, Inc. | 3,058 | ||||||
967 | SI Financial Group, Inc. | 12,310 | ||||||
561 | Southern Missouri Bancorp, Inc. | 19,018 | ||||||
733 | Territorial Bancorp, Inc. | 19,043 | ||||||
5,881 | TFS Financial Corp. | 94,861 | ||||||
7,273 | TrustCo Bank Corp. | 49,893 | ||||||
2,800 | United Community Financial Corp. | 24,780 | ||||||
3,669 | United Financial Bancorp, Inc. | 53,934 | ||||||
3,136 | Washington Federal, Inc. | 83,763 | ||||||
2,036 | Waterstone Financial, Inc. | 34,123 | ||||||
2,381 | Wawlker & Dunlop, Inc. | 102,978 | ||||||
1,498 | Western New England BanCorp, Inc.^ | 15,040 | ||||||
1,534 | WSFS Financial Corp. | 58,154 | ||||||
|
| |||||||
2,473,429 | ||||||||
|
| |||||||
Tobacco (0.8%): | ||||||||
38,620 | Altria Group, Inc. | 1,907,442 | ||||||
21,928 | Philip Morris International, Inc. | 1,463,913 | ||||||
1,284 | Universal Corp. | 69,529 | ||||||
8,071 | Vector Group, Ltd. | 78,531 | ||||||
|
| |||||||
3,519,415 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.8%): | ||||||||
6,679 | Air Lease Corp. | 201,773 | ||||||
4,508 | Aircastle, Ltd. | 77,718 | ||||||
1,994 | Applied Industrial Technologies, Inc. | 107,556 | ||||||
2,840 | Beacon Roofing Supply, Inc.* | 90,085 | ||||||
3,866 | BMC Stock Holdings, Inc.* | 59,846 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Trading Companies & Distributors, continued | ||||||||
1,592 | CAI International, Inc.* | $ | 36,982 | |||||
644 | DXP Enterprises, Inc.* | 17,929 | ||||||
7,381 | Fastenal Co.^ | 385,952 | ||||||
876 | GATX Corp.^ | 62,030 | ||||||
2,334 | Gms, Inc.* | 34,683 | ||||||
3,600 | H&E Equipment Services, Inc. | 73,512 | ||||||
6,084 | HD Supply Holdings, Inc.* | 228,272 | ||||||
2,167 | Herc Holdings, Inc.* | 56,320 | ||||||
1,307 | Huttig Building Products, Inc.* | 2,353 | ||||||
1,554 | Kaman Corp., Class A^ | 87,164 | ||||||
5,217 | MRC Global, Inc.*^ | 63,804 | ||||||
2,233 | MSC Industrial Direct Co., Inc., Class A | 171,762 | ||||||
2,582 | Nexeo Solutions, Inc.* | 22,179 | ||||||
5,453 | NOW, Inc.*^ | 63,473 | ||||||
1,902 | Rush Enterprises, Inc., Class A | 65,581 | ||||||
2,034 | Systemax, Inc. | 48,592 | ||||||
2,654 | Textainer Group Holdings, Ltd.*^ | 26,434 | ||||||
651 | Titan Machinery, Inc.* | 8,561 | ||||||
1,007 | TransAct Technologies, Inc.* | 19,153 | ||||||
3,334 | Triton International, Ltd. | 103,587 | ||||||
2,958 | United Rentals, Inc.* | 303,284 | ||||||
5,034 | Univar, Inc.* | 89,303 | ||||||
1,184 | Veritiv Corp.*^ | 29,564 | ||||||
2,033 | W.W. Grainger, Inc.^ | 574,038 | ||||||
902 | Watsco, Inc. | 125,504 | ||||||
84 | Watsco, Inc., Class B | 10,752 | ||||||
2,455 | WESCO International, Inc.* | 117,840 | ||||||
|
| |||||||
3,365,586 | ||||||||
|
| |||||||
Transportation Infrastructure (0.0%)†: | ||||||||
2,859 | Macquarie Infrastructure Corp. | 104,525 | ||||||
|
| |||||||
Water Utilities (0.2%): | ||||||||
1,727 | American States Water Co.^ | 115,778 | ||||||
2,774 | American Water Works Co., Inc. | 251,796 | ||||||
5,012 | Aqua America, Inc.^ | 171,360 | ||||||
491 | Artesian Resources Corp. | 17,121 | ||||||
2,491 | California Water Service Group | 118,721 | ||||||
665 | Connecticut Water Service, Inc. | 44,469 | ||||||
979 | Middlesex Water Co. | 52,230 | ||||||
669 | Pure Cycle Corp.* | 6,643 | ||||||
1,234 | SJW Corp. | 68,635 | ||||||
772 | York Water Co. (The) | 24,750 | ||||||
|
| |||||||
871,503 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.2%): | ||||||||
2,055 | Boingo Wireless, Inc.*^ | 42,271 | ||||||
2,603 | Shenandoah Telecommunications Co. | 115,183 | ||||||
1,649 | Spok Holdings, Inc. | 21,866 | ||||||
15,850 | Sprint Corp.* | 92,247 | ||||||
4,354 | Telephone & Data Systems, Inc. | 141,679 | ||||||
7,271 | T-Mobile US, Inc.* | 462,508 | ||||||
1,695 | United States Cellular Corp.* | 88,089 | ||||||
|
| |||||||
963,843 | ||||||||
|
| |||||||
Total Common Stocks (Cost $412,047,161) | 461,441,768 | |||||||
|
| |||||||
Rights (0.0%)†: | ||||||||
Chemicals (0.0%)†: | ||||||||
2,215 | Schulman, Inc. CVR, Expires on 12/31/49* | 3,173 | ||||||
|
|
See accompanying notes to the financial statements.
24
AZL DFA U.S. Core Equity Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Rights, continued | ||||||||
Diversified Financial Services (0.0%)†: | ||||||||
2,411 | NewStar Financial, Inc. CVR, Expires on 12/31/49* | $ | 626 | |||||
|
| |||||||
Media (0.0%)†: | ||||||||
9,820 | Media General, Inc. CVR, Expires on 12/31/49 | 982 | ||||||
|
| |||||||
Total Rights (Cost $4,345) | 4,781 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.3%): | ||||||||
1,570,004 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(a) | 1,570,004 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $1,570,004) | 1,570,004 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (6.8%)(b) | ||||||||
Floating Rate Notes (0.3%) | ||||||||
685,000 | HSBC Bank USA NA, 2.71%, 2/1/19 | 685,000 | ||||||
800,000 | Societe Generale SA, 2.70%, 1/28/19 | 800,000 | ||||||
|
| |||||||
1,485,000 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Repurchase Agreements (1.6%) | ||||||||
7,315,730 | RBC Dominion Securities Inc., 3.02%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $7,316,957, Collateralized by U.S. Government Agency Obligations, 3.00% - 7.00%, 10/1/25 - 10/20/48, fair value of $7,462,045 | $ | 7,315,730 | |||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
22,574,581 | Short-Term Investments(c) | 22,574,581 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on Loan | 31,375,311 | ||||||
|
| |||||||
Total Investment Securities (Cost $444,996,821) —106.7%(d) | 494,391,864 | |||||||
Net other assets (liabilities) — (6.7)% | (30,855,158 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 463,536,706 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
CVR—Contingency Valued Rights
* | Non-income producing security. |
† | Represents less than 0.05%. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $30,797,523. |
(a) | The rate represents the effective yield at December 31, 2018. |
(b) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(c) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
25
AZL DFA U.S. Core Equity Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 444,996,821 | |||
|
| ||||
Investment securities, at value(a) | $ | 494,391,864 | |||
Cash | 442,119 | ||||
Interest and dividends receivable | 501,491 | ||||
Reclaims receivable | 3,897 | ||||
Prepaid expenses | 6,230 | ||||
|
| ||||
Total Assets | 495,345,601 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 94,182 | ||||
Payable for collateral received on loaned securities | 31,375,311 | ||||
Manager fees payable | 218,906 | ||||
Administration fees payable | 5,404 | ||||
Distribution fees payable | 101,345 | ||||
Custodian fees payable | 1,157 | ||||
Administrative and compliance services fees payable | 1,358 | ||||
Transfer agent fees payable | 385 | ||||
Trustee fees payable | 520 | ||||
Other accrued liabilities | 10,327 | ||||
|
| ||||
Total Liabilities | 31,808,895 | ||||
|
| ||||
Net Assets | $ | 463,536,706 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 377,767,282 | |||
Total distributable earnings | 85,769,424 | ||||
|
| ||||
Net Assets | $ | 463,536,706 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 40,944,954 | ||||
Net Asset Value (offering and redemption price per share) | $ | 11.32 | |||
|
|
(a) | Includes securities on loan of $30,797,523. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 9,885,092 | |||
Income from securities lending | 205,242 | ||||
Foreign withholding tax | (3,177 | ) | |||
|
| ||||
Total Investment Income | 10,087,157 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 4,395,698 | ||||
Administration fees | 156,808 | ||||
Distribution fees | 1,373,653 | ||||
Custodian fees | 18,957 | ||||
Administrative and compliance services fees | 8,579 | ||||
Transfer agent fees | 5,488 | ||||
Trustee fees | 27,159 | ||||
Professional fees | 24,652 | ||||
Shareholder reports | 6,084 | ||||
Other expenses | 12,922 | ||||
|
| ||||
Total expenses before reductions | 6,030,000 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (1,428,605 | ) | |||
|
| ||||
Net expenses | 4,601,395 | ||||
|
| ||||
Net Investment Income/(Loss) | 5,485,762 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 30,756,695 | ||||
Change in net unrealized appreciation/depreciation on securities | (69,335,803 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (38,579,108 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (33,093,346 | ) | ||
|
|
See accompanying notes to the financial statements.
26
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 5,485,762 | $ | 5,964,403 | ||||||
Net realized gains/(losses) on investments | | 30,756,695 | 15,378,569 | |||||||
Change in unrealized appreciation/depreciation on investments | (69,335,803 | ) | 87,380,355 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (33,093,346 | ) | 108,723,327 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (21,156,078 | ) | (7,868,323 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (21,156,078 | ) | (7,868,323 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 9,663,472 | 7,612,367 | ||||||||
Proceeds from dividends reinvested | 21,156,078 | 7,868,323 | ||||||||
Value of shares redeemed | (97,254,403 | ) | (114,202,622 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (66,434,853 | ) | (98,721,932 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (120,684,277 | ) | 2,133,072 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 584,220,983 | 582,087,911 | ||||||||
|
|
|
| |||||||
End of period | $ | 463,536,706 | $ | 584,220,983 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 753,910 | 661,904 | ||||||||
Dividends reinvested | 1,661,907 | 666,807 | ||||||||
Shares redeemed | (7,270,508 | ) | (9,741,917 | ) | ||||||
|
|
|
| |||||||
Change in shares | (4,854,691 | ) | (8,413,206 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
27
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | April 27, 2015 to December 31, 2015(a) | |||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.76 | $ | 10.74 | $ | 9.49 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Investment Activities: | ||||||||||||||||||||
Net Investment Income/(Loss) | 0.16 | 0.15 | 0.13 | 0.08 | ||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.06 | ) | 2.04 | 1.21 | (0.59 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total from Investment Activities | (0.90 | ) | 2.19 | 1.34 | (0.51 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||
Net Investment Income | (0.15 | ) | (0.14 | ) | (0.09 | ) | — | |||||||||||||
Net Realized Gains | (0.39 | ) | (0.03 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Dividends | (0.54 | ) | (0.17 | ) | (0.09 | ) | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net Asset Value, End of Period | $ | 11.32 | $ | 12.76 | $ | 10.74 | $ | 9.49 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Return(b) | (7.52 | )% | 20.45 | % | 14.25 | % | (5.10 | )%(c) | ||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 463,537 | $ | 584,221 | $ | 582,088 | $ | 557,576 | ||||||||||||
Net Investment Income/(Loss)(d) | 1.00 | % | 1.02 | % | 1.24 | % | 1.12 | % | ||||||||||||
Expenses Before Reductions(d)(e) | 1.10 | % | 1.10 | % | 1.10 | % | 1.12 | % | ||||||||||||
Expenses Net of Reductions(d) | 0.84 | % | 0.84 | % | 0.84 | % | 0.86 | % | ||||||||||||
Portfolio Turnover Rate | 4 | % | 2 | % | 10 | % | 12 | %(c) |
(a) | For the period April 27, 2015 (commencement of share class) to December 31, 2015. |
(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.
28
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL DFA U.S. Core Equity Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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.
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 Fund of Funds Trust.
29
AZL DFA U.S. Core Equity Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $117,621 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $31,222,909 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (6,644,057 | ) | ||
From net realized gains | (1,224,266 | ) | |||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (7,868,323 | ) | ||
|
|
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 Dimensional Fund Advisors LP (“DFA”), DFA 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 Statement of Operations as “Manager
30
AZL DFA U.S. Core Equity Fund
Notes to the Financial Statements
December 31, 2018
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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL DFA U.S. Core Equity Fund | 0.80 | % | 1.20 | % |
* | The Manager voluntarily reduced the management fee to 0.54% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $4,423 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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AZL DFA U.S. Core Equity Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | �� | |||||||||||||||||||
Metals & Mining | $ | — | $ | — | $ | — | # | $ | — | |||||||||||
Other Common Stocks+ | 461,441,768 | — | — | 461,441,768 | ||||||||||||||||
Rights | — | 4,781 | — | 4,781 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 31,375,311 | — | 31,375,311 | ||||||||||||||||
Unaffiliated Investment Company | 1,570,004 | — | — | 1,570,004 | ||||||||||||||||
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Total Investments | $ | 463,011,772 | $ | 31,380,092 | $ | — | $ | 494,391,864 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
# | Represents the interest in securities that were determined to have a value of zero at December 31, 2018. |
5. Security Purchases and Sales
For the year ended December 31, 2018, 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 U.S. Core Equity Fund | $ | 23,416,209 | $ | 102,393,960 |
6. Investment Risks
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 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.
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.
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.
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AZL DFA U.S. Core Equity Fund
Notes to the Financial Statements
December 31, 2018
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at December 31, 2018 is $ 444,926,610. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 101,728,299 | ||
Unrealized (depreciation) | (52,263,045 | ) | ||
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| |||
Net unrealized appreciation/(depreciation) | $ | 49,465,254 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA U.S. Core Equity Fund | $ | 6,370,472 | $ | 14,785,606 | $ | 21,156,078 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA U.S. Core Equity Fund | $ | 6,644,057 | $ | 1,224,266 | $ | 7,868,323 |
(a) | Total distributions paid may differ from the 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 DFA U.S. Core Equity Fund | $ | 5,561,013 | $ | 30,743,157 | $ | — | $ | 49,465,254 | $ | 85,769,424 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and other miscellaneous differences. |
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 75% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL DFA U.S. Core Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL DFA U.S. Core Equity Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 100.00% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $556,531.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $14,785,606.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
39
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex During Past 5 Years | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
40
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
41
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® DFA U.S. Small Cap Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 21
Page 21
Statements of Changes in Net Assets
Page 22
Page 23
Notes to the Financial Statements
Page 24
Report of Independent Registered Public Accounting Firm
Page 29
Other Federal Income Tax Information
Page 30
Page 31
Approval of Investment Advisory and Subadvisory Agreements
Page 32
Information about the Board of Trustees and Officers
Page 35
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 U.S. Small Cap Fund (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® DFA U.S. Small Cap Fund and Dimensional Fund Advisors LP serves as Subadviser to the Fund.
| ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® DFA U.S. Small Cap Fund (the “Fund”) returned-12.64%. That compared to a-11.01% total return for its benchmark, the Russell 2000® Index1.
U.S. equities began the year rallying to record highs. However, concerns about U.S. trade protectionism, rising yields and fears of an overheated economy drove an increase in volatility near the end of the first quarter—annualized realized volatility in the S&P 500 Index2 was 19% for the quarter compared to just 6.6% for 2017. These factors dragged equity markets downwards despite strong employment data, relatively high consumer confidence and healthy macroeconomic data.
Strong U.S. economic data and corporate earnings poweredmid-year gains, but those increases were offset by sharp declines in the energy and information technology sectors during the fourth quarter, when a decline in crude oil prices proved a major setback to the energy sector. Trade tensions and a possible slowdown in economic growth both weighed heavily on investor confidence.
The U.S. Federal Reserve Board raised interest rates four times in 2018 in response to improving economic conditions, but communicated a more hawkish tone for the coming year.
U.S. stocks had negative performance for the year. In general,large-cap stocks outperformed theirsmall-cap counterparts for the period. Growth stocks outperformed value among both large- andsmall-cap companies. Stocks with lower relative prices and higher profitability underperformed stocks with higher relative prices and lower profitability in both the large- andsmall-cap segments.
The Fund underperformed its benchmark for the12-month period. The Fund’s exclusion of stocks with the lowest profitability and highest relative price primarily drove underperformance, as those securities outperformed.*
The Fund’s general exclusion of real estate investment trusts3 (REITs) also hurt relative performance, as REITs outperformed the overall index during the period.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
3 | The performance of investments in real estate depends on the overall strength of the real estate market, the management of real estate investments trusts (REITs), real estate operating companies (REOCs), and foreign real estate companies, and property management, all of which can be affected by a variety of factors, including national and regional economic conditions. |
1
AZL® DFA U.S. Small Cap Fund (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek long-term capital appreciation. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in equity securities of small-capitalization U.S. companies.
| ||||
Investment Concerns
| ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
| ||||
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
| ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | Since Inception (4/27/15) | ||||||||||
AZL®DFA U.S. Small Cap Fund | -12.64 | % | 6.55 | % | 2.94 | % | ||||||
Russell 2000®Index | -11.01 | % | 7.36 | % | 3.47 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®DFA U.S. Small Cap Fund | 1.16 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.70% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 1.35% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Russell 2000® Index, which is an unmanaged market capitalization-weighted index comprised of the 2,000 smallest companies listed in the Russell 3000® Index, which contains the 3,000 largest companies in the U.S. based on market capitalization. The index does not reflect the deduction of fees associated with a mutual fund, such as investment fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL DFA U.S. Small Cap 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL DFA U.S. Small Cap Fund | $ | 1,000.00 | $ | 830.70 | $ | 4.71 | 1.02 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL DFA U.S. Small Cap Fund | $ | 1,000.00 | $ | 1,020.06 | $ | 5.19 | 1.02 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Financials | 21.4 | % | |||
Industrials | 20.5 | ||||
Consumer Discretionary | 15.3 | ||||
Information Technology | 12.1 | ||||
Health Care | 7.8 | ||||
Materials | 5.0 | ||||
Utilities | 4.8 | ||||
Consumer Staples | 4.3 | ||||
Energy | 3.8 | ||||
Telecommunication Services | 4.1 | ||||
Real Estate | 0.7 | ||||
|
| ||||
Total Common Stocks | 99.8 | ||||
Rights | — | ^ | |||
Short-Term Securities Held as Collateral for Securities on Loan | 19.4 | ||||
Money Markets | 0.2 | ||||
|
| ||||
Total Investment Securities | 119.4 | ||||
Net other assets (liabilities) | (19.4 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (99.8%): | ||||||||
Aerospace & Defense (1.6%): | ||||||||
1,397 | AAR Corp. | $ | 52,164 | |||||
10,367 | Aerojet Rocketdyne Holdings, Inc.*^ | 365,229 | ||||||
2,568 | AeroVironment, Inc.*^ | 174,496 | ||||||
1,402 | Air Industries Group, Inc.* | 1,002 | ||||||
5,128 | Arotech Corp.* | 13,435 | ||||||
2,615 | Astronics Corp.* | 79,627 | ||||||
392 | Astronics Corp., Class B* | 11,921 | ||||||
4,266 | Axon Enterprise, Inc.* | 186,638 | ||||||
685 | CPI Aerostructures, Inc.* | 4,363 | ||||||
3,061 | Cubic Corp. | 164,498 | ||||||
766 | Ducommun, Inc.* | 27,821 | ||||||
3,343 | Engility Holdings, Inc.* | 95,142 | ||||||
1,175 | Esterline Technologies Corp.* | 142,704 | ||||||
3,376 | Innovative Solutions & Support, Inc.* | 7,444 | ||||||
11,071 | Kratos Defense & Security Solutions, Inc.*^ | 155,990 | ||||||
4,348 | Mercury Computer Systems, Inc.*^ | 205,617 | ||||||
4,347 | Moog, Inc., Class A | 336,806 | ||||||
947 | National Presto Industries, Inc. | 110,723 | ||||||
590 | Sparton Corp.* | 10,732 | ||||||
7,022 | The KEYW Holding Corp.*^ | 46,977 | ||||||
4,541 | Triumph Group, Inc.^ | 52,222 | ||||||
459 | Vectrus, Inc.* | 9,905 | ||||||
12,220 | WESCO Aircraft Holdings, Inc.* | 96,538 | ||||||
|
| |||||||
2,351,994 | ||||||||
|
| |||||||
Air Freight & Logistics (0.5%): | ||||||||
492 | Air T, Inc.* | 12,054 | ||||||
7,991 | Air Transport Services Group, Inc.* | 182,275 | ||||||
1,862 | Atlas Air Worldwide Holdings, Inc.* | 78,558 | ||||||
3,555 | Echo Global Logistics, Inc.* | 72,273 | ||||||
4,353 | Forward Air Corp. | 238,761 | ||||||
5,582 | Hub Group, Inc.* | 206,925 | ||||||
5,212 | Radiant Logistics, Inc.* | 22,151 | ||||||
|
| |||||||
812,997 | ||||||||
|
| |||||||
Airlines (0.5%): | ||||||||
2,342 | Allegiant Travel Co. | 234,715 | ||||||
7,320 | Hawaiian Holdings, Inc.^ | 193,321 | ||||||
2,689 | SkyWest, Inc. | 119,580 | ||||||
4,325 | Spirit Airlines, Inc.* | 250,504 | ||||||
|
| |||||||
798,120 | ||||||||
|
| |||||||
Auto Components (1.9%): | ||||||||
3,195 | Adient plc | 48,117 | ||||||
12,952 | American Axle & Manufacturing Holdings, Inc.*^ | 143,767 | ||||||
7,311 | Cooper Tire & Rubber Co.^ | 236,365 | ||||||
2,216 | Cooper-Standard Holding, Inc.* | 137,658 | ||||||
11,599 | Dana Holding Corp. | 158,094 | ||||||
4,979 | Dorman Products, Inc.*^ | 448,211 | ||||||
4,852 | Fox Factory Holding Corp.* | 285,638 | ||||||
5,653 | Gentherm, Inc.*^ | 226,007 | ||||||
1,680 | Horizon Global Corp.* | 2,402 | ||||||
3,713 | LCI Industries^ | 248,029 | ||||||
7,745 | Modine Manufacturing Co.* | 83,723 | ||||||
2,866 | Motorcar Parts of America, Inc.*^ | 47,690 | ||||||
1,992 | Shiloh Industries, Inc.* | 11,613 | ||||||
3,444 | Standard Motor Products, Inc. | 166,793 | ||||||
3,162 | Stoneridge, Inc.* | 77,943 | ||||||
733 | Strattec Security Corp. | 21,110 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Auto Components, continued | ||||||||
4,822 | Tenneco, Inc. | $ | 132,075 | |||||
3,420 | Tower International, Inc. | 81,396 | ||||||
472 | Veoneer, Inc.* | 11,125 | ||||||
3,073 | Visteon Corp.*^ | 185,240 | ||||||
4,313 | VOXX International Corp.*^ | 17,079 | ||||||
|
| |||||||
2,770,075 | ||||||||
|
| |||||||
Automobiles (0.1%): | ||||||||
4,607 | Winnebago Industries, Inc. | 111,535 | ||||||
|
| |||||||
Banks (12.9%): | ||||||||
1,584 | 1st Constitution Bancorp | 31,569 | ||||||
3,659 | 1st Source Corp. | 147,604 | ||||||
2,359 | Access National Corp. | 50,317 | ||||||
410 | ACNB Corp. | 16,093 | ||||||
551 | Allegiance Bancshares, Inc.* | 17,836 | ||||||
1,339 | American National Bankshares, Inc. | 39,246 | ||||||
346 | American River Bankshares | 4,775 | ||||||
4,156 | Ameris Bancorp | 131,621 | ||||||
1,649 | Ames National Corp. | 41,918 | ||||||
1,757 | Arrow Financial Corp.^ | 56,259 | ||||||
5,023 | Associated Banc-Corp. | 99,405 | ||||||
1,465 | Atlantic Capital Bancshares, Inc.* | 23,982 | ||||||
13 | Auburn National Bancorp, Inc. | 412 | ||||||
5,894 | Banc of California, Inc.^ | 78,449 | ||||||
4,614 | BancFirst Corp. | 230,239 | ||||||
810 | Bancorp of New Jersey, Inc.* | 10,546 | ||||||
8,252 | Bancorp, Inc. (The)* | 65,686 | ||||||
11,527 | BancorpSouth Bank^ | 301,316 | ||||||
2,653 | Bank of Commerce Holdings | 29,077 | ||||||
3,143 | Bank of Hawaii Corp.^ | 211,587 | ||||||
2,190 | Bank of Marin Bancorp | 90,316 | ||||||
485 | Bank of South Carolina Corp. | 8,832 | ||||||
2,463 | Bank OZK^ | 56,230 | ||||||
2,842 | BankUnited, Inc. | 85,089 | ||||||
3,835 | Banner Corp. | 205,096 | ||||||
2,449 | Bar Harbor Bankshares | 54,931 | ||||||
595 | BCB Bancorp, Inc. | 6,230 | ||||||
4,723 | Berkshire Hills Bancorp, Inc. | 127,379 | ||||||
1,025 | Blue Hills BanCorp, Inc. | 21,874 | ||||||
9,350 | Boston Private Financial Holdings, Inc. | 98,830 | ||||||
2,206 | Bridge Bancorp, Inc. | 56,231 | ||||||
10,018 | Brookline Bancorp, Inc. | 138,449 | ||||||
2,266 | Bryn Mawr Bank Corp. | 77,950 | ||||||
227 | C&F Financial Corp. | 12,079 | ||||||
524 | Cadence Bancorp | 8,793 | ||||||
1,274 | California First National Bancorp | 18,027 | ||||||
2,359 | Camden National Corp. | 84,853 | ||||||
2,242 | Capital City Bank Group, Inc. | 52,037 | ||||||
1,218 | Carolina Financial Corp. | 36,041 | ||||||
9,304 | Cathay General Bancorp | 311,962 | ||||||
10,318 | Centerstate Banks, Inc. | 217,091 | ||||||
5,261 | Central Pacific Financial Corp. | 128,105 | ||||||
1,141 | Central Valley Community Bancorp | 21,531 | ||||||
511 | Century Bancorp, Inc. | 34,610 | ||||||
2,631 | Chemical Financial Corp.^ | 96,321 | ||||||
668 | Chemung Financial Corp. | 27,595 | ||||||
2,009 | Citizens & Northern Corp.^ | 53,098 | ||||||
261 | Citizens First Corp. | 5,593 |
See accompanying notes to the financial statements.
4
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
718 | Citizens Holding Co. | $ | 14,927 | |||||
2,264 | City Holding Co.^ | 153,024 | ||||||
822 | Civista Bancshares, Inc. | 14,319 | ||||||
2,720 | CNB Financial Corp. | 62,424 | ||||||
81 | Codorus Valley Bancorp, Inc. | 1,721 | ||||||
56 | Colony Bankcorp, Inc. | 818 | ||||||
8,275 | Columbia Banking System, Inc. | 300,300 | ||||||
5,723 | Community Bank System, Inc.^ | 333,650 | ||||||
3,296 | Community Bankers Trust Corp.* | 23,797 | ||||||
2,232 | Community Trust Bancorp, Inc. | 88,410 | ||||||
525 | Community West Bancshares | 5,266 | ||||||
4,062 | ConnectOne Bancorp, Inc. | 75,025 | ||||||
4,048 | Customers Bancorp, Inc.* | 73,674 | ||||||
15,555 | CVB Financial Corp.^ | 314,677 | ||||||
130 | DNB Financial Corp. | 3,510 | ||||||
609 | Eagle Bancorp Montana, Inc. | 9,848 | ||||||
4,678 | Eagle Bancorp, Inc.* | 227,865 | ||||||
2,893 | Enterprise Financial Services Corp. | 108,864 | ||||||
300 | Equity Bancshares, Inc.* | 10,575 | ||||||
534 | Evans Bancorp, Inc. | 17,360 | ||||||
11,671 | F.N.B. Corp. | 114,843 | ||||||
2,582 | Farmers National Banc Corp. | 32,895 | ||||||
242 | Fauquier Bankshares, Inc. | 4,419 | ||||||
819 | FCB Financial Holdings, Inc.* | 27,502 | ||||||
3,915 | Fidelity Southern Corp. | 101,868 | ||||||
2,609 | Financial Institutions, Inc. | 67,051 | ||||||
28,440 | First Bancorp | 244,585 | ||||||
3,366 | First Bancorp | 109,934 | ||||||
2,165 | First Bancorp, Inc. | 56,940 | ||||||
965 | First Bancshares, Inc. (The) | 29,191 | ||||||
5,271 | First Busey Corp. | 129,350 | ||||||
940 | First Business Financial Services, Inc. | 18,339 | ||||||
3,144 | First Commonwealth Financial Corp. | 37,980 | ||||||
2,514 | First Community Bankshares^ | 79,141 | ||||||
10,949 | First Financial Bancorp | 259,710 | ||||||
9,006 | First Financial Bankshares, Inc.^ | 519,555 | ||||||
1,800 | First Financial Corp. | 72,270 | ||||||
1,717 | First Financial Northwest, Inc. | 26,562 | ||||||
2,578 | First Foundation, Inc.* | 33,153 | ||||||
5,182 | First Hawaiian, Inc. | 116,647 | ||||||
402 | First Internet BanCorp | 8,217 | ||||||
3,985 | First Interstate BancSystem, Class A | 145,692 | ||||||
5,491 | First Merchants Corp. | 188,177 | ||||||
320 | FirstMid-Illinois Bancshares, Inc. | 10,214 | ||||||
11,327 | First Midwest Bancorp, Inc. | 224,388 | ||||||
3,897 | First of Long Island Corp. (The) | 77,745 | ||||||
28 | First Savings Financial Group | 1,454 | ||||||
234 | First United Corp. | 3,725 | ||||||
908 | First US Bancshares, Inc. | 7,219 | ||||||
3,766 | Flushing Financial Corp. | 81,082 | ||||||
601 | Franklin Financial Network, Inc.*^ | 15,848 | ||||||
19,583 | Fulton Financial Corp.^ | 303,144 | ||||||
3,270 | German American Bancorp, Inc. | 90,808 | ||||||
8,924 | Glacier Bancorp, Inc.^ | 353,568 | ||||||
2,005 | Great Southern Bancorp, Inc. | �� | 92,290 | |||||
2,715 | Great Western Bancorp, Inc. | 84,844 | ||||||
1,393 | Green BanCorp, Inc. | 23,876 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
3,376 | Guaranty Bancorp | $ | 70,052 | |||||
2,686 | Hancock Holding Co. | 93,070 | ||||||
4,853 | Hanmi Financial Corp. | 95,604 | ||||||
846 | Harborone BanCorp, Inc.*^ | 13,443 | ||||||
40 | Hawthorn Bancshares, Inc. | 841 | ||||||
3,598 | Heartland Financial USA, Inc.^ | 158,132 | ||||||
3,957 | Heritage Financial Corp. | 117,602 | ||||||
5,806 | Hertiage Commerce Corp. | 65,840 | ||||||
15,083 | Hilltop Holdings, Inc. | 268,930 | ||||||
6,293 | Home Bancshares, Inc.^ | 102,828 | ||||||
2,818 | Hometrust Bancshares, Inc. | 73,775 | ||||||
14,852 | Hope BanCorp, Inc. | 176,145 | ||||||
4,456 | Horizon Bancorp | 70,316 | ||||||
698 | IBERIABANK Corp. | 44,867 | ||||||
3,081 | Independent Bank Corp. | 216,625 | ||||||
3,196 | Independent Bank Group, Inc.^ | 146,281 | ||||||
7,476 | International Bancshares Corp. | 257,174 | ||||||
8,851 | Investors Bancorp, Inc. | 92,050 | ||||||
6,091 | Lakeland Bancorp, Inc. | 90,208 | ||||||
3,599 | Lakeland Financial Corp.^ | 144,536 | ||||||
821 | Landmark Bancorp, Inc. | 18,805 | ||||||
1,512 | LCNB Corp. | 22,907 | ||||||
4,935 | LegacyTexas Financial Group, Inc.^ | 158,364 | ||||||
1,000 | Limestone Bancorp, Inc.* | 13,760 | ||||||
5,225 | Macatawa Bank Corp. | 50,265 | ||||||
1,048 | Mackinac Financial Corp.^ | 14,305 | ||||||
5,099 | MB Financial, Inc. | 202,073 | ||||||
1,565 | MBT Financial Corp. | 14,555 | ||||||
2,659 | Mercantile Bank Corp. | 75,143 | ||||||
974 | Midland States BanCorp, Inc. | 21,759 | ||||||
1,441 | MidWestone Financial Group, Inc. | 35,780 | ||||||
892 | MutualFirst Financial, Inc. | 23,700 | ||||||
4,074 | National Bank Holdings Corp. | 125,764 | ||||||
1,069 | National Bankshares, Inc. | 38,944 | ||||||
647 | National Commerce Corp.* | 23,292 | ||||||
4,939 | NBT Bancorp, Inc. | 170,840 | ||||||
378 | Nicolet Bankshares, Inc.*^ | 18,446 | ||||||
1,136 | Northeast Bancorp^ | 19,005 | ||||||
657 | Northrim Bancorp, Inc. | 21,596 | ||||||
609 | Norwood Financial Corp. | 20,097 | ||||||
7,468 | OFG Bancorp | 122,923 | ||||||
183 | Ohio Valley Banc Corp. | 6,476 | ||||||
2,587 | Old Line Bancshares, Inc. | 68,090 | ||||||
17,586 | Old National Bancorp | 270,824 | ||||||
1,004 | Old Point Financial Corp. | 21,917 | ||||||
3,314 | Old Second Bancorp, Inc. | 43,082 | ||||||
1,805 | Opus Bank | 35,360 | ||||||
1,398 | Orrstown Financial Services, Inc. | 25,458 | ||||||
1,718 | Pacific Mercantile Bancorp* | 12,284 | ||||||
4,430 | Pacific Premier Bancorp, Inc.* | 113,054 | ||||||
2,159 | PacWest Bancorp | 71,852 | ||||||
2,017 | Park National Corp.^ | 171,344 | ||||||
1,488 | Parke Bancorp, Inc.^ | 27,848 | ||||||
2,884 | Peapack-Gladstone Financial Corp. | 72,619 | ||||||
968 | Penns Woods Bancorp, Inc. | 38,952 | �� | |||||
434 | Peoples Bancorp of NC | 10,616 | ||||||
3,066 | Peoples Bancorp, Inc. | 92,287 |
See accompanying notes to the financial statements.
5
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
452 | People’s Utah BanCorp^ | $ | 13,628 | |||||
997 | Pinnacle Financial Partners, Inc. | 45,962 | ||||||
773 | Popular, Inc. | 36,501 | ||||||
2,285 | Preferred Bank Los Angeles^ | 99,055 | ||||||
1,193 | Premier Financial Bancorp, Inc. | 17,788 | ||||||
1,118 | QCR Holdings, Inc. | 35,877 | ||||||
5,547 | Renasant Co. | 167,408 | ||||||
2,499 | Republic Bancorp, Inc., Class A | 96,761 | ||||||
6,466 | Republic First Bancorp, Inc.* | 38,602 | ||||||
3,965 | S & T Bancorp, Inc. | 150,036 | ||||||
320 | Salisbury Bancorp, Inc. | 11,578 | ||||||
4,027 | Sandy Spring Bancorp, Inc. | 126,206 | ||||||
552 | SB Financial Group, Inc.^ | 9,080 | ||||||
625 | SB One BanCorp | 12,775 | ||||||
4,737 | Seacoast Banking Corp.* | 123,257 | ||||||
1,252 | Select Bancorp, Inc.* | 15,500 | ||||||
3,209 | ServisFirst Bancshares, Inc.^ | 102,271 | ||||||
2,325 | Shore Bancshares, Inc. | 33,806 | ||||||
2,333 | Sierra Bancorp | 56,062 | ||||||
10,700 | Simmons First National Corp., Class A | 258,191 | ||||||
4,213 | South State Corp. | 252,569 | ||||||
562 | Southern First Bancshares, Inc.* | 18,023 | ||||||
2,309 | Southern National Bancorp | 30,525 | ||||||
3,815 | Southside Bancshares, Inc.^ | 121,126 | ||||||
88 | Southwest Georgia Financial Corp. | 1,785 | ||||||
4,328 | State Bank Financial Corp. | 93,442 | ||||||
14,724 | Sterling Bancorp^ | 243,093 | ||||||
690 | Stewardship Financial Corp. | 6,279 | ||||||
3,509 | Stock Yards Bancorp, Inc.^ | 115,095 | ||||||
682 | Summit Financial Group, Inc. | 13,169 | ||||||
1,203 | Summit State Bank^ | 14,159 | ||||||
1,471 | Synovus Financial Corp. | 47,057 | ||||||
16,193 | TCF Financial Corp. | 315,601 | ||||||
1,640 | Texas Capital Bancshares, Inc.* | 83,788 | ||||||
2,166 | Tompkins Financial Corp. | 162,472 | ||||||
7,834 | TowneBank^ | 187,624 | ||||||
3,566 | TriCo Bancshares | 120,495 | ||||||
4,406 | Tristate Capital Holdings, Inc.* | 85,741 | ||||||
598 | Triumph BanCorp, Inc.* | 17,761 | ||||||
7,744 | Trustmark Corp.^ | 220,162 | ||||||
98 | Two River Bancorp | 1,495 | ||||||
3,397 | UMB Financial Corp.^ | 207,115 | ||||||
1,749 | Umpqua Holdings Corp.^ | 27,809 | ||||||
6,055 | Union Bankshares Corp. | 170,933 | ||||||
249 | Union Bankshares, Inc. | 11,890 | ||||||
450 | United Bancshares, Inc. | 8,730 | ||||||
4,192 | United Bankshares, Inc.^ | 130,413 | ||||||
3,612 | United Community Banks, Inc. | 77,514 | ||||||
916 | United Security Bancshares | 8,775 | ||||||
42 | Unity Bancorp, Inc. | 872 | ||||||
3,568 | Univest Corp. | 76,962 | ||||||
12,867 | Valley National Bancorp^ | 114,259 | ||||||
1,164 | Veritex Holdings, Inc.* | 24,886 | ||||||
2,567 | Washington Trust Bancorp | 122,010 | ||||||
127 | Wellesley Bank^ | 3,523 | ||||||
6,318 | WesBanco, Inc. | 231,807 | ||||||
2,380 | West Bancorp | 45,434 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
3,781 | Westamerica Bancorp^ | $ | 210,526 | |||||
1,398 | Wintrust Financial Corp. | 92,953 | ||||||
|
| |||||||
19,118,311 | ||||||||
|
| |||||||
Beverages (0.3%): | ||||||||
547 | Boston Beer Co., Inc. (The), Class A*^ | 131,739 | ||||||
1,011 | Coca-Cola Bottling Co. Consolidated | 179,332 | ||||||
1,920 | Craft Brewers Alliance, Inc.* | 27,475 | ||||||
2,640 | MGP Ingredients, Inc.^ | 150,612 | ||||||
1,846 | Primo Water Corp.* | 25,862 | ||||||
985 | Willamette Valley Vineyards, Inc.* | 6,787 | ||||||
|
| |||||||
521,807 | ||||||||
|
| |||||||
Biotechnology (1.1%): | ||||||||
838 | Abeona Therapeutics, Inc.* | 5,983 | ||||||
8,857 | Achillion Pharmaceuticals, Inc.* | 14,083 | ||||||
4,449 | Acorda Therapeutics, Inc.*^ | 69,315 | ||||||
3,308 | Adverum Biotechnologies, Inc.* | 10,420 | ||||||
1,905 | Alder Biopharmaceuticals, Inc.*^ | 19,526 | ||||||
1,397 | AMAG Pharmaceuticals, Inc.*^ | 21,220 | ||||||
1,103 | Applied Genetic Technologies Corp.* | 2,746 | ||||||
3,846 | Aptevo Therapeutics, Inc.* | 4,884 | ||||||
3,101 | Ardelyx, Inc.* | 5,551 | ||||||
409 | Atara Biotherapeutics, Inc.* | 14,209 | ||||||
1,280 | Biospecifics Technologies Corp.* | 77,568 | ||||||
4,360 | Calithera Biosciences, Inc.* | 17,484 | ||||||
1,053 | Catalyst Biosciences, Inc.*^ | 8,308 | ||||||
6,042 | Celldex Theraputics, Inc.* | 1,196 | ||||||
1,958 | ChemoCentryx, Inc.* | 21,362 | ||||||
4,691 | Chimerix, Inc.* | 12,056 | ||||||
1,046 | Concert Pharmaceuticals, Inc.* | 13,127 | ||||||
5,621 | Emergent Biosolutions, Inc.* | 333,214 | ||||||
2,302 | Enanta Pharmaceuticals, Inc.* | 163,051 | ||||||
2,224 | Five Prime Therapeutics, Inc.* | 20,683 | ||||||
589 | Global Blood Therapeutics, Inc.*^ | 24,178 | ||||||
661 | Glycomimetics Industries*^ | 6,260 | ||||||
3,792 | Halozyme Therapeutics, Inc.* | 55,477 | ||||||
592 | ImmuCell Corp.* | 4,037 | ||||||
2,265 | Karyopharm Therapeutics, Inc.*^ | 21,223 | ||||||
2,769 | Kindred Biosciences, Inc.* | 30,321 | ||||||
742 | Ligand Pharmaceuticals, Inc., Class B* | 100,689 | ||||||
1,612 | Macrogenics, Inc.* | 20,472 | ||||||
3,803 | Mimedx Group, Inc.* | 6,807 | ||||||
927 | Mirati Therapeutics, Inc.* | 39,323 | ||||||
9,783 | Myriad Genetics, Inc.* | 284,392 | ||||||
19,735 | OPKO Health, Inc.* | 59,402 | ||||||
19,091 | PDL BioPharma, Inc.*^ | 55,364 | ||||||
1,429 | Pfenex, Inc.* | 4,559 | ||||||
2,626 | Prothena Corp. plc*^ | 27,048 | ||||||
1,357 | Recro Pharma, Inc.*^ | 9,635 | ||||||
858 | Repligen Corp.* | 45,251 | ||||||
3,247 | Retrophin, Inc.* | 73,480 | ||||||
846 | Sierra Oncology, Inc.* | 1,117 | ||||||
1,670 | Spectrum Pharmaceuticals, Inc.*^ | 14,613 | ||||||
1,000 | Syndax Pharmaceuticals, Inc.* | 4,450 | ||||||
905 | Syros Pharmaceuticals, Inc.* | 5,041 | ||||||
7,380 | Trevena, Inc.* | 3,173 | ||||||
6,962 | Verastem, Inc.*^ | 23,392 | ||||||
3,399 | Zafgen, Inc.* | 16,825 | ||||||
|
| |||||||
1,772,515 | ||||||||
|
|
See accompanying notes to the financial statements.
6
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Building Products (1.7%): | ||||||||
7,376 | AAON, Inc.^ | $ | 258,603 | |||||
5,005 | Advanced Drainage Systems, Inc. | 121,371 | ||||||
2,533 | American Woodmark Corp.* | 141,037 | ||||||
4,114 | Apogee Enterprises, Inc.^ | 122,803 | ||||||
3,226 | Armstrong Flooring, Inc.* | 38,196 | ||||||
6,018 | Armstrong World Industries, Inc. | 350,308 | ||||||
14,981 | Builders FirstSource, Inc.* | 163,443 | ||||||
1,725 | Continental Building Products, Inc.* | 43,901 | ||||||
308 | Continental Materials Corp.* | 3,330 | ||||||
815 | Csw Industrials, Inc.* | 39,405 | ||||||
1,117 | Gibraltar Industries, Inc.* | 39,754 | ||||||
2,794 | Insteel Industries, Inc. | 67,838 | ||||||
10,561 | NCI Building Systems, Inc.* | 76,567 | ||||||
3,771 | Patrick Industries, Inc.* | 111,659 | ||||||
7,162 | PGT, Inc.* | 113,518 | ||||||
4,793 | Quanex Building Products Corp.^ | 65,137 | ||||||
7,059 | Simpson Manufacturing Co., Inc. | 382,104 | ||||||
5,905 | Trex Co., Inc.* | 350,521 | ||||||
1,413 | Universal Forest Products, Inc. | 36,681 | ||||||
|
| |||||||
2,526,176 | ||||||||
|
| |||||||
Capital Markets (1.4%): | ||||||||
3,202 | Artisan Partners Asset Management, Inc., Class A | 70,796 | ||||||
1,300 | Blucora, Inc.* | 34,632 | ||||||
5,851 | BrightSphere Investment Group plc | 62,489 | ||||||
6,803 | Cohen & Steers, Inc.^ | 233,478 | ||||||
473 | Diamond Hill Investment Group | 70,690 | ||||||
2,638 | Donnelley Financial Solutions, Inc.* | 37,011 | ||||||
7,007 | Federated Investors, Inc., Class B^ | 186,036 | ||||||
8,015 | Gain Capital Holdings, Inc.^ | 49,372 | ||||||
1,776 | GAMCO Investors, Inc., Class A | 29,997 | ||||||
3,795 | Greenhill & Co., Inc. | 92,598 | ||||||
260 | Hamilton Lane, Inc. | 9,620 | ||||||
211 | Hennessy Advisors, Inc. | 2,112 | ||||||
1,116 | Houlihan Lokey, Inc. | 41,069 | ||||||
2,999 | Interactive Brokers Group, Inc., Class A | 163,895 | ||||||
2,101 | INTL FCStone, Inc.* | 76,855 | ||||||
1,911 | Investment Technology Group, Inc. | 57,789 | ||||||
4,175 | Janus Henderson Group plc | 86,506 | ||||||
31,437 | Ladenburg Thalmann Financial Services, Inc. | 73,248 | ||||||
685 | Legg Mason, Inc. | 17,474 | ||||||
2,775 | Manning & Napier, Inc. | 4,884 | ||||||
1,649 | Moelis & Co., Class A | 56,693 | ||||||
614 | Morningstar, Inc. | 67,442 | ||||||
1,741 | Oppenheimer Holdings, Class A | 44,483 | ||||||
284 | Piper Jaffray Cos., Inc. | 18,699 | ||||||
1,221 | PJT Partners, Inc. | 47,326 | ||||||
2,624 | Pzena Investment Management, Inc. | 22,698 | ||||||
3,824 | Safeguard Scientifics, Inc.*^ | 32,963 | ||||||
1,619 | Silvercrest Asset Management Group, Inc., Class A | 21,419 | ||||||
3,787 | Stifel Financial Corp. | 156,858 | ||||||
207 | Value Line, Inc. | 5,384 | ||||||
345 | Virtus Investment Partners, Inc.^ | 27,403 | ||||||
1,478 | Westwood Holdings, Inc. | 50,252 | ||||||
18,068 | WisdomTree Investments, Inc. | 120,152 | ||||||
|
| |||||||
2,072,323 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals (2.7%): | ||||||||
1,064 | Advanced Emmissions Solutions | $ | 11,225 | |||||
3,852 | AdvanSix, Inc.* | 93,758 | ||||||
1,429 | Agrofresh Solutions, Inc.*^ | 5,416 | ||||||
4,305 | American Vanguard Corp. | 65,393 | ||||||
4,463 | Balchem Corp. | 349,676 | ||||||
3,659 | Cabot Corp. | 157,117 | ||||||
1,192 | Chase Corp. | 119,260 | ||||||
1,403 | Core Molding Technologies, Inc. | 9,975 | ||||||
2,886 | Ferro Corp.* | 45,252 | ||||||
2,318 | Flotek Industries, Inc.* | 2,527 | ||||||
7,277 | Futurefuel Corp. | 115,413 | ||||||
3,321 | GCP Applied Technologies, Inc.*^ | 81,531 | ||||||
5,688 | H.B. Fuller Co. | 242,707 | ||||||
1,335 | Hawkins, Inc. | 54,668 | ||||||
1,176 | Ingevity Corp.* | 98,419 | ||||||
2,429 | Innophos Holdings, Inc. | 59,583 | ||||||
3,359 | Innospec, Inc. | 207,452 | ||||||
14,475 | Intrepid Potash, Inc.* | 37,635 | ||||||
638 | Koppers Holdings, Inc.* | 10,872 | ||||||
4,651 | Kraton Performance Polymers, Inc.* | 101,578 | ||||||
6,883 | Kronos Worldwide, Inc.^ | 79,292 | ||||||
4,373 | LSB Industries, Inc.*^ | 24,139 | ||||||
5,078 | Minerals Technologies, Inc. | 260,705 | ||||||
893 | Northern Technologies International Corp. | 26,424 | ||||||
8,599 | Olin Corp. | 172,926 | ||||||
6,607 | Omnova Solutions, Inc.* | 48,429 | ||||||
18,384 | Platform Speciality Products Corp.* | 189,907 | ||||||
3,797 | PolyOne Corp. | 108,594 | ||||||
1,916 | PQ Group Holdings, Inc.* | 28,376 | ||||||
1,959 | Quaker Chemical Corp. | 348,134 | ||||||
5,893 | Rayonier Advanced Materials, Inc.^ | 62,760 | ||||||
1,058 | ScottsMiracle-Gro Co. (The) | 65,025 | ||||||
1,833 | Sensient Technologies Corp. | 102,373 | ||||||
2,991 | Stepan Co. | 221,334 | ||||||
3,421 | Trecora Resources*^ | 26,684 | ||||||
1,788 | Tredegar Corp. | 28,358 | ||||||
2,135 | Trinseo SA | 97,740 | ||||||
10,917 | Tronox, Ltd., Class A | 84,934 | ||||||
5,595 | Valvoline, Inc. | 108,263 | ||||||
2,972 | Venator Materials plc* | 12,453 | ||||||
375 | W.R. Grace & Co. | 24,341 | ||||||
|
| |||||||
3,990,648 | ||||||||
|
| |||||||
Commercial Services & Supplies (3.6%): | ||||||||
6,854 | ABM Industries, Inc.^ | 220,082 | ||||||
16,494 | ACCO Brands Corp. | 111,829 | ||||||
675 | Acme United Corp. | 9,619 | ||||||
462 | Advanced Disposal Services, Inc.* | 11,060 | ||||||
1,580 | AMREP Corp.* | 9,401 | ||||||
8,754 | ARC Document Solutions, Inc.* | 17,946 | ||||||
6,658 | Brady Corp., Class A | 289,356 | ||||||
4,155 | Brink’s Co. (The)^ | 268,620 | ||||||
6,301 | Casella Waste Systems, Inc.* | 179,515 | ||||||
5,965 | CECO Environmental Corp.* | 40,264 | ||||||
2,582 | Cimpress NV* | 267,031 | ||||||
5,239 | Civeo Corp.* | 7,492 | ||||||
2,332 | Clean Harbors, Inc.* | 115,084 | ||||||
325 | CompX International, Inc. | 4,423 |
See accompanying notes to the financial statements.
7
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Commercial Services & Supplies, continued | ||||||||
19,019 | Covanta Holding Corp.^ | $ | 255,235 | |||||
1,356 | Deluxe Corp. | 52,125 | ||||||
535 | Ecology and Environment, Inc., Class A | 6,067 | ||||||
1,100 | Ennis, Inc. | 21,175 | ||||||
6,386 | Essendant, Inc. | 80,336 | ||||||
3,351 | Healthcare Services Group, Inc.^ | 134,643 | ||||||
8,377 | Herman Miller, Inc. | 253,404 | ||||||
6,253 | HNI Corp. | 221,544 | ||||||
3,277 | Hudson Technologies, Inc.* | 2,917 | ||||||
9,267 | Interface, Inc. | 132,055 | ||||||
5,879 | Kimball International, Inc., Class B | 83,423 | ||||||
7,373 | Knoll, Inc. | 121,507 | ||||||
1,430 | LSC Communications, Inc. | 10,010 | ||||||
4,706 | Matthews International Corp., Class A | 191,158 | ||||||
3,955 | McGrath Rentcorp | 203,603 | ||||||
5,478 | Mobile Mini, Inc. | 173,927 | ||||||
3,732 | MSA Safety, Inc. | 351,815 | ||||||
2,406 | Multi-Color Corp.^ | 84,427 | ||||||
2,566 | NL Industries, Inc.* | 9,007 | ||||||
2,198 | Perma-Fix Environmental Services, Inc.* | 5,165 | ||||||
3,566 | PICO Holdings, Inc.* | 32,593 | ||||||
4,293 | Pitney Bowes, Inc. | 25,372 | ||||||
5,379 | Quad Graphics, Inc. | 66,269 | ||||||
1,787 | RR Donnelley & Sons Co.^ | 7,077 | ||||||
3,757 | SP Plus Corp.* | 110,982 | ||||||
11,600 | Steelcase, Inc., Class A | 172,028 | ||||||
5,115 | Team, Inc.*^ | 74,935 | ||||||
7,581 | Tetra Tech, Inc. | 392,467 | ||||||
1,723 | UniFirst Corp. | 246,510 | ||||||
3,362 | US Ecology, Inc. | 211,739 | ||||||
3,364 | Virco Manufacturing Co. | 14,432 | ||||||
1,477 | Vse Corp. | 44,177 | ||||||
|
| |||||||
5,343,846 | ||||||||
|
| |||||||
Communications Equipment (1.7%): | ||||||||
7,162 | ADTRAN, Inc. | 76,920 | ||||||
1,444 | Applied Optoelectronics, Inc.*^ | 22,281 | ||||||
7,940 | ARRIS International plc* | 242,726 | ||||||
900 | BK Technologies, Inc. | 3,375 | ||||||
2,711 | Black Box Corp.* | 2,928 | ||||||
5,439 | CalAmp Corp.*^ | 70,761 | ||||||
7,919 | Calix, Inc.* | 77,210 | ||||||
10,966 | Ciena Corp.* | 371,856 | ||||||
980 | Clearfield, Inc.* | 9,722 | ||||||
3,616 | ClearOne, Inc. | 4,520 | ||||||
316 | Communications Systems, Inc. | 641 | ||||||
2,902 | Comtech Telecommunications Corp. | 70,635 | ||||||
2,559 | Digi International, Inc.* | 25,820 | ||||||
1,076 | EchoStar Corp., Class A* | 39,511 | ||||||
6,028 | EMCORE Corp.*^ | 25,318 | ||||||
1,369 | Extreme Networks, Inc.* | 8,351 | ||||||
13,656 | Finisar Corp.*^ | 294,970 | ||||||
12,360 | Harmonic, Inc.*^ | 58,339 | ||||||
6,890 | Infinera Corp.*^ | 27,491 | ||||||
4,172 | InterDigital, Inc. | 277,146 | ||||||
3,225 | KVH Industries, Inc.* | 33,185 | ||||||
2,927 | Lumentum Holdings, Inc.* | 122,963 | ||||||
3,305 | NETGEAR, Inc.* | 171,959 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Communications Equipment, continued | ||||||||
7,359 | NetScout Systems, Inc.*^ | $ | 173,893 | |||||
2,391 | Network-1 Technologies, Inc. | 5,332 | ||||||
131 | Optical Cable Corp.* | 499 | ||||||
4,065 | Plantronics, Inc. | 134,552 | ||||||
6,923 | Ribbon Communications, Inc.* | 33,369 | ||||||
886 | ViaSat, Inc.*^ | 52,230 | ||||||
8,844 | Viavi Solutions, Inc.* | 88,882 | ||||||
|
| |||||||
2,527,385 | ||||||||
|
| |||||||
Construction & Engineering (1.3%): | ||||||||
4,275 | Ameresco, Inc., Class A* | 60,278 | ||||||
1,970 | Argan, Inc. | 74,545 | ||||||
5,817 | Comfort Systems USA, Inc. | 254,087 | ||||||
4,203 | Dycom Industries, Inc.*^ | 227,130 | ||||||
1,913 | EMCOR Group, Inc. | 114,187 | ||||||
5,422 | Granite Construction, Inc.^ | 218,398 | ||||||
2,621 | Great Lakes Dredge & Dock Co.* | 17,351 | ||||||
1,979 | IES Holdings, Inc.* | 30,773 | ||||||
19,282 | KBR, Inc. | 292,702 | ||||||
2,037 | MasTec, Inc.*^ | 82,621 | ||||||
2,719 | MYR Group, Inc.* | 76,594 | ||||||
1,479 | Northwest Pipe Co.*^ | 34,446 | ||||||
1,180 | NV5 Holdings, Inc.* | 71,449 | ||||||
5,203 | Orion Marine Group, Inc.* | 22,321 | ||||||
1,563 | Primoris Services Corp. | 29,900 | ||||||
3,151 | Sterling Construction Co., Inc.* | 34,314 | ||||||
4,317 | The Goldfield Corp.* | 9,756 | ||||||
1,290 | Tutor Perini Corp.*^ | 20,601 | ||||||
2,416 | Valmont Industries, Inc. | 268,055 | ||||||
|
| |||||||
1,939,508 | ||||||||
|
| |||||||
Construction Materials (0.1%): | ||||||||
4,132 | Summit Materials, Inc., Class A* | 51,237 | ||||||
2,142 | U.S. Concrete, Inc.*^ | 75,570 | ||||||
720 | U.S. Lime & Minerals, Inc. | 51,120 | ||||||
|
| |||||||
177,927 | ||||||||
|
| |||||||
Consumer Finance (1.1%): | ||||||||
195 | Asta Funding, Inc. | 831 | ||||||
2,191 | Atlanticus Holdings Corp.* | 7,975 | ||||||
5,088 | Consumer Portfolio Services, Inc.* | 15,315 | ||||||
3,868 | Encore Capital Group, Inc.*^ | 90,898 | ||||||
5,261 | Enova International, Inc.* | 102,379 | ||||||
8,075 | EZCORP, Inc., Class A*^ | 62,420 | ||||||
5,468 | Firstcash, Inc. | 395,609 | ||||||
3,061 | Green Dot Corp., Class A* | 243,411 | ||||||
10,795 | LendingClub Corp.* | 28,391 | ||||||
14,462 | Navient Corp. | 127,410 | ||||||
4,135 | Nelnet, Inc., Class A | 216,426 | ||||||
1,556 | Nicholas Financial, Inc.* | 16,182 | ||||||
2,511 | Onemain Holdings, Inc.* | 60,992 | ||||||
5,326 | PRA Group, Inc.*^ | 129,795 | ||||||
1,376 | Regional Mgmt Corp.* | 33,093 | ||||||
1,276 | World Acceptance Corp.*^ | 130,484 | ||||||
|
| |||||||
1,661,611 | ||||||||
|
| |||||||
Containers & Packaging (0.4%): | ||||||||
3,939 | Graphic Packaging Holding Co.^ | 41,911 | ||||||
3,300 | Greif, Inc., Class A | 122,464 | ||||||
1,290 | Greif, Inc., Class B | 57,276 |
See accompanying notes to the financial statements.
8
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Containers & Packaging, continued | ||||||||
5,009 | Myers Industries, Inc. | $ | 75,686 | |||||
5,954 | Owens-Illinois, Inc.*^ | 102,647 | ||||||
4,520 | Silgan Holdings, Inc. | 106,762 | ||||||
1,332 | UFP Technologies, Inc.* | 40,013 | ||||||
|
| |||||||
546,759 | ||||||||
|
| |||||||
Distributors (0.1%): | ||||||||
12 | AMCON Distributing Co. | 1,197 | ||||||
4,993 | Core Markt Holdngs Co., Inc. | 116,087 | ||||||
1,626 | Educational Development Corp. | 13,870 | ||||||
1,655 | Weyco Group, Inc. | 48,276 | ||||||
|
| |||||||
179,430 | ||||||||
|
| |||||||
Diversified Consumer Services (1.1%): | ||||||||
6,497 | Adtalem Global Education, Inc.* | 307,439 | ||||||
2,153 | American Public Education, Inc.* | 61,274 | ||||||
1,526 | Ascent Capital Group, Inc.* | 595 | ||||||
3,362 | Bridgepoint Education, Inc.* | 23,568 | ||||||
8,806 | Career Education Corp.* | 100,565 | ||||||
2,338 | Carriage Services, Inc.^ | 36,239 | ||||||
578 | Chegg, Inc.* | 16,427 | ||||||
1,667 | Collectors Universe, Inc. | 18,937 | ||||||
271 | Graham Holdings Co., Class B | 173,597 | ||||||
6,370 | Houghton Mifflin Harcourt Co.* | 56,438 | ||||||
5,615 | K12, Inc.* | 139,196 | ||||||
1,977 | Laureate Education, Inc.* | 30,129 | ||||||
2,183 | Liberty Tax, Inc. | 25,607 | ||||||
2,561 | Regis Corp.* | 43,409 | ||||||
6,837 | Sotheby’s* | 271,702 | ||||||
2,395 | Strategic Education, Inc. | 271,641 | ||||||
5,156 | Universal Technical Institute, Inc.* | 18,819 | ||||||
2,086 | Weight Watchers International, Inc.* | 80,415 | ||||||
|
| |||||||
1,675,997 | ||||||||
|
| |||||||
Diversified Financial Services (0.0%)†: | ||||||||
718 | Cannae Holdings, Inc.* | 12,292 | ||||||
1,617 | Marlin Business Services, Inc. | 36,108 | ||||||
1,396 | On Deck Capital, Inc.* | 8,236 | ||||||
|
| |||||||
56,636 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.9%): | ||||||||
2,311 | ATN International, Inc. | 165,306 | ||||||
8,538 | Cincinnati Bell, Inc.* | 66,426 | ||||||
6,360 | Cogent Communications Group, Inc. | 287,536 | ||||||
5,491 | Consolidated Communications Holdings, Inc.^ | 54,251 | ||||||
4,115 | IDT Corp. | 25,472 | ||||||
6,073 | Intelsat S.A.* | 129,901 | ||||||
13,452 | Iridium Communications, Inc.* | 248,189 | ||||||
8,713 | Orbcomm, Inc.*^ | 71,969 | ||||||
13,169 | Vonage Holdings Corp.* | 114,965 | ||||||
|
| |||||||
1,164,015 | ||||||||
|
| |||||||
Electric Utilities (1.4%): | ||||||||
3,762 | ALLETE, Inc. | 286,740 | ||||||
5,690 | El Paso Electric Co. | 285,240 | ||||||
3,043 | Genie Energy, Ltd., Class B | 18,349 | ||||||
5,661 | Hawaiian Electric Industries, Inc. | 207,306 | ||||||
649 | IDA Corp., Inc. | 60,396 | ||||||
5,326 | MGE Energy, Inc. | 319,347 | ||||||
5,364 | Otter Tail Power Co. | 266,269 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electric Utilities, continued | ||||||||
11,312 | PNM Resources, Inc. | $ | 464,809 | |||||
4,234 | Portland General Electric Co. | 194,129 | ||||||
|
| |||||||
2,102,585 | ||||||||
|
| |||||||
Electrical Equipment (0.9%): | ||||||||
1,259 | Allied Motion Technologies, Inc. | 56,265 | ||||||
634 | Atkore International Group, Inc.* | 12,579 | ||||||
2,918 | AZZ, Inc. | 117,770 | ||||||
14,588 | Babcock & Wilcox Enterprises, Inc.* | 5,695 | ||||||
2,210 | Encore Wire Corp. | 110,898 | ||||||
5,838 | EnerSys | 453,087 | ||||||
411 | Espey Manufacturing & Electronics Corp. | 10,242 | ||||||
2,200 | Fuelcell Energy, Inc.* | 1,211 | ||||||
3,351 | Generac Holdings, Inc.* | 166,545 | ||||||
4,534 | LSI Industries, Inc. | 14,373 | ||||||
53 | Pioneer Power Solutions, Inc.*^ | 278 | ||||||
569 | Powell Industries, Inc. | 14,231 | ||||||
864 | Preformed Line Products Co. | 46,872 | ||||||
3,194 | Regal-Beloit Corp. | 223,740 | ||||||
75 | Servotronics, Inc. | 746 | ||||||
5,025 | Thermon Group Holdings, Inc.* | 101,907 | ||||||
3,104 | Ultralife Corp.* | 20,952 | ||||||
5,942 | Vivint Solar, Inc.* | 22,639 | ||||||
|
| |||||||
1,380,030 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (3.2%): | ||||||||
2,011 | ADDvantage Technologies Group, Inc.* | 2,815 | ||||||
3,997 | Anixter International, Inc.* | 217,077 | ||||||
2,047 | Avnet, Inc. | 73,897 | ||||||
12,822 | AVX Corp. | 195,536 | ||||||
3,861 | Badger Meter, Inc.^ | 190,000 | ||||||
254 | Bel Fuse, Inc., Class A | 3,493 | ||||||
1,595 | Bel Fuse, Inc., Class B | 29,380 | ||||||
1,972 | Belden, Inc.^ | 82,370 | ||||||
896 | Benchmark Electronics, Inc. | 18,977 | ||||||
203 | Coherent, Inc.* | 21,459 | ||||||
3,141 | Control4 Corp.* | 55,282 | ||||||
4,147 | CUI Global, Inc.* | 5,101 | ||||||
8,032 | Daktronics, Inc.^ | 59,437 | ||||||
1,365 | Data I/O Corp.* | 6,825 | ||||||
5,745 | Electro Scientific Industries, Inc.* | 172,120 | ||||||
4,550 | Fabrinet* | 233,460 | ||||||
1,853 | FARO Technologies, Inc.* | 75,306 | ||||||
9,035 | Flextronics International, Ltd.* | 68,756 | ||||||
640 | Frequency Electronics, Inc.* | 6,784 | ||||||
646 | IEC Electronics Corp.* | 3,695 | ||||||
8,062 | II-VI, Inc.*^ | 261,693 | ||||||
1,303 | Insight Enterprises, Inc.* | 53,097 | ||||||
3,899 | Itron, Inc.* | 184,384 | ||||||
3,461 | Jabil, Inc. | 85,798 | ||||||
8,386 | KEMET Corp. | 147,090 | ||||||
2,556 | Kimball Electronics, Inc.* | 39,592 | ||||||
10,286 | Knowles Corp.* | 136,907 | ||||||
450 | Mesa Labs, Inc.^ | 93,776 | ||||||
4,775 | Methode Electronics, Inc., Class A | 111,210 | ||||||
2,201 | MTS Systems Corp. | 88,326 | ||||||
2,608 | Napco Security Technologies, Inc.*^ | 41,076 | ||||||
4,565 | Novanta, Inc.* | 287,594 |
See accompanying notes to the financial statements.
9
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
2,432 | OSI Systems, Inc.*^ | $ | 178,266 | |||||
3,068 | PAR Technology Corp.*^ | 66,729 | ||||||
2,564 | Park Electrochemical Corp. | 46,331 | ||||||
400 | PC Connection, Inc.^ | 11,892 | ||||||
1,746 | PCM, Inc.* | 30,747 | ||||||
1,875 | Perceptron, Inc.* | 15,113 | ||||||
3,488 | Plexus Corp.* | 178,167 | ||||||
1,727 | RF Industries, Ltd. | 12,538 | ||||||
2,724 | Rogers Corp.*^ | 269,839 | ||||||
8,103 | Sanmina Corp.* | 194,958 | ||||||
3,045 | ScanSource, Inc.* | 104,687 | ||||||
1,578 | SYNNEX Corp. | 127,566 | ||||||
2,482 | Tech Data Corp.* | 203,052 | ||||||
12,240 | TTM Technologies, Inc.* | 119,095 | ||||||
7,410 | Vishay Intertechnology, Inc. | 133,454 | ||||||
989 | Wayside Technology Group, Inc. | 9,890 | ||||||
3,952 | Wireless Telecom Group, Inc.* | 6,995 | ||||||
|
| |||||||
4,761,632 | ||||||||
|
| |||||||
Energy Equipment & Services (1.1%): | ||||||||
292 | Apergy Corp.* | 7,907 | ||||||
3,965 | Archrock, Inc. | 29,698 | ||||||
1,261 | Basic Energy Services, Inc.*^ | 4,842 | ||||||
2,794 | Bristow Group, Inc.*^ | 6,789 | ||||||
522 | C&J Energy Services, Inc.* | 7,047 | ||||||
1,457 | Dawson Geophysical Co.* | 4,925 | ||||||
4,461 | Diamond Offshore Drilling, Inc.* | 42,112 | ||||||
4,116 | Dril-Quip, Inc.*^ | 123,604 | ||||||
26,896 | Ensco plc, Class A, ADR^ | 95,749 | ||||||
3,837 | Era Group, Inc.* | 33,535 | ||||||
4,307 | Exterran Corp.* | 76,234 | ||||||
12,451 | Forum Energy Technologies, Inc.* | 51,423 | ||||||
3,592 | Frank’s International NV* | 18,750 | ||||||
1,260 | Geospace Technologies Corp.* | 12,991 | ||||||
2,641 | Gulf Island Fabrication, Inc.*^ | 19,068 | ||||||
6,137 | Helix Energy Solutions Group, Inc.*^ | 33,201 | ||||||
1,321 | Hornbeck Offshore Services, Inc.* | 1,902 | ||||||
1,407 | Keane Group, Inc.* | 11,509 | ||||||
2,658 | KLX Energy Services Holdings, Inc.* | 62,330 | ||||||
4,480 | Matrix Service Co.* | 80,371 | ||||||
15,261 | McDermott International, Inc.*^ | 99,807 | ||||||
24,731 | Nabors Industries, Ltd.^ | 49,462 | ||||||
2,316 | Natural Gas Services Group* | 38,075 | ||||||
11,883 | Newpark Resources, Inc.*^ | 81,636 | ||||||
18,346 | Noble Corp. plc*^ | 48,067 | ||||||
10,150 | Oceaneering International, Inc.* | 122,816 | ||||||
3,039 | Oil States International, Inc.*^ | 43,397 | ||||||
14,429 | Patterson-UTI Energy, Inc. | 149,341 | ||||||
2,412 | PHI, Inc.*^ | 4,462 | ||||||
11,895 | Pioneer Energy Services Corp.* | 14,631 | ||||||
548 | Propetro Holding Corp.* | 6,751 | ||||||
1,757 | Rignet, Inc.* | 22,208 | ||||||
14,811 | Rowan Cos. plc, Class A* | 124,265 | ||||||
1,381 | RPC, Inc.^ | 13,630 | ||||||
565 | SEACOR Holdings, Inc.* | 20,905 | ||||||
1,598 | SEACOR Marine Holdings, Inc.*^ | 18,792 | ||||||
837 | Solaris Oilfield Infrastructure, Inc. | 10,119 | ||||||
14,153 | Superior Energy Services, Inc.* | 47,413 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Energy Equipment & Services, continued | ||||||||
5,480 | TETRA Technologies, Inc.* | $ | 9,206 | |||||
1,075 | Tidewater, Inc.* | 20,565 | ||||||
3,561 | Transocean, Ltd.* | 24,713 | ||||||
5,730 | U.S. Silica Holdings, Inc.^ | 58,331 | ||||||
3,954 | Unit Corp.*^ | 56,463 | ||||||
|
| |||||||
1,809,042 | ||||||||
|
| |||||||
Entertainment (0.4%): | ||||||||
3,922 | AMC Entertainment Holdings, Inc., Class A^ | 48,162 | ||||||
2,527 | Ballantyne Strong, Inc.* | 2,906 | ||||||
2,242 | Eros International plc*^ | 18,586 | ||||||
4,000 | Glu Mobile, Inc.* | 32,280 | ||||||
1,045 | Imax Corp.*^ | 19,656 | ||||||
3,297 | Lions Gate Entertainment Corp., Class A | 53,082 | ||||||
2,945 | Lions Gate Entertainment Corp., Class B | 43,822 | ||||||
870 | Marcus Corp. | 34,365 | ||||||
2,715 | Reading International, Inc., Class A* | 39,476 | ||||||
700 | Rosetta Stone, Inc.* | 11,480 | ||||||
89,857 | Zynga, Inc.* | 353,138 | ||||||
|
| |||||||
656,953 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.0%)†: | ||||||||
2,234 | Alexander & Baldwin, Inc.* | 41,061 | ||||||
|
| |||||||
Food & Staples Retailing (0.7%): | ||||||||
364 | Casey’s General Stores, Inc. | 46,643 | ||||||
1,910 | Ingles Markets, Inc., Class A | 51,990 | ||||||
4,259 | Natural Grocers by Vitamin Cottage, Inc.* | 65,290 | ||||||
3,229 | Performance Food Group Co.* | 104,200 | ||||||
4,174 | PriceSmart, Inc. | 246,682 | ||||||
6,101 | Rite Aid Corp.* | 4,321 | ||||||
3,532 | Smart & Final Stores, Inc.*^ | 16,742 | ||||||
1,276 | SpartanNash Co. | 21,922 | ||||||
3,641 | Sprouts Farmers Market, Inc.* | 85,600 | ||||||
1,576 | The Andersons, Inc. | 47,107 | ||||||
4,717 | The Chefs’ Warehouse, Inc.*^ | 150,850 | ||||||
3,444 | United Natural Foods, Inc.*^ | 36,472 | ||||||
1,832 | Village Super Market, Inc., Class A^ | 48,988 | ||||||
3,750 | Weis Markets, Inc.^ | 179,175 | ||||||
|
| |||||||
1,105,982 | ||||||||
|
| |||||||
Food Products (1.7%): | ||||||||
8,875 | B&G Foods, Inc.^ | 256,576 | ||||||
2,290 | Calavo Growers, Inc.^ | 167,078 | ||||||
3,684 | Cal-Maine Foods, Inc.^ | 155,833 | ||||||
1,318 | Coffee Holding Co., Inc.* | 4,653 | ||||||
11,242 | Darling International, Inc.* | 216,296 | ||||||
13,942 | Dean Foods Co.^ | 53,119 | ||||||
2,411 | Farmer Brothers Co.* | 56,249 | ||||||
2,122 | Flowers Foods, Inc.^ | 39,193 | ||||||
1,800 | Fresh Del Monte Produce, Inc. | 50,886 | ||||||
4,577 | Hostess Brands, Inc.*^ | 50,072 | ||||||
2,736 | J & J Snack Foods Corp. | 395,599 | ||||||
470 | John B Sanfilippo And Son, Inc.^ | 26,160 | ||||||
2,162 | Lancaster Colony Corp. | 382,372 | ||||||
2,754 | Landec Corp.* | 32,607 | ||||||
2,175 | Limoneira Co. | 42,521 | ||||||
1,220 | Rocky Mountain Chocolate Factory, Inc. | 10,260 | ||||||
2,912 | Sanderson Farms, Inc. | 289,132 | ||||||
927 | Seneca Foods Corp., Class A* | 26,160 |
See accompanying notes to the financial statements.
10
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products, continued | ||||||||
12 | Seneca Foods Corp., Class B* | $ | 339 | |||||
4,288 | Tootsie Roll Industries, Inc.^ | 143,219 | ||||||
3,670 | TreeHouse Foods, Inc.* | 186,106 | ||||||
|
| |||||||
2,584,430 | ||||||||
|
| |||||||
Gas Utilities (1.3%): | ||||||||
2,387 | Chesapeake Utilities Corp. | 194,063 | ||||||
9,297 | New Jersey Resources Corp. | 424,594 | ||||||
2,904 | Northwest Natural Holding Co.^ | 175,576 | ||||||
3,722 | ONE Gas, Inc. | 296,271 | ||||||
118 | RGC Resources, Inc. | 3,535 | ||||||
7,843 | South Jersey Industries, Inc.^ | 218,035 | ||||||
2,872 | Southwest Gas Corp. | 219,708 | ||||||
6,439 | Spire, Inc. | 477,002 | ||||||
|
| |||||||
2,008,784 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (2.3%): | ||||||||
6,691 | Accuray, Inc.* | 22,816 | ||||||
6,050 | AngioDynamics, Inc.* | 121,787 | ||||||
2,261 | Anika Therapeutics, Inc.* | 75,992 | ||||||
263 | Atrion Corp. | 194,904 | ||||||
4,568 | Avanos Medical, Inc.*^ | 204,601 | ||||||
1,983 | Cantel Medical Corp. | 147,634 | ||||||
629 | CONMED Corp. | 40,382 | ||||||
4,705 | CryoLife, Inc.* | 133,528 | ||||||
875 | Cutera, Inc.* | 14,893 | ||||||
1,118 | Elctromed, Inc.* | 5,691 | ||||||
427 | Fonar Corp.* | 8,642 | ||||||
1,470 | Globus Medical, Inc., Class A* | 63,622 | ||||||
2,404 | Haemonetics Corp.* | 240,520 | ||||||
608 | Heska Corp.*^ | 52,349 | ||||||
1,629 | Inogen, Inc.* | 202,273 | ||||||
3,861 | Integer Holdings Corp.* | 294,440 | ||||||
199 | IntriCon Corp.* | 5,250 | ||||||
4,509 | Invacare Corp.^ | 19,389 | ||||||
2,006 | IRIDEX Corp.* | 9,428 | ||||||
249 | Kewaunee Scientific CP | 8,277 | ||||||
3,514 | Lantheus Holdings, Inc.* | 54,994 | ||||||
2,690 | LeMaitre Vascular, Inc.^ | 63,592 | ||||||
450 | LivaNova plc* | 41,162 | ||||||
6,577 | Meridian Bioscience, Inc. | 114,177 | ||||||
5,338 | Merit Medical Systems, Inc.*^ | 297,913 | ||||||
3,498 | Natus Medical, Inc.* | 119,037 | ||||||
1,038 | Neogen Corp.* | 59,166 | ||||||
4,707 | NuVasive, Inc.* | 233,279 | ||||||
3,020 | Nuvectra Corp.* | 49,347 | ||||||
6,333 | OraSure Technologies, Inc.* | 73,969 | ||||||
2,682 | Orthofix Medical, Inc.* | 140,778 | ||||||
920 | Quidel Corp.* | 44,914 | ||||||
10,930 | RTI Surgical, Inc.* | 40,441 | ||||||
2,363 | SeaSpine Holdings Corp.* | 43,101 | ||||||
2,431 | Surmodics, Inc.* | 114,889 | ||||||
3,600 | TransEnterix, Inc.*^ | 8,136 | ||||||
554 | Utah Medical Products, Inc. | 46,026 | ||||||
287 | Varex Imaging Corp.* | 6,796 | ||||||
2,492 | Wright Medical Group NV* | 67,832 | ||||||
|
| |||||||
3,485,967 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Providers & Services (2.8%): | ||||||||
1,781 | Aac Holdings, Inc.* | $ | 2,493 | |||||
6,333 | Acadia Healthcare Co., Inc.*^ | 162,821 | ||||||
5,540 | Aceto Corp. | 4,654 | ||||||
1,870 | Addus HomeCare Corp.* | 126,936 | ||||||
3,654 | Amedisys, Inc.*^ | 427,920 | ||||||
1,150 | American Renal Associates Holdings, Inc.*^ | 13,248 | ||||||
7,081 | AMN Healthcare Services, Inc.*^ | 401,209 | ||||||
1,753 | BioScrip, Inc.*^ | 6,258 | ||||||
3,573 | BioTelemetry, Inc.* | 213,380 | ||||||
12,012 | Brookdale Senior Living, Inc.* | 80,480 | ||||||
3,946 | Capital Senior Living Corp.*^ | 26,833 | ||||||
302 | Chemed Corp. | 85,551 | ||||||
1,432 | Civitas Solutions, Inc.* | 25,074 | ||||||
5,249 | Community Health Systems, Inc.* | 14,802 | ||||||
2,726 | CorVel Corp.* | 168,249 | ||||||
2,958 | Cross Country Healthcare, Inc.* | 21,682 | ||||||
2,588 | Diplomat Pharmacy, Inc.* | 34,834 | ||||||
7,737 | Ensign Group, Inc. (The) | 300,118 | ||||||
1,905 | Five Star Quality Care, Inc.* | 886 | ||||||
2,195 | HealthEquity, Inc.* | 130,932 | ||||||
3,529 | InfuSystems Holdings, Inc.* | 12,140 | ||||||
3,429 | LHC Group, Inc.* | 321,915 | ||||||
3,561 | Magellan Health Services, Inc.* | 202,585 | ||||||
5,350 | MEDNAX, Inc.* | 176,550 | ||||||
1,646 | National Healthcare Corp. | 129,129 | ||||||
2,600 | National Research Corp. | 99,164 | ||||||
7,794 | Owens & Minor, Inc. | 49,336 | ||||||
3,316 | Patterson Cos., Inc.^ | 65,193 | ||||||
2,021 | Providence Service Corp.* | 121,300 | ||||||
1,080 | Psychemedics Corp. | 17,140 | ||||||
2,464 | Quorum Health Corp.*^ | 7,121 | ||||||
1,454 | R1 RCM, Inc.* | 11,559 | ||||||
6,913 | RadNet, Inc.* | 70,305 | ||||||
18,186 | Select Medical Holdings Corp.* | 279,155 | ||||||
4,998 | Tenet Healthcare Corp.* | 85,666 | ||||||
5,590 | Tivity Health, Inc.* | 138,688 | ||||||
3,389 | Triple-S Management Corp., Class B* | 58,935 | ||||||
1,714 | U.S. Physical Therapy, Inc. | 175,428 | ||||||
|
| |||||||
4,269,669 | ||||||||
|
| |||||||
Health Care Technology (0.5%): | ||||||||
18,164 | Allscripts Healthcare Solutions, Inc.* | 175,101 | ||||||
2,108 | Computer Programs & Systems, Inc. | 52,911 | ||||||
564 | Evolent Health, Inc., Class A*^ | 11,252 | ||||||
2,627 | HealthStream, Inc. | 63,442 | ||||||
3,326 | HMS Holdings Corp.* | 93,560 | ||||||
1,027 | Inovalon Holdings, Inc., Class A*^ | 14,563 | ||||||
558 | Micron Solutions, Inc.* | 1,484 | ||||||
8,396 | NextGen Healthcare, Inc.* | 127,199 | ||||||
3,783 | Omnicell, Inc.* | 231,672 | ||||||
2,026 | Simulations Plus, Inc. | 40,317 | ||||||
|
| |||||||
811,501 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (3.2%): | ||||||||
4,748 | BBX Capital Corp. | 27,206 | ||||||
11,616 | Belmond, Ltd., Class A* | 290,748 | ||||||
3 | Biglari Holdings, Inc., Class A* | 1,763 | ||||||
168 | Biglari Holdings, Inc., Class B* | 19,081 |
See accompanying notes to the financial statements.
11
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
2,915 | BJ’s Restaurants, Inc.^ | $ | 147,412 | |||||
13,769 | Bloomin’ Brands, Inc. | 246,327 | ||||||
2,784 | Brinker International, Inc. | 122,440 | ||||||
9,452 | Caesars Entertainment Corp.* | 64,179 | ||||||
4,497 | Carrols Restaurant Group, Inc.* | 44,250 | ||||||
4,585 | Century Casinos, Inc.* | 33,883 | ||||||
6,259 | Cheesecake Factory, Inc. (The) | 272,329 | ||||||
3,166 | Choice Hotels International, Inc.^ | 226,622 | ||||||
2,799 | Chuy’s Holdings, Inc.*^ | 49,654 | ||||||
845 | Cracker Barrel Old Country Store, Inc. | 135,082 | ||||||
3,275 | Dave & Buster’s Entertainment, Inc.^ | 145,934 | ||||||
2,754 | Del Frisco’s Restaurant Group, Inc.* | 19,691 | ||||||
2,980 | del Taco Restaurants, Inc.* | 29,770 | ||||||
10,418 | Denny’s Corp.* | 168,876 | ||||||
267 | DineEquity, Inc.^ | 17,980 | ||||||
3,712 | Dover Motorsports, Inc. | 6,979 | ||||||
3,973 | Drive Shack, Inc.*^ | 15,574 | ||||||
2,394 | El Pollo Loco Holdings, Inc.* | 36,317 | ||||||
2,209 | Eldorado Resorts, Inc.*^ | 79,988 | ||||||
1,724 | Famous Dave’s of America, Inc.* | 7,913 | ||||||
4,357 | Fiesta Restaurant Group, Inc.* | 67,577 | ||||||
378 | Flanigan’s Enterprises, Inc. | 9,605 | ||||||
608 | Habit Restaurants, Inc. (The), Class A* | 6,384 | ||||||
296 | Hilton Grand Vacations, Inc.* | 7,811 | ||||||
3,548 | Jack in the Box, Inc. | 275,431 | ||||||
1,168 | Kona Grill, Inc.* | 1,226 | ||||||
2,108 | Lindblad Expeditions Holdings, Inc.* | 28,374 | ||||||
5,681 | Luby’s, Inc.* | 6,817 | ||||||
5,886 | Marriott Vacations Worldwide Corp. | 415,023 | ||||||
597 | Nathans Famous, Inc. | 39,671 | ||||||
5,384 | Papa John’s International, Inc. | 214,337 | ||||||
5,583 | Penn National Gaming, Inc.* | 105,128 | ||||||
5,796 | Planet Fitness, Inc.*^ | 310,782 | ||||||
1,446 | Playa Hotels & Resorts NV* | 10,397 | ||||||
3,185 | Potbelly Corp.*^ | 25,639 | ||||||
1,669 | RCI Hospitality Holdings, Inc. | 37,269 | ||||||
3,634 | Red Lion Hotels Corp.*^ | 29,799 | ||||||
2,030 | Red Robin Gourmet Burgers*^ | 54,242 | ||||||
662 | Red Rock Resorts, Inc. | 13,445 | ||||||
4,652 | Ruth’s Hospitality Group, Inc. | 105,740 | ||||||
2,478 | Scientific Games Corp., Class A*^ | 44,307 | ||||||
1,179 | SeaWorld Entertainment, Inc.* | 26,044 | ||||||
788 | Shake Shack, Inc., Class A*^ | 35,791 | ||||||
5,849 | Speedway Motorsports, Inc. | 95,163 | ||||||
4,120 | Texas Roadhouse, Inc. | 245,964 | ||||||
4,346 | Town Sports International Holdings, Inc.* | 27,814 | ||||||
13,989 | Wendy’s Co. (The) | 218,368 | ||||||
2,153 | Wingstop, Inc. | 138,201 | ||||||
1,063 | Wyndham Worldwide Corp. | 38,098 | ||||||
|
| |||||||
4,844,445 | ||||||||
|
| |||||||
Household Durables (2.0%): | ||||||||
608 | Bassett Furniture Industries, Inc. | 12,184 | ||||||
899 | Cavco Industries, Inc.* | 117,212 | ||||||
1,544 | Century Communities, Inc.* | 26,649 | ||||||
3,024 | Dixie Group, Inc. (The)* | 2,126 | ||||||
4,218 | Ethan Allen Interiors, Inc.^ | 74,195 | ||||||
820 | Flexsteel Industries, Inc. | 18,106 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables, continued | ||||||||
3,162 | Helen of Troy, Ltd.* | $ | 414,791 | |||||
670 | Hooker Furniture Corp. | 17,648 | ||||||
2,905 | Installed Building Products, Inc.* | 97,869 | ||||||
3,858 | iRobot Corp.*^ | 323,069 | ||||||
11,216 | KB Home | 214,226 | ||||||
1,138 | Koss Corp.* | 2,151 | ||||||
6,113 | La-Z-Boy, Inc. | 169,391 | ||||||
924 | LGI Homes, Inc.*^ | 41,783 | ||||||
4,396 | Libbey, Inc.^ | 17,056 | ||||||
2,522 | Lifetime Brands, Inc. | 25,296 | ||||||
6,495 | M.D.C. Holdings, Inc. | 182,574 | ||||||
4,157 | M/I Homes, Inc.* | 87,380 | ||||||
6,186 | Meritage Corp.* | 227,150 | ||||||
723 | P & F Industries, Inc., Class A | 5,589 | ||||||
1,301 | Skyline Corp. | 19,112 | ||||||
5,672 | Taylor Morrison Home Corp., Class A* | 90,185 | ||||||
2,725 | Tempur Sealy International, Inc.*^ | 112,815 | ||||||
2,041 | TopBuild Corp.* | 91,845 | ||||||
20,593 | TRI Pointe Homes, Inc.*^ | 225,081 | ||||||
4,563 | Tupperware Brands Corp. | 144,054 | ||||||
1,860 | Universal Electronics, Inc.*^ | 47,021 | ||||||
4,639 | William Lyon Homes, Class A* | 49,591 | ||||||
4,044 | Zagg, Inc.*^ | 39,550 | ||||||
|
| |||||||
2,895,699 | ||||||||
|
| |||||||
Household Products (0.5%): | ||||||||
1,115 | Central Garden & Pet Co.* | 38,412 | ||||||
3,036 | Central Garden & Pet Co., Class A* | 94,875 | ||||||
3,445 | Energizer Holdings, Inc. | 155,542 | ||||||
1,767 | OceanBio-Chem, Inc. | 5,796 | ||||||
940 | Oil-Dri Corp. | 24,910 | ||||||
1,648 | Orchids Paper Products Co.*^ | 1,549 | ||||||
1,701 | Spectrum Brands Holdings, Inc.^ | 71,867 | ||||||
2,171 | WD-40 Co.^ | 397,857 | ||||||
|
| |||||||
790,808 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.5%): | ||||||||
22,978 | Atlantic Power Corp.* | 49,862 | ||||||
506 | Atlantica Yield plc | 9,918 | ||||||
3,724 | Clearway Energy, Inc., Class A | 63,010 | ||||||
5,480 | Clearway Energy, Inc., Class C | 94,530 | ||||||
7,048 | Ormat Technologies, Inc.^ | 368,611 | ||||||
9,283 | Pattern Energy Group, Inc. | 172,849 | ||||||
2,274 | TerraForm Power, Inc., Class A | 25,514 | ||||||
|
| |||||||
784,294 | ||||||||
|
| |||||||
Industrial Conglomerates (0.1%): | ||||||||
6,077 | Raven Industries, Inc. | 219,927 | ||||||
|
| |||||||
Insurance (3.4%): | ||||||||
8,008 | AMBAC Financial Group, Inc.* | 138,058 | ||||||
10,500 | American Equity Investment Life Holding Co. | 293,369 | ||||||
1,653 | American National Insurance Co. | 210,328 | ||||||
2,876 | Amerisafe, Inc.^ | 163,040 | ||||||
3,798 | Argo Group International Holdings, Ltd. | 255,416 | ||||||
6,619 | Aspen Insurance Holdings, Ltd. | 277,933 | ||||||
1,079 | Assured Guaranty, Ltd. | 41,304 | ||||||
1,304 | Brighthouse Financial, Inc.* | 39,746 | ||||||
8,209 | Citizens, Inc.*^ | 61,732 |
See accompanying notes to the financial statements.
12
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Insurance, continued | ||||||||
3,445 | Crawford & Co. | $ | 31,005 | |||||
4,636 | Crawford & Co., Class A | 41,260 | ||||||
2,691 | Donegal Group, Inc., Class A | 36,719 | ||||||
2,004 | eHealth, Inc.* | 76,994 | ||||||
3,293 | EMC Insurance Group, Inc. | 104,882 | ||||||
4,666 | Employers Holdings, Inc. | 195,832 | ||||||
549 | Enstar Group, Ltd.*^ | 91,996 | ||||||
2,939 | FBL Financial Group, Inc., Class A | 192,945 | ||||||
2,111 | FedNat Holding Co. | 42,051 | ||||||
10,826 | Genworth Financial, Inc., Class A* | 50,449 | ||||||
1,050 | Global Indemnity, Ltd.^ | 38,042 | ||||||
4,955 | Greenlight Capital Re, Ltd.*^ | 42,712 | ||||||
1,752 | Hallmark Financial Services, Inc.* | 18,729 | ||||||
1,470 | HCI Group, Inc.^ | 74,691 | ||||||
414 | Health Insurance Innovations, Inc.*^ | 11,066 | ||||||
569 | Heritage Insurance Holdings, Inc. | 8,376 | ||||||
1,214 | Horace Mann Educators Corp. | 45,464 | ||||||
2,328 | Independence Holding Co. | 81,946 | ||||||
253 | Investors Title Co. | 44,700 | ||||||
941 | James River Group Holdings | 34,384 | ||||||
1,037 | Kemper Corp. | 68,836 | ||||||
1,473 | Kingstone Co., Inc. | 26,057 | ||||||
12,677 | Maiden Holdings, Ltd. | 20,917 | ||||||
2,590 | Mercury General Corp.^ | 133,929 | ||||||
4,062 | National General Holdings Corp. | 98,341 | ||||||
386 | National Western Life Group, Inc., Class A | 116,070 | ||||||
944 | Navigators Group, Inc. | 65,599 | ||||||
2,367 | Primerica, Inc. | 231,280 | ||||||
6,215 | ProAssurance Corp. | 252,080 | ||||||
180 | Protective Insurance Corp. | 3,060 | ||||||
4,712 | RLI Corp.^ | 325,080 | ||||||
513 | Safety Insurance Group, Inc. | 41,969 | ||||||
3,236 | Selective Insurance Group, Inc. | 197,202 | ||||||
5,250 | State Auto Financial Corp. | 178,710 | ||||||
3,277 | Stewart Information Services Corp. | 135,668 | ||||||
204 | The National Security Group, Inc. | 2,654 | ||||||
2,083 | Third Point Reinsurance, Ltd.* | 20,080 | ||||||
2,849 | Tiptree Financial, Inc., Class A^ | 15,926 | ||||||
748 | United Fire Group, Inc. | 41,477 | ||||||
4,002 | United Insurance Holdings Co. | 66,513 | ||||||
5,267 | Universal Insurance Holdings, Inc. | 199,725 | ||||||
161 | White Mountains Insurance Group, Ltd. | 138,088 | ||||||
|
| |||||||
5,124,430 | ||||||||
|
| |||||||
Interactive Media & Services (0.3%): | ||||||||
3,666 | Cars.com, Inc.*^ | 78,819 | ||||||
6,181 | DHI Group, Inc.* | 9,395 | ||||||
9,267 | Liberty TripAdvisor Holdings, Inc., Class A* | 147,252 | ||||||
7,450 | QuinStreet, Inc.* | 120,913 | ||||||
7,131 | The Meet Group, Inc. (The)*^ | 33,017 | ||||||
2,073 | Travelzoo, Inc.* | 20,378 | ||||||
1,495 | Yelp, Inc.* | 52,310 | ||||||
1,473 | Zedge, Inc., Class B* | 3,606 | ||||||
|
| |||||||
465,690 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.7%): | ||||||||
4,886 | 1-800 Flowers.com, Inc., Class A* | 59,756 | ||||||
1,840 | FTD Cos., Inc.* | 2,723 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Internet & Direct Marketing Retail, continued | ||||||||
5,334 | Groupon, Inc.* | $ | 17,069 | |||||
1,300 | Lands’ End, Inc.*^ | 18,473 | ||||||
3,938 | Leaf Group, Ltd.* | 26,975 | ||||||
2,711 | Liberty Expedia Holdings, Class A* | 106,027 | ||||||
3,018 | Liquidity Services, Inc.* | 18,621 | ||||||
4,721 | Nutri/System, Inc. | 207,158 | ||||||
1,945 | Overstock.com, Inc.*^ | 26,413 | ||||||
3,081 | PetMed Express, Inc. | 71,664 | ||||||
4,901 | Shutterfly, Inc.*^ | 197,315 | ||||||
4,549 | Shutterstock, Inc.^ | 163,809 | ||||||
1,086 | Stamps.com, Inc.* | 169,025 | ||||||
1,880 | US Auto Parts Network, Inc.* | 1,711 | ||||||
|
| |||||||
1,086,739 | ||||||||
|
| |||||||
IT Services (2.3%): | ||||||||
1,869 | CACI International, Inc., Class A* | 269,192 | ||||||
3,767 | Carbonite, Inc.*^ | 95,154 | ||||||
5,955 | Cardtronics plc* | 154,829 | ||||||
1,886 | Cass Information Systems, Inc.^ | 99,807 | ||||||
11,403 | Conduent, Inc.* | 121,214 | ||||||
3,613 | CoreLogic, Inc.* | 120,746 | ||||||
4,402 | CSG Systems International, Inc. | 139,852 | ||||||
758 | CSP, Inc. | 7,406 | ||||||
1,258 | Endurance International Group Holdings, Inc.*^ | 8,366 | ||||||
1,349 | Evertec, Inc. | 38,716 | ||||||
4,219 | Exlservice Holdings, Inc.* | 222,004 | ||||||
4,964 | GTT Communications, Inc.*^ | 117,448 | ||||||
4,599 | Hackett Group, Inc. (The) | 73,630 | ||||||
1,786 | Internap Corp.*^ | 7,412 | ||||||
18,673 | Limelight Networks, Inc.* | 43,695 | ||||||
8,660 | LiveRamp Holdings, Inc.* | 334,536 | ||||||
790 | Luxoft Holding, Inc.* | 24,032 | ||||||
3,081 | ManTech International Corp., Class A | 161,121 | ||||||
500 | Maximus, Inc. | 32,545 | ||||||
6,208 | MoneyGram International, Inc.* | 12,416 | ||||||
8,730 | NIC, Inc. | 108,950 | ||||||
4,334 | Perficient, Inc.* | 96,475 | ||||||
1,678 | Perspecta, Inc. | 28,895 | ||||||
3,168 | PFSweb, Inc.* | 16,252 | ||||||
5,456 | Science Applications International Corp. | 347,546 | ||||||
8,429 | Servicesource International, Inc.* | 9,103 | ||||||
1,555 | StarTek, Inc.*^ | 10,341 | ||||||
10,553 | Steel Connect, Inc.* | 18,257 | ||||||
5,434 | Sykes Enterprises, Inc.* | 134,383 | ||||||
7,198 | Travelport Worldwide, Ltd. | 112,433 | ||||||
5,956 | TTEC Holdings, Inc. | 170,163 | ||||||
7,332 | Unisys Corp.* | 85,271 | ||||||
3,309 | Virtusa Corp.* | 140,930 | ||||||
|
| |||||||
3,363,120 | ||||||||
|
| |||||||
Leisure Products (0.4%): | ||||||||
8,017 | American Outdoor Brands Corp.* | 103,099 | ||||||
7,292 | Callaway Golf Co. | 111,568 | ||||||
2,916 | Escalade, Inc.^ | 33,388 | ||||||
2,447 | JAKKS Pacific, Inc.* | 3,597 | ||||||
361 | Johnson Outdoors, Inc., Class A | 21,205 | ||||||
1,830 | Malibu Boats, Inc.* | 63,684 | ||||||
2,419 | Marine Products Corp. | 40,905 |
See accompanying notes to the financial statements.
13
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Leisure Products, continued | ||||||||
850 | Mastercraft Boat Holdings, Inc.* | $ | 15,895 | |||||
4,982 | Nautilus Group, Inc.*^ | 54,304 | ||||||
7,141 | Vista Outdoor, Inc.* | 81,050 | ||||||
|
| |||||||
528,695 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.3%): | ||||||||
4,622 | Cambrex Corp.*^ | 174,528 | ||||||
7,407 | Enzo Biochem, Inc.* | 20,591 | ||||||
7,018 | Harvard Bioscience, Inc.* | 22,317 | ||||||
5,461 | Luminex Corp. | 126,204 | ||||||
3,971 | Neogenomics, Inc.* | 50,074 | ||||||
1,075 | Syneos Health, Inc.* | 42,301 | ||||||
|
| |||||||
436,015 | ||||||||
|
| |||||||
Machinery (5.5%): | ||||||||
6,598 | Actuant Corp., Class A | 138,492 | ||||||
1,154 | Alamo Group, Inc. | 89,227 | ||||||
4,190 | Albany International Corp., Class A | 261,582 | ||||||
4,536 | Altra Industrial Motion Corp. | 114,080 | ||||||
1,974 | ARC Group Worldwide, Inc.* | 1,974 | ||||||
806 | Art’s-Way Manufacturing Co.* | 1,612 | ||||||
2,880 | Astec Industries, Inc. | 86,947 | ||||||
7,075 | Barnes Group, Inc. | 379,362 | ||||||
1,300 | Briggs & Stratton Corp. | 17,004 | ||||||
4,063 | Chart Industries, Inc.*^ | 264,217 | ||||||
2,359 | CIRCOR International, Inc.*^ | 50,247 | ||||||
2,851 | Colfax Corp.* | 59,586 | ||||||
3,780 | Columbus McKinnon Corp. | 113,929 | ||||||
5,525 | Commercial Vehicle Group, Inc.* | 31,493 | ||||||
1,676 | Dmc Global, Inc. | 58,861 | ||||||
3,590 | Douglas Dynamics, Inc. | 128,845 | ||||||
500 | Eastern Co. (The) | 12,090 | ||||||
2,433 | EnPro Industries, Inc. | 146,223 | ||||||
3,185 | ESCO Technologies, Inc. | 210,051 | ||||||
8,469 | Federal Signal Corp. | 168,533 | ||||||
6,496 | Franklin Electric Co., Inc. | 278,548 | ||||||
2,281 | FreightCar America, Inc.*^ | 15,260 | ||||||
1,765 | Gencor Industries, Inc.* | 19,362 | ||||||
2,940 | Global Brass & Copper Holdings, Inc. | 73,941 | ||||||
3,372 | Gorman-Rupp Co. (The) | 109,287 | ||||||
459 | Graham Corp. | 10,484 | ||||||
3,586 | Greenbrier Cos, Inc.^ | 141,790 | ||||||
11,887 | Harsco Corp.* | 236,076 | ||||||
8,780 | Hillenbrand, Inc. | 333,025 | ||||||
785 | Hurco Cos, Inc. | 28,025 | ||||||
1,711 | Hyster-Yale Materials Handling, Inc., Class A | 106,014 | ||||||
4,544 | John Bean Technologies Corp. | 326,305 | ||||||
9,594 | Kennametal, Inc. | 319,288 | ||||||
1,529 | L.B. Foster Co., Class A* | 24,311 | ||||||
1,368 | Lindsay Corp. | 131,670 | ||||||
829 | Lydall, Inc.* | 16,837 | ||||||
3,228 | Manitex International, Inc.* | 18,335 | ||||||
4,498 | Manitowoc Co., Inc. (The)* | 66,435 | ||||||
14,363 | Meritor, Inc.* | 242,878 | ||||||
8,208 | Mueller Industries, Inc. | 191,739 | ||||||
22,037 | Mueller Water Products, Inc., Class A | 200,537 | ||||||
5,638 | Navistar International Corp.* | 146,306 | ||||||
3,562 | NN, Inc.^ | 23,901 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
738 | Omega Flex, Inc. | $ | 39,904 | |||||
2,028 | Park-Ohio Holdings Corp. | 62,239 | ||||||
1,756 | Proto Labs, Inc.*^ | 198,059 | ||||||
3,427 | RBC Bearings, Inc.* | 449,280 | ||||||
14,208 | Rexnord Corp.* | 326,074 | ||||||
5,735 | Spartan Motors, Inc. | 41,464 | ||||||
1,692 | SPX Corp.* | 47,393 | ||||||
1,085 | SPX FLOW, Inc.* | 33,006 | ||||||
1,898 | Standex International Corp. | 127,508 | ||||||
3,615 | Sun Hydraulics Corp.^ | 119,982 | ||||||
466 | Taylor Devices, Inc.* | 5,592 | ||||||
1,866 | Tennant Co.^ | 97,237 | ||||||
9,270 | Terex Corp.^ | 255,574 | ||||||
800 | The Exone Co.* | 5,296 | ||||||
2,794 | Timken Co. | 104,272 | ||||||
7,930 | Titan International, Inc. | 36,954 | ||||||
5,970 | TriMas Corp.* | 162,921 | ||||||
1,747 | Twin Disc, Inc.* | 25,768 | ||||||
8,536 | Wabash National Corp. | 111,651 | ||||||
3,816 | Watts Water Technologies, Inc., Class A | 246,246 | ||||||
18,993 | Welbilt, Inc.*^ | 211,012 | ||||||
|
| |||||||
8,102,141 | ||||||||
|
| |||||||
Marine (0.1%): | ||||||||
1,689 | Costamare, Inc. | 7,415 | ||||||
550 | Genco Shipping & Trading, Ltd.* | 4,340 | ||||||
327 | Kirby Corp.*^ | 22,027 | ||||||
5,648 | Matson, Inc. | 180,848 | ||||||
3,151 | Scorpio Bulkers, Inc.^ | 17,425 | ||||||
|
| |||||||
232,055 | ||||||||
|
| |||||||
Media (1.9%): | ||||||||
3,904 | A.H. Belo Corp., Class A | 13,156 | ||||||
709 | AMC Networks, Inc., Class A*^ | 38,910 | ||||||
478 | Beasley Broadcast Group, Inc., Class A | 1,793 | ||||||
145 | Cable One, Inc. | 118,915 | ||||||
23,234 | Central Eurpoean Media Enterprises* | 64,591 | ||||||
229 | Daily Journal Corp.* | 53,586 | ||||||
7,889 | E.W. Scripps Co. (The), Class A^ | 124,094 | ||||||
973 | Emerald Expositions Events, Inc. | 12,007 | ||||||
6,123 | Entercom Communications Corp. | 34,962 | ||||||
11,865 | Entravision Communications Corp., Class A | 34,527 | ||||||
4,669 | Gannett Co., Inc.^ | 39,827 | ||||||
980 | GCI Liberty, Inc., Class A* | 40,337 | ||||||
8,641 | Gray Television, Inc.* | 127,368 | ||||||
2,892 | Hemisphere Media Group*^ | 35,109 | ||||||
2,441 | Insignia Systems, Inc.* | 3,637 | ||||||
4,052 | John Wiley & Sons, Inc., Class A | 190,322 | ||||||
10,454 | Lee Enterprises, Inc.* | 22,058 | ||||||
7,609 | Liberty Latin America, Ltd.*^ | 110,862 | ||||||
3,964 | Liberty Latin America, Ltd.*^ | 57,399 | ||||||
6,655 | Marchex, Inc., Class B | 17,636 | ||||||
372 | McClatchy Co., Class A* | 2,846 | ||||||
4,388 | Meredith Corp. | 227,913 | ||||||
3,571 | MSG Networks, Inc., Class A*^ | 84,133 | ||||||
10,941 | National CineMedia, Inc. | 70,898 | ||||||
2,347 | New Media Investment Group, Inc. | 27,155 | ||||||
6,603 | New York Times Co. (The), Class A^ | 147,181 |
See accompanying notes to the financial statements.
14
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media, continued | ||||||||
7,050 | Nexstar Broadcasting Group, Inc., Class A^ | $ | 554,412 | |||||
1,017 | Scholastic Corp. | 40,944 | ||||||
8,414 | Sinclair Broadcast Group, Inc., Class A | 221,625 | ||||||
3,708 | TechTarget, Inc.*^ | 45,275 | ||||||
3,266 | Tegna, Inc. | 35,501 | ||||||
1,693 | Tribune Media Co., Class A | 76,828 | ||||||
2,169 | Tribune Publishing Co.* | 24,596 | ||||||
8,158 | Urban One, Inc.* | 13,134 | ||||||
|
| |||||||
2,713,537 | ||||||||
|
| |||||||
Metals & Mining (1.1%): | ||||||||
23,109 | AK Steel Holding Corp.*^ | 51,995 | ||||||
7,802 | Allegheny Technologies, Inc.*^ | 169,850 | ||||||
2,124 | Ampco-Pittsburgh Corp.* | 6,584 | ||||||
6,694 | Carpenter Technology Corp. | 238,373 | ||||||
3,100 | Century Aluminum Co.* | 22,661 | ||||||
21,148 | Cleveland-Cliffs, Inc.*^ | 162,628 | ||||||
7,283 | Coeur d’Alene Mines Corp.* | 32,555 | ||||||
12,903 | Commercial Metals Co. | 206,706 | ||||||
4,543 | Compass Minerals International, Inc.^ | 189,398 | ||||||
13,641 | Ferroglobe plc | 21,689 | ||||||
13,641 | Ferroglobe Unit* | — | ||||||
1,805 | Gold Resource Corp. | 7,220 | ||||||
1,557 | Haynes International, Inc. | 41,105 | ||||||
42,581 | Hecla Mining Co.^ | 100,491 | ||||||
931 | Kaiser Aluminum Corp.^ | 83,129 | ||||||
2,598 | Materion Corp. | 116,884 | ||||||
9,373 | McEwen Mining, Inc. | 17,059 | ||||||
2,868 | Ryerson Holding Corp.* | 18,183 | ||||||
1,487 | Schnitzer Steel Industries, Inc., Class A | 32,045 | ||||||
3,318 | SunCoke Energy, Inc.* | 28,369 | ||||||
1,789 | Synalloy Corp. | 29,680 | ||||||
4,467 | TimkenSteel Corp.*^ | 39,042 | ||||||
1,582 | United States Steel Corp.^ | 28,856 | ||||||
1,458 | Universal Stainless & Alloy Products, Inc.* | 23,634 | ||||||
2,441 | Worthington Industries, Inc. | 85,044 | ||||||
|
| |||||||
1,753,180 | ||||||||
|
| |||||||
Multiline Retail (0.3%): | ||||||||
5,705 | Big Lots, Inc.^ | 164,989 | ||||||
654 | Dillard’s, Inc., Class A^ | 39,443 | ||||||
800 | Fred’s, Inc.* | 1,512 | ||||||
27,998 | J.C. Penney Co., Inc.*^ | 29,118 | ||||||
3,073 | Ollie’s Bargain Outlet Holdings, Inc.*^ | 204,384 | ||||||
5,314 | Tuesday Morning Corp.*^ | 9,034 | ||||||
|
| |||||||
448,480 | ||||||||
|
| |||||||
Multi-Utilities (0.8%): | ||||||||
8,048 | Avista Corp. | 341,879 | ||||||
5,171 | Black Hills Corp.^ | 324,635 | ||||||
6,986 | NorthWestern Corp. | 415,248 | ||||||
2,144 | Unitil Corp. | 108,572 | ||||||
|
| |||||||
1,190,334 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.7%): | ||||||||
4,107 | Abraxas Petroleum Corp.* | 4,477 | ||||||
816 | Adams Resources & Energy, Inc. | 31,587 | ||||||
2,181 | Alta Mesa Resources, Inc.* | 2,181 | ||||||
2,307 | Antero Resources Corp.*^ | 21,663 | ||||||
6,000 | Approach Resources, Inc.* | 5,232 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
1,638 | Arch Coal, Inc.^ | $ | 135,938 | |||||
1,954 | Ardmore Shipping Corp.*^ | 9,125 | ||||||
901 | Barnwell Industries, Inc.* | 1,198 | ||||||
1,332 | Bonanza Creek Energy, Inc.* | 27,532 | ||||||
1,697 | California Resources Corp.*^ | 28,917 | ||||||
15,796 | Callon Petroleum Co.*^ | 102,516 | ||||||
4,289 | Carrizo Oil & Gas, Inc.*^ | 48,423 | ||||||
42,515 | Chesapeake Energy Corp.* | 89,282 | ||||||
16,914 | Clean Energy Fuel Corp.* | 29,092 | ||||||
8,098 | Cloud Peak Energy, Inc.*^ | 2,966 | ||||||
19,397 | CNX Resources Corp.* | 221,514 | ||||||
2,015 | CONSOL Energy, Inc.* | 63,896 | ||||||
1,914 | Contango Oil & Gas Co.*^ | 6,221 | ||||||
2,325 | CVR Energy, Inc. | 80,166 | ||||||
7,363 | Delek US Holdings, Inc. | 239,370 | ||||||
39,156 | Denbury Resources, Inc.* | 66,957 | ||||||
16,266 | DHT Holdings, Inc.^ | 63,763 | ||||||
2,613 | Dorian LPG, Ltd.* | 15,234 | ||||||
416 | Earthstone Energy, Inc.* | 1,880 | ||||||
4,363 | Eclipse Resources Corp.* | 4,581 | ||||||
10,622 | Enlink Midstream LLC^ | 100,803 | ||||||
12,047 | EP Energy Corp., Class A* | 8,433 | ||||||
2,943 | Evolution Petroleum Corp. | 20,071 | ||||||
5,664 | Extraction Oil & Gas, Inc.*^ | 24,299 | ||||||
10,643 | Gaslog, Ltd.^ | 175,183 | ||||||
1,561 | Green Plains Renewable Energy, Inc.^ | 20,465 | ||||||
9,417 | Gulfport Energy Corp.* | 61,681 | ||||||
10,901 | Halcon Resources Corp.*^ | 18,532 | ||||||
5,504 | Hallador Energy Co. | 27,905 | ||||||
9,079 | HighPoint Resources Corp.* | 22,607 | ||||||
1,951 | International Seaways, Inc.* | 32,855 | ||||||
34,496 | Kosmos Energy, Ltd.* | 140,399 | ||||||
14,513 | Laredo Petroleum Holdings, Inc.* | 52,537 | ||||||
9,030 | Matador Resources Co.*^ | 140,236 | ||||||
1,034 | Midstates Petroleum Co., Inc.* | 7,765 | ||||||
1,600 | Murphy Oil Corp. | 37,424 | ||||||
12,361 | Nordic American Tankers, Ltd. | 24,722 | ||||||
3,092 | Northern Oil & Gas, Inc.* | 6,988 | ||||||
18,805 | Oasis Petroleum, Inc.* | 103,992 | ||||||
4,913 | Pacific Ethanol, Inc.* | 4,230 | ||||||
2,410 | Panhandle Oil & Gas, Inc., Class A | 37,355 | ||||||
1,648 | PAR Pacific Holdings, Inc.* | 23,369 | ||||||
6,480 | PBF Energy, Inc., Class A | 211,702 | ||||||
3,470 | PDC Energy, Inc.* | 103,267 | ||||||
5,636 | Peabody Energy Corp. | 171,785 | ||||||
523 | Penn Virginia Corp.* | 28,273 | ||||||
6 | PrimeEnergy Corp.* | 416 | ||||||
12,864 | QEP Resources, Inc.* | 72,424 | ||||||
12,188 | Range Resources Corp.^ | 116,639 | ||||||
6,030 | Renewable Energy Group, Inc.*^ | 154,971 | ||||||
3,561 | Ring Energy, Inc.* | 18,090 | ||||||
1,533 | SandRidge Energy, Inc.* | 11,666 | ||||||
28,682 | Scorpio Tankers, Inc.^ | 50,480 | ||||||
5,243 | SemGroup Corp., Class A^ | 72,249 | ||||||
12,619 | Ship Finance International^ | 132,878 | ||||||
7,278 | SM Energy Co. | 112,663 | ||||||
32,445 | Southwestern Energy Co.*^ | 110,637 |
See accompanying notes to the financial statements.
15
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
23,009 | SRC Energy, Inc.* | $ | 108,142 | |||||
1,352 | Talos Energy, Inc.* | 22,065 | ||||||
1,980 | Teekay Shipping Corp.^ | 6,613 | ||||||
18,909 | Teekay Tankers, Ltd. | 17,548 | ||||||
9,332 | Ultra Petroleum Corp.* | 7,093 | ||||||
8,709 | W&T Offshore, Inc.*^ | 35,881 | ||||||
7,070 | Whiting Petroleum Corp.* | 160,418 | ||||||
639 | Wildhorse Resource Development Corp.* | 9,016 | ||||||
3,407 | World Fuel Services Corp. | 72,944 | ||||||
|
| |||||||
4,203,422 | ||||||||
|
| |||||||
Paper & Forest Products (0.7%): | ||||||||
5,866 | Boise Cascade Co. | 139,904 | ||||||
2,174 | Clearwater Paper Corp.* | 52,980 | ||||||
7,194 | Domtar Corp. | 252,726 | ||||||
3,550 | Louisiana-Pacific Corp. | 78,881 | ||||||
8,641 | Mercer International, Inc. | 90,212 | ||||||
2,510 | Neenah Paper, Inc. | 147,889 | ||||||
1,455 | P.H. Glatfelter Co. | 14,201 | ||||||
12,394 | Resolute Forest Products | 98,284 | ||||||
4,054 | Schweitzer-Mauduit International, Inc. | 101,553 | ||||||
1,313 | Verso Corp.* | 29,411 | ||||||
|
| |||||||
1,006,041 | ||||||||
|
| |||||||
Personal Products (0.9%): | ||||||||
27,730 | Avon Products, Inc.* | 42,150 | ||||||
1,214 | CCA Industries, Inc.* | 2,671 | ||||||
2,807 | Edgewell Personal Care Co.* | 104,841 | ||||||
4,304 | Inter Parfums, Inc. | 282,213 | ||||||
900 | Lifevantage Corp.* | 11,871 | ||||||
537 | Mannatech, Inc. | 10,096 | ||||||
1,346 | Medifast, Inc. | 168,277 | ||||||
1,387 | Natural Alternatives International, Inc.* | 13,634 | ||||||
369 | Natural Health Trends Corp. | 6,823 | ||||||
2,857 | Natures Sunshine Products, Inc.* | 23,285 | ||||||
2,622 | Nu Skin Enterprises, Inc., Class A | 160,807 | ||||||
2,009 | Revlon, Inc.* | 50,607 | ||||||
340 | United-Guardian, Inc. | 6,236 | ||||||
3,463 | Usana Health Sciences, Inc.* | 407,698 | ||||||
|
| |||||||
1,291,209 | ||||||||
|
| |||||||
Pharmaceuticals (0.8%): | ||||||||
680 | Aclaris Therapeutics, Inc.*^ | 5,025 | ||||||
3,223 | Akorn, Inc.* | 10,926 | ||||||
1,722 | Amneal Pharmaceuticals, Inc.*^ | 23,299 | ||||||
3,129 | Amphastar Pharmaceuticals, Inc.*^ | 62,267 | ||||||
1,566 | ANI Pharmaceuticals, Inc.* | 70,501 | ||||||
1,496 | Aratana Therapeutics, Inc.* | 9,170 | ||||||
4,744 | Assertio Therapeutics, Inc.*^ | 17,126 | ||||||
3,245 | Corcept Therapeutics, Inc.*^ | 43,353 | ||||||
3,415 | Cumberland Pharmaceuticals, Inc.* | 21,515 | ||||||
810 | Cymabay Therapeutics, Inc.* | 6,375 | ||||||
1,500 | Dermira, Inc.* | 10,785 | ||||||
10,521 | Endo International plc* | 76,803 | ||||||
10,506 | Horizon Pharma plc* | 205,288 | ||||||
5,141 | Innoviva, Inc.*^ | 89,710 | ||||||
1,879 | Intra-Cellular Therapies, Inc.* | 21,402 | ||||||
6,034 | Lannett Co., Inc.*^ | 29,929 | ||||||
2,617 | Lipocine, Inc.* | 3,402 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Pharmaceuticals, continued | ||||||||
2,988 | Mallinckrodt plc*^ | $ | 47,210 | |||||
845 | Melinta Therapeutics, Inc.* | 670 | ||||||
2,308 | Otonomy, Inc.* | 4,270 | ||||||
859 | Phibro Animal Health Corp., Class A | 27,625 | ||||||
5,702 | Prestige Brands Holdings, Inc.*^ | 176,078 | ||||||
5,788 | Supernus Pharmaceuticals, Inc.*^ | 192,277 | ||||||
341 | Taro Pharmaceutical Industries, Ltd. | 28,862 | ||||||
1,949 | Tetraphase Pharmaceuticals, Inc.* | 2,202 | ||||||
1,034 | Zogenix, Inc.*^ | 37,700 | ||||||
|
| |||||||
1,223,770 | ||||||||
|
| |||||||
Professional Services (2.2%): | ||||||||
1,888 | Acacia Research Corp.* | 5,626 | ||||||
5,362 | ASGN, Inc.* | 292,229 | ||||||
1,199 | Barrett Business Services, Inc. | 68,643 | ||||||
6,714 | CBIZ, Inc.* | 132,266 | ||||||
490 | CRA International, Inc. | 20,850 | ||||||
7,190 | Exponent, Inc. | 364,605 | ||||||
2,512 | Forrester Research, Inc. | 112,286 | ||||||
2,695 | Franklin Covey Co.* | 60,179 | ||||||
4,532 | FTI Consulting, Inc.* | 302,012 | ||||||
2,202 | GP Strategies Corp.* | 27,767 | ||||||
2,274 | Heidrick & Struggles International, Inc. | 70,926 | ||||||
2,768 | Huron Consulting Group, Inc.* | 142,026 | ||||||
2,643 | ICF International, Inc. | 171,214 | ||||||
5,892 | InnerWorkings, Inc.*^ | 22,036 | ||||||
4,401 | Insperity, Inc. | 410,877 | ||||||
1,000 | Kelly Services, Inc., Class A | 20,480 | ||||||
4,482 | Kforce, Inc. | 138,583 | ||||||
8,105 | Korn/Ferry International | 320,472 | ||||||
1,332 | Mastech Holdings, Inc.* | 8,392 | ||||||
3,943 | Mistras Group, Inc.* | 56,700 | ||||||
4,799 | Navigant Consulting, Inc. | 115,416 | ||||||
4,033 | Resources Connection, Inc. | 57,269 | ||||||
3,165 | TriNet Group, Inc.* | 132,772 | ||||||
6,167 | Trueblue, Inc.* | 137,216 | ||||||
4,212 | Volt Information Sciences, Inc.* | 9,056 | ||||||
831 | Wageworks, Inc.* | 22,570 | ||||||
1,576 | Willdan Group, Inc.*^ | 55,128 | ||||||
|
| |||||||
3,277,596 | ||||||||
|
| |||||||
Real Estate Management & Development (0.7%): | ||||||||
2,400 | Altisource Portfolio Solutions* | 53,976 | ||||||
395 | CKX Lands, Inc.^ | 4,072 | ||||||
920 | Consolidated-Tomoka Land Co.^ | 48,300 | ||||||
692 | Forestar Group, Inc.* | 9,584 | ||||||
504 | FRP Holdings, Inc.* | 23,189 | ||||||
376 | Griffin Industrial Realty, Inc. | 11,994 | ||||||
6,592 | HFF, Inc., Class A | 218,592 | ||||||
478 | Howard Hughes Corp. (The)* | 46,662 | ||||||
10 | J.W. Mays, Inc.* | 387 | ||||||
5,824 | Kennedy-Wilson Holdings, Inc. | 105,822 | ||||||
5,387 | Marcus & Millichap, Inc.* | 184,936 | ||||||
1,035 | Maui Land & Pineapple Co.*^ | 10,267 | ||||||
2,057 | Rafael Holdings, Inc., Class B* | 16,312 | ||||||
702 | RE/MAX Holdings, Inc., Class A | 21,587 | ||||||
8,369 | Realogy Holdings Corp.^ | 122,857 | ||||||
308 | Stratus Properties, Inc.* | 7,386 |
See accompanying notes to the financial statements.
16
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
3,421 | Tejon Ranch Co.* | $ | 56,720 | |||||
1,076 | The RMR Group, Inc., Class A | 57,114 | ||||||
2,700 | The St. Joe Co.*^ | 35,559 | ||||||
|
| |||||||
1,035,316 | ||||||||
|
| |||||||
Road & Rail (0.9%): | ||||||||
1,803 | ArcBest Corp. | 61,771 | ||||||
9,143 | Avis Budget Group, Inc.* | 205,535 | ||||||
2,278 | Covenant Transportation Group, Inc., Class A* | 43,738 | ||||||
10,920 | Heartland Express, Inc.^ | 199,836 | ||||||
3,276 | Hertz Global Holdings, Inc.* | 44,717 | ||||||
875 | Landstar System, Inc. | 83,711 | ||||||
1,700 | Marten Transport, Ltd. | 27,523 | ||||||
598 | Ryder System, Inc. | 28,794 | ||||||
4,204 | Saia, Inc.* | 234,667 | ||||||
3,855 | Universal Truckload Services, Inc. | 69,737 | ||||||
988 | USA Truck, Inc.* | 14,790 | ||||||
10,586 | Werner Enterprises, Inc.^ | 312,710 | ||||||
4,526 | YRC Worldwide, Inc.*^ | 14,257 | ||||||
|
| |||||||
1,341,786 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (2.9%): | ||||||||
4,922 | Advanced Energy Industries, Inc.* | 211,301 | ||||||
3,814 | Alpha & Omega Semiconductor, Ltd.* | 38,865 | ||||||
1,056 | Ambarella, Inc.* | 36,939 | ||||||
30,273 | Amkor Technology, Inc.* | 198,591 | ||||||
1,301 | Amtech Systems, Inc.*^ | 5,894 | ||||||
4,245 | Axcelis Technologies, Inc.* | 75,561 | ||||||
2,777 | AXT, Inc.*^ | 12,080 | ||||||
2,314 | Brooks Automation, Inc. | 60,581 | ||||||
3,650 | Cabot Microelectronics Corp. | 348,027 | ||||||
1,462 | CEVA, Inc.* | 32,296 | ||||||
5,549 | Cirrus Logic, Inc.*^ | 184,116 | ||||||
6,183 | Cohu, Inc. | 99,361 | ||||||
5,880 | Cree, Inc.*^ | 251,516 | ||||||
522 | Cyberoptics Corp.*^ | 9,203 | ||||||
6,488 | Diodes, Inc.* | 209,303 | ||||||
3,285 | DSP Group, Inc.* | 36,792 | ||||||
4,414 | Entegris, Inc. | 123,129 | ||||||
346 | First Solar, Inc.*^ | 14,689 | ||||||
9,457 | FormFactor, Inc.* | 133,249 | ||||||
4,679 | GSI Technology, Inc.* | 24,050 | ||||||
1,254 | Ichor Holdings, Ltd.*^ | 20,440 | ||||||
1,201 | Inphi Corp.*^ | 38,612 | ||||||
11,059 | Integrated Device Technology, Inc.* | 535,586 | ||||||
1,349 | inTest Corp.* | 8,269 | ||||||
12,127 | Kopin Corp.*^ | 12,115 | ||||||
7,339 | Kulicke & Soffa Industries, Inc. | 148,762 | ||||||
12,204 | Lattice Semiconductor Corp.* | 84,452 | ||||||
1,636 | MagnaChip Semiconductor Corp.*^ | 10,160 | ||||||
4,333 | MaxLinear, Inc., Class A* | 76,261 | ||||||
3,511 | Nanometrics, Inc.*^ | 95,956 | ||||||
6,163 | Neophotonics Corp.* | 39,936 | ||||||
807 | NVE Corp.^ | 70,645 | ||||||
4,804 | PDF Solutions, Inc.*^ | 40,498 | ||||||
11,404 | Photronics, Inc.* | 110,391 | ||||||
2,109 | Pixelworks, Inc.* | 6,116 | ||||||
2,975 | Power Integrations, Inc. | 181,416 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
11,907 | Rambus, Inc.* | $ | 91,327 | |||||
5,028 | Rudolph Technologies, Inc.* | 102,923 | ||||||
2,943 | Semtech Corp.* | 134,995 | ||||||
1,179 | Silicon Laboratories, Inc.* | 92,917 | ||||||
2,469 | Synaptics, Inc.*^ | 91,871 | ||||||
5,213 | Ultra Clean Holdings, Inc.* | 44,154 | ||||||
6,109 | Veeco Instruments, Inc.*^ | 45,268 | ||||||
3,045 | Versum Materials, Inc. | 84,407 | ||||||
5,605 | Xperi Corp. | 103,076 | ||||||
|
| |||||||
4,376,096 | ||||||||
|
| |||||||
Software (1.7%): | ||||||||
12,450 | ACI Worldwide, Inc.* | 344,491 | ||||||
994 | Agilysys, Inc.* | 14,254 | ||||||
1,263 | Alarm.com Holding, Inc.*^ | 65,512 | ||||||
4,794 | American Software, Inc., Class A | 50,097 | ||||||
935 | Asure Software, Inc.* | 4,750 | ||||||
2,785 | Aware, Inc.* | 10,054 | ||||||
784 | Blackbaud, Inc.^ | 49,314 | ||||||
488 | Bottomline Technologies, Inc.* | 23,424 | ||||||
2,350 | BSQUARE Corp.* | 3,643 | ||||||
1,269 | Cision, Ltd.*^ | 14,847 | ||||||
311 | CommVault Systems, Inc.* | 18,377 | ||||||
3,842 | Ebix, Inc. | 163,516 | ||||||
1,594 | Ellie Mae, Inc.*^ | 100,151 | ||||||
1,210 | Envestnet, Inc.*^ | 59,520 | ||||||
2,049 | Evolving Systems, Inc.* | 2,428 | ||||||
5,614 | Finjan Holdings, Inc.* | 14,091 | ||||||
4,113 | GlobalSCAPE, Inc. | 18,426 | ||||||
1,013 | Globant SA* | 57,052 | ||||||
2,147 | j2 Global, Inc.^ | 148,959 | ||||||
784 | LogMeIn, Inc.^ | 63,951 | ||||||
2,560 | Manhattan Associates, Inc.*^ | 108,467 | ||||||
562 | MicroStrategy, Inc., Class A* | 71,796 | ||||||
997 | Mimecast, Ltd.* | 33,529 | ||||||
481 | Mindbody, Inc.*^ | 17,508 | ||||||
4,090 | Monotype Imaging Holdings, Inc. | 63,477 | ||||||
5,507 | OneSpan, Inc.* | 71,316 | ||||||
1,220 | Paylocity Holding Corp.* | 73,456 | ||||||
1,770 | Pegasystems, Inc. | 84,659 | ||||||
6,260 | Progress Software Corp. | 222,166 | ||||||
1,864 | QAD, Inc. | 73,311 | ||||||
1,490 | Qualys, Inc.* | 111,363 | ||||||
1,839 | Qumu Corp.* | 3,494 | ||||||
7,302 | RealNetworks, Inc.* | 16,868 | ||||||
2,886 | Rubicon Project, Inc.* | 10,765 | ||||||
6,367 | SeaChange International, Inc.* | 8,022 | ||||||
116 | SPS Commerce, Inc.* | 9,556 | ||||||
5,449 | Synacor, Inc.* | 8,065 | ||||||
1,833 | Synchronoss Technologies, Inc.*^ | 11,255 | ||||||
8,928 | Telaria, Inc.* | 24,373 | ||||||
7,906 | Telenav, Inc.* | 32,098 | ||||||
576 | The Trade Desk, Inc.*^ | 66,851 | ||||||
16,342 | TiVo Corp.^ | 153,778 | ||||||
3,726 | Verint Systems, Inc.* | 157,647 | ||||||
1,895 | Zix Corp.* | 10,858 | ||||||
|
| |||||||
2,671,535 | ||||||||
|
|
See accompanying notes to the financial statements.
17
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail (4.2%): | ||||||||
9,338 | Aaron’s, Inc. | $ | 392,664 | |||||
3,905 | Abercrombie & Fitch Co., Class A^ | 78,295 | ||||||
13,115 | American Eagle Outfitters, Inc. | 253,513 | ||||||
996 | America’s Car Mart, Inc.* | 72,160 | ||||||
2,646 | Asbury Automotive Group, Inc.* | 176,382 | ||||||
13,213 | Ascena Retail Group, Inc.* | 33,165 | ||||||
357 | At Home Group, Inc.* | 6,662 | ||||||
4,741 | AutoNation, Inc.* | 169,254 | ||||||
7,305 | Barnes & Noble Education, Inc.* | 29,293 | ||||||
11,581 | Barnes & Noble, Inc.^ | 82,109 | ||||||
7,174 | Bed Bath & Beyond, Inc.^ | 81,210 | ||||||
4,102 | Big 5 Sporting Goods Corp.^ | 10,624 | ||||||
3,574 | Boot Barn Holdings, Inc.*^ | 60,865 | ||||||
1,732 | Build-A-Bear Workshop, Inc.* | 6,841 | ||||||
5,586 | Caleres, Inc.^ | 155,458 | ||||||
3,499 | Cato Corp., Class A^ | 49,931 | ||||||
19,215 | Chico’s FAS, Inc.^ | 107,988 | ||||||
2,663 | Children’s Place Retail Stores, Inc. (The) | 239,910 | ||||||
2,175 | Citi Trends, Inc. | 44,348 | ||||||
3,476 | Conn’s, Inc.* | 65,557 | ||||||
2,917 | Destination Maternity Corp.* | 8,284 | ||||||
10,159 | Destination XL Group, Inc.* | 22,045 | ||||||
5,615 | Dick’s Sporting Goods, Inc.^ | 175,188 | ||||||
8,084 | DSW, Inc., Class A | 199,675 | ||||||
11,002 | Express, Inc.*^ | 56,220 | ||||||
2,291 | Five Below, Inc.* | 234,415 | ||||||
4,415 | Francesca’s Holdings Corp.*^ | 4,286 | ||||||
5,741 | GameStop Corp., Class A^ | 72,451 | ||||||
2,288 | Genesco, Inc.* | 101,358 | ||||||
693 | Group 1 Automotive, Inc.^ | 36,535 | ||||||
11,356 | Guess?, Inc. | 235,864 | ||||||
2,764 | Haverty Furniture Cos., Inc.^ | 51,908 | ||||||
2,944 | Hibbett Sports, Inc.*^ | 42,099 | ||||||
1,806 | Kirkland’s, Inc.*^ | 17,211 | ||||||
3,560 | Lithia Motors, Inc., Class A | 271,735 | ||||||
1,529 | Lumber Liquidators Holdings, Inc.*^ | 14,556 | ||||||
3,611 | MarineMax, Inc.*^ | 66,117 | ||||||
8,315 | Michaels Cos., Inc. (The)*^ | 112,585 | ||||||
4,597 | Monro Muffler Brake, Inc.^ | 316,045 | ||||||
4,397 | Murphy U.S.A., Inc.* | 336,987 | ||||||
565 | National Vision Holdings, Inc.* | 15,916 | ||||||
42,056 | Office Depot, Inc. | 108,504 | ||||||
5,416 | Party City Holdco, Inc.*^ | 54,052 | ||||||
5,392 | Penske Automotive Group, Inc.^ | 217,405 | ||||||
11,557 | Pier 1 Imports, Inc.^ | 3,534 | ||||||
1,537 | Rent-A-Center, Inc.* | 24,884 | ||||||
434 | Restoration Hardware, Inc.* | 52,002 | ||||||
11,726 | RTW Retailwinds, Inc.*^ | 33,185 | ||||||
7,968 | Sally Beauty Holdings, Inc.* | 135,854 | ||||||
4,149 | Signet Jewelers, Ltd. | 131,814 | ||||||
5,594 | Sleep Number Corp.*^ | 177,498 | ||||||
4,654 | Sonic Automotive, Inc., Class A^ | 64,039 | ||||||
2,363 | Sportsman’s Warehouse Holdings, Inc.* | 10,350 | ||||||
1,752 | Tailored Brands, Inc.^ | 23,897 | ||||||
289 | Tandy Leather Factory, Inc.* | 1,642 | ||||||
6,734 | The Buckle, Inc.^ | 130,236 | ||||||
6,893 | The Container Store Group, Inc.* | 32,880 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
7,392 | The Tile Shop Holdings, Inc.^ | $ | 40,508 | |||||
2,271 | Tilly’s, Inc. | 24,663 | ||||||
2,621 | Urban Outfitters, Inc.* | 87,017 | ||||||
4,282 | Vitamin Shoppe, Inc.* | 20,297 | ||||||
727 | Winmark Corp. | 115,593 | ||||||
3,700 | Zumiez, Inc.*^ | 70,929 | ||||||
|
| |||||||
6,068,492 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.3%): | ||||||||
3,723 | 3D Systems Corp.* | 37,863 | ||||||
1,308 | Astro-Med, Inc. | 24,525 | ||||||
7,288 | Avid Technology, Inc.*^ | 34,618 | ||||||
1,901 | CCUR Holdings, Inc.* | 6,292 | ||||||
1,813 | Cray, Inc.*^ | 39,143 | ||||||
4,887 | Diebold, Inc. | 12,169 | ||||||
4,412 | Electronics for Imaging, Inc.*^ | 109,418 | ||||||
2,226 | NCR Corp.*^ | 51,376 | ||||||
2,458 | Stratasys, Ltd.*^ | 44,269 | ||||||
5,858 | Super Micro Computer, Inc.* | 80,840 | ||||||
1,590 | TransAct Technologies, Inc. | 14,278 | ||||||
|
| |||||||
454,791 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.3%): | ||||||||
151 | Carter’s, Inc. | 12,325 | ||||||
8,448 | Crocs, Inc.* | 219,479 | ||||||
2,291 | Culp, Inc. | 43,300 | ||||||
4,229 | Deckers Outdoor Corp.* | 541,100 | ||||||
6,596 | G-III Apparel Group, Ltd.* | 183,962 | ||||||
816 | Lakeland Industries, Inc.* | 8,519 | ||||||
2,740 | Oxford Industries, Inc. | 194,650 | ||||||
1,515 | Rocky Brands, Inc. | 39,390 | ||||||
6,949 | Sequential Brands Group, Inc.* | 5,560 | ||||||
12,261 | Steven Madden, Ltd. | 371,018 | ||||||
957 | Unifi, Inc.* | 21,858 | ||||||
1,916 | Vera Bradley, Inc.* | 16,420 | ||||||
10,479 | Wolverine World Wide, Inc. | 334,175 | ||||||
|
| |||||||
1,991,756 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (2.6%): | ||||||||
8,516 | Axos Financial, Inc.*^ | 214,433 | ||||||
2,838 | BankFinancial Corp. | 42,428 | ||||||
8,886 | Beneficial Bancorp, Inc. | 126,981 | ||||||
1,659 | BSB Bancorp, Inc.* | 46,552 | ||||||
15,845 | Capitol Federal Financial, Inc. | 202,341 | ||||||
280 | Citizens Community Bancorp, Inc. | 3,052 | ||||||
4,896 | Dime Community Bancshares | 83,134 | ||||||
1,537 | ESSA Bancorp, Inc. | 23,993 | ||||||
3,103 | Essent Group, Ltd.* | 106,061 | ||||||
696 | Federal Agricultural Mortgage Corp. | 42,066 | ||||||
242 | First Capital, Inc. | 9,612 | ||||||
1,180 | First Defiance Financial Corp. | 28,922 | ||||||
6,849 | Flagstar Bancorp, Inc.* | 180,814 | ||||||
659 | FS Bancorp, Inc. | 28,258 | ||||||
195 | Guaranty Federal Bankshares, Inc. | 4,259 | ||||||
681 | Hamilton Bancorp, Inc.*^ | 9,466 | ||||||
301 | Hingham Institution for Savings | 59,520 | ||||||
629 | HMN Financial, Inc.* | 12,341 | ||||||
973 | Home Bancorp, Inc. | 34,444 | ||||||
43 | Home Federal Bancorp, Inc. | 1,267 |
See accompanying notes to the financial statements.
18
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Thrifts & Mortgage Finance, continued | ||||||||
3,414 | HomeStreet, Inc.* | $ | 72,479 | |||||
1,446 | HopFed Bancorp, Inc. | 19,217 | ||||||
869 | IF Bancorp, Inc. | 17,484 | ||||||
865 | Impac Mortgage Holdings, Inc.* | 3,270 | ||||||
8,131 | Kearny Financial Corp. | 104,239 | ||||||
390 | Kentucky First Federal Bancorp | 2,695 | ||||||
955 | LendingTree, Inc.*^ | 209,689 | ||||||
940 | Malvern Bancorp, Inc.* | 18,546 | ||||||
6,412 | Meridian Bancorp, Inc. | 91,820 | ||||||
3,591 | Meta Financial Group, Inc. | 69,629 | ||||||
3,964 | Mr Cooper Group, Inc.*^ | 46,260 | ||||||
676 | MSB Financial Corp. | 12,067 | ||||||
3,627 | NMI Holdings, Inc., Class A* | 64,742 | ||||||
6,978 | Northfield Bancorp, Inc. | 94,552 | ||||||
11,531 | Northwest Bancshares, Inc.^ | 195,335 | ||||||
5,723 | Oceanfirst Financial Corp.^ | 128,825 | ||||||
198 | Oconee Federal Financial Corp.^ | 4,930 | ||||||
16,927 | Ocwen Financial Corp.* | 22,682 | ||||||
6,648 | Oritani Financial Corp.^ | 98,058 | ||||||
600 | PCSB Financial Corp. | 11,736 | ||||||
4,022 | PennyMac Financial Services, Inc. | 85,508 | ||||||
1,677 | Provident Financial Holdings, Inc. | 25,994 | ||||||
2,873 | Provident Financial Services, Inc. | 69,325 | ||||||
1,685 | Prudential Bancorp, Inc. | 29,656 | ||||||
1,982 | Riverview Bancorp, Inc. | 14,429 | ||||||
2,881 | Security National Financial Corp., Class A* | 14,866 | ||||||
671 | Severn Bancorp, Inc. | 5,355 | ||||||
1,709 | SI Financial Group, Inc. | 21,756 | ||||||
707 | Southern Missouri Bancorp, Inc. | 23,967 | ||||||
1,815 | Territorial Bancorp, Inc. | 47,154 | ||||||
15,166 | TrustCo Bank Corp. | 104,039 | ||||||
7,757 | United Community Financial Corp. | 68,649 | ||||||
6,358 | United Financial Bancorp, Inc. | 93,463 | ||||||
9,516 | Washington Federal, Inc. | 254,171 | ||||||
4,703 | Waterstone Financial, Inc. | 78,822 | ||||||
4,268 | Wawlker & Dunlop, Inc. | 184,591 | ||||||
3,601 | Western New England BanCorp, Inc. | 36,154 | ||||||
4,073 | WSFS Financial Corp. | 154,407 | ||||||
35 | WVS Financial Corp. | 517 | ||||||
|
| |||||||
3,861,022 | ||||||||
|
| |||||||
Tobacco (0.2%): | ||||||||
1,419 | Pyxus International, Inc.*^ | 16,829 | ||||||
491 | Turning Point Brands, Inc. | 13,365 | ||||||
975 | Universal Corp. | 52,796 | ||||||
18,829 | Vector Group, Ltd. | 183,207 | ||||||
|
| |||||||
266,197 | ||||||||
|
| |||||||
Trading Companies & Distributors (1.5%): | ||||||||
311 | AeroCentury Corp.* | 2,976 | ||||||
1,597 | Air Lease Corp. | 48,245 | ||||||
3,318 | Aircastle, Ltd. | 57,202 | ||||||
5,198 | Applied Industrial Technologies, Inc. | 280,381 | ||||||
8,168 | Beacon Roofing Supply, Inc.* | 259,089 | ||||||
2,473 | BMC Stock Holdings, Inc.* | 38,282 | ||||||
2,824 | CAI International, Inc.* | 65,602 | ||||||
2,504 | DXP Enterprises, Inc.* | 69,711 | ||||||
1,463 | EVI Industries, Inc.^ | 48,791 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Trading Companies & Distributors, continued | ||||||||
1,904 | GATX Corp.^ | $ | 134,822 | |||||
1,239 | H&E Equipment Services, Inc. | 25,300 | ||||||
1,116 | Herc Holdings, Inc.* | 29,005 | ||||||
4,781 | Huttig Building Products, Inc.* | 8,606 | ||||||
4,012 | Kaman Corp., Class A^ | 225,033 | ||||||
373 | Lawson Products, Inc.* | 11,787 | ||||||
4,569 | MRC Global, Inc.* | 55,879 | ||||||
4,852 | NOW, Inc.*^ | 56,477 | ||||||
2,681 | Rush Enterprises, Inc., Class A | 92,441 | ||||||
2,017 | Systemax, Inc. | 48,186 | ||||||
7,847 | Textainer Group Holdings, Ltd.*^ | 78,156 | ||||||
2,765 | Titan Machinery, Inc.* | 36,360 | ||||||
577 | TransAct Technologies, Inc.* | 10,975 | ||||||
5,731 | Triton International, Ltd. | 178,062 | ||||||
2,679 | Univar, Inc.* | 47,525 | ||||||
2,676 | Veritiv Corp.*^ | 66,820 | ||||||
3,460 | WESCO International, Inc.* | 166,080 | ||||||
|
| |||||||
2,141,793 | ||||||||
|
| |||||||
Transportation Infrastructure (0.1%): | ||||||||
3,618 | Macquarie Infrastructure Corp.^ | 132,274 | ||||||
|
| |||||||
Water Utilities (0.8%): | ||||||||
4,757 | American States Water Co.^ | 318,909 | ||||||
1,221 | Artesian Resources Corp. | 42,576 | ||||||
7,681 | California Water Service Group | 366,077 | ||||||
1,558 | Connecticut Water Service, Inc. | 104,183 | ||||||
2,756 | Consolidated Water Co., Ltd. | 32,135 | ||||||
2,508 | Middlesex Water Co. | 133,802 | ||||||
669 | Pure Cycle Corp.* | 6,643 | ||||||
2,763 | SJW Corp. | 153,678 | ||||||
1,642 | York Water Co. (The) | 52,643 | ||||||
|
| |||||||
1,210,646 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.6%): | ||||||||
6,783 | Boingo Wireless, Inc.*^ | 139,526 | ||||||
7,479 | Shenandoah Telecommunications Co. | 330,947 | ||||||
2,722 | Spok Holdings, Inc. | 36,094 | ||||||
9,308 | Telephone & Data Systems, Inc. | 302,882 | ||||||
1,352 | United States Cellular Corp.* | 70,263 | ||||||
|
| |||||||
879,712 | ||||||||
|
| |||||||
Total Common Stocks (Cost $150,928,537) | 149,550,294 | |||||||
|
| |||||||
Preferred Stock (0.0%)†: | ||||||||
Media (0.0%)†: | ||||||||
430 | GCI Liberty, Inc., Class A, 7.00%, 4/15/19 | 10,419 | ||||||
|
| |||||||
Total Preferred Stock (Cost $3,517) | 10,419 | |||||||
|
| |||||||
Rights (0.0%)†: | ||||||||
Chemicals (0.0%)†: | ||||||||
4,314 | Schulman, Inc. CVR, Expires on 12/31/49* | 6,180 | ||||||
|
| |||||||
Diversified Financial Services (0.0%)†: | ||||||||
6,056 | NewStar Financial, Inc. CVR, Expires on 12/31/49* | 1,572 | ||||||
|
| |||||||
Media (0.0%)†: | ||||||||
21,894 | Media General, Inc. CVR, Expires on 12/31/49 | 2,189 | ||||||
|
| |||||||
Total Rights (Cost $10,055) | 9,941 | |||||||
|
|
See accompanying notes to the financial statements.
19
AZL DFA U.S. Small Cap Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Unaffiliated Investment Company (0.2%): | ||||||||
$ | 355,231 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(b) | $ | 355,231 | ||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $355,231) | 355,231 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (19.4%)(c) | ||||||||
Floating Rate Notes (11.0%) | ||||||||
442,000 | Australia & New Zealand Banking Group, 2.65%, 8/23/19 | 442,000 | ||||||
468,000 | Bank Of Nova Scotia, 2.77%, 5/17/19 | 468,000 | ||||||
367,000 | Bank Of Nova Scotia, 2.53%, 10/15/19 | 367,557 | ||||||
434,000 | Bedford Row Funding, 2.79%, 5/20/19 | 434,000 | ||||||
460,000 | Bedford Row Funding, 2.82%, 5/23/19 | 460,000 | ||||||
389,000 | BNP Paribas, 2.65%, 3/20/19 | 389,000 | ||||||
475,000 | BNP Paribas, 2.79%, 5/21/19 | 475,000 | ||||||
400,000 | Canadian Imperial Bank of Commerce, 2.59%, 1/11/19 | 400,000 | ||||||
400,000 | Canadian Imperial Bank of Commerce, 2.58%, 8/1/19 | 399,998 | ||||||
368,000 | Collateralized Commercial Paper Program Co. LLC, 2.74%, 4/26/19 | 368,000 | ||||||
418,000 | Commonwealth Bank Australia, 2.68%, 5/3/19 | 418,000 | ||||||
400,000 | Commonwealth Bank Australia, 2.53%, 7/19/19 | 400,000 | ||||||
489,000 | Credit Agricole CIB, 2.55%, 2/11/19 | 489,000 | ||||||
400,000 | Credit Industriel et Commercial, 2.66%, 1/14/19 | 400,000 | ||||||
468,000 | Credit Suisse AG, 2.57%, 10/1/19 | 468,000 | ||||||
400,000 | DBS Bank, Ltd., 2.62%, 3/21/19 | 400,000 | ||||||
400,000 | DNB Bank ASA, 2.66%, 1/31/19 | 400,000 | ||||||
676,000 | HSBC Bank USA NA, 2.71%, 2/1/19 | 676,000 | ||||||
478,000 | JPMorgan Securities LLC, 2.63%, 1/9/19 | 478,000 | ||||||
400,000 | Mitsubishi UFJ Trust and Banking Corp., 2.63%, 1/11/19 | 400,000 | ||||||
400,000 | Mitsubishi UFJ Trust and Banking Corp., 2.68%, 1/17/19 | 400,000 | ||||||
400,000 | Mizuho Bank, Ltd., 2.71%, 1/28/19 | 400,000 | ||||||
509,000 | Mizuho Bank, Ltd., 2.55%, 2/1/19 | 509,000 | ||||||
400,000 | National Australia Bank, 2.55%, 8/2/19 | 400,000 | ||||||
400,000 | National Bank of Canada, 2.60%, 1/7/19 | 400,000 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
$ | 400,000 | Natixis SA, 2.52%, 2/1/19 | $ | 400,000 | ||||
494,000 | Nordea Bank Abp, 2.61%, 2/8/19 | 494,000 | ||||||
383,000 | Nordea Bank Abp, 2.60%, 6/13/19 | 383,004 | ||||||
400,000 | Skandinaviska Enskilda Banken AB, 2.72%, 7/30/19 | 400,000 | ||||||
800,000 | Societe Generale SA, 2.70%, 1/28/19 | 800,000 | ||||||
400,000 | Svenska Handelsbanken AB, 2.57%, 1/11/19 | 400,000 | ||||||
418,000 | Svenska Handelsbanken AB, 2.63%, 2/12/19 | 418,189 | ||||||
506,000 | Swedbank AB, 2.72%, 1/22/19 | 506,000 | ||||||
488,000 | Toronto-Dominion Bank, 2.50%, 4/17/19 | 488,177 | ||||||
398,000 | Toronto-Dominion Bank, 2.94%, 6/7/19 | 398,000 | ||||||
400,000 | US Bank NA, 2.58%, 5/13/19 | 400,000 | ||||||
500,000 | Wells Fargo Bank NA, 2.61%, 1/7/19 | 500,000 | ||||||
|
| |||||||
16,428,925 | ||||||||
|
| |||||||
Repurchase Agreements (3.6%) | ||||||||
1,100,000 | Citigroup Global Markets Inc., 2.79%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $1,100,171, Collateralized by U.S. Treasury Obligations, 0.00% - 2.75%, 1/31/19 - 9/9/49, fair value of $1,122,001 | 1,100,000 | ||||||
4,315,828 | Mizuho Securities USA LLC, 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $4,316,535, Collateralized by U.S. Government Agency Obligations, 2.00% - 5.50%, 2/1/31 - 2/20/48, fair value of $4,402,145 | 4,315,828 | ||||||
|
| |||||||
5,415,828 | ||||||||
|
| |||||||
Miscellaneous Investments (4.8%) | ||||||||
7,235,660 | Short-Term Investments(d) | 7,235,660 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 29,080,413 | ||||||
|
| |||||||
Total Investment Securities (Cost $180,377,753) — 119.4%(e) | 179,006,298 | |||||||
Net other assets (liabilities) — (19.4)% | (29,133,384 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 149,872,914 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR— American Depositary Receipt
CVR—Contingency Valued Rights
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $28,478,237. |
† | Represents less than 0.05%. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.00% of the net assets of the fund. |
(b) | The rate represents the effective yield at December 31, 2018. |
(c) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
20
AZL DFA U.S. Small Cap Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 180,377,753 | |||
|
| ||||
Investment securities, at value(a) | $ | 179,006,298 | |||
Interest and dividends receivable | 149,363 | ||||
Reclaims receivable | 443 | ||||
Prepaid expenses | 2,149 | ||||
|
| ||||
Total Assets | 179,158,253 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 70,012 | ||||
Payable for collateral received on loaned securities | 29,080,413 | ||||
Manager fees payable | 92,314 | ||||
Administration fees payable | 3,691 | ||||
Distribution fees payable | 32,969 | ||||
Custodian fees payable | 673 | ||||
Administrative and compliance services fees payable | 540 | ||||
Transfer agent fees payable | 440 | ||||
Trustee fees payable | 207 | ||||
Other accrued liabilities | 4,080 | ||||
|
| ||||
Total Liabilities | 29,285,339 | ||||
|
| ||||
Net Assets | $ | 149,872,914 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 138,076,898 | |||
Total distributable earnings | 11,796,016 | ||||
|
| ||||
Net Assets | $ | 149,872,914 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 14,705,187 | ||||
Net Asset Value (offering and redemption price per share) | $ | 10.19 | |||
|
|
(a) | Includes securities on loan of $28,478,237. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 2,549,522 | |||
Income from securities lending | 210,342 | ||||
Foreign withholding tax | (1,242 | ) | |||
|
| ||||
Total Investment Income | 2,758,622 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 1,574,685 | ||||
Administration fees | 68,866 | ||||
Distribution fees | 463,141 | ||||
Custodian fees | 11,399 | ||||
Administrative and compliance services fees | 2,964 | ||||
Transfer agent fees | 5,178 | ||||
Trustee fees | 9,421 | ||||
Professional fees | 8,395 | ||||
Shareholder reports | 2,070 | ||||
Other expenses | 4,934 | ||||
|
| ||||
Total expenses before reductions | 2,151,053 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (277,886 | ) | |||
|
| ||||
Net expenses | 1,873,167 | ||||
|
| ||||
Net Investment Income/(Loss) | 885,455 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 12,151,134 | ||||
Change in net unrealized appreciation/depreciation on securities | (33,614,615 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (21,463,481 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (20,578,026 | ) | ||
|
|
See accompanying notes to the financial statements.
21
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 885,455 | $ | 1,086,364 | ||||||
Net realized gains/(losses) on investments | 12,151,134 | 9,375,020 | ||||||||
Change in unrealized appreciation/depreciation on investments | (33,614,615 | ) | 9,991,127 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (20,578,026 | ) | 20,452,511 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (10,343,723 | ) | (4,073,776 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (10,343,723 | ) | (4,073,776 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 2,337,294 | 3,794,880 | ||||||||
Proceeds from dividends reinvested | 10,343,723 | 4,073,776 | ||||||||
Value of shares redeemed | (30,305,676 | ) | (33,839,893 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (17,624,659 | ) | (25,971,237 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (48,546,408 | ) | (9,592,502 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 198,419,322 | 208,011,824 | ||||||||
|
|
|
| |||||||
End of period | $ | 149,872,914 | $ | 198,419,322 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 186,349 | 327,610 | ||||||||
Dividends reinvested | 869,951 | 348,186 | ||||||||
Shares redeemed | (2,349,735 | ) | (2,884,226 | ) | ||||||
|
|
|
| |||||||
Change in shares | (1,293,435 | ) | (2,208,430 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
22
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | April 27, 2015 to December 31, 2015(a) | |||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.40 | $ | 11.42 | $ | 9.20 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Investment Activities: | ||||||||||||||||||||
Net Investment Income/(Loss) | 0.07 | 0.07 | 0.07 | 0.03 | ||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.53 | ) | 1.16 | 2.21 | (0.83 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total from Investment Activities | (1.46 | ) | 1.23 | 2.28 | (0.80 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders From: | ||||||||||||||||||||
Net Investment Income | (0.07 | ) | (0.07 | ) | (0.04 | ) | — | |||||||||||||
Net Realized Gains | (0.68 | ) | (0.18 | ) | (0.02 | ) | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Dividends | (0.75 | ) | (0.25 | ) | (0.06 | ) | — | |||||||||||||
|
|
|
|
|
|
|
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Net Asset Value, End of Period | $ | 10.19 | $ | 12.40 | $ | 11.42 | $ | 9.20 | ||||||||||||
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Total Return(b) | (12.64 | )% | 10.87 | % | 24.90 | % | (8.00 | )%(c) | ||||||||||||
Ratios to Average Net Assets/Supplemental Data: | ||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 149,873 | $ | 198,419 | $ | 208,012 | $ | 208,531 | ||||||||||||
Net Investment Income/(Loss)(d) | 0.48 | % | 0.55 | % | 0.56 | % | 0.50 | % | ||||||||||||
Expenses Before Reductions(d)(e) | 1.16 | % | 1.16 | % | 1.14 | % | 1.18 | % | ||||||||||||
Expenses Net of Reductions(d) | 1.01 | % | 1.01 | % | 0.99 | % | 1.03 | % | ||||||||||||
Portfolio Turnover Rate | 9 | % | 9 | % | 9 | % | 10 | %(c) |
(a) | For the period April 27, 2015 (commencement of share class) to December 31, 2015. |
(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.
23
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL DFA U.S. Small Cap Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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.
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 Fund of Funds Trust.
24
AZL DFA U.S. Small Cap Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $20,520 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $28,904,722 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (1,109,970 | ) | ||
From net realized gains | (2,963,806 | ) | |||
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| ||||
Change in net assets resulting from distributions to shareholders | $ | (4,073,776 | ) | ||
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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 Dimensional Fund Advisors LP (“DFA”), DFA 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 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 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.
25
AZL DFA U.S. Small Cap Fund
Notes to the Financial Statements
December 31, 2018
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL DFA U.S. Small Cap Fund | 0.85 | % | 1.35 | % |
* | The Manager voluntarily reduced the management fee to 0.70% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $1,497 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
26
AZL DFA U.S. Small Cap Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 149,550,294 | $ | — | $ | — | # | $ | 149,550,294 | |||||||||||
Preferred Stock | 10,419 | — | — | 10,419 | ||||||||||||||||
Rights | — | 9,941 | — | 9,941 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 29,080,413 | — | 29,080,413 | ||||||||||||||||
Unaffiliated Investment Company | 355,231 | — | — | 355,231 | ||||||||||||||||
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| |||||||||||||
Total Investments | $ | 149,915,944 | $ | 29,090,354 | $ | — | $ | 179,006,298 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
# | Represents the interest in securities that were determined to have a value of zero at December 31, 2018. |
5. Security Purchases and Sales
For the year ended December 31, 2018, 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 U.S. Small Cap Fund | $ | 16,211,278 | $ | 42,938,190 |
6. Investment Risks
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.
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 December 31, 2018 is $180,205,718. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 28,686,417 | ||
Unrealized (depreciation) | (29,885,837 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | (1,199,420 | ) | |
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27
AZL DFA U.S. Small Cap Fund
Notes to the Financial Statements
December 31, 2018
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA U.S. Small Cap Fund | $ | 1,260,088 | $ | 9,083,635 | $ | 10,343,723 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL DFA U.S. Small Cap Fund | $ | 2,345,932 | $ | 1,727,844 | $ | 4,073,776 |
(a) | Total distributions paid may differ from the 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/ | Total Earnings/ | |||||||||||||||||||||
AZL DFA U.S. Small Cap Fund | $ | 1,380,982 | $ | 11,614,493 | $ | — | $ | (1,199,459 | ) | $ | 11,796,016 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales, return of capital from underlying investments and other miscellaneous differences. |
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 60% 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.
28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL DFA U.S. Small Cap Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL DFA U.S. Small Cap Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
29
Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 100.00% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $304,630.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $9,083,636.
30
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 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-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 calling800-SEC-0330.
31
Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions FOF Trust | Term of Office(2)/ Length | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) Minneapolis, MN 55416 | Chief Compliance Officer(4) andAnti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
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The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Enhanced Bond Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 29
Page 29
Statements of Changes in Net Assets
Page 30
Page 31
Notes to the Financial Statements
Page 32
Report of Independent Registered Public Accounting Firm
Page 40
Page 42
Approval of Investment Advisory and Subadvisory Agreements
Page 43
Information about the Board of Trustees and Officers
Page 46
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® Enhanced Bond Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL®Enhanced Bond Index Fund and BlackRock Financial Management, Inc. serves as Subadviser to the Fund.
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What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Enhanced Bond Index Fund (the “Fund”) had a total return of-0.58%. That compared to a 0.01% total return for its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index1.
The12-month period began with a theme of synchronized global growth, with unprecedented U.S. fiscal stimulus helping the U.S. take the lead from Europe and China in terms of driving global economic expansion. However early in 2018, geopolitical uncertainty weighed on market conditions and caused bouts of volatility starting in February and picking up in the second quarter, first in equities and then in the investment-grade and emerging market bond sectors. The pressure on these sectors was largely a result of trade protectionism by the U.S., as well as more isolated uncertainty surrounding Italy and Turkey. In the third quarter, yields rose as trade discussions progressed and the Federal Reserve’s Open Market Committee (FOMC) members adopted a more hawkish tone in their speeches. An increase in the supply of Treasuries also helped push yields higher.
The fourth quarter saw yields initially reach a seven-year high before tightening financial conditions and a shift in tone from the FOMC caused intermediate- and long-yields to fall.
While the Federal Reserve Board (the Fed) raised short-term rates four times during the year, Fed Chairman Jerome Powell’s comments in December indicated uncertainty about the timing and need for further rate increases in 2019. For its part, the European Central Bank left interest rates unchanged throughout the year and signaled the end of its quantitative easing program.
In relative terms, the Fund’s overweight exposure to credit, which includes corporate investment-grade bonds, dragged on returns. As credit spreads began to widen early in the period, the Fund added exposure to this asset class as prices fell. However, spreads moved wider than expected, particularly in the fourth quarter, which maintained pressure on the asset class and resulted in a drag on relative results. The Fund’s allocation to Treasury Inflation-Protected Securities and the security selection within agency mortgages also detracted from performance.*
The Fund’s relative performance benefited from its security selection within investment-grade credit, mainly in the industrial sector. The Fund’s allocation to ultra-short maturities also benefited on a relative basis. Duration positioning added to relative returns, particularly in December, as the Fund held a longer-than-benchmark duration position, which benefited as rates rallied during the end of the year. Security selection in emerging markets and commercial mortgage-backed securities also added to relative performance.*
The Fund held derivatives in the form of foreign currency forward contracts to hedge the portfolio’s currency exposure tonon-dollar bonds. The portfolio also held Treasury futures to manage duration and yield curve exposures. The derivative positions benefited the portfolio through the ability to more precisely manage duration and yield curve risk during a period where yields proved volatile.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
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AZL® Enhanced Bond Index Fund Review (Unaudited)
Fund Objective
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The Fund’s investment objective is to exceed the total return of the Bloomberg Barclays U.S. Aggregate Bond Index. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in investment-grade debt securities (those of medium and high quality) of all types and repurchase agreements for those securities. | ||||
Investment Concerns
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Bonds offer a relatively stable level of income, although bond prices will fluctuate, providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. | ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
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Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities. | ||||
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates. | ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Since | ||||||||||||||||
1 | 3 | 5 | Inception | |||||||||||||
Year | Year | Year | (7/10/09) | |||||||||||||
AZL®Enhanced Bond Index Fund | -0.58 | % | 1.56 | % | 2.04 | % | 2.65 | % | ||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 0.01 | % | 2.06 | % | 2.52 | % | 3.34 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®Enhanced Bond Index Fund | 0.65 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.70% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Bloomberg Barclays U.S. Aggregate Bond Index, which is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL Enhanced Bond Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 1,000.00 | $ | 1,012.80 | $ | 3.35 | 0.66 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 1,000.00 | $ | 1,021.88 | $ | 3.36 | 0.66 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
U.S. Government Agency Mortgages | 41.3 | % | |||
Corporate Bonds | 25.9 | ||||
U.S. Treasury Obligations | 21.4 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 8.9 | ||||
Yankee Dollars | 8.7 | ||||
Commercial Paper | 3.8 | ||||
Collateralized Mortgage Obligations | 3.7 | ||||
Asset Backed Securities | 3.4 | ||||
Money Markets | 1.2 | ||||
Municipal Bonds | 0.1 | ||||
|
| ||||
Total Investment Securities | 118.4 | ||||
Net other assets (liabilities) | (18.4 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Asset Backed Securities (3.4%): | ||||||||
$ | 6,930,000 | Aebor Realty Collateralized Loan, Class A,Series 2017-FL1, 3.76%(US0001M+130bps), 4/15/27, Callable 11/15/19 @ 100(a) | $ | 6,881,272 | ||||
2,446,712 | American Homes 4 Rent LLC, Class A, Series 2014-SFR3, 3.68%, 12/17/36(a) | 2,455,525 | ||||||
1,506,036 | AmeriCredit Automobile Receivables Trust, Class A3, Series2016-4, 1.53%, 7/8/21, Callable 1/8/21 @ 100 | 1,498,206 | ||||||
2,220,000 | Benchmark Mortgage Trust, Class A4,Series 2018-B7, 4.51%, 11/15/51 | 2,361,303 | ||||||
2,000,000 | Chase Issuance Trust, Class A5, Series2016-A5, 1.27%, 7/15/21 | 1,982,469 | ||||||
7,917,497 | Chesapeake Funding II LLC, Class A1,Series 2018-1A, 3.04%, 4/15/30, Callable 4/15/21 @ 100(a) | 7,911,995 | ||||||
2,210,000 | Citibank Credit Card Issuance Trust, Class A1, Series2014-A1, 2.88%, 1/23/23 | 2,208,801 | ||||||
1,409,000 | Citibank Credit Card Issuance Trust, Class A7, Series18-A7, 3.96%, 10/15/30, Callable 4/13/29 @ 100 | 1,478,603 | ||||||
4,730,000 | Credit Acceptance Auto Loan Trust, Class A, Series2018-3A, 3.55%, 8/15/27, Callable 10/15/21 @ 100(a) | 4,765,808 | ||||||
3,894,165 | JPMorgan Chase Commercial Mortgage Securities Corp., Class A4, Series2017-1, 3.50%, 1/25/47, Callable 1/25/41 @ 100(a)(b) | 3,854,334 | ||||||
3,400,000 | LoanCore Issuer, Ltd., Class A, Series 2018-CRE1, 3.59%(US0001M+113bps), 5/15/28, Callable 5/15/20 @ 100(a) | 3,356,347 | ||||||
461,000 | Navient Student Loan Trust, Class A2,Series 18-EA, 4.00%, 12/15/59, Callable 2/15/27 @ 100(a) | 471,100 | ||||||
367,060 | Navient Student Loan Trust, Class A,Series 2014-CTA, 3.16%(US0001M+70bps), 9/16/24, Callable 8/15/21 @ 100(a) | 367,725 | ||||||
1,192,388 | Navient Student Loan Trust, Class A2A,Series 2016-AA, 3.91%, 12/15/45, Callable 3/15/30 @ 100(a) | 1,212,018 | ||||||
364,472 | OneMain Financial Issuance Trust, Class A,Series 2015-1A, 3.19%, 3/18/26, Callable 1/18/19 @ 101(a) | 364,177 | ||||||
480,000 | PFS Financing Corp., Class A, Series2016-BA, 1.87%, 10/15/21(a) | 475,183 | ||||||
2,039,618 | Progress Residential Trust, Class A,Series 2015-SFR2, 2.74%, 6/12/32(a) | 2,013,756 | ||||||
425,684 | SMB Private Education Loan Trust, Class A2A, Series2015-B, 2.98%, 7/15/27, Callable 5/15/27 @ 100(a) | 424,863 | ||||||
2,250,000 | SMB Private Education Loan Trust, Class A2A, Series2017-A, 2.88%, 9/15/34(a) | 2,201,507 | ||||||
193,988 | SMB Private Education Loan Trust, Class A2A, Series2016-A, 2.70%, 5/15/31(a)(b) | 194,014 | ||||||
3,710,000 | SMB Private Education Loan Trust, Class A2A, Series2018-B, 3.60%, 1/15/37(a) | 3,756,681 | ||||||
1,500,000 | SMB Private Education Loan Trust, Class A2A, Series2017-B, 2.82%, 10/15/35(a) | 1,467,114 |
Principal Amount | Fair Value | |||||||
Asset Backed Securities, continued | ||||||||
$ | 900,000 | SMB Private Education Loan Trust, Class A2B, Series2017-B, 3.21%(US0001M+75bps), 10/15/35(a) | $ | 894,463 | ||||
1,963,845 | Social Professional Loan Program, Class A2, Series2015-D, 2.72%, 10/27/36, Callable 5/25/24 @ 100(a) | 1,931,206 | ||||||
668,370 | Social Professional Loan Program, Class A2, Series2015-C, 2.51%, 8/25/33, Callable 3/25/23 @ 100(a) | 658,781 | ||||||
5,850,000 | SoFi Professional Loan Program LLC, Class A2FX, Series2017-F, 2.84%, 1/25/41, Callable 11/25/26 @ 100(a) | 5,718,240 | ||||||
550,239 | Springleaf Funding Trust, Class A,Series 2015-AA, 3.16%, 11/15/24, Callable 1/15/19 @ 100(a) | 549,480 | ||||||
2,435,000 | Synchrony Credit Card Master Note Trust, Class A, Series2012-7, 1.76%, 9/15/22 | 2,413,748 | ||||||
435,000 | World Financial Network Credit Card Master Trust, Class A, Series2012-A, 3.14%, 1/17/23 | 434,954 | ||||||
2,000,000 | World Financial Network Credit Card Master Trust, Class A, Series2016-C, 1.72%, 8/15/23 | 1,978,320 | ||||||
|
| |||||||
Total Asset Backed Securities (Cost $66,649,734) | 66,281,993 | |||||||
|
| |||||||
Collateralized Mortgage Obligations (3.7%): | ||||||||
4,840,000 | BBCMS Mortgage Trust, Class A,Series 2018-TALL, 3.18%(US0001M+72bps), 3/15/37(a) | 4,754,815 | ||||||
1,847,000 | Caesars Palace Las Vegas Trust, Class A, Series 2017-VICI, 3.53%, 10/15/34(a) | 1,858,742 | ||||||
3,030,000 | Citigroup Commercial Mortgage Trust, Class A5, Series 2014-GC21, 3.86%, 5/10/47 | 3,094,936 | ||||||
3,360,000 | Cityline Commercial Mortgage Trust, Class A, Series 2016-CLNE, 2.78%, 11/10/31(a)(b) | 3,291,802 | ||||||
667,000 | Commercial Mortgage Loan Trust, Class A5, Series 2015-CR24, 3.70%, 8/10/48 | 674,507 | ||||||
1,279,058 | Commercial Mortgage Loan Trust, Class AM, Series2013-CR7, 3.31%, 3/10/46, Callable 4/6/23 @ 100(a) | 1,264,692 | ||||||
8,970,000 | Commercial Mortgage Loan Trust, Class A,Series 2014-TWC, 3.24%(US0001M+85bps), 2/13/32(a) | 8,943,130 | ||||||
3,720,000 | Cosmopolitan Hotel Trust, Class A,Series 2017-CSMO, 3.39%(US0001M+93bps), 11/15/36(a) | 3,674,666 | ||||||
1,102,420 | Credit Suisse Mortgage Trust, Class A, Series2016-MFF, 4.06%(US0001M+160bps), 11/15/33(a) | 1,105,158 | ||||||
2,760,000 | CSAIL Commercial Mortgage Trust, Class A5, Series 2018-CX11, 4.03%, 4/15/51(b) | 2,817,674 | ||||||
640,000 | GAHR Commercial Mortgage Trust, Class AFX, Series2015-NRF, 3.23%, 12/15/34(a) | 637,987 | ||||||
1,100,000 | GS Mortgage Securities Trust, Class A, Series 2012-SHOP, 2.93%, 6/5/31(a) | 1,097,751 | ||||||
1,185,000 | GS Mortgage Securities Trust, Class B, Series 2018-CHLL, 3.51%(US0001M+105bps), 2/15/37(a) | 1,182,488 | ||||||
1,525,000 | IMT Trust, Class BFX, Series 2017-APTS, 3.50%, 6/15/34(a)(b) | 1,507,102 |
See accompanying notes to the financial statements.
4
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Collateralized Mortgage Obligations, continued | ||||||||
$ | 1,650,000 | InTown Hotel Portfolio Trust, Class A, Series 2018-STAY, 3.16%(US0001M+70bps), 1/15/33(a) | $ | 1,636,438 | ||||
240,987 | JPMorgan Chase Commercial Mortgage Securities Corp., Class A, Series 2012-WLDN, 3.91%, 5/5/30(a) | 243,061 | ||||||
5,065,000 | JPMorgan Chase Commercial Mortgage Securities Corp., Class A4FX, Series2012-CBX, 3.48%, 6/15/45(a) | 5,076,481 | ||||||
2,841,713 | JPMorgan Mortgage Trust, Class A6, Series2017-2, 3.00%, 5/25/47, Callable 3/25/41 @ 100(a)(b) | 2,764,441 | ||||||
3,104,639 | JPMorgan Mortgage Trust, Class A6, Series2017-4, 3.00%, 11/25/48, Callable 11/25/41 @ 100(a)(b) | 3,066,171 | ||||||
1,108,602 | Latitude Management Real Estate Capital, Class A, Series 2016-CRE2, 4.20%(US0001M+170bps), 11/24/31(a) | 1,108,602 | ||||||
2,600,000 | Merrill Lynch Mortgage Trust, Class E, Series 2005-MKB2, 6.32%, 9/12/42(b) | 2,658,413 | ||||||
1,300,000 | Morgan Stanley Bank of America Merrill Lynch Trust, Class A3, Series2015-C24, 3.48%, 5/15/48 | 1,296,991 | ||||||
1,540,000 | Morgan Stanley Capital I Trust, Class A4, Series 2016-BNK2, 3.05%, 11/15/49 | 1,480,371 | ||||||
1,740,000 | Morgan Stanley Capital I Trust, Class A,Series 2014-MP, 3.47%, 8/11/33(a) | 1,760,628 | ||||||
4,373,296 | One Lincoln Street Commercial Mortgage, Class A1, Series2004-C3, 5.72%, 10/15/30(a)(b) | 4,769,900 | ||||||
1,673,778 | Seasoned Credit Risk Transfer Trust, Class MA, Series2018-2, 3.50%, 11/25/57, Callable 3/25/38 @ 100 | 1,678,005 | ||||||
125,000 | SG Commercial Mortgage Securities Trust, Class A4, Series2016-C5, 3.06%, 10/10/48 | 120,270 | ||||||
266,543 | SMB Private Education Loan Trust, Class A2A, Series2016-B, 2.43%, 2/17/32(a)(b) | 261,055 | ||||||
120,000 | Social Professional Loan Program, Class A2B, Series2016-D, 2.34%, 4/25/33, Callable 11/25/25 @ 100(a) | 117,870 | ||||||
415,479 | Tharaldson Hotel Portfolio Trust, Class A,Series 2018-THL, 3.13%(US0001M+75bps), 11/11/34(a) | 412,472 | ||||||
1,460,000 | �� | VNO Mortgage Trust, Class A, Series 2013-PENN, 3.81%, 12/13/29(a) | 1,473,388 | |||||
170,000 | Waldorf Astoria Boca Raton Trust, Class A, Series 2016-BOCA, 3.81%(US0001M+135bps), 6/15/29(a) | 169,668 | ||||||
1,250,000 | Wells Fargo Commercial Mortgage Trust, Class AS, Series 2015-NXS1, 3.41%, 5/15/48 | 1,240,300 | ||||||
975,000 | Wells Fargo Commercial Mortgage Trust, Class A4, Series2015-C28, 3.54%, 5/15/48 | 975,828 | ||||||
1,635,000 | Wells Fargo Commercial Mortgage Trust, Class A4, Series 2015-NXS4, 3.72%, 12/15/48 | 1,652,783 | ||||||
10,407,236 | Wells Fargo Commercial Mortgage Trust, Class XA, Series 2016-LC25, 1.02%, 12/15/59(b) | 553,504 | ||||||
940,000 | Wells Fargo Commercial Mortgage Trust, Class A4, Series2018-C46, 4.15%, 8/15/51 | 967,557 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations (Cost $73,075,756) | 71,389,647 | |||||||
|
|
Principal Amount | Fair Value | |||||||
Corporate Bonds (25.9%): | ||||||||
Aerospace & Defense (2.2%): | ||||||||
$ | 715,000 | BAE Systems Holdings, Inc., 3.80%, 10/7/24(a) | $ | 713,545 | ||||
385,000 | BAE Systems plc, 2.85%, 12/15/20, Callable 11/15/20 @ 100(a) | 379,930 | ||||||
95,000 | BAE Systems plc, 3.85%, 12/15/25, Callable 9/15/25 @ 100(a) | 94,186 | ||||||
145,000 | Boeing Co., 6.13%, 2/15/33 | 183,541 | ||||||
555,000 | General Dynamics Corp., 3.75%, 5/15/28, Callable 2/15/28 @ 100 | 560,048 | ||||||
135,000 | Harris Corp., 2.70%, 4/27/20, Callable 3/27/20 @ 100 | 133,850 | ||||||
1,000,000 | Harris Corp., 3.83%, 4/27/25, Callable 1/27/25 @ 100 | 980,892 | ||||||
1,545,000 | Harris Corp., 4.40%, 6/15/28, Callable 3/15/28 @ 100 | 1,538,001 | ||||||
370,000 | Harris Corp., 5.05%, 4/27/45, Callable 10/27/44 @ 100 | 380,609 | ||||||
1,565,000 | Huntington Ingalls Industries, Inc., 5.00%, 11/15/25, Callable 11/15/20 @ 102.5(a) | 1,589,962 | ||||||
2,995,000 | Huntington Ingalls Industries, Inc., 3.48%, 12/1/27, Callable 9/1/27 @ 100 | 2,789,633 | ||||||
290,000 | L3 Communications Holdings Corp., 3.95%, 5/28/24, Callable 2/28/24 @ 100 | 289,451 | ||||||
2,050,000 | L3 Technologies, Inc., 3.85%, 6/15/23, Callable 5/15/23 @ 100 | 2,053,186 | ||||||
1,685,000 | L3 Technologies, Inc., 3.85%, 12/15/26, Callable 9/15/26 @ 100 | 1,631,177 | ||||||
1,495,000 | L3 Technologies, Inc., 4.40%, 6/15/28, Callable 3/15/28 @ 100 | 1,494,667 | ||||||
3,503,000 | Lockheed Martin Corp., 2.90%, 3/1/25, Callable 12/1/24 @ 100 | 3,362,164 | ||||||
2,000 | Lockheed Martin Corp., 3.55%, 1/15/26, Callable 10/15/25 @ 100 | 1,985 | ||||||
319,000 | Lockheed Martin Corp., 4.50%, 5/15/36, Callable 11/15/35 @ 100 | 329,153 | ||||||
710,000 | Lockheed Martin Corp., 4.07%, 12/15/42 | 677,472 | ||||||
1,605,000 | Lockheed Martin Corp., 3.80%, 3/1/45, Callable 9/1/44 @ 100 | 1,462,402 | ||||||
785,000 | Lockheed Martin Corp., 4.70%, 5/15/46, Callable 11/15/45 @ 100 | 817,994 | ||||||
724,000 | Lockheed Martin Corp., 4.09%, 9/15/52, Callable 3/15/52 @ 100 | 675,790 | ||||||
1,810,000 | Northrop Grumman Corp., 3.25%, 8/1/23 | 1,781,268 | ||||||
4,602,000 | Northrop Grumman Corp., 2.93%, 1/15/25, Callable 11/15/24 @ 100 | 4,366,768 | ||||||
1,891,000 | Northrop Grumman Corp., 3.25%, 1/15/28, Callable 10/15/27 @ 100 | 1,764,305 | ||||||
1,730,000 | Northrop Grumman Corp., 4.03%, 10/15/47, Callable 4/15/47 @ 100 | 1,573,453 | ||||||
280,000 | Raytheon Co., 7.20%, 8/15/27 | 352,383 | ||||||
365,000 | Rockwell Collins, Inc., 3.10%, 11/15/21, Callable 8/15/21 @ 100 | 362,025 | ||||||
1,800,000 | Rockwell Collins, Inc., 2.80%, 3/15/22, Callable 2/15/22 @ 100 | 1,749,573 | ||||||
1,385,000 | Spirit AeroSystems, Inc., 3.95%, 6/15/23, Callable 5/15/23 @ 100 | 1,380,880 |
See accompanying notes to the financial statements.
5
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Aerospace & Defense, continued | ||||||||
$ | 5,805,000 | United Technologies Corp., 3.35%, 8/16/21 | $ | 5,789,292 | ||||
1,025,000 | United Technologies Corp., 1.95%, 11/1/21, Callable 10/1/21 @ 100^ | 983,950 | ||||||
500,000 | United Technologies Corp., 4.50%, 6/1/42 | 472,370 | ||||||
760,000 | United Technologies Corp., 3.75%, 11/1/46, Callable 5/1/46 @ 100 | 641,018 | ||||||
105,000 | United Technologies Corp., 4.63%, 11/16/48, Callable 5/16/48 @ 100 | 101,397 | ||||||
|
| |||||||
43,458,320 | ||||||||
|
| |||||||
Air Freight & Logistics (0.1%): | ||||||||
500,000 | FedEx Corp., 3.88%, 8/1/42 | 415,161 | ||||||
1,315,000 | FedEx Corp., 4.55%, 4/1/46, Callable 10/1/45 @ 100 | 1,195,166 | ||||||
615,000 | FedEx Corp., 4.40%, 1/15/47, Callable 7/15/46 @ 100 | 552,488 | ||||||
|
| |||||||
2,162,815 | ||||||||
|
| |||||||
Airlines (0.2%): | ||||||||
575,518 | American Airlines, Series A, 3.38%, 11/1/28 | 546,938 | ||||||
1,193,233 | American Airlines Pass Through Trust, Class B, Series2015-2, 4.40%, 3/22/25 | 1,170,203 | ||||||
31,769 | American Airlines Pass Through Trust, Class B, Series2016-1, 5.25%, 7/15/25 | 32,703 | ||||||
528,965 | American Airlines Pass Through Trust, Class AA, Series2015-2, 3.60%, 3/22/29 | 509,076 | ||||||
66,461 | American Airlines Passs Through Trust, Class B, Series2017-2, 3.70%, 4/15/27 | 64,284 | ||||||
459,457 | Continental Airlines, Class A, Series2012-A, 4.15%, 10/11/25 | 457,982 | ||||||
375,000 | Delta Air Lines, Inc., 3.63%, 3/15/22, Callable 2/15/22 @ 100 | 366,971 | ||||||
400,000 | Southwest Airlines Co., 2.75%, 11/16/22, Callable 10/16/22 @ 100 | 391,389 | ||||||
13,593 | United Airlines, Class B, Series2014-1, 4.75%, 10/11/23 | 13,627 | ||||||
23,929 | United Airlines, Class B, Series2016-1, 3.65%, 7/7/27 | 23,392 | ||||||
370,000 | United Airlines, Class B, Series2018-1, 4.60%, 9/1/27 | 370,155 | ||||||
21,675 | US Airways, Class B, Series2012-2, 6.75%, 12/3/22 | 22,648 | ||||||
69,165 | US Airways, Class B, Series2013-1, 5.38%, 5/15/23 | 71,277 | ||||||
|
| |||||||
4,040,645 | ||||||||
|
| |||||||
Auto Components (0.1%): | ||||||||
50,000 | Delphi Corp., 4.15%, 3/15/24, Callable 12/15/23 @ 100 | 50,050 | ||||||
164,000 | Lear Corp., 5.25%, 1/15/25, Callable 1/15/20 @ 102.63 | 168,469 | ||||||
1,216,000 | ZF North America Capital, Inc., 4.50%, 4/29/22(a) | 1,187,806 | ||||||
|
| |||||||
1,406,325 | ||||||||
|
| |||||||
Automobiles (0.7%): | ||||||||
2,575,000 | Daimler Finance North America LLC, 2.70%, 8/3/20(a) | 2,542,329 | ||||||
1,205,000 | Daimler Finance North America LLC, 3.75%, 11/5/21(a) | 1,209,108 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Automobiles, continued | ||||||||
$ | 1,590,000 | Ford Motor Co., 7.45%, 7/16/31 | $ | 1,639,328 | ||||
160,000 | Ford Motor Co., 4.75%, 1/15/43 | 123,390 | ||||||
690,000 | General Motors Co., 6.25%, 10/2/43 | 646,767 | ||||||
1,025,000 | General Motors Co., 6.75%, 4/1/46, Callable 10/1/45 @ 100 | 992,307 | ||||||
540,000 | General Motors Co., 5.40%, 4/1/48, Callable 10/1/47 @ 100^ | 459,890 | ||||||
1,400,000 | Nissan Motor Acceptance Corp., 3.15%, 3/15/21(a) | 1,380,204 | ||||||
1,390,000 | Volkswagen Group of America Finance LLC, 2.40%, 5/22/20(a) | 1,368,390 | ||||||
1,805,000 | Volkswagen Group of America Finance LLC, 3.88%, 11/13/20(a) | 1,813,806 | ||||||
625,000 | Volkswagen Group of America Finance LLC, 4.00%, 11/12/21(a) | 624,612 | ||||||
|
| |||||||
12,800,131 | ||||||||
|
| |||||||
Banks (3.3%): | ||||||||
2,230,000 | Bank of America Corp., Series G, 2.63%, 4/19/21^ | 2,199,670 | ||||||
7,430,000 | Bank of America Corp., Series G, 2.37%(US0003M+66bps), 7/21/21, Callable 7/21/20 @ 100 | 7,297,037 | ||||||
185,000 | Bank of America Corp., 4.13%, 1/22/24, MTN | 187,521 | ||||||
5,560,000 | Bank of America Corp., 3.55%(US0003M+78bps), 3/5/24, Callable 3/5/23 @ 100 | 5,492,758 | ||||||
1,095,000 | Bank of America Corp., 4.00%, 4/1/24 | 1,101,069 | ||||||
625,000 | Bank of America Corp., 3.86%(US0003M+94bps), 7/23/24, Callable 7/23/23 @ 100 | 623,511 | ||||||
4,010,000 | Bank of America Corp., 4.20%, 8/26/24 | 3,977,118 | ||||||
1,015,000 | Bank of America Corp., 4.00%, 1/22/25, MTN | 988,758 | ||||||
1,810,000 | Bank of America Corp., Series G, 3.50%, 4/19/26 | 1,741,829 | ||||||
1,040,000 | Bank of America Corp., 3.82%(US0003M+158bps), 1/20/28, Callable 1/20/27 @ 100, MTN | 1,008,905 | ||||||
380,000 | Bank of America Corp., 4.24%(US0003M+181bps), 4/24/38, Callable 4/24/37 @ 100 | 361,492 | ||||||
920,000 | Citigroup, Inc., 2.45%, 1/10/20, Callable 12/10/19 @ 100 | 912,612 | ||||||
830,000 | Citigroup, Inc., 2.40%, 2/18/20^ | 822,463 | ||||||
1,030,000 | Citigroup, Inc., 2.65%, 10/26/20 | 1,016,307 | ||||||
920,000 | Citigroup, Inc., 2.88%(US0003M+95bps), 7/24/23, Callable 7/24/22 @ 100 | 890,310 | ||||||
1,545,000 | Citigroup, Inc., 4.40%, 6/10/25 | 1,512,005 | ||||||
225,000 | Citigroup, Inc., 3.20%, 10/21/26, Callable 7/21/26 @ 100 | 207,717 | ||||||
965,000 | Citizens Bank NA, 2.20%, 5/26/20, Callable 4/26/20 @ 100 | 951,173 | ||||||
250,000 | Citizens Bank NA, 2.55%, 5/13/21, Callable 4/13/21 @ 100 | 244,520 | ||||||
40,000 | Citizens Financial Group, Inc., 2.38%, 7/28/21, Callable 6/28/21 @ 100^ | 39,007 | ||||||
1,042,000 | Fifth Third Bank, Series B, 3.85%, 3/15/26, Callable 2/15/26 @ 100 | 1,026,349 | ||||||
850,000 | HSBC USA, Inc., 2.35%, 3/5/20 | 841,418 | ||||||
435,000 | HSBC USA, Inc., 5.00%, 9/27/20 | 444,226 | ||||||
470,000 | Huntington National Bank (The), 2.40%, 4/1/20, Callable 3/1/20 @ 100 | 465,002 | ||||||
20,000 | JPMorgan Chase & Co., 2.75%, 6/23/20, Callable 5/23/20 @ 100 | 19,885 |
See accompanying notes to the financial statements.
6
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Banks, continued | ||||||||
$ | 1,720,000 | JPMorgan Chase & Co., 2.30%, 8/15/21, Callable 8/15/20 @ 100 | $ | 1,678,106 | ||||
125,000 | JPMorgan Chase & Co., 4.50%, 1/24/22 | 128,798 | ||||||
7,934,000 | JPMorgan Chase & Co., 2.78%(US0003M+94bps), 4/25/23, Callable 4/25/22 @ 100^ | 7,693,173 | ||||||
445,000 | JPMorgan Chase & Co., 3.38%, 5/1/23 | 435,269 | ||||||
3,325,000 | JPMorgan Chase & Co., 3.56%(US0003M+73bps), 4/23/24, Callable 4/23/23 @ 100 | 3,299,853 | ||||||
3,796,000 | JPMorgan Chase & Co., 3.78%(US0003M+134bps), 2/1/28, Callable 2/1/27 @ 100 | 3,684,852 | ||||||
470,000 | JPMorgan Chase & Co., 3.54%(US0003M+138bps), 5/1/28, Callable 5/1/27 @ 100 | 448,092 | ||||||
2,320,000 | JPMorgan Chase & Co., 3.51%(US0003M+95bps), 1/23/29, Callable 1/23/28 @ 100 | 2,196,817 | ||||||
470,000 | JPMorgan Chase & Co., 4.20%(US0003M+126bps), 7/23/29, Callable 7/23/28 @ 100 | 468,571 | ||||||
250,000 | KeyBank NA, Series B, 3.35%, 6/15/21 | 250,780 | ||||||
500,000 | KeyBank NA, Series B, 2.40%, 6/9/22 | 484,217 | ||||||
200,000 | KeyCorp, 2.90%, 9/15/20 | 198,490 | ||||||
345,000 | KeyCorp, 4.15%, 10/29/25 | 350,434 | ||||||
245,000 | SunTrust Banks, Inc., 4.00%, 5/1/25, Callable 3/1/25 @ 100 | 245,787 | ||||||
440,000 | Synovus Financial Corp., 3.13%, 11/1/22, Callable 10/1/22 @ 100 | 415,246 | ||||||
128,000 | Wachovia Corp., 5.50%, 8/1/35 | 137,790 | ||||||
514,000 | Wells Fargo & Co., Series G, 2.60%, 7/22/20 | 509,018 | ||||||
2,200,000 | Wells Fargo & Co., 2.63%, 7/22/22, MTN | 2,121,374 | ||||||
320,000 | Wells Fargo & Co., 3.30%, 9/9/24, MTN | 309,549 | ||||||
250,000 | Wells Fargo & Co., 3.00%, 4/22/26 | 232,960 | ||||||
1,257,000 | Wells Fargo & Co., 3.00%, 10/23/26^ | 1,163,636 | ||||||
655,000 | Wells Fargo & Co., Series G, 4.30%, 7/22/27 | 644,301 | ||||||
4,290,000 | Wells Fargo Bank NA, 2.60%, 1/15/21 | 4,236,715 | ||||||
330,000 | Zions Bancorp NA, 3.50%, 8/27/21 | 328,977 | ||||||
|
| |||||||
66,035,467 | ||||||||
|
| |||||||
Beverages (0.6%): | ||||||||
2,285,000 | Anheuser-Busch Cos. LLC, 4.70%, 2/1/36, Callable 8/1/35 @ 100(a) | 2,119,104 | ||||||
1,625,000 | Anheuser-Busch Cos. LLC, 4.90%, 2/1/46, Callable 8/1/45 @ 100(a) | 1,507,001 | ||||||
3,029,000 | Anheuser-Busch InBev Finance, Inc., 2.63%, 1/17/23 | 2,882,955 | ||||||
520,000 | Anheuser-Busch InBev Worldwide, Inc., 2.50%, 7/15/22 | 496,491 | ||||||
685,000 | Anheuser-Busch InBev Worldwide, Inc., 4.75%, 4/15/58, Callable 10/15/57 @ 100 | 596,107 | ||||||
210,000 | Constellation Brands, Inc., 3.21%(US0003M+70bps), 11/15/21, Callable 10/30/19 @ 100 | 207,485 | ||||||
720,000 | Constellation Brands, Inc., 3.60%, 2/15/28, Callable 11/15/27 @ 100 | 663,074 | ||||||
150,000 | Dr Pepper Snapple Group, Inc., 4.42%, 12/15/46, Callable 6/15/46 @ 100 | 132,398 | ||||||
260,000 | Maple Escrow Subsidiary, Inc., 3.55%, 5/25/21(a) | 259,606 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Beverages, continued | ||||||||
$ | 650,000 | Maple Escrow Subsidiary, Inc., 4.06%, 5/25/23, Callable 4/25/23 @ 100(a) | $ | 647,750 | ||||
675,000 | Molson Coors Brewing Co., 2.25%, 3/15/20, Callable 2/15/20 @ 100^ | 665,802 | ||||||
930,000 | PepsiCo, Inc., 2.38%, 10/6/26, Callable 7/6/26 @ 100 | 853,785 | ||||||
200,000 | PepsiCo, Inc., 3.45%, 10/6/46, Callable 4/6/46 @ 100 | 177,504 | ||||||
415,000 | PepsiCo, Inc., 4.00%, 5/2/47, Callable 11/2/46 @ 100^ | 405,700 | ||||||
|
| |||||||
11,614,762 | ||||||||
|
| |||||||
Biotechnology (0.6%): | ||||||||
1,130,000 | AbbVie, Inc., 3.38%, 11/14/21 | 1,128,937 | ||||||
2,250,000 | AbbVie, Inc., 3.60%, 5/14/25, Callable 2/14/25 @ 100 | 2,158,165 | ||||||
265,000 | AbbVie, Inc., 4.70%, 5/14/45, Callable 11/14/44 @ 100 | 240,994 | ||||||
540,000 | AbbVie, Inc., 4.45%, 5/14/46, Callable 11/14/45 @ 100 | 472,359 | ||||||
100,000 | AbbVie, Inc., 4.88%, 11/14/48, Callable 5/14/48 @ 100 | 93,300 | ||||||
500,000 | Amgen, Inc., 1.85%, 8/19/21, Callable 7/19/21 @ 100^ | 482,122 | ||||||
640,000 | Amgen, Inc., 2.60%, 8/19/26, Callable 5/19/26 @ 100 | 581,568 | ||||||
350,000 | Amgen, Inc., 4.40%, 5/1/45, Callable 11/1/44 @ 100 | 327,316 | ||||||
254,000 | Amgen, Inc., 4.56%, 6/15/48, Callable 12/15/47 @ 100 | 243,246 | ||||||
304,000 | Amgen, Inc., 4.66%, 6/15/51, Callable 12/15/50 @ 100 | 286,425 | ||||||
605,000 | Baxalta, Inc., 4.00%, 6/23/25, Callable 3/23/25 @ 100 | 591,485 | ||||||
90,000 | Celgene Corp., 3.95%, 10/15/20 | 90,968 | ||||||
420,000 | Celgene Corp., 3.25%, 8/15/22 | 412,349 | ||||||
410,000 | Celgene Corp., 3.55%, 8/15/22 | 405,497 | ||||||
380,000 | Celgene Corp., 3.25%, 2/20/23, Callable 1/20/23 @ 100 | 371,052 | ||||||
512,000 | Celgene Corp., 3.88%, 8/15/25, Callable 5/15/25 @ 100 | 492,883 | ||||||
220,000 | Celgene Corp., 3.90%, 2/20/28, Callable 11/20/27 @ 100 | 206,355 | ||||||
50,000 | Gilead Sciences, Inc., 2.50%, 9/1/23, Callable 7/1/23 @ 100^ | 48,235 | ||||||
800,000 | Gilead Sciences, Inc., 3.65%, 3/1/26, Callable 12/1/25 @ 100 | 784,161 | ||||||
230,000 | Gilead Sciences, Inc., 4.80%, 4/1/44, Callable 10/1/43 @ 100 | 230,682 | ||||||
610,000 | Gilead Sciences, Inc., 4.75%, 3/1/46, Callable 9/1/45 @ 100 | 605,176 | ||||||
880,000 | Gilead Sciences, Inc., 4.15%, 3/1/47, Callable 9/1/46 @ 100 | 810,604 | ||||||
|
| |||||||
11,063,879 | ||||||||
|
| |||||||
Capital Markets (1.7%): | ||||||||
1,710,000 | Ares Capital Corp., 4.25%, 3/1/25, Callable 1/1/25 @ 100 | 1,628,112 |
See accompanying notes to the financial statements.
7
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Capital Markets, continued | ||||||||
$ | 1,475,000 | Bank of New York Mellon Corp. (The), 2.05%, 5/3/21, Callable 4/3/21 @ 100, MTN | $ | 1,439,636 | ||||
260,000 | Bank of New York Mellon Corp. (The), 2.95%, 1/29/23, Callable 12/29/22 @ 100 | 255,908 | ||||||
185,000 | Bank of New York Mellon Corp. (The), 3.00%, 10/30/28, Callable 7/30/28 @ 100 | 169,912 | ||||||
335,000 | Bank of New York Mellon Corp. (The), 3.30%, 8/23/29, Callable 5/23/29 @ 100, MTN | 313,385 | ||||||
950,000 | Bank of New York Mellon Corp. (The), 4.62%(US0003M+313bps), 12/29/49, Callable 9/20/26 @ 100 | 851,438 | ||||||
1,435,000 | Chalres Schwab Corp., Series E, 4.62%(US0003M+332bps), 12/29/49, Callable 3/1/22 @ 100^ | 1,313,025 | ||||||
305,000 | CME Group, Inc., 3.75%, 6/15/28, Callable 3/15/28 @ 100^ | 309,093 | ||||||
1,815,000 | Goldman Sachs Group, Inc., 4.00%, 3/3/24 | 1,790,994 | ||||||
425,000 | Goldman Sachs Group, Inc., 3.79%(US0003M+117bps), 5/15/26, Callable 5/15/25 @ 100 | 407,904 | ||||||
1,320,000 | Goldman Sachs Group, Inc., 3.69%(US0003M+151bps), 6/5/28, Callable 6/5/27 @ 100 | 1,226,769 | ||||||
2,140,000 | Goldman Sachs Group, Inc., 4.22%(US0003M+130bps), 5/1/29, Callable 5/1/28 @ 100 | 2,059,511 | ||||||
355,000 | Goldman Sachs Group, Inc. (The), 3.31%(US0003M+78bps), 10/31/22, Callable 10/31/21 @ 100 | 345,905 | ||||||
415,000 | Goldman Sachs Group, Inc. (The), 3.75%, 2/25/26, Callable 11/25/25 @ 100 | 392,443 | ||||||
455,000 | Goldman Sachs Group, Inc. (The), 3.50%, 11/16/26, Callable 11/16/25 @ 100 | 420,261 | ||||||
106,000 | Goldman Sachs Group, Inc. (The), 5.95%, 1/15/27^ | 111,618 | ||||||
930,000 | Goldman Sachs Group, Inc. (The), 3.85%, 1/26/27, Callable 1/26/26 @ 100 | 874,802 | ||||||
45,000 | Goldman Sachs Group, Inc. (The), 4.80%, 7/8/44, Callable 1/8/44 @ 100 | 42,855 | ||||||
320,000 | Intercontinental Exchange, Inc., 3.45%, 9/21/23, Callable 8/21/23 @ 100 | 321,037 | ||||||
760,000 | Intercontinental Exchange, Inc., 4.00%, 10/15/23 | 777,456 | ||||||
125,000 | Intercontinental Exchange, Inc., 3.75%, 9/21/28, Callable 6/21/28 @ 100 | 124,437 | ||||||
760,000 | Intercontinental Exchange, Inc., 4.25%, 9/21/48, Callable 3/21/48 @ 100 | 744,811 | ||||||
425,000 | Moody’s Corp., 4.25%, 2/1/29, Callable 11/1/28 @ 100 | 432,857 | ||||||
1,555,000 | Morgan Stanley, 3.75%, 2/25/23 | 1,552,259 | ||||||
3,450,000 | Morgan Stanley, Series G, 3.88%, 1/27/26 | 3,365,031 | ||||||
2,880,000 | Morgan Stanley, 3.13%, 7/27/26, MTN | 2,662,947 | ||||||
3,750,000 | Morgan Stanley, 3.63%, 1/20/27 | 3,563,993 | ||||||
2,205,000 | Morgan Stanley, 3.77%(US0003M+114bps), 1/24/29, Callable 1/24/28 @ 100^ | 2,109,688 | ||||||
760,000 | Morgan Stanley, 4.38%, 1/22/47 | 719,294 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Capital Markets, continued | ||||||||
$ | 320,000 | S&P Global, Inc., 4.00%, 6/15/25, Callable 3/15/25 @ 100 | $ | 325,838 | ||||
741,000 | State Street Corp., Series F, 5.25%(US0003M+360bps), 12/31/49, Callable 9/15/20 @ 100^ | 727,106 | ||||||
1,510,000 | State Street Corp., Series H, 5.63%(US0003M+254bps), 12/31/99, Callable 12/15/23 @ 100^ | 1,426,950 | ||||||
|
| |||||||
32,807,275 | ||||||||
|
| |||||||
Chemicals (0.3%): | ||||||||
560,000 | Dow Chemical Co. (The), 4.55%, 11/30/25, Callable 9/30/25 @ 100(a) | 569,699 | ||||||
49,000 | Dow Chemical Co. (The), 4.38%, 11/15/42, Callable 5/15/42 @ 100 | 43,000 | ||||||
2,860,000 | DowDuPont, Inc., 4.49%, 11/15/25, Callable 9/15/25 @ 100 | 2,944,586 | ||||||
1,560,000 | DowDuPont, Inc., 5.42%, 11/15/48, Callable 5/15/48 @ 100 | 1,620,751 | ||||||
130,000 | Eastman Chemical Co., 2.70%, 1/15/20, Callable 12/15/19 @ 100 | 129,042 | ||||||
220,000 | Eastman Chemical Co., 4.65%, 10/15/44, Callable 4/15/44 @ 100 | 196,707 | ||||||
1,000,000 | Ecolab, Inc., 2.70%, 11/1/26, Callable 8/1/26 @ 100 | 933,052 | ||||||
45,000 | LyondellBasell Idustries NV, 4.88%, 3/15/44, Callable 9/15/43 @ 100 | 40,865 | ||||||
220,000 | RPM International, Inc., 3.75%, 3/15/27, Callable 12/15/26 @ 100 | 208,892 | ||||||
|
| |||||||
6,686,594 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.1%): | ||||||||
90,000 | Republic Services, Inc., 4.75%, 5/15/23, Callable 2/15/23 @ 100 | 94,206 | ||||||
535,000 | Republic Services, Inc., 3.20%, 3/15/25, Callable 12/15/24 @ 100 | 519,091 | ||||||
45,000 | Republic Services, Inc., 2.90%, 7/1/26, Callable 4/1/26 @ 100^ | 42,445 | ||||||
35,000 | Republic Services, Inc., 3.38%, 11/15/27, Callable 8/15/27 @ 100 | 33,528 | ||||||
1,310,000 | Republic Services, Inc., 3.95%, 5/15/28, Callable 2/15/28 @ 100 | 1,310,847 | ||||||
|
| |||||||
2,000,117 | ||||||||
|
| |||||||
Communications Equipment (0.0%)†: | ||||||||
35,000 | Cisco Systems, Inc., 2.20%, 9/20/23, Callable 7/20/23 @ 100^ | 33,517 | ||||||
50,000 | Juniper Networks, Inc., 4.35%, 6/15/25, Callable 3/15/25 @ 100 | 49,875 | ||||||
400,000 | Motorola Solutions, Inc., 3.50%, 9/1/21 | 396,816 | ||||||
224,000 | Motorola Solutions, Inc., 4.00%, 9/1/24 | 217,984 | ||||||
|
| |||||||
698,192 | ||||||||
|
| |||||||
Consumer Finance (1.2%): | ||||||||
320,000 | American Express Co., 3.40%, 2/27/23, Callable 1/27/23 @ 100 | 317,022 | ||||||
595,000 | American Express Co., 3.70%, 8/3/23, Callable 7/3/23 @ 100 | 596,721 |
See accompanying notes to the financial statements.
8
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Consumer Finance, continued | ||||||||
$ | 335,000 | Capital One Financial Corp., 3.75%, 7/28/26, Callable 6/28/26 @ 100^ | $ | 306,840 | ||||
250,000 | Discover Bank, 3.35%, 2/6/23, Callable 1/6/23 @ 100 | 243,340 | ||||||
370,000 | Discover Bank, 3.45%, 7/27/26, Callable 4/27/26 @ 100 | 339,289 | ||||||
270,000 | Ford Motor Credit Co. LLC, 3.16%, 8/4/20 | 264,581 | ||||||
705,000 | Ford Motor Credit Co. LLC, 3.20%, 1/15/21 | 683,677 | ||||||
203,000 | Ford Motor Credit Co. LLC, 3.34%, 3/18/21 | 196,973 | ||||||
1,380,000 | Ford Motor Credit Co. LLC, 3.81%, 10/12/21 | 1,340,248 | ||||||
1,550,000 | Ford Motor Credit Co. LLC, 3.10%, 5/4/23 | 1,401,169 | ||||||
435,000 | Ford Motor Credit Co. LLC, 3.66%, 9/8/24^ | 389,060 | ||||||
810,000 | Ford Motor Credit Co. LLC, 4.39%, 1/8/26^ | 730,220 | ||||||
2,269,000 | General Motors Financial Co., Inc., 3.20%, 7/13/20, Callable 6/13/20 @ 100 | 2,240,832 | ||||||
1,740,000 | General Motors Financial Co., Inc., 2.45%, 11/6/20 | 1,690,014 | ||||||
755,000 | General Motors Financial Co., Inc., 4.38%, 9/25/21 | 756,461 | ||||||
635,000 | General Motors Financial Co., Inc., 3.45%, 4/10/22, Callable 2/10/22 @ 100 | 614,084 | ||||||
1,752,000 | General Motors Financial Co., Inc., 3.95%, 4/13/24, Callable 2/13/24 @ 100 | 1,663,892 | ||||||
95,000 | Hyundai Capital America, 2.50%, 3/18/19(a) | 94,842 | ||||||
2,060,000 | Hyundai Capital America, 1.75%, 9/27/19(a) | 2,033,062 | ||||||
945,000 | Hyundai Capital America, 2.55%, 4/3/20(a) | 932,978 | ||||||
588,000 | Hyundai Capital America, 3.00%, 10/30/20(a) | 581,376 | ||||||
225,000 | John Deere Capital Corp., 2.65%, 1/6/22, MTN^ | 220,697 | ||||||
865,000 | Synchrony Bank, Series B, 3.65%, 5/24/21, Callable 4/24/21 @ 100 | 846,356 | ||||||
1,690,000 | Synchrony Financial, 3.00%, 8/15/19, Callable 7/15/19 @ 100 | 1,678,845 | ||||||
2,250,000 | Synchrony Financial, 2.70%, 2/3/20, Callable 1/3/20 @ 100 | 2,211,779 | ||||||
220,000 | Toyota Motor Credit Corp., Series G, 3.45%, 9/20/23, MTN | 220,367 | ||||||
|
| |||||||
22,594,725 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
715,000 | International Paper Co., 4.35%, 8/15/48, Callable 2/15/48 @ 100 | 611,735 | ||||||
685,000 | WestRock RKT Co., 4.90%, 3/1/22 | 704,986 | ||||||
|
| |||||||
1,316,721 | ||||||||
|
| |||||||
Diversified Consumer Services (0.1%): | ||||||||
145,000 | California Institute of Technology, 4.32%, 8/1/45 | 153,424 | ||||||
360,000 | Massachusetts Institute of Technology, 4.68%, 7/1/14 | 395,082 | ||||||
114,000 | Pres & Fellows of Harvar, 3.15%, 7/15/46, Callable 1/15/46 @ 100 | 101,695 | ||||||
575,000 | Pres & Fellows of Harvar, 3.30%, 7/15/56, Callable 1/15/56 @ 100 | 508,654 | ||||||
|
| |||||||
1,158,855 | ||||||||
|
| |||||||
Diversified Financial Services (0.1%): | ||||||||
1,220,000 | AXA Equitable Holdings, Inc., 3.90%, 4/20/23, Callable 3/20/23 @ 100(a) | 1,204,882 | ||||||
135,000 | Berkshire Hathaway, Inc., 2.75%, 3/15/23, Callable 1/15/23 @ 100 | 132,526 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Diversified Financial Services, continued | ||||||||
$ | 95,000 | Berkshire Hathaway, Inc., 3.13%, 3/15/26, Callable 12/15/25 @ 100 | $ | 92,078 | ||||
320,000 | BP Capital Markets America, Inc., 3.12%, 5/4/26, Callable 2/4/26 @ 100 | 300,906 | ||||||
1,000,000 | PPL Capital Funding, Inc., 3.40%, 6/1/23, Callable 3/1/23 @ 100 | 989,362 | ||||||
|
| |||||||
2,719,754 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.0%): | ||||||||
1,000,000 | AT&T, Inc., 2.80%, 2/17/21, Callable 1/17/21 @ 100 | 987,510 | ||||||
1,000,000 | AT&T, Inc., 3.88%, 11/27/22(a)(c) | 866,762 | ||||||
150,000 | AT&T, Inc., 4.45%, 4/1/24, Callable 1/1/24 @ 100 | 152,489 | ||||||
185,000 | AT&T, Inc., 3.95%, 1/15/25, Callable 10/15/24 @ 100 | 180,903 | ||||||
3,886,000 | AT&T, Inc., 4.30%, 2/15/30, Callable 11/15/29 @ 100 | 3,672,214 | ||||||
170,000 | AT&T, Inc., 4.50%, 5/15/35, Callable 11/15/34 @ 100 | 152,626 | ||||||
122,000 | AT&T, Inc., 4.90%, 8/15/37, Callable 2/14/37 @ 100 | 113,752 | ||||||
2,465,000 | AT&T, Inc., 4.35%, 6/15/45, Callable 12/15/44 @ 100 | 2,083,091 | ||||||
1,010,000 | AT&T, Inc., 4.75%, 5/15/46, Callable 11/15/45 @ 100 | 896,773 | ||||||
3,744,000 | Verizon Communications, Inc., 4.33%, 9/21/28 | 3,759,387 | ||||||
3,225,000 | Verizon Communications, Inc., 4.50%, 8/10/33 | 3,183,351 | ||||||
510,000 | Verizon Communications, Inc., 4.40%, 11/1/34, Callable 5/1/34 @ 100 | 491,534 | ||||||
880,000 | Verizon Communications, Inc., 4.27%, 1/15/36 | 821,808 | ||||||
222,000 | Verizon Communications, Inc., 4.86%, 8/21/46 | 218,175 | ||||||
1,350,000 | Verizon Communications, Inc., 5.50%, 3/16/47^ | 1,435,611 | ||||||
|
| |||||||
19,015,986 | ||||||||
|
| |||||||
Electric Utilities (1.7%): | ||||||||
430,000 | AEP Texas, Inc., 2.40%, 10/1/22, Callable 9/1/22 @ 100^ | 416,991 | ||||||
290,000 | AEP Texas, Inc., 3.95%, 6/1/28, Callable 3/1/28 @ 100^(a) | 290,432 | ||||||
750,000 | AEP Transmission Co. LLC, 4.25%, 9/15/48, Callable 3/15/48 @ 100 | 755,703 | ||||||
168,000 | Alabama Power Co., Series2011-C, 5.20%, 6/1/41 | 181,426 | ||||||
320,000 | Alabama Power Co., 3.85%, 12/1/42 | 297,907 | ||||||
640,000 | Alabama Power Co., 4.15%, 8/15/44, Callable 2/15/44 @ 100 | 626,137 | ||||||
480,000 | Alabama Power Co., Series A, 4.30%, 7/15/48, Callable 1/15/48 @ 100 | 480,774 | ||||||
680,000 | Alliant Energy Finance, 3.75%, 6/15/23, Callable 5/15/23 @ 100(a) | 684,195 | ||||||
500,000 | Baltimore Gas & Electric, 2.80%, 8/15/22, Callable 5/15/22 @ 100 | 490,077 | ||||||
500,000 | Baltimore Gas & Electric, 2.40%, 8/15/26, Callable 5/15/26 @ 100^ | 457,432 | ||||||
900,000 | Baltimore Gas & Electric Co., 3.75%, 8/15/47, Callable 2/15/47 @ 100^ | 825,284 | ||||||
110,000 | Baltimore Gas & Electric Co., 4.25%, 9/15/48, Callable 3/15/48 @ 100 | 109,236 |
See accompanying notes to the financial statements.
9
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Electric Utilities, continued | ||||||||
$ | 704,000 | DTE Electric Co., 3.65%, 3/15/24, Callable 12/15/23 @ 100 | $ | 718,602 | ||||
600,000 | DTE Electric Co., 3.75%, 8/15/47, Callable 2/15/47 @ 100 | 558,135 | ||||||
1,000,000 | Duke Energy Carolinas LLC, 4.25%, 12/15/41, Callable 6/15/41 @ 100 | 1,002,570 | ||||||
555,000 | Duke Energy Carolinas LLC, 3.75%, 6/1/45, Callable 12/1/44 @ 100 | 511,475 | ||||||
465,000 | Duke Energy Carolinas LLC, 3.95%, 3/15/48, Callable 9/15/47 @ 100 | 443,701 | ||||||
1,500,000 | Duke Energy Corp., 1.80%, 9/1/21, Callable 8/1/21 @ 100 | 1,435,732 | ||||||
220,000 | Duke Energy Corp., 3.05%, 8/15/22, Callable 5/15/22 @ 100 | 215,596 | ||||||
1,640,000 | Duke Energy Corp., 3.95%, 10/15/23, Callable 7/15/23 @ 100 | 1,654,798 | ||||||
1,500,000 | Duke Energy Corp., 2.65%, 9/1/26, Callable 6/1/26 @ 100 | 1,363,703 | ||||||
140,000 | Duke Energy Corp., 3.75%, 9/1/46, Callable 3/1/46 @ 100 | 121,038 | ||||||
470,000 | Duke Energy Florida LLC, 4.20%, 7/15/48, Callable 1/15/48 @ 100 | 467,971 | ||||||
255,000 | Duke Energy Progress LLC, 3.00%, 9/15/21, Callable 6/15/21 @ 100 | 255,364 | ||||||
220,000 | Duke Energy Progress LLC, 5.70%, 4/1/35 | 248,307 | ||||||
430,000 | Duke Energy Progress LLC, 4.10%, 3/15/43, Callable 9/15/42 @ 100 | 416,650 | ||||||
670,000 | Duke Energy Progress LLC, 4.20%, 8/15/45, Callable 2/15/45 @ 100 | 664,830 | ||||||
45,000 | Emera US Finance LP, 2.15%, 6/15/19 | 44,632 | ||||||
220,000 | Entergy Louisiana LLC, 5.40%, 11/1/24 | 241,829 | ||||||
850,000 | Entergy Louisiana LLC, 4.00%, 3/15/33, Callable 12/15/32 @ 100 | 859,820 | ||||||
65,000 | Entergy Louisiana LLC, 4.20%, 9/1/48, Callable 3/1/48 @ 100 | 64,153 | ||||||
490,000 | Entergy Texas, Inc., 3.45%, 12/1/27, Callable 9/1/27 @ 100 | 469,577 | ||||||
440,000 | Eversource Energy, Series L, 2.90%, 10/1/24, Callable 8/1/24 @ 100 | 421,680 | ||||||
135,000 | Exelon Corp., 2.85%, 6/15/20, Callable 5/15/20 @ 100 | 133,930 | ||||||
15,000 | Exelon Corp., 2.45%, 4/15/21, Callable 3/15/21 @ 100 | 14,671 | ||||||
92,000 | Exelon Corp., 4.95%, 6/15/35, Callable 12/15/34 @ 100 | 92,635 | ||||||
163,000 | Exelon Corp., 5.63%, 6/15/35 | 175,836 | ||||||
450,000 | Florida Power & Light Co., 3.13%, 12/1/25, Callable 6/1/25 @ 100 | 445,841 | ||||||
110,000 | Florida Power & Light Co., 5.69%, 3/1/40 | 133,868 | ||||||
460,000 | Florida Power & Light Co., 4.05%, 6/1/42, Callable 12/1/41 @ 100 | 458,537 | ||||||
170,000 | Florida Power & Light Co., 3.80%, 12/15/42, Callable 6/15/42 @ 100 | 161,775 | ||||||
340,000 | Florida Power & Light Co., 3.70%, 12/1/47, Callable 6/1/47 @ 100 | 317,935 | ||||||
155,000 | Florida Power & Light Co., 3.95%, 3/1/48, Callable 9/1/47 @ 100 | 151,380 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Electric Utilities, continued | ||||||||
$ | 120,000 | Florida Power & Light Co., 4.13%, 6/1/48, Callable 12/1/47 @ 100 | $ | 120,307 | ||||
568,000 | Georgia Power Co., 2.00%, 3/30/20 | 558,728 | ||||||
750,000 | Georgia Power Co., 3.25%, 3/30/27, Callable 12/30/26 @ 100 | 701,650 | ||||||
120,000 | Indiana Michigan Power Co., 4.25%, 8/15/48, Callable 2/15/48 @ 100 | 117,945 | ||||||
290,000 | Mid-Atlantic Interstate Transmission LLC, 4.10%, 5/15/28(a) | 287,934 | ||||||
365,000 | NextEra Energy Capital Holdings, Inc., 3.55%, 5/1/27, Callable 2/1/27 @ 100 | 348,300 | ||||||
110,000 | Northern States Power Co., 3.40%, 8/15/42, Callable 2/15/42 @ 100^ | 99,135 | ||||||
320,000 | Northern States Power Co., 3.60%, 5/15/46, Callable 11/15/45 @ 100 | 295,479 | ||||||
660,000 | Northern States Power Co., 3.60%, 9/15/47, Callable 3/15/47 @ 100 | 604,160 | ||||||
135,000 | Northern States Power Co., 4.20%, 9/1/48, Callable 3/1/48 @ 100 | 132,780 | ||||||
275,000 | Ohio Power Co., Series G, 6.60%, 2/15/33 | 343,321 | ||||||
120,000 | Ohio Power Co., 4.15%, 4/1/48, Callable 10/1/47 @ 100 | 118,415 | ||||||
170,000 | Oncor Electric Delivery Co., LLC, 3.80%, 9/30/47, Callable 3/30/47 @ 100 | 160,763 | ||||||
350,000 | Pacific Gas & Electric Co., 6.05%, 3/1/34 | 324,295 | ||||||
350,000 | PacifiCorp, 4.13%, 1/15/49, Callable 7/15/48 @ 100 | 344,430 | ||||||
325,000 | PacifiCorp., 5.75%, 4/1/37 | 387,977 | ||||||
660,000 | PECO Energy Co., 3.90%, 3/1/48, Callable 9/1/47 @ 100 | 630,613 | ||||||
480,000 | Public Service Electric & Gas Co., 3.65%, 9/1/28, Callable 6/1/28 @ 100 | 485,989 | ||||||
490,000 | Southwestern Electric Power Co., Series M, 4.10%, 9/15/28, Callable 6/15/28 @ 100 | 491,735 | ||||||
600,000 | Southwestern Public Service Co., 3.30%, 6/15/24, Callable 12/15/23 @ 100 | 597,908 | ||||||
560,000 | Tampa Electric Co., 2.60%, 9/15/22, Callable 6/15/22 @ 100 | 542,895 | ||||||
395,000 | Tampa Electric Co., 4.30%, 6/15/48, Callable 12/15/47 @ 100 | 377,451 | ||||||
510,000 | Virginia Electric & Power Co., 3.45%, 9/1/22, Callable 6/1/22 @ 100 | 511,883 | ||||||
235,000 | Virginia Electric & Power Co., Series C, 2.75%, 3/15/23, Callable 12/15/22 @ 100 | 229,136 | ||||||
1,075,000 | Virginia Electric & Power Co., Series A, 3.15%, 1/15/26, Callable 10/15/25 @ 100 | 1,038,142 | ||||||
215,000 | Virginia Electric & Power Co., Series B, 2.95%, 11/15/26, Callable 8/15/26 @ 100 | 204,109 | ||||||
730,000 | Virginia Electric & Power Co., Series A, 3.80%, 4/1/28, Callable 1/1/28 @ 100 | 733,073 | ||||||
25,000 | Virginia Electric & Power Co., 6.35%, 11/30/37 | 30,758 | ||||||
2,110,000 | Virginia Electric & Power Co., 4.00%, 1/15/43, Callable 7/15/42 @ 100 | 1,992,731 | ||||||
255,000 | Virginia Electric & Power Co., Series C, 4.00%, 11/15/46, Callable 5/15/46 @ 100^ | 241,193 | ||||||
|
| |||||||
32,935,400 | ||||||||
|
|
See accompanying notes to the financial statements.
10
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Electrical Equipment (0.0%)†: | ||||||||
$ | 645,000 | Eaton Corp., 2.75%, 11/2/22 | $ | 627,323 | ||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.1%): | ||||||||
40,000 | Avnet, Inc., 4.63%, 4/15/26, Callable 1/15/26 @ 100 | 39,081 | ||||||
1,505,000 | Corning, Inc., 4.38%, 11/15/57, Callable 5/15/57 @ 100 | 1,263,147 | ||||||
435,000 | Trimble, Inc., 4.15%, 6/15/23, Callable 5/15/23 @ 100 | 437,302 | ||||||
|
| |||||||
1,739,530 | ||||||||
|
| |||||||
Energy Equipment & Services (0.1%): | ||||||||
75,000 | Halliburton Co., 3.80%, 11/15/25, Callable 8/15/25 @ 100 | 72,674 | ||||||
790,000 | Patterson-UTI Energy, Inc., 3.95%, 2/1/28, Callable 11/1/27 @ 100^ | 724,426 | ||||||
610,000 | Schlumberger Holdings Corp., 4.00%, 12/21/25, Callable 9/21/25 @ 100(a) | 602,095 | ||||||
|
| |||||||
1,399,195 | ||||||||
|
| |||||||
Entertainment (0.2%): | ||||||||
1,844,000 | Activision Blizzard, Inc., 2.30%, 9/15/21, Callable 8/15/21 @ 100 | 1,795,859 | ||||||
1,260,000 | Activision Blizzard, Inc., 3.40%, 9/15/26, Callable 6/15/26 @ 100 | 1,183,492 | ||||||
1,555,000 | Activision Blizzard, Inc., 3.40%, 6/15/27, Callable 3/15/27 @ 100 | 1,465,079 | ||||||
|
| |||||||
4,444,430 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.3%): | ||||||||
25,000 | Crown Castle International Corp., 3.40%, 2/15/21, Callable 1/15/21 @ 100 | 24,991 | ||||||
175,000 | Crown Castle International Corp., 2.25%, 9/1/21, Callable 8/1/21 @ 100 | 169,194 | ||||||
2,000,000 | Crown Castle International Corp., 5.25%, 1/15/23 | 2,076,848 | ||||||
535,000 | Crown Castle International Corp., 3.70%, 6/15/26, Callable 3/15/26 @ 100 | 514,270 | ||||||
240,000 | Crown Castle International Corp., 4.75%, 5/15/47, Callable 11/15/46 @ 100 | 222,466 | ||||||
2,305,000 | GLP Capital LP, 4.88%, 11/1/20, Callable 8/1/20 @ 100 | 2,324,592 | ||||||
410,000 | Realty Income Corp., 3.00%, 1/15/27, Callable 10/15/26 @ 100 | 381,196 | ||||||
|
| |||||||
5,713,557 | ||||||||
|
| |||||||
Food & Staples Retailing (0.2%): | ||||||||
970,000 | Sysco Corp., 3.55%, 3/15/25, Callable 1/15/25 @ 100^ | 955,207 | ||||||
255,000 | Walgreen Co., 4.40%, 9/15/42 | 223,548 | ||||||
245,000 | Walgreens Boots Alliance, Inc., 3.80%, 11/18/24, Callable 8/18/24 @ 100 | 241,274 | ||||||
952,000 | Walgreens Boots Alliance, Inc., 3.45%, 6/1/26, Callable 3/1/26 @ 100 | 895,725 | ||||||
935,000 | Walgreens Boots Alliance, Inc., 4.80%, 11/18/44, Callable 5/18/44 @ 100 | 851,293 | ||||||
295,000 | Wal-Mart Stores, Inc., 3.55%, 6/26/25, Callable 4/26/25 @ 100^ | 298,253 | ||||||
305,000 | Wal-Mart Stores, Inc., 4.00%, 4/11/43, Callable 10/11/42 @ 100 | 303,416 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Food & Staples Retailing, continued | ||||||||
$ | 189,000 | Wal-Mart Stores, Inc., 4.30%, 4/22/44, Callable 10/22/43 @ 100 | $ | 190,739 | ||||
140,000 | Wal-Mart Stores, Inc., 4.05%, 6/29/48, Callable 12/29/47 @ 100 | 139,303 | ||||||
|
| |||||||
4,098,758 | ||||||||
|
| |||||||
Food Products (0.2%): | ||||||||
230,000 | Conagra Brands, Inc., 3.80%, 10/22/21 | 230,081 | ||||||
855,000 | General Mills, Inc., 4.00%, 4/17/25, Callable 2/17/25 @ 100 | 841,444 | ||||||
470,000 | Kraft Heinz Foods Co., 3.00%, 6/1/26, Callable 3/1/26 @ 100 | 419,279 | ||||||
105,000 | Tyson Foods, Inc., 3.90%, 9/28/23, Callable 8/23/23 @ 100^ | 104,854 | ||||||
1,011,000 | Tyson Foods, Inc., 3.55%, 6/2/27, Callable 3/2/27 @ 100^ | 942,195 | ||||||
320,000 | Tyson Foods, Inc., 4.55%, 6/2/47, Callable 12/2/46 @ 100 | 280,393 | ||||||
110,000 | Tyson Foods, Inc., 5.10%, 9/28/48, Callable 3/23/48 @ 100 | 105,556 | ||||||
|
| |||||||
2,923,802 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.3%): | ||||||||
935,000 | Abbott Laboratories, 3.40%, 11/30/23, Callable 9/30/23 @ 100 | 932,148 | ||||||
1,195,000 | Abbott Laboratories, 2.95%, 3/15/25, Callable 12/15/24 @ 100^ | 1,149,551 | ||||||
35,000 | Abbott Laboratories, 3.88%, 9/15/25, Callable 6/15/25 @ 100 | 35,441 | ||||||
154,000 | Abbott Laboratories, 3.75%, 11/30/26, Callable 8/30/26 @ 100 | 152,090 | ||||||
166,000 | Abbott Laboratories, 4.75%, 4/15/43, Callable 10/15/42 @ 100 | 172,144 | ||||||
1,070,000 | Baxter International, Inc., 1.70%, 8/15/21, Callable 7/15/21 @ 100 | 1,026,558 | ||||||
109,000 | Becton Dickinson & Co., 2.68%, 12/15/19 | 107,964 | ||||||
84,000 | Becton Dickinson and Co., 3.73%, 12/15/24, Callable 9/15/24 @ 100 | 81,144 | ||||||
395,000 | Edwards Lifesciences Corp., 4.30%, 6/15/28, Callable 3/15/28 @ 100 | 399,359 | ||||||
830,000 | Medtronic, Inc., 3.50%, 3/15/25 | 826,721 | ||||||
1,360,000 | Medtronic, Inc., 4.38%, 3/15/35 | 1,392,421 | ||||||
|
| |||||||
6,275,541 | ||||||||
|
| |||||||
Health Care Providers & Services (1.0%): | ||||||||
55,000 | Aetna, Inc., 2.75%, 11/15/22, Callable 8/15/22 @ 100 | 52,765 | ||||||
380,000 | Aetna, Inc., 4.13%, 11/15/42, Callable 5/15/42 @ 100 | 328,961 | ||||||
110,000 | Aetna, Inc., 3.88%, 8/15/47, Callable 2/15/47 @ 100 | 93,130 | ||||||
715,000 | Anthem, Inc., 2.95%, 12/1/22, Callable 11/1/22 @ 100 | 697,295 | ||||||
10,000 | Anthem, Inc., 3.65%, 12/1/27, Callable 9/1/27 @ 100 | 9,554 | ||||||
255,000 | Anthem, Inc., 4.38%, 12/1/47, Callable 6/1/47 @ 100 | 237,161 |
See accompanying notes to the financial statements.
11
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Health Care Providers & Services, continued | ||||||||
$ | 1,065,000 | Cigna Corp., 3.25%, 4/15/25, Callable 1/15/25 @ 100 | $ | 1,012,126 | ||||
230,000 | Cigna Corp., 3.05%, 10/15/27, Callable 7/15/27 @ 100 | 210,389 | ||||||
705,000 | CVS Health Corp., 3.35%, 3/9/21 | 702,987 | ||||||
2,805,000 | CVS Health Corp., 3.70%, 3/9/23, Callable 2/9/23 @ 100 | 2,774,973 | ||||||
3,270,000 | CVS Health Corp., 4.30%, 3/25/28, Callable 12/25/27 @ 100 | 3,196,782 | ||||||
520,000 | CVS Health Corp., 5.13%, 7/20/45, Callable 1/20/45 @ 100 | 506,173 | ||||||
695,000 | CVS Health Corp., 5.05%, 3/25/48, Callable 9/25/47 @ 100 | 675,964 | ||||||
4,025,000 | Halfmoon Parent, Inc., 3.20%, 9/17/20(a) | 4,008,457 | ||||||
735,000 | Halfmoon Parent, Inc., 3.75%, 7/15/23, Callable 6/15/23 @ 100(a) | 732,552 | ||||||
650,000 | UnitedHealth Group, Inc., 3.70%, 12/15/25 | 656,486 | ||||||
1,000,000 | UnitedHealth Group, Inc., 3.10%, 3/15/26 | 965,084 | ||||||
1,320,000 | UnitedHealth Group, Inc., 4.75%, 7/15/45^ | 1,396,561 | ||||||
220,000 | WellPoint, Inc., 3.50%, 8/15/24, Callable 5/15/24 @ 100 | 215,792 | ||||||
|
| |||||||
18,473,192 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.2%): | ||||||||
10,000 | McDonald’s Corp., 2.75%, 12/9/20, Callable 11/9/20 @ 100 | 9,931 | ||||||
545,000 | McDonald’s Corp., 3.70%, 1/30/26, Callable 10/30/25 @ 100, MTN | 534,258 | ||||||
50,000 | McDonald’s Corp., 4.70%, 12/9/35, Callable 6/9/35 @ 100 | 50,220 | ||||||
310,000 | McDonald’s Corp., 3.70%, 2/15/42, MTN | 267,979 | ||||||
120,000 | McDonald’s Corp., 4.60%, 5/26/45, Callable 11/26/44 @ 100 | 116,728 | ||||||
780,000 | McDonald’s Corp., 4.88%, 12/9/45, Callable 6/9/45 @ 100, MTN | 785,183 | ||||||
1,460,000 | McDonald’s Corp., 4.45%, 3/1/47, Callable 9/1/46 @ 100, MTN | 1,395,908 | ||||||
160,000 | McDonald’s Corp., 4.45%, 9/1/48, Callable 3/1/48 @ 100, MTN^ | 152,205 | ||||||
315,000 | Starbucks Corp., 3.80%, 8/15/25, Callable 6/15/25 @ 100 | 311,509 | ||||||
215,000 | Starbucks Corp., 3.75%, 12/1/47, Callable 6/1/47 @ 100^ | 178,039 | ||||||
120,000 | Starbucks Corp., 4.50%, 11/15/48, Callable 5/15/48 @ 100 | 111,705 | ||||||
|
| |||||||
3,913,665 | ||||||||
|
| |||||||
Household Products (0.0%)†: | ||||||||
330,000 | Clorox Co. (The), 3.90%, 5/15/28, Callable 2/15/28 @ 100 | 331,480 | ||||||
|
| |||||||
Industrial Conglomerates (0.1%): | ||||||||
565,000 | General Electric Capital Corp., Series A, 5.55%, 5/4/20, MTN | 574,683 | ||||||
164,000 | Georgia-Pacific LLC, 5.40%, 11/1/20(a) | 169,933 | ||||||
505,000 | Georgia-Pacific LLC, 3.73%, 7/15/23, Callable 4/15/23 @ 100(a) | 509,806 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Industrial Conglomerates, continued | ||||||||
$ | 309,000 | Georgia-Pacific LLC, 3.60%, 3/1/25, Callable 12/1/24 @ 100^(a) | $ | 308,275 | ||||
|
| |||||||
1,562,697 | ||||||||
|
| |||||||
Insurance (0.5%): | ||||||||
325,000 | ACE INA Holdings, Inc., 3.35%, 5/15/24 | 322,916 | ||||||
410,000 | ACE INA Holdings, Inc., 4.15%, 3/13/43^ | 406,670 | ||||||
700,000 | American International Group, Inc., 5.75%(US0003M+287bps), 4/1/48, Callable 4/1/28 @ 100 | 609,000 | ||||||
810,000 | American International Group, Inc., 4.38%, 1/15/55, Callable 7/15/54 @ 100 | 672,432 | ||||||
910,000 | Aon Corp., 4.50%, 12/15/28, Callable 9/15/28 @ 100 | 921,202 | ||||||
235,000 | Brighthouse Financial, Inc., 4.70%, 6/22/47, Callable 12/22/46 @ 100 | 174,992 | ||||||
401,000 | Hartford Financial Services Group, Inc. (The), 4.30%, 4/15/43 | 372,525 | ||||||
2,550,000 | Marsh & McLennan Cos., Inc., 3.50%, 6/3/24, Callable 3/3/24 @ 100 | 2,511,835 | ||||||
20,000 | Marsh & McLennan Cos., Inc., 3.50%, 3/10/25, Callable 12/10/24 @ 100 | 19,647 | ||||||
610,000 | Marsh & McLennan Cos., Inc., 4.35%, 1/30/47, Callable 7/30/46 @ 100 | 568,857 | ||||||
420,000 | Marsh & McLennan Cos., Inc., 4.20%, 3/1/48, Callable 9/1/47 @ 100 | 381,464 | ||||||
30,000 | Nuveen LLC, 4.00%, 11/1/28, Callable 8/1/28 @ 100(a) | 30,913 | ||||||
95,000 | Principal Financial Group, Inc., 3.13%, 5/15/23 | 93,775 | ||||||
196,000 | Principal Financial Group, Inc., 3.10%, 11/15/26, Callable 8/15/26 @ 100 | 183,029 | ||||||
25,000 | Principal Financial Group, Inc., 4.63%, 9/15/42 | 24,162 | ||||||
12,000 | Teachers Insurance & Annuity Association of America, 6.85%, 12/16/39(a) | 15,603 | ||||||
50,000 | Teachers Insurance & Annuity Association of America, 4.90%, 9/15/44(a) | 51,846 | ||||||
540,000 | Teachers Insurance & Annuity Association of America, 4.27%, 5/15/47, Callable 11/15/46 @ 100(a) | 516,847 | ||||||
195,000 | Travelers Cos., Inc., 4.05%, 3/7/48, Callable 9/7/47 @ 100 | 189,007 | ||||||
214,000 | Travelers Cos., Inc. (The), 4.30%, 8/25/45, Callable 2/25/45 @ 100 | 215,269 | ||||||
500,000 | Willis North America, Inc., 3.60%, 5/15/24, Callable 3/15/24 @ 100 | 488,180 | ||||||
|
| |||||||
8,770,171 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.1%): | ||||||||
116,000 | Amazon.com, Inc., 4.80%, 12/5/34, Callable 6/5/34 @ 100 | 124,252 | ||||||
368,000 | Amazon.com, Inc., 4.05%, 8/22/47, Callable 2/22/47 @ 100^ | 359,572 | ||||||
570,000 | Amazon.com, Inc., 4.25%, 8/22/57, Callable 2/22/57 @ 100 | 553,836 | ||||||
275,000 | eBay, Inc., 4.00%, 7/15/42, Callable 1/15/42 @ 100 | 204,751 | ||||||
|
| |||||||
1,242,411 | ||||||||
|
|
See accompanying notes to the financial statements.
12
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
IT Services (0.2%): | ||||||||
$ | 70,000 | DXC Technology Co., 2.88%, 3/27/20 | $ | 69,395 | ||||
499,000 | Fidelity National Information Services, Inc., 3.00%, 8/15/26, Callable 5/15/26 @ 100 | 459,063 | ||||||
250,000 | Fidelity National Information Services, Inc., 4.50%, 8/15/46, Callable 2/15/46 @ 100 | 227,361 | ||||||
200,000 | International Business Machines Corp., 2.90%, 11/1/21 | 197,293 | ||||||
420,000 | International Business Machines Corp., 2.88%, 11/9/22 | 410,272 | ||||||
100,000 | International Business Machines Corp., 4.70%, 2/19/46^ | 99,841 | ||||||
260,000 | Mastercard, Inc., 3.38%, 4/1/24 | 261,623 | ||||||
300,000 | Total System Services, Inc., 3.80%, 4/1/21, Callable 3/1/21 @ 100 | 299,940 | ||||||
405,000 | Total System Services, Inc., 3.75%, 6/1/23, Callable 3/1/23 @ 100 | 401,705 | ||||||
770,000 | Visa, Inc., 3.15%, 12/14/25, Callable 9/14/25 @ 100 | 756,672 | ||||||
|
| |||||||
3,183,165 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.2%): | ||||||||
780,000 | Agilent Technologies, Inc., 3.20%, 10/1/22, Callable 7/1/22 @ 100 | 770,581 | ||||||
95,000 | Agilent Technologies, Inc., 3.05%, 9/22/26, Callable 6/22/26 @ 100 | 87,911 | ||||||
313,000 | Thermo Fisher Scientific, Inc., 3.60%, 8/15/21, Callable 5/15/21 @ 100 | 313,921 | ||||||
790,000 | Thermo Fisher Scientific, Inc., 4.15%, 2/1/24, Callable 11/1/23 @ 100 | 800,251 | ||||||
1,470,000 | Thermo Fisher Scientific, Inc., 2.95%, 9/19/26, Callable 6/19/26 @ 100 | 1,356,584 | ||||||
140,000 | Thermo Fisher Scientific, Inc., 3.20%, 8/15/27, Callable 5/15/27 @ 100^ | 130,111 | ||||||
|
| |||||||
3,459,359 | ||||||||
|
| |||||||
Machinery (0.1%): | ||||||||
130,000 | Crane Co., 4.20%, 3/15/48, Callable 9/15/47 @ 100 | 119,065 | ||||||
910,000 | Kennametal, Inc., 4.63%, 6/15/28, Callable 3/15/28 @ 100 | 906,727 | ||||||
|
| |||||||
1,025,792 | ||||||||
|
| |||||||
Media (1.1%): | ||||||||
410,000 | Comcast Corp., 3.45%, 10/1/21^ | 414,157 | ||||||
1,150,000 | Comcast Corp., 4.15%, 10/15/28, Callable 7/15/28 @ 100 | 1,167,747 | ||||||
920,000 | Comcast Corp., 4.25%, 10/15/30, Callable 7/15/30 @ 100 | 930,403 | ||||||
545,000 | Comcast Corp., 3.20%, 7/15/36, Callable 1/15/36 @ 100 | 468,812 | ||||||
4,300,000 | Comcast Corp., 3.40%, 7/15/46, Callable 1/15/46 @ 100 | 3,562,877 | ||||||
775,000 | Comcast Corp., 4.95%, 10/15/58, Callable 4/15/58 @ 100 | 787,905 | ||||||
2,105,000 | COX Communications, Inc., 3.15%, 8/15/24, Callable 6/15/24 @ 100(a) | 2,025,018 | ||||||
250,000 | Discovery Communications LLC, 2.20%, 9/20/19 | 247,384 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Media, continued | ||||||||
$ | 2,310,000 | Discovery Communications LLC, 2.95%, 3/20/23, Callable 2/20/23 @ 100 | $ | 2,210,074 | ||||
392,000 | Discovery Communications, Inc., 4.88%, 4/1/43 | 346,833 | ||||||
265,000 | Interpublic Group of Cos., Inc., 3.50%, 10/1/20 | 265,328 | ||||||
145,000 | Interpublic Group of Cos., Inc., 3.75%, 10/1/21 | 145,905 | ||||||
5,730,000 | NBCUniversal Enterprise, Inc., 5.25%, 12/31/99, Callable 3/19/21 @ 100(a) | 5,801,624 | ||||||
1,345,000 | Time Warner, Inc., 3.80%, 2/15/27, Callable 11/15/26 @ 100 | 1,262,018 | ||||||
1,300,000 | Time Warner, Inc., 5.35%, 12/15/43 | 1,253,050 | ||||||
206,000 | Twenty-First Century Fox, Inc., 6.40%, 12/15/35 | 256,996 | ||||||
|
| |||||||
21,146,131 | ||||||||
|
| |||||||
Metals & Mining (0.0%)†: | ||||||||
400,000 | Newmont Mining Corp., 4.88%, 3/15/42, Callable 9/15/41 @ 100 | 378,232 | ||||||
|
| |||||||
Multiline Retail (0.0%)†: | ||||||||
423,000 | Dollar General Corp., 4.15%, 11/1/25, Callable 8/1/25 @ 100 | 422,267 | ||||||
|
| |||||||
Multi-Utilities (0.3%): | ||||||||
240,000 | Ameren Illinois Co., 3.80%, 5/15/28, Callable 2/15/28 @ 100^ | 244,146 | ||||||
1,435,000 | Berkshire Hathaway Energy Co., 3.25%, 4/15/28, Callable 1/15/28 @ 100 | 1,365,079 | ||||||
170,000 | Black Hills Corp., 3.15%, 1/15/27, Callable 7/15/26 @ 100 | 159,145 | ||||||
495,000 | Black Hills Corp., 4.35%, 5/1/33, Callable 2/1/33 @ 100 | 496,095 | ||||||
350,000 | CenterPoint Energy Houston Electric LLC, 3.55%, 8/1/42, Callable 2/1/42 @ 100 | 318,396 | ||||||
190,000 | CenterPoint Energy Houston Electric LLC, 3.95%, 3/1/48, Callable 9/1/47 @ 100 | 184,603 | ||||||
745,000 | CenterPoint Energy Resources Corp., 4.10%, 9/1/47, Callable 3/1/47 @ 100 | 689,591 | ||||||
85,000 | CMS Energy Corp., 3.00%, 5/15/26, Callable 2/15/26 @ 100 | 79,926 | ||||||
775,000 | CMS Energy Corp., 4.70%, 3/31/43, Callable 9/30/42 @ 100 | 785,214 | ||||||
165,000 | Consumers Energy Co., 3.80%, 11/15/28, Callable 8/15/28 @ 100^ | 168,981 | ||||||
255,000 | Dominion Energy, Inc., 2.58%, 7/1/20 | 251,010 | ||||||
590,000 | DTE Energy Co., Series B, 3.30%, 6/15/22, Callable 4/15/22 @ 100 | 585,469 | ||||||
515,000 | NiSource Finance Corp., 3.49%, 5/15/27, Callable 2/15/27 @ 100 | 491,436 | ||||||
315,000 | WEC Energy Group, Inc., 3.38%, 6/15/21 | 314,802 | ||||||
|
| |||||||
6,133,893 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (3.0%): | ||||||||
1,000,000 | Anadarko Petroleum Corp., 7.75%, 10/10/36(c) | 417,049 | ||||||
920,000 | Anadarko Petroleum Corp., 7.73%, 9/15/96 | 1,046,170 | ||||||
689,000 | Apache Corp., 5.10%, 9/1/40, Callable 3/1/40 @ 100 | 624,052 | ||||||
410,000 | Buckeye Partners LP, 4.88%, 2/1/21, Callable 11/1/20 @ 100^ | 414,556 | ||||||
2,230,000 | Buckeye Partners LP, 3.95%, 12/1/26, Callable 9/1/26 @ 100 | 1,959,067 |
See accompanying notes to the financial statements.
13
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 1,407,000 | Buckeye Partners LP, 5.85%, 11/15/43, Callable 5/15/43 @ 100 | $ | 1,289,328 | ||||
1,568,000 | Buckeye Partners LP, 5.60%, 10/15/44, Callable 4/15/44 @ 100 | 1,397,065 | ||||||
270,000 | Chevron Corp., 2.95%, 5/16/26, Callable 2/16/26 @ 100 | 259,922 | ||||||
2,900,000 | Cimarex Energy Co., 4.38%, 6/1/24, Callable 3/1/24 @ 100 | 2,883,853 | ||||||
1,630,000 | Cimarex Energy Co., 3.90%, 5/15/27, Callable 2/15/27 @ 100^ | 1,512,543 | ||||||
520,000 | Concho Resources, Inc., 3.75%, 10/1/27, Callable 7/1/27 @ 100 | 489,509 | ||||||
225,000 | Continental Resources, Inc., 5.00%, 9/15/22, Callable 2/7/19 @ 101.67 | 223,404 | ||||||
790,000 | Continental Resources, Inc., 3.80%, 6/1/24, Callable 3/1/24 @ 100 | 747,869 | ||||||
250,000 | El Paso Pipeline Partners Operating Co. LLC, 5.00%, 10/1/21, Callable 7/1/21 @ 100 | 257,079 | ||||||
625,000 | Energy Transfer Partners LP, 4.65%, 6/1/21, Callable 3/1/21 @ 100 | 635,870 | ||||||
265,000 | Energy Transfer Partners LP, 4.05%, 3/15/25, Callable 12/15/24 @ 100 | 248,717 | ||||||
700,000 | Energy Transfer Partners LP, 4.75%, 1/15/26, Callable 10/15/25 @ 100 | 680,162 | ||||||
110,000 | Energy Transfer Partners LP, 6.63%, 10/15/36 | 112,957 | ||||||
750,000 | Energy Transfer Partners LP, 6.13%, 12/15/45, Callable 6/15/45 @ 100 | 733,498 | ||||||
595,000 | Enterprise Products Operating LLC, 4.45%, 2/15/43, Callable 8/15/42 @ 100 | 539,933 | ||||||
479,000 | Enterprise Products Operating LLC, 5.10%, 2/15/45, Callable 8/15/44 @ 100 | 480,738 | ||||||
120,000 | Enterprise Products Operating LLC, 4.25%, 2/15/48, Callable 8/15/47 @ 100 | 106,366 | ||||||
60,000 | Enterprise Products Operating LLC, 4.80%, 2/1/49, Callable 8/1/48 @ 100 | 58,287 | ||||||
1,495,000 | Enterprise Products Operating LLC, Series E, 5.25%(US0003M+303bps), 8/16/77, Callable 8/16/27 @ 100 | 1,244,175 | ||||||
885,000 | Enterprise Products Operating LLC, 5.38%(US0003M+257bps), 2/15/78, Callable 2/15/28 @ 100 | 731,750 | ||||||
450,000 | EOG Resources, Inc., 2.63%, 3/15/23, Callable 12/15/22 @ 100^ | 432,314 | ||||||
1,300,000 | EOG Resources, Inc., 3.90%, 4/1/35, Callable 10/1/34 @ 100 | 1,227,338 | ||||||
1,440,000 | Kinder Morgan (Delaware), Inc., 3.05%, 12/1/19, Callable 11/1/19 @ 100 | 1,431,699 | ||||||
1,745,000 | Kinder Morgan (Delaware), Inc., 5.55%, 6/1/45, Callable 12/1/44 @ 100 | 1,728,194 | ||||||
235,000 | Kinder Morgan Energy Partners LP, 5.40%, 9/1/44, Callable 3/1/44 @ 100 | 224,636 | ||||||
150,000 | Magellan Midstream Partners LP, 4.20%, 10/3/47, Callable 4/3/47 @ 100 | 133,379 | ||||||
1,470,000 | Marathon Oil Corp., 2.70%, 6/1/20, Callable 5/1/20 @ 100 | 1,448,280 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 850,000 | Marathon Petroleum Corp., 4.75%, 12/15/23, Callable 10/15/23 @ 100(a) | $ | 872,181 | ||||
348,000 | Marathon Petroleum Corp., 4.75%, 9/15/44, Callable 3/15/44 @ 100^ | 306,886 | ||||||
900,000 | MPLX LP, 4.50%, 7/15/23, Callable 4/15/23 @ 100 | 909,010 | ||||||
1,618,000 | MPLX LP, 4.88%, 6/1/25, Callable 3/1/25 @ 100 | 1,632,825 | ||||||
330,000 | MPLX LP, 5.20%, 3/1/47, Callable 9/1/46 @ 100 | 303,764 | ||||||
145,000 | MPLX LP, 5.50%, 2/15/49, Callable 8/15/48 @ 100 | 141,043 | ||||||
1,287,000 | NGPL PipeCo LLC, 4.38%, 8/15/22, Callable 5/15/22 @ 100(a) | 1,251,608 | ||||||
1,280,000 | Northern Natural Gas Co., 4.30%, 1/15/49, Callable 7/15/48 @ 100^(a) | 1,247,478 | ||||||
1,650,000 | Northwest Pipeline LLC, 4.00%, 4/1/27, Callable 1/1/27 @ 100 | 1,603,748 | ||||||
740,000 | Occidental Petroleum Corp., 2.70%, 2/15/23, Callable 11/15/22 @ 100^ | 717,230 | ||||||
411,000 | Pioneer Natural Resource, 3.95%, 7/15/22, Callable 4/15/22 @ 100 | 412,220 | ||||||
2,974,000 | Pioneer Natural Resource Co., 4.45%, 1/15/26, Callable 10/15/25 @ 100 | 3,002,696 | ||||||
145,000 | Plains All American Pipeline LP, 3.65%, 6/1/22, Callable 3/1/22 @ 100 | 142,351 | ||||||
670,000 | Regency Energy Finance Corp., 4.50%, 11/1/23, Callable 8/1/23 @ 100 | 670,217 | ||||||
190,000 | Sabine Pass Liquefaction, 5.88%, 6/30/26, Callable 12/31/25 @ 100 | 201,173 | ||||||
625,000 | Sabine Pass Liquefaction LLC, 5.63%, 4/15/23, Callable 1/15/23 @ 100 | 658,488 | ||||||
1,680,000 | Sabine Pass Liquefaction LLC, 5.75%, 5/15/24, Callable 2/15/24 @ 100 | 1,752,840 | ||||||
4,312,000 | Sabine Pass Liquefaction LLC, 5.63%, 3/1/25, Callable 12/1/24 @ 100 | 4,477,837 | ||||||
1,000,000 | Sabine Pass Liquefcation LLC, 6.25%, 3/15/22, Callable 12/15/21 @ 100 | 1,051,490 | ||||||
470,000 | Spectra Energy Partners LP, 4.75%, 3/15/24, Callable 12/15/23 @ 100 | 483,008 | ||||||
505,000 | Spectra Energy Partners LP, 3.50%, 3/15/25, Callable 12/15/24 @ 100 | 482,080 | ||||||
1,030,000 | Spectra Energy Partners LP, 4.50%, 3/15/45, Callable 9/15/44 @ 100 | 931,353 | ||||||
378,000 | Sunoco Logistics Partner LP, 5.35%, 5/15/45, Callable 11/15/44 @ 100 | 334,581 | ||||||
985,000 | Tesoro Logistics LP, 5.25%, 1/15/25, Callable 1/15/21 @ 102.63 | 1,002,697 | ||||||
220,000 | Texas Eastern Transmission LP, 2.80%, 10/15/22, Callable 7/15/22 @ 100(a) | 211,562 | ||||||
1,625,000 | Texas Eastern Transmission LP, 3.50%, 1/15/28, Callable 10/15/27 @ 100(a) | 1,534,205 | ||||||
3,145,000 | Texas Eastern Transmission LP, 4.15%, 1/15/48, Callable 7/15/47 @ 100(a) | 2,799,153 | ||||||
1,992,000 | Transcontinental Gas Pipe Line Co. LLC, 7.85%, 2/1/26, Callable 11/1/25 @ 100 | 2,408,102 | ||||||
1,970,000 | Transcontinental Gas Pipe Line Co. LLC, 4.00%, 3/15/28, Callable 12/15/27 @ 100 | 1,926,344 |
See accompanying notes to the financial statements.
14
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 865,000 | Transcontinental Gas Pipe Line Co. LLC, 4.60%, 3/15/48, Callable 9/15/47 @ 100 | $ | 808,790 | ||||
240,000 | Williams Co., Inc., Series A, 7.50%, 1/15/31 | 286,491 | ||||||
240,000 | Williams Partners LP, 4.13%, 11/15/20, Callable 8/15/20 @ 100 | 241,906 | ||||||
|
| |||||||
60,525,116 | ||||||||
|
| |||||||
Pharmaceuticals (0.3%): | ||||||||
405,000 | Bayer US Finance II LLC, 3.38%, 7/15/24, Callable 4/15/24 @ 100(a) | 385,266 | ||||||
90,000 | Bayer US Finance II LLC, 4.40%, 7/15/44, Callable 1/15/44 @ 100(a) | 77,029 | ||||||
250,000 | Bayer US Finance II LLC, 3.95%, 4/15/45, Callable 10/15/44 @ 100(a) | 200,696 | ||||||
1,540,000 | Bayer US Finance LLC, 3.00%, 10/8/21(a) | 1,505,763 | ||||||
697,000 | Bayer US Finance LLC, 3.38%, 10/8/24(a) | 657,266 | ||||||
500,000 | Johnson & Johnson, 2.45%, 3/1/26, Callable 12/1/25 @ 100 | 469,608 | ||||||
200,000 | Johnson & Johnson, 2.95%, 3/3/27, Callable 12/3/26 @ 100 | 192,312 | ||||||
1,195,000 | Johnson & Johnson, 2.90%, 1/15/28, Callable 10/15/27 @ 100 | 1,145,341 | ||||||
250,000 | Merck & Co., Inc., 3.70%, 2/10/45, Callable 8/10/44 @ 100 | 240,107 | ||||||
13,000 | Novartis Capital Corp., 3.00%, 11/20/25, Callable 8/20/25 @ 100 | 12,593 | ||||||
32,000 | Novartis Capital Corp., 3.10%, 5/17/27, Callable 2/17/27 @ 100 | 30,985 | ||||||
320,000 | Pfizer, Inc., 4.40%, 5/15/44 | 333,232 | ||||||
480,000 | Wyeth LLC, 5.95%, 4/1/37 | 575,647 | ||||||
|
| |||||||
5,825,845 | ||||||||
|
| |||||||
Professional Services (0.1%): | ||||||||
120,000 | Equifax, Inc., 2.30%, 6/1/21, Callable 5/1/21 @ 100^ | 116,383 | ||||||
85,000 | Relx Capital, Inc., 3.13%, 10/15/22, Callable 7/15/22 @ 100 | 83,459 | ||||||
1,175,000 | Relx Capital, Inc., 3.50%, 3/16/23, Callable 2/16/23 @ 100 | 1,165,686 | ||||||
|
| |||||||
1,365,528 | ||||||||
|
| |||||||
Real Estate Management & Development (0.1%): | ||||||||
1,807,000 | CC Holdings GS V LLC, 3.85%, 4/15/23 | 1,789,449 | ||||||
575,000 | Northwest Florida Timber Finance LLC, 4.75%, 3/4/29(a) | 530,254 | ||||||
|
| |||||||
2,319,703 | ||||||||
|
| |||||||
Road & Rail (0.6%): | ||||||||
1,000,000 | Burlington North Santa Fe LLC, 3.05%, 9/1/22, Callable 6/1/22 @ 100^ | 992,685 | ||||||
740,000 | Burlington North Santa Fe LLC, 4.55%, 9/1/44, Callable 3/1/44 @ 100 | 771,564 | ||||||
382,000 | Burlington Northern Santa Fe LLC, 6.15%, 5/1/37 | 465,334 | ||||||
215,000 | Burlington Northern Santa Fe LLC, 4.15%, 12/15/48, Callable 6/15/48 @ 100 | 209,379 | ||||||
550,000 | CSX Corp., 3.25%, 6/1/27, Callable 3/1/27 @ 100 | 517,474 | ||||||
1,100,000 | CSX Corp., 3.80%, 3/1/28, Callable 12/1/27 @ 100 | 1,079,224 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Road & Rail, continued | ||||||||
$ | 525,000 | CSX Corp., 3.80%, 11/1/46, Callable 5/1/46 @ 100 | $ | 462,408 | ||||
485,000 | CSX Corp., 4.30%, 3/1/48, Callable 9/1/47 @ 100^ | 461,771 | ||||||
215,000 | Norfolk Southern Corp., 3.65%, 8/1/25, Callable 6/1/25 @ 100 | 216,122 | ||||||
432,000 | Norfolk Southern Corp., 2.90%, 6/15/26, Callable 3/15/26 @ 100 | 409,070 | ||||||
480,000 | Norfolk Southern Corp., 4.15%, 2/28/48, Callable 8/28/47 @ 100^ | 447,880 | ||||||
500,000 | Penske Truck Leasing, 3.40%, 11/15/26, Callable 8/15/26 @ 100(a) | 467,283 | ||||||
1,090,000 | Ryder System, Inc., 2.65%, 3/2/20, Callable 2/2/20 @ 100, MTN | 1,079,966 | ||||||
345,000 | Union Pacific Corp., 2.75%, 3/1/26, Callable 12/1/25 @ 100 | 321,772 | ||||||
551,000 | Union Pacific Corp., 3.38%, 2/1/35, Callable 8/1/34 @ 100 | 482,217 | ||||||
435,000 | Union Pacific Corp., 3.80%, 10/1/51, Callable 4/1/51 @ 100 | 368,951 | ||||||
484,000 | Union Pacific Corp., 3.88%, 2/1/55, Callable 8/1/54 @ 100^ | 413,259 | ||||||
1,705,000 | Union Pacific Corp., 4.10%, 9/15/67, Callable 3/15/67 @ 100 | 1,448,976 | ||||||
435,513 | Union Pacific Railroad Co., Series2014-1, 3.23%, 5/14/26 | 427,642 | ||||||
|
| |||||||
11,042,977 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.5%): | ||||||||
515,000 | Analog Devices, Inc., 3.50%, 12/5/26, Callable 9/5/26 @ 100 | 492,909 | ||||||
280,000 | Analog Devices, Inc., 4.50%, 12/5/36, Callable 6/5/36 @ 100 | 264,363 | ||||||
190,000 | Analog Devices, Inc., 5.30%, 12/15/45, Callable 6/15/45 @ 100 | 199,869 | ||||||
780,000 | Applied Materials, Inc., 4.35%, 4/1/47, Callable 10/1/46 @ 100^ | 762,597 | ||||||
1,340,000 | Broadcom Cayman Finance, Ltd., 3.00%, 1/15/22, Callable 12/15/21 @ 100 | 1,288,683 | ||||||
1,655,000 | Broadcom Cayman Finance, Ltd., 3.13%, 1/15/25, Callable 11/15/24 @ 100 | 1,494,068 | ||||||
305,000 | Broadcom Cayman Finance, Ltd., 3.88%, 1/15/27, Callable 10/15/26 @ 100 | 273,617 | ||||||
220,000 | Intel Corp., 4.10%, 5/19/46, Callable 11/19/45 @ 100 | 213,774 | ||||||
19,000 | KLA-Tencor Corp., 4.65%, 11/1/24, Callable 8/1/24 @ 100 | 19,472 | ||||||
645,000 | Lam Research Corp., 2.75%, 3/15/20, Callable 2/15/20 @ 100 | 638,939 | ||||||
302,000 | Lam Research Corp., 2.80%, 6/15/21, Callable 5/15/21 @ 100 | 298,636 | ||||||
730,000 | NVIDIA Corp., 3.20%, 9/16/26, Callable 6/16/26 @ 100 | 692,366 | ||||||
933,000 | Qualcomm, Inc., 3.45%, 5/20/25, Callable 2/20/25 @ 100 | 897,670 | ||||||
1,153,000 | Qualcomm, Inc., 4.80%, 5/20/45, Callable 11/20/44 @ 100 | 1,098,234 |
See accompanying notes to the financial statements.
15
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
$ | 90,000 | Qualcomm, Inc., 4.30%, 5/20/47, Callable 11/20/46 @ 100 | $ | 79,934 | ||||
270,000 | Texas Instruments, Inc., 4.15%, 5/15/48, Callable 11/15/47 @ 100 | 269,414 | ||||||
|
| |||||||
8,984,545 | ||||||||
|
| |||||||
Software (0.4%): | ||||||||
345,000 | Autodesk, Inc., 3.50%, 6/15/27, Callable 3/15/27 @ 100 | 322,471 | ||||||
200,000 | Microsoft Corp., 2.00%, 8/8/23, Callable 6/8/23 @ 100 | 192,293 | ||||||
770,000 | Microsoft Corp., 3.30%, 2/6/27, Callable 11/6/26 @ 100 | 762,687 | ||||||
925,000 | Microsoft Corp., 3.45%, 8/8/36, Callable 2/8/36 @ 100 | 871,220 | ||||||
1,095,000 | Microsoft Corp., 3.70%, 8/8/46, Callable 2/8/46 @ 100 | 1,048,991 | ||||||
760,000 | Microsoft Corp., 4.00%, 2/12/55, Callable 8/12/54 @ 100 | 746,349 | ||||||
250,000 | Microsoft Corp., 3.95%, 8/8/56, Callable 2/8/56 @ 100^ | 243,919 | ||||||
965,000 | Oracle Corp., 2.40%, 9/15/23, Callable 7/15/23 @ 100 | 926,045 | ||||||
1,125,000 | Oracle Corp., 2.65%, 7/15/26, Callable 4/15/26 @ 100 | 1,042,607 | ||||||
195,000 | Oracle Corp., 4.50%, 7/8/44, Callable 1/8/44 @ 100 | 195,242 | ||||||
525,000 | Oracle Corp., 4.00%, 7/15/46, Callable 1/15/46 @ 100 | 489,870 | ||||||
290,000 | Oracle Corp., 4.00%, 11/15/47, Callable 5/15/47 @ 100 | 270,193 | ||||||
450,000 | Oracle Corp., 4.38%, 5/15/55, Callable 11/15/54 @ 100 | 441,131 | ||||||
|
| |||||||
7,553,018 | ||||||||
|
| |||||||
Specialty Retail (0.1%): | ||||||||
750,000 | Home Depot, Inc. (The), 3.00%, 4/1/26, Callable 1/1/26 @ 100 | 726,480 | ||||||
560,000 | Home Depot, Inc. (The), 4.25%, 4/1/46, Callable 10/1/45 @ 100 | 558,096 | ||||||
435,000 | Lowe’s Cos., Inc., 2.50%, 4/15/26, Callable 1/15/26 @ 100 | 386,657 | ||||||
560,000 | Lowe’s Cos., Inc., 3.70%, 4/15/46, Callable 10/15/45 @ 100 | 456,701 | ||||||
|
| |||||||
2,127,934 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.3%): | ||||||||
730,000 | Apple, Inc., 3.85%, 5/4/43 | 691,295 | ||||||
1,900,000 | Apple, Inc., 3.45%, 2/9/45 | 1,682,400 | ||||||
610,000 | Apple, Inc., 4.65%, 2/23/46, Callable 8/23/45 @ 100 | 645,708 | ||||||
1,015,000 | Apple, Inc., 3.85%, 8/4/46, Callable 2/4/46 @ 100 | 943,932 | ||||||
220,000 | Dell International LLC/ EMC Corp., 6.02%, 6/15/26, Callable 3/15/26 @ 100(a) | 220,995 | ||||||
680,000 | Diamond 1 Finance Corp./Diamond 2 Finance Corp., 8.35%, 7/15/46, Callable 1/15/46 @ 100(a) | 736,297 | ||||||
|
| |||||||
4,920,627 | ||||||||
|
|
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Textiles, Apparel & Luxury Goods (0.0%)†: | ||||||||
$ | 245,000 | Coach, Inc., 4.13%, 7/15/27, Callable 4/15/27 @ 100 | $ | 229,244 | ||||
145,000 | NIKE, Inc., 2.38%, 11/1/26, Callable 8/1/26 @ 100 | 132,823 | ||||||
|
| |||||||
362,067 | ||||||||
|
| |||||||
Tobacco (0.4%): | ||||||||
1,065,000 | Altria Group, Inc., 2.85%, 8/9/22 | 1,022,375 | ||||||
345,000 | Altria Group, Inc., 4.00%, 1/31/24 | 339,047 | ||||||
300,000 | Altria Group, Inc., 2.63%, 9/16/26, Callable 6/16/26 @ 100 | 262,062 | ||||||
500,000 | Altria Group, Inc., 5.38%, 1/31/44 | 466,233 | ||||||
940,000 | BAT Capital Corp., 3.22%, 8/15/24, Callable 6/15/24 @ 100 | 865,828 | ||||||
1,075,000 | BAT Capital Corp., 3.56%, 8/15/27, Callable 5/15/27 @ 100 | 954,327 | ||||||
1,061,000 | BAT Capital Corp., 4.54%, 8/15/47, Callable 2/15/47 @ 100 | 844,610 | ||||||
14,000 | Philip Morris International, Inc., 2.50%, 8/22/22 | 13,491 | ||||||
310,000 | Philip Morris International, Inc., 3.38%, 8/11/25, Callable 5/11/25 @ 100 | 301,221 | ||||||
92,000 | Reynolds American, Inc., 3.25%, 6/12/20 | 91,435 | ||||||
450,000 | Reynolds American, Inc., 4.00%, 6/12/22 | 445,150 | ||||||
1,030,000 | Reynolds American, Inc., 4.45%, 6/12/25, Callable 3/12/25 @ 100 | 993,162 | ||||||
955,000 | RJ Reynolds Tobacco Co., 6.88%, 5/1/20 | 993,747 | ||||||
|
| |||||||
7,592,688 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.0%)†: | ||||||||
215,000 | Air Lease Corp., 3.88%, 7/3/23, Callable 6/3/23 @ 100 | 211,605 | ||||||
75,000 | Air Lease Corp., 3.63%, 4/1/27, Callable 1/1/27 @ 100 | 67,079 | ||||||
|
| |||||||
278,684 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.8%): | ||||||||
8,676,250 | Sprint Spectrum Co. LLC, 3.36%, 3/20/23(a) | 8,567,796 | ||||||
7,035,000 | Sprint Spectrum Co. LLC, 4.74%, 3/20/25(a) | 6,903,094 | ||||||
|
| |||||||
15,470,890 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $514,977,779) | 500,150,176 | |||||||
|
| |||||||
Yankee Dollars (8.7%): | ||||||||
Auto Components (0.0%)†: | ||||||||
56,000 | Aptiv plc, 4.40%, 10/1/46, Callable 4/1/46 @ 100 | 48,878 | ||||||
|
| |||||||
Automobiles (0.1%): | ||||||||
1,300,000 | Volkswagen International Finance NV, 4.00%, 8/12/20(a) | 1,308,386 | ||||||
|
| |||||||
Banks (3.5%): | ||||||||
3,145,000 | ABN AMRO Bank NV, 2.65%, 1/19/21(a) | 3,099,732 | ||||||
1,200,000 | ABN AMRO Bank NV, 3.40%, 8/27/21(a) | 1,197,581 | ||||||
1,165,000 | Australia & New Zealand Banking Group, Ltd., 2.25%, 11/9/20^ | 1,146,637 | ||||||
400,000 | Banco Santander SA, 4.38%, 4/12/28 | 373,490 | ||||||
1,915,000 | Banque Federative du Credit Mutuel SA, 2.75%, 10/15/20(a) | 1,895,775 | ||||||
1,608,000 | Barclays Bank plc, 5.14%, 10/14/20 | 1,625,405 | ||||||
2,782,000 | Barclays Bank plc, 3.25%, 1/12/21 | 2,724,407 |
See accompanying notes to the financial statements.
16
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Banks, continued | ||||||||
$ | 910,000 | Barclays Bank plc, 4.34%(US0003M+136bps), 5/16/24, Callable 5/16/23 @ 100 | $ | 884,744 | ||||
888,000 | Barclays Bank plc, 4.38%, 1/12/26 | 843,540 | ||||||
2,990,000 | Barclays Bank plc, 4.97%(US0003M+190bps), 5/16/29, Callable 5/16/28 @ 100 | 2,882,891 | ||||||
425,000 | BNP Paribas SA, 3.38%, 1/9/25(a) | 399,958 | ||||||
240,000 | BNP Paribas SA, 3.50%, 11/16/27^(a) | 221,069 | ||||||
470,000 | BPCE SA, 3.00%, 5/22/22(a) | 453,992 | ||||||
510,000 | BPCE SA, 5.70%, 10/22/23(a) | 528,066 | ||||||
1,855,000 | Credit Agricole SA, 3.25%, 10/4/24(a) | 1,734,395 | ||||||
2,075,000 | HSBC Holdings plc, 2.95%, 5/25/21 | 2,048,261 | ||||||
1,525,000 | HSBC Holdings plc, 3.26%(US0003M+106bps), 3/13/23, Callable 3/13/22 @ 100 | 1,492,453 | ||||||
400,000 | HSBC Holdings plc, 3.95%(US0003M+99bps), 5/18/24, Callable 5/18/23 @ 100 | 397,840 | ||||||
200,000 | HSBC Holdings plc, 4.58%(US0003M+153bps), 6/19/29, Callable 6/19/28 @ 100 | 198,248 | ||||||
1,630,000 | ING Bank NV, 2.45%, 3/16/20(a) | 1,614,419 | ||||||
440,000 | ING Bank NV, 2.75%, 3/22/21(a) | 434,040 | ||||||
900,000 | ING Bank NV, 5.00%, 6/9/21^(a) | 932,084 | ||||||
1,200,000 | ING Bank NV, 5.80%, 9/25/23(a) | 1,253,434 | ||||||
590,000 | ING Groep NV, 3.15%, 3/29/22 | 580,111 | ||||||
1,150,000 | Intesa Sanpaolo SpA, 3.13%, 7/14/22(a) | 1,063,305 | ||||||
660,000 | Intesa Sanpaolo SpA, 3.88%, 7/14/27(a) | 567,717 | ||||||
682,000 | Lloyds Banking Group plc, 2.70%, 8/17/20 | 673,373 | ||||||
200,000 | Lloyds Banking Group plc, 3.00%, 1/11/22 | 193,476 | ||||||
435,000 | Lloyds Banking Group plc, 4.05%, 8/16/23 | 429,747 | ||||||
1,270,000 | Lloyds Banking Group plc, 2.91%(US0003M+81bps), 11/7/23, Callable 11/7/22 @ 100 | 1,202,605 | ||||||
690,000 | Lloyds Banking Group plc, 4.45%, 5/8/25 | 685,145 | ||||||
2,025,000 | Lloyds Banking Group plc, 4.58%, 12/10/25 | 1,917,073 | ||||||
660,000 | Lloyds Banking Group plc, 4.65%, 3/24/26 | 620,525 | ||||||
550,000 | Lloyds Banking Group plc, 3.75%, 1/11/27 | 505,284 | ||||||
270,000 | Lloyds TSB Bank plc, 6.50%, 9/14/20(a) | 280,020 | ||||||
1,041,000 | Mitsubishi UFJ Financial Group, Inc., 2.95%, 3/1/21 | 1,030,541 | ||||||
135,000 | Mitsubishi UFJ Financial Group, Inc., 3.54%, 7/26/21 | 135,507 | ||||||
690,000 | Mizuho Financial Group, 2.95%, 2/28/22 | 676,454 | ||||||
420,000 | Mizuho Financial Group, Inc., 2.60%, 9/11/22^ | 406,234 | ||||||
815,000 | National Australia Bank, Ltd., 2.50%, 1/12/21 | 801,448 | ||||||
860,000 | Nordea Bank Abp, 3.75%, 8/30/23(a) | 848,275 | ||||||
2,135,000 | Rabobank Nederland NY, Series G, 2.50%, 1/19/21 | 2,097,965 | ||||||
2,670,000 | Royal Bank of Canada, 2.20%, 9/23/19 | 2,655,454 | ||||||
550,000 | Royal Bank of Scotland Group plc, 4.89%(US0003M+175bps), 5/18/29, Callable 5/18/28 @ 100 | 525,001 | ||||||
1,985,000 | Santander UK Group Holdings plc, 2.88%, 10/16/20 | 1,950,370 | ||||||
4,875,000 | Santander UK Group Holdings plc, 3.37%(US0003M+108bps), 1/5/24, Callable 1/5/23 @ 100 | 4,625,531 | ||||||
1,200,000 | Santander UK Group Holdings plc, 3.82%(US0003M+140bps), 11/3/28, Callable 11/3/27 @ 100 | 1,084,685 |
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Banks, continued | ||||||||
$ | 240,000 | Santander UK Group Holdings plc, 7.95%, 10/26/29 | $ | 281,431 | ||||
755,000 | Societe Generale SA, 2.63%, 9/16/20^(a) | 745,969 | ||||||
1,545,000 | Societe Generale SA, 2.50%, 4/8/21(a) | 1,509,962 | ||||||
1,375,000 | Standard Chartered plc, 2.25%, 4/17/20^(a) | 1,347,676 | ||||||
210,000 | Standard Chartered plc, 3.95%, 1/11/23(a) | 204,866 | ||||||
2,505,000 | Standard Chartered plc, 4.25%(US0003M+115bps), 1/20/23, Callable 1/20/22 @ 100(a) | 2,479,842 | ||||||
1,355,000 | Sumitomo Mitsui Financial Group, Inc., 2.93%, 3/9/21 | 1,340,737 | ||||||
360,000 | Svenska Handelsbanken AB, 1.88%, 9/7/21^ | 346,895 | ||||||
640,000 | Toronto-Dominion Bank, Series G, 3.50%, 7/19/23^ | 644,406 | ||||||
1,330,000 | Westpac Banking Corp., 2.60%, 11/23/20 | 1,313,034 | ||||||
|
| |||||||
64,153,125 | ||||||||
|
| |||||||
Biotechnology (0.2%): | ||||||||
1,445,000 | Shire Acq INV Ireland DA, 2.40%, 9/23/21, Callable 8/23/21 @ 100 | 1,397,292 | ||||||
2,880,000 | Shire Acq INV Ireland DA, 2.88%, 9/23/23, Callable 7/23/23 @ 100 | 2,722,513 | ||||||
959,000 | Shire Acq INV Ireland DA, 3.20%, 9/23/26, Callable 6/23/26 @ 100 | 867,820 | ||||||
|
| |||||||
4,987,625 | ||||||||
|
| |||||||
Building Products (0.0%)†: | ||||||||
50,000 | Johnson Controls International plc, 3.90%, 2/14/26, Callable 11/14/25 @ 100 | 49,035 | ||||||
|
| |||||||
Capital Markets (1.2%): | ||||||||
1,000,000 | Credit Suisse Group AG, 3.00%, 10/29/21 | 987,320 | ||||||
250,000 | Credit Suisse Group AG, 3.63%, 9/9/24 | 245,297 | ||||||
1,380,000 | Credit Suisse Group AG, 3.87%(US0003M+141bps), 1/12/29, Callable 1/12/28 @ 100(a) | 1,283,829 | ||||||
1,775,000 | Credit Suisse Group Fun, Ltd., 2.75%, 3/26/20 | 1,755,850 | ||||||
1,705,000 | Credit Suisse Group Fun, Ltd., 3.45%, 4/16/21 | 1,698,873 | ||||||
180,000 | Deutsche Bank AG, 2.95%, 8/20/20 | 174,711 | ||||||
1,740,000 | Deutsche Bank AG, 4.25%, 2/4/21 | 1,714,798 | ||||||
4,305,000 | Deutsche Bank AG, 4.25%, 10/14/21 | 4,209,225 | ||||||
895,000 | Deutsche Bank AG, 4.10%, 1/13/26^ | 820,692 | ||||||
1,310,000 | Macquarie Group, Ltd., 4.65%(US0003M+173bps), 3/27/29, Callable 3/27/28 @ 100^(a) | 1,282,187 | ||||||
1,980,000 | UBS AG, 2.20%, 6/8/20, Callable 5/8/20 @ 100(a) | 1,947,823 | ||||||
1,135,000 | UBS AG, 2.45%, 12/1/20, Callable 11/1/20 @ 100(a) | 1,113,790 | ||||||
670,000 | UBS Group AG, 4.13%, 9/24/25(a) | 667,522 | ||||||
3,445,000 | UBS Group Funding, 2.86%(US0003M+95bps), 8/15/23, Callable 8/15/22 @ 100(a) | 3,313,352 | ||||||
|
| |||||||
21,215,269 | ||||||||
|
| |||||||
Chemicals (0.0%)†: | ||||||||
750,000 | Air Liquide Finance SA, 1.75%, 9/27/21, Callable 8/27/21 @ 100^(a) | 717,962 | ||||||
|
| |||||||
Communications Equipment (0.0%)†: | ||||||||
125,000 | Tyco Electronics Group SA, 3.45%, 8/1/24, Callable 5/1/24 @ 100 | 121,667 | ||||||
|
|
See accompanying notes to the financial statements.
17
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Consumer Finance (0.2%): | ||||||||
$ | 1,675,000 | Hyundai Capital Services, Inc., 3.00%, 8/29/22(a) | $ | 1,620,663 | ||||
1,390,000 | Hyundai Capital Services, Inc., 3.75%, 3/5/23(a) | 1,371,810 | ||||||
|
| |||||||
2,992,473 | ||||||||
|
| |||||||
Diversified Financial Services (0.3%): | ||||||||
245,000 | Corp. Financiera de Desarrollo SA, 4.75%, 7/15/25(a) | 243,163 | ||||||
1,984,000 | GE Capital International Funding, 4.42%, 11/15/35 | 1,661,732 | ||||||
690,000 | GlaxoSmithKline Capital plc, 2.85%, 5/8/22 | 681,633 | ||||||
1,425,000 | Mitsubishi UFJ Trust & Banking Corp., 2.65%, 10/19/20(a) | 1,409,386 | ||||||
1,500,000 | Nvent Finance Sarl, 4.55%, 4/15/28, Callable 1/15/28 @ 100 | 1,469,644 | ||||||
2,605,000 | ORIX Corp., 2.90%, 7/18/22 | 2,545,342 | ||||||
885,000 | Shell International Finance BV, 3.25%, 5/11/25 | 872,645 | ||||||
1,024,000 | TransCanada Trust, 5.30%(US0003M+321bps), 3/15/77, Callable 3/15/27 @ 100 | 883,840 | ||||||
|
| |||||||
9,767,385 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.2%): | ||||||||
1,640,000 | Deutsche Telekom International Finance, 1.95%, 9/19/21, Callable 8/19/21 @ 100(a) | 1,573,532 | ||||||
2,192,000 | Telecom Italia SpA, 5.30%, 5/30/24^(a) | 2,082,400 | ||||||
125,000 | Telus Corp., 4.60%, 11/16/48, Callable 5/16/48 @ 100^ | 123,907 | ||||||
|
| |||||||
3,779,839 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
1,240,000 | Seven & i Holdings Co., Ltd., 3.35%, 9/17/21(a) | 1,242,458 | ||||||
|
| |||||||
Health Care Equipment & Supplies (0.0%)†: | ||||||||
120,000 | Covidien International Finance SA, 3.20%, 6/15/22, Callable 3/15/22 @ 100 | 119,663 | ||||||
470,000 | Covidien International Finance SA, 2.95%, 6/15/23, Callable 3/15/23 @ 100 | 460,175 | ||||||
|
| |||||||
579,838 | ||||||||
|
| |||||||
Insurance (0.1%): | ||||||||
1,210,000 | Aon plc, 3.88%, 12/15/25, Callable 9/15/25 @ 100^ | 1,194,038 | ||||||
81,000 | Aon plc, 4.45%, 5/24/43, Callable 2/24/43 @ 100 | 73,442 | ||||||
744,000 | Aon plc, 4.60%, 6/14/44, Callable 3/14/44 @ 100 | 709,413 | ||||||
200,000 | Aon plc, 4.75%, 5/15/45, Callable 11/15/44 @ 100 | 196,244 | ||||||
|
| |||||||
2,173,137 | ||||||||
|
| |||||||
Interactive Media & Services (0.1%): | ||||||||
490,000 | Baidu, Inc., 4.38%, 5/14/24, Callable 4/14/24 @ 100 | 494,031 | ||||||
475,000 | Baidu, Inc., 4.38%, 3/29/28, Callable 12/29/27 @ 100 | 465,335 | ||||||
1,511,000 | Tencent Holdings, Ltd., 2.99%, 1/19/23, Callable 12/19/22 @ 100(a) | 1,468,452 | ||||||
515,000 | Tencent Holdings, Ltd., 3.60%, 1/19/28, Callable 10/19/27 @ 100(a) | 483,875 | ||||||
|
| |||||||
2,911,693 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.1%): | ||||||||
320,000 | Alibaba Group Holding, Ltd., 2.80%, 6/6/23, Callable 5/6/23 @ 100 | 309,763 |
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Internet & Direct Marketing Retail, continued | ||||||||
$ | 850,000 | Alibaba Group Holding, Ltd., 4.40%, 12/6/57, Callable 6/6/57 @ 100^ | $ | 765,672 | ||||
|
| |||||||
1,075,435 | ||||||||
|
| |||||||
Media (0.0%)†: | ||||||||
460,000 | British Sky Broadcasting Group plc, 3.75%, 9/16/24(a) | 458,314 | ||||||
|
| |||||||
Metals & Mining (0.0%)†: | ||||||||
755,000 | Anglo American Capital plc, 3.63%, 9/11/24(a) | 713,664 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.4%): | ||||||||
555,000 | Ecopetrol SA, 4.13%, 1/16/25 | 527,250 | ||||||
69,000 | Petroleos Mexicanos, 6.00%, 3/5/20 | 70,259 | ||||||
4,155,000 | Petroleos Mexicanos, 6.50%, 3/13/27 | 3,905,700 | ||||||
883,000 | Petroleos Mexicanos, 5.63%, 1/23/46 | 668,334 | ||||||
700,000 | Shell International Finance BV, 3.88%, 11/13/28, Callable 8/13/28 @ 100^ | 719,355 | ||||||
396,000 | Suncor Energy, Inc., 5.95%, 12/1/34 | 440,777 | ||||||
1,210,000 | TransCanada PipeLines, Ltd., 4.88%, 1/15/26, Callable 10/15/25 @ 100 | 1,252,381 | ||||||
1,020,000 | TransCanada PipeLines, Ltd., 4.25%, 5/15/28, Callable 2/15/28 @ 100^ | 1,010,148 | ||||||
635,000 | TransCanada PipeLines, Ltd., 6.10%, 6/1/40 | 708,736 | ||||||
|
| |||||||
9,302,940 | ||||||||
|
| |||||||
Pharmaceuticals (0.5%): | ||||||||
4,055,000 | Actavis Funding SCS, 3.45%, 3/15/22, Callable 1/15/22 @ 100 | 3,990,292 | ||||||
845,000 | Actavis Funding SCS, 3.85%, 6/15/24, Callable 3/15/24 @ 100 | 833,420 | ||||||
678,000 | Actavis Funding SCS, 3.80%, 3/15/25, Callable 12/15/24 @ 100 | 661,880 | ||||||
225,000 | AstraZeneca plc, 2.38%, 6/12/22, Callable 5/12/22 @ 100 | 215,827 | ||||||
740,000 | Takeda Pharmaceutical Co., Ltd., 3.80%, 11/26/20(a) | 744,464 | ||||||
2,260,000 | Takeda Pharmaceutical Co., Ltd., 5.00%, 11/26/28, Callable 8/26/28 @ 100(a) | 2,308,274 | ||||||
|
| |||||||
8,754,157 | ||||||||
|
| |||||||
Real Estate Management & Development (0.0%)†: | ||||||||
250,000 | Mitsui Fudosan Co., Ltd., 2.95%, 1/23/23, Callable 12/23/22 @ 100(a) | 243,331 | ||||||
|
| |||||||
Sovereign Bond (1.5%): | ||||||||
1,930,000 | Colombia Government International Bond, 4.50%, 3/15/29, Callable 12/15/28 @ 100 | 1,907,805 | ||||||
5,119,000 | Mexico Government International Bond, 4.15%, 3/28/27^ | 4,949,612 | ||||||
3,390,000 | Mexico Government International Bond, 3.75%, 1/11/28^ | 3,173,074 | ||||||
589,561 | Oriental Republic of Uruguay, 4.50%, 8/14/24^ | 599,790 | ||||||
1,590,000 | Oriental Republic of Uruguay, 4.38%, 10/27/27 | 1,590,572 | ||||||
689,000 | Province of Manitoba, 3.05%, 5/14/24 | 692,438 | ||||||
1,574,000 | Republic of Chile, 3.24%, 2/6/28, Callable 11/6/27 @ 100 | 1,510,253 | ||||||
595,000 | Republic of Colombia, 4.50%, 1/28/26, Callable 10/28/25 @ 100^ | 595,000 | ||||||
3,516,000 | Republic of Colombia, 3.88%, 4/25/27, Callable 1/25/27 @ 100 | 3,357,780 |
See accompanying notes to the financial statements.
18
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Sovereign Bond, continued | ||||||||
$ | 581,000 | Republic of Indonesia, 4.10%, 4/24/28^ | $ | 565,263 | ||||
575,000 | Republic of Panama, 4.00%, 9/22/24, Callable 6/22/24 @ 100 | 579,893 | ||||||
540,000 | Republic of Panama, 4.50%, 5/15/47 | 524,475 | ||||||
980,000 | Republic of Peru, 4.13%, 8/25/27^ | 1,011,850 | ||||||
281,000 | Republic of Peru, 5.63%, 11/18/50^ | 329,894 | ||||||
3,200,000 | Republic of Philippines, 3.00%, 2/1/28 | 3,027,814 | ||||||
262,000 | United Mexican States, Series E, 3.50%, 1/21/21 | 260,677 | ||||||
2,506,000 | United Mexican States, 4.13%, 1/21/26 | 2,449,615 | ||||||
|
| |||||||
27,125,805 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.2%): | ||||||||
95,000 | Rogers Communications, Inc., 3.63%, 12/15/25, Callable 9/15/25 @ 100 | 92,622 | ||||||
130,000 | Rogers Communications, Inc., 5.00%, 3/15/44, Callable 9/15/43 @ 100 | 135,186 | ||||||
1,960,000 | Vodafone Group plc, 3.75%, 1/16/24 | 1,931,838 | ||||||
835,000 | Vodafone Group plc, 4.13%, 5/30/25 | 824,889 | ||||||
1,885,000 | Vodafone Group plc, 5.25%, 5/30/48 | 1,769,706 | ||||||
|
| |||||||
4,754,241 | ||||||||
|
| |||||||
Total Yankee Dollars (Cost $172,286,124) | 168,476,657 | |||||||
|
| |||||||
Municipal Bonds (0.1%): | ||||||||
Massachusetts (0.0%)†: | ||||||||
450,000 | Massachusetts State School Building Authority Sales Tax Revenue, Series B, 5.00%, 10/15/41, Continuously Callable @100 | 479,552 | ||||||
|
| |||||||
New Jersey (0.1%): | ||||||||
800,000 | New Jersey State Transportation Trust Fund Authority Revenue, Series AA, 5.00%, 6/15/36, Continuously Callable @100 | 841,288 | ||||||
|
| |||||||
New York (0.0%)†: | ||||||||
540,000 | New York State Urban Development Corp. Revenue, Series E, 5.00%, 3/15/24, Continuously Callable @100 | 603,083 | ||||||
|
| |||||||
California (0.0%)†: | ||||||||
347,000 | University of California Revenue, 4.77%, 5/15/15 | 356,778 | ||||||
50,000 | University of California Revenue, 4.86%, 5/15/12 | 52,486 | ||||||
|
| |||||||
409,264 | ||||||||
|
| |||||||
Total Municipal Bonds (Cost $2,265,023) | 2,333,187 | |||||||
|
| |||||||
U.S. Government Agency Mortgages (41.3%): | ||||||||
Federal Home Loan Bank (0.2%) | ||||||||
4,080,000 | 3.56%, 5/16/33 | 4,124,835 | ||||||
|
| |||||||
4,124,835 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation (7.3%) | ||||||||
1,135,008 | 2.50%, 2/1/24, Pool #G14989 | 1,135,969 | ||||||
3,650,000 | Class A2, Series KC02, 3.37%, 7/25/25 | 3,678,171 | ||||||
1,297,173 | Class A1, Series KIR2, 2.75%, 3/25/27 | 1,283,949 | ||||||
312,333 | 3.00%, 9/1/27, Pool #U70060 | 311,547 | ||||||
168,809 | 3.00%, 7/1/28, Pool #U79018 | 168,384 | ||||||
1,963,000 | Class A2, Series K085, 4.06%, 10/25/28 | 2,067,301 | ||||||
591,000 | 3.83%, 9/15/29(c) | 417,462 | ||||||
79,325 | 3.00%, 1/1/30, Pool #V60724 | 79,379 | ||||||
51,631 | 3.00%, 1/1/30, Pool #V60696 | 51,679 | ||||||
111,563 | 2.50%, 3/1/30, Pool #V60770 | 109,462 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal Home Loan Mortgage Corporation, continued | ||||||||
$ | 261,940 | 2.50%, 5/1/30, Pool #J31728 | $ | 256,678 | ||||
178,593 | 2.50%, 5/1/30, Pool #V60796 | 174,932 | ||||||
125,736 | 2.50%, 5/1/30, Pool #J31418 | 123,210 | ||||||
254,680 | 3.00%, 5/1/30, Pool #J31689 | 254,979 | ||||||
498,552 | 3.00%, 6/1/30, Pool #V60840 | 498,179 | ||||||
11,676 | 2.50%, 7/1/30, Pool #J32491 | 11,417 | ||||||
47,105 | 2.50%, 7/1/30, Pool #J32204 | 46,159 | ||||||
43,896 | 2.50%, 7/1/30, Pool #J32209 | 43,033 | ||||||
26,156 | 3.00%, 7/1/30, Pool #J32181 | 26,126 | ||||||
15,012 | 2.50%, 7/1/30, Pool #V60905 | 14,698 | ||||||
224,475 | 3.00%, 7/1/30, Pool #G15520 | 224,394 | ||||||
154,920 | 2.50%, 8/1/30, Pool #V60902 | 151,553 | ||||||
32,289 | 3.00%, 8/1/30, Pool #J32436 | 32,253 | ||||||
48,605 | 3.00%, 8/1/30, Pool #V60909 | 48,531 | ||||||
200,543 | 2.50%, 8/1/30, Pool #V60886 | 196,350 | ||||||
496,094 | �� | 2.50%, 9/1/30, Pool #V60904 | 485,110 | |||||
148,840 | 2.50%, 9/1/30, Pool #V60903 | 145,605 | ||||||
197,000 | 4.00%, 3/15/31(c) | 131,780 | ||||||
190,000 | 6.75%, 3/15/31 | 258,328 | ||||||
786,794 | 2.50%, 4/1/31, Pool #G16186 | 769,049 | ||||||
150,452 | 5.50%, 2/1/35, Pool #G04692 | 162,115 | ||||||
220,454 | 6.00%, 4/1/39, Pool #G07613 | 243,524 | ||||||
42,623 | 4.50%, 12/1/39, Pool #A90196 | 44,629 | ||||||
39,577 | 4.50%, 7/1/40, Pool #A93010 | 41,440 | ||||||
50,517 | 4.00%, 8/1/40, Pool #A93534 | 51,978 | ||||||
293,354 | 4.00%, 9/1/40, Pool #A93851 | 301,745 | ||||||
793,613 | 4.50%, 9/1/40, Pool #A93700 | 830,961 | ||||||
45,847 | 4.00%, 10/1/40, Pool #A95923 | 47,174 | ||||||
46,877 | 4.00%, 11/1/40, Pool #A95144 | 48,233 | ||||||
42,565 | 4.00%, 11/1/40, Pool #A94977 | 43,796 | ||||||
43,596 | 4.00%, 11/1/40, Pool #A94779 | 44,854 | ||||||
2,951 | 4.00%, 4/1/41, Pool #Q00093 | 3,036 | ||||||
130,406 | 4.50%, 5/1/41, Pool #Q00804 | 136,543 | ||||||
142,549 | 4.50%, 5/1/41, Pool #Q00959 | 149,257 | ||||||
562,366 | Class FL, Series 4248, 2.91%(US0001M+45bps), 5/15/41 | 559,226 | ||||||
626,697 | 5.50%, 6/1/41, Pool #G07553 | 673,306 | ||||||
43,933 | 4.00%, 10/1/41, Pool #Q03841 | 45,205 | ||||||
659,241 | 3.50%, 10/1/41, Pool #G08462 | 664,132 | ||||||
140,490 | 5.00%, 10/1/41, Pool #G07642 | 148,811 | ||||||
81,540 | 4.00%, 10/1/41, Pool #Q04022 | 83,900 | ||||||
325,702 | 3.50%, 4/1/42, Pool #C03811 | 328,116 | ||||||
271,094 | 3.50%, 4/1/42, Pool #Q07417 | 273,105 | ||||||
9,496 | 3.50%, 5/1/42, Pool #Q08306 | 9,567 | ||||||
31,219 | 3.50%, 5/1/42, Pool #Q08239 | 31,381 | ||||||
17,457 | 3.50%, 5/1/42, Pool #Q07896 | 17,587 | ||||||
458,794 | 3.50%, 8/1/42, Pool #Q10724 | 462,197 | ||||||
41,742 | 3.50%, 8/1/42, Pool #Q12162 | 42,052 | ||||||
273,191 | 3.50%, 8/1/42, Pool #G07106 | 275,218 | ||||||
41,216 | 3.50%, 10/1/42, Pool #Q11750 | 41,522 | ||||||
24,322 | 3.50%, 10/1/42, Pool #Q11909 | 24,393 | ||||||
517,359 | 3.50%, 11/1/42, Pool #Q13134 | 521,184 | ||||||
310,818 | 3.00%, 12/1/42, Pool #C04320 | 305,618 | ||||||
359,542 | 3.00%, 1/1/43, Pool #Q14866 | 353,407 | ||||||
332,970 | 3.00%, 3/1/43, Pool #Q16673 | 327,213 | ||||||
231,332 | 3.00%, 3/1/43, Pool #Q16403 | 227,339 |
See accompanying notes to the financial statements.
19
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal Home Loan Mortgage Corporation, continued | ||||||||
$ | 432,784 | 3.00%, 3/1/43, Pool #Q16567 | $ | 425,392 | ||||
117,701 | 3.00%, 4/1/43, Pool #Q17095 | 115,667 | ||||||
154,480 | 3.50%, 6/1/43, Pool #Q18718 | 155,610 | ||||||
239,095 | 3.50%, 7/1/43, Pool #Q20206 | 240,869 | ||||||
156,663 | 3.50%, 8/1/43, Pool #Q21320 | 157,786 | ||||||
1,306,142 | 3.00%, 8/1/43, Pool #G07550 | 1,279,689 | ||||||
111,121 | 4.00%, 9/1/43, Pool #Q21579 | 114,402 | ||||||
3,780,645 | 3.00%, 9/1/43, Pool #G60675 | 3,714,887 | ||||||
318,004 | 3.00%, 10/1/43, Pool #G60037 | 312,610 | ||||||
4,584,149 | 3.50%, 12/1/43, Pool #G60270 | 4,618,146 | ||||||
356,882 | 4.50%, 12/1/43, Pool #Q23779 | 369,932 | ||||||
315,192 | 4.50%, 12/1/43, Pool #G60018 | 328,065 | ||||||
13,304,026 | 3.50%, 1/1/44, Pool #G07922 | 13,402,706 | ||||||
6,867,403 | 3.50%, 1/1/44, Pool #G60271 | 6,918,281 | ||||||
27,105 | 3.50%, 1/1/44, Pool #Q24368 | 27,306 | ||||||
860,283 | Class XZ, Series 4316, 4.50%, 3/15/44 | 934,013 | ||||||
161,502 | 4.00%, 4/1/44, Pool #Q25643 | 165,996 | ||||||
19,588 | 3.50%, 4/1/44, Pool #Q25812 | 19,727 | ||||||
1,129,057 | 3.50%, 4/1/44, Pool #G07848 | 1,137,429 | ||||||
1,268,670 | Class ZX, Series 4352, 4.00%, 4/15/44 | 1,325,433 | ||||||
19,183 | 3.50%, 5/1/44, Pool #Q25988 | 19,319 | ||||||
33,168 | 3.50%, 5/1/44, Pool #Q26218 | 33,465 | ||||||
55,720 | 3.50%, 5/1/44, Pool #Q26362 | 56,122 | ||||||
23,031 | 3.50%, 5/1/44, Pool #Q26452 | 23,194 | ||||||
27,651 | 3.50%, 6/1/44, Pool #Q26707 | 27,847 | ||||||
137,541 | 3.50%, 6/1/44, Pool #Q28764 | 138,561 | ||||||
205,879 | 4.00%, 7/1/44, Pool #G60901 | 211,570 | ||||||
27,921 | 3.50%, 7/1/44, Pool #Q27319 | 28,172 | ||||||
105,582 | 3.50%, 8/1/44, Pool #Q27843 | 106,332 | ||||||
600,107 | 4.00%, 8/1/44, Pool #G07786 | 617,807 | ||||||
122,160 | 3.50%, 9/1/44, Pool #Q28605 | 123,029 | ||||||
47,118 | 3.50%, 9/1/44, Pool #Q28604 | 47,540 | ||||||
20,049 | 3.50%, 9/1/44, Pool #Q28763 | 20,139 | ||||||
9,697 | 3.50%, 11/1/44, Pool #Q29697 | 9,752 | ||||||
3,469 | 3.50%, 11/1/44, Pool #Q29911 | 3,490 | ||||||
53,105 | 3.50%, 1/1/45, Pool #Q30876 | 53,360 | ||||||
38,339 | 3.50%, 1/1/45, Pool #Q31122 | 38,480 | ||||||
17,801 | 4.00%, 2/1/45, Pool #Q31128 | 18,233 | ||||||
40,572 | 4.00%, 2/1/45, Pool #Q31338 | 41,557 | ||||||
14,831 | 3.50%, 5/1/45, Pool #Q33131 | 14,851 | ||||||
123,610 | 3.50%, 5/1/45, Pool #Q33606 | 124,030 | ||||||
116,973 | 3.50%, 6/1/45, Pool #Q34176 | 117,370 | ||||||
3,341 | 3.50%, 7/1/45, Pool #Q34960 | 3,352 | ||||||
3,889,622 | 3.50%, 8/1/45, Pool #G60138 | 3,917,278 | ||||||
32,235 | 3.50%, 9/1/45, Pool #Q36302 | 32,501 | ||||||
303,936 | 4.00%, 10/1/45, Pool #Q36972 | 311,617 | ||||||
13,240 | 3.50%, 10/1/45, Pool #V81932 | 13,285 | ||||||
41,270 | 4.00%, 12/1/45, Pool #Q37955 | 42,203 | ||||||
50,936 | 4.00%, 12/1/45, Pool #Q37957 | 52,138 | ||||||
529,746 | 3.50%, 1/1/46, Pool #G60393 | 531,543 | ||||||
40,092 | 3.50%, 2/1/46, Pool #V82209 | 40,228 | ||||||
378,724 | 3.50%, 3/1/46, Pool #Q39250 | 380,009 | ||||||
431,987 | 3.50%, 5/1/46, Pool #G60561 | 433,453 | ||||||
704,262 | 4.00%, 7/1/46, Pool #V82528 | 721,417 | ||||||
4,344,578 | 3.50%, 7/1/46, Pool #G60658 | 4,368,066 | ||||||
411,746 | 4.00%, 8/1/46, Pool #V82553 | 421,776 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal Home Loan Mortgage Corporation, continued | ||||||||
$ | 9,663,834 | 3.00%, 8/1/46, Pool #G60717 | $ | 9,437,926 | ||||
811,083 | Class FB, Series 4606, 2.96%(US0001M+50bps), 8/15/46 | 818,118 | ||||||
56,666 | 4.00%, 9/1/46, Pool #G60729 | 57,942 | ||||||
550,667 | 3.00%, 9/1/46, Pool #G60718 | 537,609 | ||||||
1,565,933 | 3.00%, 9/1/46, Pool #Q42979 | 1,528,194 | ||||||
3,520,678 | 3.00%, 9/1/46, Pool #Q43104 | 3,440,469 | ||||||
112,454 | 4.00%, 10/1/46, Pool #V82661 | 114,987 | ||||||
146,072 | 3.00%, 12/1/46, Pool #Q45083 | 143,084 | ||||||
575,287 | 3.00%, 12/1/46, Pool #Q45064 | 561,646 | ||||||
243,956 | 3.00%, 12/1/46, Pool #Q45079 | 238,587 | ||||||
1,948,061 | 3.00%, 12/1/46, Pool #V82781 | 1,900,963 | ||||||
597,514 | 3.00%, 12/1/46, Pool #Q44853 | 583,902 | ||||||
289,919 | 3.00%, 12/1/46, Pool #Q45080 | 283,360 | ||||||
2,538,582 | 4.00%, 2/1/47, Pool #V82929 | 2,600,421 | ||||||
1,103,211 | 3.50%, 3/1/47, Pool #G60968 | 1,108,324 | ||||||
187,362 | 3.50%, 7/1/47, Pool #Q53113 | 188,694 | ||||||
2,742,533 | 4.50%, 7/1/47, Pool #G61047 | 2,878,083 | ||||||
2,111,305 | 4.00%, 8/1/47, Pool #G67704 | 2,170,244 | ||||||
727,949 | 3.50%, 10/1/47, Pool #G61178 | 732,226 | ||||||
13,322,636 | 3.50%, 12/1/47, Pool #G67706 | 13,359,614 | ||||||
921,168 | 3.50%, 12/1/47, Pool #G61208 | 925,152 | ||||||
2,225,005 | 3.50%, 1/1/48, Pool #Q53747 | 2,228,771 | ||||||
202,432 | 3.50%, 1/1/48, Pool #Q53648 | 203,026 | ||||||
105,198 | 3.50%, 1/1/48, Pool #Q53630 | 105,816 | ||||||
1,154,000 | 4.50%, 1/15/48, TBA | 1,194,496 | ||||||
893,000 | 4.00%, 1/15/48, TBA | 910,354 | ||||||
6,198,694 | 4.00%, 6/1/48, Pool #G67712 | 6,373,350 | ||||||
3,207,836 | 4.50%, 8/1/48, Pool #G67715 | 3,358,960 | ||||||
300,000 | 6.00%, 1/15/49, TBA | 322,785 | ||||||
2,600,000 | 5.50%, 1/15/49, TBA | 2,745,740 | ||||||
10,861,416 | 3.00%, 1/15/49, TBA | 10,584,028 | ||||||
|
| |||||||
141,303,334 | ||||||||
|
| |||||||
Federal National Mortgage Association (21.4%) | ||||||||
222,399 | 2.50%, 9/1/27, Pool #AB6194 | 219,245 | ||||||
148,045 | 2.50%, 9/1/27, Pool #AP5205 | 146,063 | ||||||
51,963 | 2.50%, 2/1/28, Pool #AB8446 | 51,267 | ||||||
72,761 | 3.00%, 4/1/28, Pool #AT3121 | 72,809 | ||||||
110,990 | 2.50%, 4/1/28, Pool #AB8870 | 109,505 | ||||||
92,872 | 3.00%, 5/1/28, Pool #AT6033 | 92,934 | ||||||
303,637 | 2.50%, 8/1/28, Pool #AS0190 | 299,567 | ||||||
3,279,000 | Class A2, Series2018-M14, 3.58%, 8/25/28 | 3,342,787 | ||||||
1,427,302 | 3.50%, 9/1/28, Pool #AL4245 | 1,449,762 | ||||||
172,032 | 3.00%, 10/1/28, Pool #AU8774 | 171,939 | ||||||
18,764 | 3.00%, 10/1/28, Pool #AQ4132 | 18,777 | ||||||
405,068 | 3.50%, 10/1/28, Pool #AV0198 | 411,441 | ||||||
604,098 | 3.50%, 11/1/28, Pool #AV1360 | 613,600 | ||||||
19,490 | 3.00%, 11/1/28, Pool #AV0298 | 19,502 | ||||||
469,251 | 3.00%, 4/1/29, Pool #AW0937 | 469,563 | ||||||
339,226 | 3.00%, 5/1/29, Pool #AW2544 | 339,450 | ||||||
650,524 | 3.00%, 6/1/29, Pool #AS2676 | 650,957 | ||||||
452,261 | 3.50%, 9/1/29, Pool #AL5806 | 458,545 | ||||||
209,439 | 3.50%, 9/1/29, Pool #AX0105 | 212,342 | ||||||
1,323,147 | 3.00%, 9/1/29, Pool #AL6897 | 1,324,025 | ||||||
426,449 | 3.00%, 9/1/29, Pool #AS3220 | 426,733 | ||||||
57,151 | 3.50%, 10/1/29, Pool #AX2741 | 57,945 |
See accompanying notes to the financial statements.
20
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 237,967 | 3.00%, 10/1/29, Pool #AS3594 | $ | 238,125 | ||||
325,811 | 3.50%, 12/1/29, Pool #AS3988 | 330,908 | ||||||
884,496 | 3.00%, 1/1/30, Pool #AL6144 | 885,086 | ||||||
2,605,000 | 3.82%, 1/15/30(c) | 1,824,497 | ||||||
128,825 | 2.50%, 2/1/30, Pool #BM3403 | 127,031 | ||||||
35,537 | 2.50%, 2/1/30, Pool #AS4485 | 34,797 | ||||||
40,559 | 2.50%, 2/1/30, Pool #AS4488 | 39,714 | ||||||
255,646 | 2.50%, 3/1/30, Pool #AS4688 | 250,323 | ||||||
175,395 | 3.00%, 3/1/30, Pool #AL6583 | 175,512 | ||||||
120,425 | 2.50%, 4/1/30, Pool #AY3416 | 117,918 | ||||||
147,647 | 3.00%, 4/1/30, Pool #AL6584 | 147,745 | ||||||
85,984 | 3.00%, 5/1/30, Pool #AL6761 | 86,041 | ||||||
57,940 | 2.50%, 5/1/30, Pool #AY0828 | 56,733 | ||||||
3,901,000 | 3.85%, 5/15/30(c) | 2,700,215 | ||||||
53,975 | 2.50%, 7/1/30, Pool #AZ2170 | 52,850 | ||||||
138,715 | 3.00%, 7/1/30, Pool #AX9701 | 138,808 | ||||||
186,978 | 2.50%, 7/1/30, Pool #AS5403 | 183,081 | ||||||
19,689 | 3.00%, 7/1/30, Pool #AZ2297 | 19,652 | ||||||
118,339 | 3.00%, 7/1/30, Pool #AL7139 | 118,418 | ||||||
39,793 | 3.00%, 7/1/30, Pool #AX9700 | 39,820 | ||||||
32,451 | 2.50%, 7/1/30, Pool #AS5405 | 31,775 | ||||||
219,334 | 3.00%, 8/1/30, Pool #AL7225 | 219,480 | ||||||
197,880 | 3.00%, 8/1/30, Pool #AL7227 | 198,012 | ||||||
32,843 | 3.00%, 8/1/30, Pool #AZ7833 | 32,865 | ||||||
15,588 | 3.00%, 8/1/30, Pool #AZ8597 | 15,598 | ||||||
954,468 | 3.50%, 8/1/30, Pool #AL7430 | 967,714 | ||||||
233,457 | 2.50%, 8/1/30, Pool #AS5616 | 228,594 | ||||||
383,630 | 2.50%, 8/1/30, Pool #BM3552 | 378,171 | ||||||
29,136 | 3.00%, 8/1/30, Pool #AX3298 | 29,156 | ||||||
156,979 | 3.00%, 8/1/30, Pool #AS5622 | 157,084 | ||||||
171,802 | 3.00%, 8/1/30, Pool #AS5623 | 171,917 | ||||||
121,145 | 2.50%, 8/1/30, Pool #AS5614 | 118,622 | ||||||
28,513 | 3.50%, 8/1/30, Pool #AS5707 | 28,909 | ||||||
127,634 | 3.50%, 8/1/30, Pool #AS5708 | 129,411 | ||||||
93,613 | 2.50%, 8/1/30, Pool #AS5548 | 91,664 | ||||||
136,799 | 2.50%, 9/1/30, Pool #AS5872 | 133,949 | ||||||
41,673 | 3.00%, 9/1/30, Pool #AL7320 | 41,700 | ||||||
154,345 | 3.00%, 9/1/30, Pool #AS5728 | 154,448 | ||||||
115,892 | 3.00%, 9/1/30, Pool #AS5714 | 115,969 | ||||||
64,064 | 3.00%, 9/1/30, Pool #AZ5719 | 64,009 | ||||||
109,948 | 2.50%, 9/1/30, Pool #AS5786 | 107,658 | ||||||
124,216 | 2.50%, 11/1/30, Pool #AS6115 | 121,629 | ||||||
130,067 | 2.50%, 11/1/30, Pool #AS6116 | 127,355 | ||||||
134,911 | 2.50%, 11/1/30, Pool #AS6141 | 132,100 | ||||||
120,428 | 2.50%, 11/1/30, Pool #AS6142 | 117,919 | ||||||
18,801 | 2.50%, 11/1/30, Pool #AL7800 | 18,410 | ||||||
220,763 | 2.50%, 3/1/31, Pool #BM1595 | 217,669 | ||||||
205,783 | 2.50%, 6/1/31, Pool #AS7320 | 201,046 | ||||||
366,191 | 2.50%, 7/1/31, Pool #AS7617 | 357,762 | ||||||
331,429 | 2.50%, 7/1/31, Pool #AS7605 | 323,800 | ||||||
16,954 | 2.50%, 8/1/31, Pool #BC2777 | 16,564 | ||||||
51,792 | 4.00%, 8/1/31, Pool #AY4688 | 53,127 | ||||||
81,259 | 4.00%, 8/1/31, Pool #AY4707 | 83,361 | ||||||
2,769,422 | 3.00%, 8/1/31, Pool #AL9376 | 2,767,004 | ||||||
228,557 | 3.00%, 9/1/31, Pool #AL9378 | 228,147 | ||||||
620,978 | 2.50%, 10/1/31, Pool #AS8193 | 606,684 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 446,319 | 2.50%, 10/1/31, Pool #AS8009 | $ | 436,045 | ||||
1,506,494 | 2.50%, 10/1/31, Pool #AS8195 | 1,471,817 | ||||||
817,155 | 2.50%, 10/1/31, Pool #AS8208 | 798,345 | ||||||
2,931,637 | 2.50%, 10/1/31, Pool #BC4773 | 2,864,156 | ||||||
134,348 | 2.00%, 10/1/31, Pool #MA2774 | 128,589 | ||||||
488,813 | 2.50%, 11/1/31, Pool #AS8240 | 477,562 | ||||||
202,649 | 2.50%, 11/1/31, Pool #BC2629 | 197,985 | ||||||
242,301 | 2.50%, 11/1/31, Pool #AS8245 | 236,723 | ||||||
617,083 | 2.00%, 11/1/31, Pool #AS8251 | 590,628 | ||||||
333,799 | 2.50%, 11/1/31, Pool #AS8241 | 326,115 | ||||||
221,498 | 2.50%, 11/1/31, Pool #BC2628 | 216,400 | ||||||
40,039 | 2.00%, 11/1/31, Pool #AS8291 | 38,324 | ||||||
404,597 | 2.50%, 11/1/31, Pool #BC2631 | 395,284 | ||||||
218,546 | 2.00%, 11/1/31, Pool #BC9040 | 209,177 | ||||||
793,432 | 2.00%, 11/1/31, Pool #BM3054 | 759,434 | ||||||
176,854 | 2.00%, 12/1/31, Pool #MA2845 | 169,272 | ||||||
1,962,000 | 2.50%, 1/25/32, TBA | 1,916,054 | ||||||
23,481 | 3.00%, 2/1/32, Pool #BE5670 | 23,439 | ||||||
1,449,465 | 3.50%, 2/1/32, Pool #AS8885 | 1,469,688 | ||||||
43,796 | 2.50%, 2/1/32, Pool #BM1036 | 42,788 | ||||||
730,687 | 2.50%, 3/1/32, Pool #AS9318 | 713,868 | ||||||
762,084 | 3.00%, 3/1/32, Pool #AS9327 | 760,715 | ||||||
771,226 | 2.50%, 3/1/32, Pool #AS9319 | 753,474 | ||||||
1,050,841 | 2.00%, 3/1/32, Pool #BM3061 | 1,005,800 | ||||||
387,357 | 2.50%, 3/1/32, Pool #AS9317 | 378,441 | ||||||
473,957 | 2.50%, 3/1/32, Pool #AS9316 | 463,048 | ||||||
685,587 | 2.50%, 3/1/32, Pool #AS9321 | 669,806 | ||||||
3,216,491 | 3.50%, 4/1/32, Pool #BM3503 | 3,271,156 | ||||||
2,340,562 | 3.50%, 5/1/32, Pool #BM1602 | 2,373,180 | ||||||
3,495,023 | 3.00%, 6/1/32, Pool #BM1791 | 3,489,139 | ||||||
1,081,059 | 2.50%, 8/1/32, Pool #BM3578 | 1,056,174 | ||||||
426,712 | 3.00%, 9/1/32, Pool #BM3240 | 427,489 | ||||||
113,040 | 3.50%, 11/1/32, Pool #BJ2054 | 114,591 | ||||||
135,218 | 5.50%, 1/1/33, Pool #676661 | 144,928 | ||||||
73,670 | 3.50%, 1/1/33, Pool #BJ2096 | 74,679 | ||||||
2,120,488 | 2.50%, 2/1/33, Pool #BM3793 | 2,076,320 | ||||||
98,223 | 5.50%, 5/1/33, Pool #555424 | 105,427 | ||||||
151,037 | 4.00%, 9/1/33, Pool #BK7642 | 155,013 | ||||||
443,937 | 4.00%, 10/1/33, Pool #CA2527 | 455,590 | ||||||
642,411 | 4.00%, 10/1/33, Pool #CA2406 | 659,310 | ||||||
886,131 | 4.00%, 10/1/33, Pool #CA2404 | 909,444 | ||||||
445,272 | 4.00%, 10/1/33, Pool #CA2528 | 456,960 | ||||||
460,619 | 4.00%, 11/1/33, Pool #CA2555 | 472,851 | ||||||
2,912,550 | 4.00%, 11/1/33, Pool #CA2557 | 2,989,000 | ||||||
1,336,996 | 3.00%, 12/1/33, Pool #MA3547 | 1,334,338 | ||||||
666,000 | 2.00%, 1/25/34, TBA | 637,396 | ||||||
200,000 | 4.50%, 1/25/34, TBA | 203,625 | ||||||
1,900,000 | 5.00%, 1/25/34, TBA | 1,931,766 | ||||||
786,359 | 5.00%, 2/1/35, Pool #735226 | 834,783 | ||||||
234,023 | 5.50%, 2/1/35, Pool #735989 | 251,510 | ||||||
58,398 | 5.00%, 3/1/35, Pool #735288 | 62,003 | ||||||
21,257 | 6.00%, 4/1/35, Pool #735504 | 23,181 | ||||||
108,923 | 5.00%, 9/1/35, Pool #889974 | 115,651 | ||||||
230,131 | 4.00%, 1/1/36, Pool #AB0686 | 236,316 | ||||||
544,058 | 5.50%, 9/1/36, Pool #995113 | 585,823 | ||||||
58,954 | 3.00%, 10/1/36, Pool #AL9227 | 58,320 |
See accompanying notes to the financial statements.
21
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 425,846 | 3.00%, 11/1/36, Pool #AS8348 | $ | 421,266 | ||||
175,424 | 3.00%, 11/1/36, Pool #AS8349 | 173,537 | ||||||
393,093 | 3.00%, 12/1/36, Pool #BE1896 | 388,866 | ||||||
511,274 | 3.00%, 12/1/36, Pool #AS8553 | 505,775 | ||||||
29,767 | 5.50%, 2/1/38, Pool #961545 | 31,711 | ||||||
16,646 | 6.00%, 3/1/38, Pool #889529 | 18,177 | ||||||
127,486 | 5.50%, 5/1/38, Pool #889692 | 136,800 | ||||||
53,931 | 6.00%, 5/1/38, Pool #889466 | 59,044 | ||||||
95,806 | 5.50%, 5/1/38, Pool #889441 | 102,323 | ||||||
84,922 | 5.50%, 6/1/38, Pool #995018 | 91,401 | ||||||
24,111 | 5.50%, 9/1/38, Pool #889995 | 25,812 | ||||||
57,868 | 6.00%, 10/1/38, Pool #889983 | 63,132 | ||||||
301,321 | 5.50%, 1/1/39, Pool #AB0200 | 323,040 | ||||||
134,028 | 4.50%, 4/1/39, Pool #930922 | 140,340 | ||||||
144,380 | 4.50%, 5/1/39, Pool #AL1472 | 151,187 | ||||||
1,347,991 | 5.00%, 6/1/39, Pool #AL7521 | 1,421,952 | ||||||
843,575 | 6.00%, 7/1/39, Pool #BF0056 | 926,419 | ||||||
61,139 | 5.50%, 10/1/39, Pool #AD0362 | 65,315 | ||||||
440,566 | 5.50%, 12/1/39, Pool #AC6680 | 468,887 | ||||||
60,981 | 5.50%, 12/1/39, Pool #AD0571 | 65,246 | ||||||
8,282,844 | 4.50%, 1/1/40, Pool #AC8568 | 8,690,476 | ||||||
50,011 | 5.50%, 3/1/40, Pool #AL5304 | 54,019 | ||||||
48,675 | 4.50%, 4/1/40, Pool #AD4038 | 50,984 | ||||||
385,313 | 6.00%, 4/1/40, Pool #AL4141 | 420,333 | ||||||
73,504 | 6.50%, 5/1/40, Pool #AL1704 | 83,066 | ||||||
105,109 | 4.50%, 7/1/40, Pool #AB1226 | 110,095 | ||||||
139,062 | 4.50%, 7/1/40, Pool #AD7127 | 145,659 | ||||||
196,670 | 4.00%, 7/1/40, Pool #AE0113 | 202,196 | ||||||
5,296 | 4.00%, 8/1/40, Pool #AD9136 | 5,446 | ||||||
352,318 | 4.00%, 8/1/40, Pool #AE0216 | 362,270 | ||||||
42,427 | 6.00%, 9/1/40, Pool #AE0823 | 46,111 | ||||||
947,497 | 4.00%, 10/1/40, Pool #AB1614 | 974,265 | ||||||
400,335 | 4.00%, 10/1/40, Pool #AE7535 | 411,646 | ||||||
64,059 | 4.00%, 11/1/40, Pool #AE8407 | 65,869 | ||||||
42,918 | 4.00%, 12/1/40, Pool #AH0006 | 44,131 | ||||||
284,566 | 4.00%, 12/1/40, Pool #AH0946 | 292,606 | ||||||
2,680,000 | Class CY, Series2010-136, 4.00%, 12/25/40 | 2,797,774 | ||||||
81,947 | 4.00%, 1/1/41, Pool #AL7167 | 84,013 | ||||||
10,890,956 | Class ZA, Series2011-8, 4.00%, 2/25/41, Callable 1/25/33 @ 100 | 11,233,583 | ||||||
622,988 | 4.00%, 4/1/41, Pool #AI1186 | 640,575 | ||||||
91,632 | 6.00%, 6/1/41, Pool #AL4142 | 99,980 | ||||||
1,003,987 | 5.00%, 7/1/41, Pool #AL7524 | 1,065,788 | ||||||
57,881 | 4.50%, 7/1/41, Pool #AB3314 | 60,601 | ||||||
63,834 | 4.00%, 9/1/41, Pool #AI5228 | 65,638 | ||||||
55,340 | 4.50%, 9/1/41, Pool #AI8961 | 57,965 | ||||||
1,155,603 | 5.50%, 9/1/41, Pool #AL8430 | 1,242,184 | ||||||
744,078 | 4.00%, 9/1/41, Pool #AJ1541 | 765,087 | ||||||
50,194 | 4.00%, 10/1/41, Pool #AC9312 | 51,613 | ||||||
3,305,300 | 4.00%, 11/1/41, Pool #AJ4701 | 3,397,795 | ||||||
168,712 | 4.00%, 12/1/41, Pool #AB4054 | 174,325 | ||||||
54,946 | 4.00%, 12/1/41, Pool #AJ7684 | 56,774 | ||||||
54,451 | 3.50%, 1/1/42, Pool #AK2073 | 54,876 | ||||||
1,469,229 | 4.00%, 1/1/42, Pool #AB4307 | 1,510,747 | ||||||
339,356 | 3.50%, 1/1/42, Pool #AW8154 | 342,150 | ||||||
180,350 | 4.00%, 2/1/42, Pool #AB4530 | 185,445 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 57,251 | 3.50%, 4/1/42, Pool #AK7510 | $ | 57,698 | ||||
163,597 | 3.50%, 4/1/42, Pool #AO0777 | 164,874 | ||||||
299,573 | 4.00%, 5/1/42, Pool #AO2961 | 308,036 | ||||||
23,605 | 3.50%, 5/1/42, Pool #AO2881 | 23,662 | ||||||
98,246 | 4.00%, 5/1/42, Pool #A02114 | 101,022 | ||||||
96,765 | 4.00%, 5/1/42, Pool #AT6144 | 99,982 | ||||||
45,634 | 3.50%, 6/1/42, Pool #AL2168 | 45,988 | ||||||
102,215 | 4.00%, 6/1/42, Pool #AL2003 | 105,103 | ||||||
51,137 | 3.50%, 6/1/42, Pool #AO3107 | 51,536 | ||||||
27,179 | 3.50%, 6/1/42, Pool #AO3048 | 27,391 | ||||||
41,501 | 3.50%, 6/1/42, Pool #AK9225 | 41,825 | ||||||
60,902 | 3.50%, 7/1/42, Pool #AO9707 | 61,378 | ||||||
213,289 | 4.00%, 7/1/42, Pool #AL4244 | 220,380 | ||||||
3,616,306 | 4.00%, 7/1/42, Pool #AL2160 | 3,736,581 | ||||||
74,788 | 4.00%, 7/1/42, Pool #AL2607 | 76,901 | ||||||
95,631 | 3.50%, 8/1/42, Pool #AO7152 | 96,378 | ||||||
1,205,938 | 4.00%, 8/1/42, Pool #AL2242 | 1,240,008 | ||||||
340,321 | 4.50%, 9/1/42, Pool #AL2482 | 356,333 | ||||||
52,416 | 4.00%, 9/1/42, Pool #AX3706 | 53,896 | ||||||
104,351 | 4.00%, 9/1/42, Pool #AL2901 | 107,295 | ||||||
143,235 | 3.00%, 10/1/42, Pool #AP9726 | 140,917 | ||||||
478,945 | 3.50%, 10/1/42, Pool #AB6512 | 482,683 | ||||||
115,043 | 3.50%, 12/1/42, Pool #AQ7127 | 115,938 | ||||||
465,589 | 3.50%, 12/1/42, Pool #AL8045 | 469,222 | ||||||
261,697 | 4.00%, 12/1/42, Pool #AL6055 | 270,390 | ||||||
239,419 | 3.00%, 12/1/42, Pool #AB7271 | 235,469 | ||||||
203,577 | 3.00%, 12/1/42, Pool #AB7425 | 200,203 | ||||||
901,109 | 3.00%, 12/1/42, Pool #AB7269 | 886,255 | ||||||
162,880 | 4.00%, 1/1/43, Pool #AL7369 | 167,475 | ||||||
600,169 | 3.00%, 1/1/43, Pool #AB7458 | 590,137 | ||||||
582,993 | 3.00%, 1/1/43, Pool #AB7497 | 573,187 | ||||||
333,850 | 3.00%, 1/1/43, Pool #AB7565 | 328,264 | ||||||
653,108 | 3.00%, 1/1/43, Pool #AB7567 | 642,408 | ||||||
404,665 | 3.00%, 1/1/43, Pool #AB7755 | 397,848 | ||||||
2,224,574 | 4.50%, 1/1/43, Pool #AL8206 | 2,329,929 | ||||||
259,360 | 3.50%, 2/1/43, Pool #AL2935 | 261,383 | ||||||
223,988 | 3.00%, 2/1/43, Pool #AB8558 | 220,188 | ||||||
228,569 | 3.00%, 2/1/43, Pool #AB7762 | 224,718 | ||||||
426,724 | 3.00%, 3/1/43, Pool #AB8701 | 419,435 | ||||||
54,760 | 3.00%, 3/1/43, Pool #AB8712 | 53,824 | ||||||
17,174 | 3.50%, 3/1/43, Pool #AR6909 | 17,308 | ||||||
50,940 | 3.50%, 3/1/43, Pool #AR9203 | 51,336 | ||||||
112,638 | 3.00%, 3/1/43, Pool #AR7576 | 110,687 | ||||||
98,404 | 3.00%, 3/1/43, Pool #AR7568 | 96,699 | ||||||
35,627 | 3.50%, 3/1/43, Pool #AR8128 | 35,881 | ||||||
145,417 | 3.00%, 3/1/43, Pool #AR9218 | 142,885 | ||||||
440,545 | 3.00%, 3/1/43, Pool #AR9194 | 433,225 | ||||||
255,707 | 4.00%, 3/1/43, Pool #AL3300 | 262,880 | ||||||
146,224 | 3.00%, 3/1/43, Pool #AB8830 | 143,760 | ||||||
684,194 | 3.50%, 3/1/43, Pool #AL3409 | 689,534 | ||||||
21,525 | 3.50%, 3/1/43, Pool #AT0310 | 21,691 | ||||||
404,186 | 3.00%, 4/1/43, Pool #AB9016 | 397,235 | ||||||
117,831 | 3.00%, 4/1/43, Pool #AB8923 | 115,787 | ||||||
55,917 | 3.00%, 4/1/43, Pool #AB9033 | 54,955 | ||||||
105,554 | 3.00%, 4/1/43, Pool #AB8924 | 103,719 | ||||||
167,051 | 3.00%, 4/1/43, Pool #AR8630 | 164,148 |
See accompanying notes to the financial statements.
22
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 63,885 | 3.00%, 4/1/43, Pool #AT2037 | $ | 62,790 | ||||
201,947 | 3.00%, 4/1/43, Pool #AT2040 | 198,480 | ||||||
121,756 | 3.00%, 4/1/43, Pool #AT2043 | 119,634 | ||||||
23,362 | 3.50%, 4/1/43, Pool #AT3019 | 23,545 | ||||||
107,592 | 3.50%, 5/1/43, Pool #AB9255 | 108,432 | ||||||
39,643 | 3.50%, 5/1/43, Pool #MA1440 | 39,939 | ||||||
157,621 | 3.00%, 5/1/43, Pool #AT6654 | 154,970 | ||||||
208,221 | 3.00%, 5/1/43, Pool #AB9462 | 204,648 | ||||||
161,422 | 3.00%, 5/1/43, Pool #AL3759 | 158,728 | ||||||
290,735 | 3.00%, 5/1/43, Pool #AB9173 | 285,769 | ||||||
427,687 | 3.00%, 5/1/43, Pool #AT2719 | 420,431 | ||||||
25,771 | 3.50%, 6/1/43, Pool #AB9567 | 25,973 | ||||||
236,758 | 3.00%, 6/1/43, Pool #AB9662 | 232,714 | ||||||
15,248 | 3.00%, 6/1/43, Pool #AB9564 | 14,987 | ||||||
86,019 | 3.00%, 6/1/43, Pool #AT7676 | 84,522 | ||||||
2,929,202 | 3.00%, 7/1/43, Pool #AB9940 | 2,878,446 | ||||||
72,423 | 3.50%, 7/1/43, Pool #AT3906 | 72,989 | ||||||
472,660 | 3.50%, 7/1/43, Pool #AL4010 | 476,347 | ||||||
211,370 | 3.50%, 7/1/43, Pool #AT8464 | 212,954 | ||||||
193,243 | 3.50%, 7/1/43, Pool #AR7145 | 194,493 | ||||||
660,595 | 3.00%, 7/1/43, Pool #AL5778 | 649,082 | ||||||
664,828 | 3.50%, 7/1/43, Pool #AU0918 | 670,014 | ||||||
448,604 | 3.50%, 7/1/43, Pool #AT9667 | 451,955 | ||||||
534,163 | 3.00%, 8/1/43, Pool #AS0331 | 524,893 | ||||||
125,063 | 3.50%, 8/1/43, Pool #AU0570 | 125,746 | ||||||
116,288 | 3.50%, 8/1/43, Pool #AU0613 | 116,884 | ||||||
14,940 | 3.50%, 8/1/43, Pool #AT7333 | 15,052 | ||||||
14,795 | 3.50%, 8/1/43, Pool #AU3032 | 14,910 | ||||||
531,868 | 3.50%, 8/1/43, Pool #AS0209 | 535,658 | ||||||
56,893 | 3.50%, 8/1/43, Pool #AU3270 | 57,337 | ||||||
18,366 | 3.50%, 9/1/43, Pool #AT7267 | 18,462 | ||||||
1,807,177 | 4.00%, 10/1/43, Pool #BM1502 | 1,858,207 | ||||||
122,673 | 4.00%, 10/1/43, Pool #AL7577 | 126,137 | ||||||
1,186,384 | 3.50%, 11/1/43, Pool #AL9745 | 1,195,645 | ||||||
1,451,371 | 5.00%, 12/1/43, Pool #AL7777 | 1,539,937 | ||||||
102,600 | 3.50%, 1/1/44, Pool #AS1703 | 103,369 | ||||||
105,671 | 3.50%, 1/1/44, Pool #AS1539 | 106,463 | ||||||
129,919 | 4.00%, 3/1/44, Pool #AV6577 | 133,718 | ||||||
3,862,181 | 4.50%, 4/1/44, Pool #AL6887 | 4,045,198 | ||||||
3,791,066 | 3.50%, 5/1/44, Pool #BM5002 | 3,827,617 | ||||||
13,620 | 3.50%, 6/1/44, Pool #AS2591 | 13,722 | ||||||
26,033 | 3.50%, 6/1/44, Pool #AW6405 | 26,228 | ||||||
5,182,384 | 3.50%, 6/1/44, Pool #AL9405 | 5,222,815 | ||||||
25,559 | 4.00%, 7/1/44, Pool #AW7055 | 26,179 | ||||||
993,270 | 4.00%, 8/1/44, Pool #890629 | 1,026,309 | ||||||
1,694,778 | 4.00%, 8/1/44, Pool #AL5601 | 1,751,132 | ||||||
792,328 | 5.00%, 11/1/44, Pool #AL8878 | 840,874 | ||||||
216,583 | 4.00%, 12/1/44, Pool #AX9372 | 223,352 | ||||||
16,995 | 4.00%, 12/1/44, Pool #AY0299 | 17,560 | ||||||
16,246 | 4.00%, 12/1/44, Pool #AX6255 | 16,787 | ||||||
67,098 | 4.00%, 1/1/45, Pool #AX8713 | 69,194 | ||||||
702,792 | 4.00%, 1/1/45, Pool #AS4083 | 724,756 | ||||||
185,095 | 4.00%, 1/1/45, Pool #AY0367 | 190,879 | ||||||
121,926 | 4.00%, 2/1/45, Pool #AY2693 | 124,981 | ||||||
29,417 | 4.00%, 2/1/45, Pool #AY1866 | 30,395 | ||||||
514,778 | 3.50%, 2/1/45, Pool #BM1100 | 518,797 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 186,316 | 4.00%, 2/1/45, Pool #AS4308 | $ | 191,763 | ||||
67,886 | 4.00%, 5/1/45, Pool #AY9770 | 70,143 | ||||||
789,242 | 4.00%, 5/1/45, Pool #AS5017 | 815,489 | ||||||
27,522 | 4.00%, 5/1/45, Pool #AY8218 | 28,189 | ||||||
427,317 | 5.00%, 6/1/45, Pool #BM3784 | 450,254 | ||||||
477,269 | 3.50%, 7/1/45, Pool #AS5459 | 480,795 | ||||||
1,246,043 | 3.50%, 7/1/45, Pool #AS5453 | 1,250,433 | ||||||
64,654 | 3.50%, 8/1/45, Pool #AS5640 | 64,778 | ||||||
248,464 | 4.50%, 9/1/45, Pool #AL7936 | 261,186 | ||||||
48,501 | 4.00%, 10/1/45, Pool #BA2879 | 49,879 | ||||||
598,781 | 3.50%, 10/1/45, Pool #MA2414 | 604,135 | ||||||
43,970 | 4.00%, 10/1/45, Pool #AZ9243 | 45,424 | ||||||
49,511 | 4.00%, 10/1/45, Pool #AZ9244 | 51,033 | ||||||
51,235 | 4.00%, 10/1/45, Pool #BA2877 | 52,510 | ||||||
47,044 | 4.00%, 10/1/45, Pool #BA2878 | 48,483 | ||||||
147,364 | 4.00%, 10/1/45, Pool #AL7443 | 151,944 | ||||||
511,739 | 4.00%, 10/1/45, Pool #AS5949 | 527,017 | ||||||
102,568 | 4.00%, 10/1/45, Pool #AL7442 | 105,979 | ||||||
1,752,391 | 3.50%, 11/1/45, Pool #BM1124 | 1,765,100 | ||||||
124,142 | 4.50%, 11/1/45, Pool #AL9501 | 130,439 | ||||||
149,828 | 4.00%, 11/1/45, Pool #BA2904 | 154,752 | ||||||
15,884 | 4.50%, 11/1/45, Pool #AS6233 | 16,591 | ||||||
107,115 | 3.50%, 11/1/45, Pool #AS6195 | 108,035 | ||||||
225,525 | 4.00%, 11/1/45, Pool #BA2905 | 232,384 | ||||||
443,783 | 3.50%, 12/1/45, Pool #AL9635 | 446,982 | ||||||
403,745 | 4.50%, 12/1/45, Pool #BM1756 | 421,902 | ||||||
128,491 | 4.00%, 12/1/45, Pool #BA4736 | 132,663 | ||||||
152,543 | 4.00%, 12/1/45, Pool #BA4737 | 157,131 | ||||||
487,692 | 4.00%, 12/1/45, Pool #AS6347 | 501,680 | ||||||
70,016 | 4.00%, 12/1/45, Pool #BA2924 | 71,686 | ||||||
173,617 | 4.00%, 1/1/46, Pool #BA4781 | 179,221 | ||||||
301,452 | 4.00%, 2/1/46, Pool #AS6662 | 310,058 | ||||||
571,206 | 3.50%, 3/1/46, Pool #AS6823 | 573,012 | ||||||
528,527 | 3.50%, 4/1/46, Pool #AS7015 | 530,033 | ||||||
219,915 | 3.50%, 4/1/46, Pool #AL8521 | 221,319 | ||||||
6,179,911 | 3.50%, 4/1/46, Pool #BC5981 | 6,217,636 | ||||||
360,889 | 3.50%, 5/1/46, Pool #AL8570 | 362,011 | ||||||
139,615 | 3.00%, 6/1/46, Pool #AS7370 | 136,792 | ||||||
1,901,124 | 3.50%, 6/1/46, Pool #AS7383 | 1,906,742 | ||||||
1,970,690 | 4.00%, 6/1/46, Pool #AL9093 | 2,016,008 | ||||||
28,755 | 3.00%, 6/1/46, Pool #AS7365 | 28,088 | ||||||
1,509,815 | 3.50%, 6/1/46, Pool #AS7353 | 1,514,121 | ||||||
250,835 | 3.00%, 6/1/46, Pool #AS7362 | 245,374 | ||||||
70,839 | 3.50%, 6/1/46, Pool #BC1154 | 71,386 | ||||||
5,063,744 | 4.00%, 7/1/46, Pool #AL8857 | 5,197,004 | ||||||
692,117 | 4.50%, 7/1/46, Pool #BM3053 | 728,067 | ||||||
4,275,025 | 3.50%, 7/1/46, Pool #BA7748 | 4,286,777 | ||||||
3,579,912 | 3.00%, 7/1/46, Pool #BC1450 | 3,495,865 | ||||||
1,015,418 | 4.50%, 7/1/46, Pool #BM1920 | 1,067,385 | ||||||
818,004 | 3.50%, 8/1/46, Pool #AL8952 | 820,464 | ||||||
3,732,819 | 3.00%, 8/1/46, Pool #BC1486 | 3,645,181 | ||||||
38,144 | 4.00%, 8/1/46, Pool #BD3933 | 39,255 | ||||||
56,422 | 4.00%, 8/1/46, Pool #BD4900 | 58,070 | ||||||
41,758 | 3.00%, 8/1/46, Pool #AL9031 | 40,913 | ||||||
1,373,201 | Class UF, Series2016-48, 2.91%(US0001M+40bps), 8/25/46 | 1,378,550 |
See accompanying notes to the financial statements.
23
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 847,610 | 3.00%, 9/1/46, Pool #AL9214 | $ | 827,080 | ||||
2,741,537 | 3.00%, 9/1/46, Pool #BD1469 | 2,680,149 | ||||||
766,728 | 3.50%, 9/1/46, Pool #AL9511 | 769,671 | ||||||
121,535 | 4.00%, 9/1/46, Pool #BD1481 | 125,239 | ||||||
34,836 | 4.00%, 9/1/46, Pool #BD7826 | 35,842 | ||||||
203,454 | 3.00%, 9/1/46, Pool #AS7889 | 199,056 | ||||||
295,777 | 3.00%, 9/1/46, Pool #AL9045 | 289,491 | ||||||
20,507 | 3.50%, 9/1/46, Pool #BE0547 | 20,525 | ||||||
384,067 | 3.00%, 9/1/46, Pool #AS7878 | 375,705 | ||||||
3,106,655 | 3.00%, 9/1/46, Pool #AS7847 | 3,033,716 | ||||||
848,462 | 3.00%, 10/1/46, Pool #AL9215 | 829,331 | ||||||
1,055,870 | 3.00%, 10/1/46, Pool #BD8925 | 1,031,849 | ||||||
653,589 | 3.00%, 10/1/46, Pool #AL9266 | 637,759 | ||||||
4,851,182 | 3.00%, 10/1/46, Pool #BD3309 | 4,743,312 | ||||||
342,432 | 3.00%, 11/1/46, Pool #BD9641 | 335,081 | ||||||
106,274 | 3.50%, 11/1/46, Pool #BD8477 | 106,500 | ||||||
1,174,504 | 3.50%, 11/1/46, Pool #BD8970 | 1,177,126 | ||||||
897,573 | 3.00%, 11/1/46, Pool #BD9644 | 877,334 | ||||||
294,520 | 3.00%, 11/1/46, Pool #AL9481 | 288,107 | ||||||
347,914 | 4.00%, 11/1/46, Pool #BC9012 | 358,085 | ||||||
33,760 | 3.50%, 11/1/46, Pool #BC7299 | 33,832 | ||||||
447,491 | 3.00%, 11/1/46, Pool #BD9645 | 436,986 | ||||||
302,389 | 3.00%, 11/1/46, Pool #BD9643 | 295,265 | ||||||
938,229 | 3.00%, 11/1/46, Pool #AL9325 | 917,074 | ||||||
54,342 | 3.50%, 11/1/46, Pool #BE1932 | 54,483 | ||||||
1,805,013 | 4.00%, 11/1/46, Pool #AS8379 | 1,857,594 | ||||||
6,942,294 | 4.00%, 11/1/46, Pool #AS8374 | 7,124,884 | ||||||
725,103 | 3.50%, 11/1/46, Pool #AS8371 | 730,090 | ||||||
566,652 | 3.50%, 11/1/46, Pool #BM1938 | 569,498 | ||||||
5,190,886 | 3.50%, 11/1/46, Pool #AL9424 | 5,205,422 | ||||||
770,612 | 3.00%, 11/1/46, Pool #BD8962 | 753,081 | ||||||
129,619 | 3.50%, 12/1/46, Pool #AL9593 | 130,029 | ||||||
725,101 | 3.50%, 12/1/46, Pool #BC9084 | 728,861 | ||||||
1,445,385 | 3.50%, 12/1/46, Pool #AS8493 | 1,450,336 | ||||||
1,848,369 | 3.00%, 12/1/46, Pool #AS8486 | 1,806,979 | ||||||
262,695 | 3.50%, 1/1/47, Pool #BD8531 | 263,526 | ||||||
503,515 | 4.00%, 1/1/47, Pool #BD2439 | 518,166 | ||||||
2,177,256 | 3.50%, 1/1/47, Pool #AL9725 | 2,192,689 | ||||||
839,622 | 3.50%, 1/1/47, Pool #AS8653 | 844,877 | ||||||
208,772 | 3.00%, 1/1/47, Pool #AS8589 | 204,222 | ||||||
325,680 | 3.50%, 1/1/47, Pool #AL9774 | 328,056 | ||||||
139,086 | 3.50%, 1/1/47, Pool #BE4913 | 139,221 | ||||||
405,611 | 3.00%, 2/1/47, Pool #BD5049 | 396,461 | ||||||
108,220 | 3.00%, 2/1/47, Pool #BD5056 | 105,861 | ||||||
350,937 | 3.50%, 2/1/47, Pool #BE3188 | 352,700 | ||||||
1,077,776 | 3.50%, 2/1/47, Pool #BM3792 | 1,083,193 | ||||||
886,846 | 3.00%, 3/1/47, Pool #AS8925 | 866,796 | ||||||
716,447 | 3.00%, 3/1/47, Pool #AS8936 | 699,596 | ||||||
3,393,539 | 4.00%, 3/1/47, Pool #BM1155 | 3,480,096 | ||||||
2,423,937 | 4.00%, 3/1/47, Pool #890824 | 2,482,464 | ||||||
963,031 | 4.00%, 5/1/47, Pool #BH0398 | 984,743 | ||||||
205,532 | 3.50%, 5/1/47, Pool #BM1937 | 207,031 | ||||||
794,359 | 3.50%, 5/1/47, Pool #BM1174 | 796,954 | ||||||
680,981 | 3.50%, 6/1/47, Pool #BM1902 | 682,653 | ||||||
829,128 | 4.00%, 7/1/47, Pool #BH3401 | 849,398 | ||||||
485,003 | 3.50%, 7/1/47, Pool #BM1571 | 486,928 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 954,963 | 4.00%, 8/1/47, Pool #BM1619 | $ | 978,309 | ||||
278,582 | 3.50%, 9/1/47, Pool #BM1822 | 279,982 | ||||||
113,321 | 3.50%, 9/1/47, Pool #BH8295 | 113,391 | ||||||
462,641 | 4.50%, 10/1/47, Pool #BM3052 | 485,849 | ||||||
624,819 | 3.50%, 10/1/47, Pool #BM1952 | 627,183 | ||||||
716,047 | 3.50%, 11/1/47, Pool #CA0689 | 720,532 | ||||||
114,930 | 3.50%, 11/1/47, Pool #CA0681 | 115,508 | ||||||
759,212 | 3.50%, 12/1/47, Pool #BM3326 | 763,967 | ||||||
567,103 | 4.00%, 12/1/47, Pool #BM3261 | 583,884 | ||||||
866,247 | 3.50%, 12/1/47, Pool #BM3282 | 871,672 | ||||||
56,295 | 3.50%, 12/1/47, Pool #BM3327 | 56,578 | ||||||
587,539 | 4.50%, 12/1/47, Pool #BH7067 | 614,120 | ||||||
3,827,429 | 3.50%, 12/1/47, Pool #BH7060 | 3,839,540 | ||||||
57,754 | 3.50%, 1/1/48, Pool #BJ8650 | 58,044 | ||||||
1,405,124 | 3.50%, 1/1/48, Pool #CA0993 | 1,408,213 | ||||||
1,566,944 | 3.50%, 1/1/48, Pool #CA1058 | 1,574,456 | ||||||
293,673 | 3.50%, 1/1/48, Pool #BJ5879 | 295,149 | ||||||
81,507 | 3.50%, 1/1/48, Pool #BJ8126 | 81,778 | ||||||
154,219 | 3.50%, 1/1/48, Pool #BJ8120 | 155,186 | ||||||
265,123 | 4.00%, 2/1/48, Pool #BJ9058 | 271,377 | ||||||
276,010 | 4.00%, 2/1/48, Pool #BJ9057 | 282,301 | ||||||
1,246,732 | 4.00%, 2/1/48, Pool #CA1199 | 1,275,626 | ||||||
1,804,001 | 4.00%, 2/1/48, Pool #CA1255 | 1,845,782 | ||||||
1,896,840 | 4.00%, 3/1/48, Pool #CA1372 | 1,953,194 | ||||||
6,045,888 | 4.00%, 4/1/48, Pool #CA1545 | 6,186,198 | ||||||
202,066 | 4.00%, 4/1/48, Pool #BM3762 | 208,069 | ||||||
221,441 | 4.00%, 4/1/48, Pool #BM3763 | 227,706 | ||||||
4,031,667 | 4.00%, 4/1/48, Pool #CA1541 | 4,136,173 | ||||||
771,681 | 4.00%, 4/1/48, Pool #CA1549 | 794,709 | ||||||
335,037 | 4.50%, 4/1/48, Pool #BM3846 | 352,235 | ||||||
7,212,458 | 4.50%, 5/1/48, Pool #CA1704 | 7,557,337 | ||||||
180,803 | 4.50%, 7/1/48, Pool #BK6113 | 190,489 | ||||||
38,514 | 4.50%, 7/1/48, Pool #BK4471 | 40,397 | ||||||
21,811,018 | 4.00%, 11/25/48, Pool #BM5003 | 22,418,110 | ||||||
4,523,000 | 6.00%, 1/25/49, TBA | 4,857,335 | ||||||
30,858,000 | 5.00%, 1/25/49, TBA | 32,321,343 | ||||||
25,306,832 | 3.00%, 1/25/49, TBA | 24,666,675 | ||||||
2,900,000 | 2.50%, 1/25/49, TBA | 2,738,008 | ||||||
19,500,000 | 4.50%, 2/25/49, TBA | 20,149,365 | ||||||
|
| |||||||
412,854,358 | ||||||||
|
| |||||||
Government National Mortgage Association (12.4%) | ||||||||
23,628 | 4.50%, 9/15/33, Pool #615516 | 24,605 | ||||||
80,398 | 5.00%, 12/15/33, Pool #783571 | 85,183 | ||||||
23,191 | 6.50%, 8/20/38, Pool #4223 | 26,182 | ||||||
23,209 | 6.50%, 10/15/38, Pool #673213 | 26,372 | ||||||
12,524 | 6.50%, 11/20/38, Pool #4292 | 14,161 | ||||||
25,217 | 6.50%, 12/15/38, Pool #782510 | 28,439 | ||||||
264,246 | 5.00%, 1/15/39, Pool #782557 | 280,030 | ||||||
114,902 | 5.00%, 4/15/39, Pool #711939 | 121,819 | ||||||
177,260 | 5.00%, 4/15/39, Pool #782619 | 187,862 | ||||||
20,256 | 4.00%, 4/20/39, Pool #4422 | 20,920 | ||||||
17,218 | 5.00%, 6/15/39, Pool #782696 | 18,246 | ||||||
70,645 | 4.00%, 7/20/39, Pool #4494 | 72,965 | ||||||
115,485 | 5.00%, 10/20/39, Pool #4559 | 122,920 | ||||||
13,325 | 4.50%, 12/20/39, Pool #G24598 | 13,982 | ||||||
35,839 | 4.50%, 1/15/40, Pool #728627 | 37,426 |
See accompanying notes to the financial statements.
24
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Government National Mortgage Association, continued | ||||||||
$ | 16,650 | 4.50%, 1/20/40, Pool #4617 | $ | 17,471 | ||||
13,041 | 4.50%, 2/20/40, Pool #G24636 | 13,684 | ||||||
94,649 | 5.00%, 5/15/40, Pool #782958 | 100,301 | ||||||
908 | 4.50%, 5/20/40, Pool #G24696 | 952 | ||||||
75,508 | 5.00%, 6/15/40, Pool #697862 | 79,943 | ||||||
790,588 | 4.50%, 7/15/40, Pool #733795 | 825,910 | ||||||
81,419 | 4.50%, 7/15/40, Pool #745793 | 85,044 | ||||||
34,022 | 4.50%, 7/20/40, Pool #4746 | 35,699 | ||||||
65,410 | 4.50%, 8/20/40, Pool #4771 | 68,636 | ||||||
19,541 | 4.00%, 9/20/40, Pool #G24800 | 20,210 | ||||||
30,790 | 4.50%, 9/20/40, Pool #748948 | 32,237 | ||||||
158,309 | 4.50%, 10/15/40, Pool #783609 | 165,367 | ||||||
495,682 | 4.00%, 10/20/40, Pool #G24833 | 511,975 | ||||||
58,132 | 4.50%, 10/20/40, Pool #4834 | 61,000 | ||||||
922,864 | 4.00%, 11/20/40, Pool #4853 | 953,173 | ||||||
449,182 | 4.00%, 12/20/40, Pool #G24882 | 463,945 | ||||||
195,135 | 4.00%, 1/15/41, Pool #759138 | 201,183 | ||||||
396,930 | 4.00%, 1/20/41, Pool #4922 | 409,984 | ||||||
52,701 | 4.50%, 2/15/41, Pool #738019 | 55,043 | ||||||
1,412,252 | 4.00%, 2/20/41, Pool #742887 | 1,454,620 | ||||||
6,763 | 4.00%, 2/20/41, Pool #4945 | 6,985 | ||||||
135,699 | 4.00%, 3/15/41, Pool #762838 | 139,880 | ||||||
9,259 | 5.00%, 4/20/41, Pool #5018 | 9,821 | ||||||
153,131 | 4.50%, 6/20/41, Pool #783590 | 160,670 | ||||||
19,765 | 5.00%, 6/20/41, Pool #5083 | 20,972 | ||||||
64,343 | 4.50%, 7/20/41, Pool #754367 | 66,640 | ||||||
673,883 | 4.00%, 7/20/41, Pool #742895 | 691,946 | ||||||
10,279 | 5.00%, 7/20/41, Pool #5116 | 10,903 | ||||||
350,968 | 4.50%, 7/20/41, Pool #5115 | 368,195 | ||||||
104,138 | 4.50%, 7/20/41, Pool #783584 | 109,250 | ||||||
113,768 | 4.50%, 11/15/41, Pool #783610 | 118,984 | ||||||
311,512 | 3.50%, 1/15/42, Pool #553461 | 315,214 | ||||||
416,806 | 4.00%, 4/20/42, Pool #MA0023 | 430,506 | ||||||
167,890 | 5.00%, 7/20/42, Pool #MA0223 | 177,193 | ||||||
497,636 | 3.50%, 4/15/43, Pool #AD2334 | 502,346 | ||||||
783,446 | 3.50%, 4/20/43, Pool #MA0934 | 792,363 | ||||||
435,760 | 3.50%, 5/20/43, Pool #MA1012 | 440,725 | ||||||
37,060 | 4.00%, 7/20/43, Pool #MA1158 | 38,263 | ||||||
1,615,106 | 4.50%, 6/20/44, Pool #MA1997 | 1,697,269 | ||||||
30,104 | 4.00%, 8/20/44, Pool #AI4167 | 30,916 | ||||||
1,420,140 | 4.00%, 8/20/44, Pool #MA2149 | 1,459,279 | ||||||
35,479 | 4.00%, 8/20/44, Pool #AJ2723 | 36,826 | ||||||
20,974 | 4.00%, 8/20/44, Pool #AJ4687 | 21,589 | ||||||
15,169 | 4.00%, 8/20/44, Pool #AI4166 | 15,624 | ||||||
86,047 | 3.00%, 12/20/44, Pool #MA2444 | 85,279 | ||||||
724,618 | 5.00%, 12/20/44, Pool #MA2448 | 765,085 | ||||||
1,525,938 | Class ZD, Series2015-3, 4.00%, 1/20/45 | 1,630,888 | ||||||
717,401 | 3.00%, 2/15/45, Pool #784439 | 709,286 | ||||||
3,903,153 | 3.50%, 4/20/45, Pool #MA2754 | 3,935,570 | ||||||
1,641,022 | 3.00%, 4/20/45, Pool #MA2753 | 1,621,802 | ||||||
4,702,822 | 3.50%, 5/20/45, Pool #MA2826 | 4,741,881 | ||||||
88,009 | 3.00%, 6/20/45, Pool #MA2891 | 86,960 | ||||||
262,959 | 3.00%, 7/20/45, Pool #MA2960 | 259,798 | ||||||
86,537 | 3.00%, 8/20/45, Pool #MA3033 | 85,487 | ||||||
533,094 | 3.00%, 10/20/45, Pool #MA3172 | 526,576 | ||||||
409,544 | 5.00%, 12/20/45, Pool #MA3313 | 432,481 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Government National Mortgage Association, continued | ||||||||
$ | 23,687,250 | 3.50%, 3/20/46, Pool #MA3521 | $ | 23,876,702 | ||||
9,781,854 | 3.00%, 4/20/46, Pool #MA3596 | 9,653,171 | ||||||
14,675,644 | 3.50%, 4/20/46, Pool #MA3597 | 14,790,762 | ||||||
69,044 | 3.00%, 5/20/46, Pool #MA3662 | 68,146 | ||||||
4,672,398 | 3.50%, 5/20/46, Pool #MA3663 | 4,707,610 | ||||||
1,570,152 | 3.00%, 6/20/46, Pool #MA3735 | 1,548,529 | ||||||
9,804,632 | 3.50%, 6/20/46, Pool #MA3736 | 9,877,012 | ||||||
3,086,735 | 3.00%, 7/20/46, Pool #MA3802 | 3,044,696 | ||||||
1,617,283 | 3.50%, 7/20/46, Pool #MA3803 | 1,628,724 | ||||||
14,427,673 | 3.00%, 8/20/46, Pool #MA3873 | 14,228,948 | ||||||
6,354,273 | 3.00%, 9/20/46, Pool #MA3936 | 6,269,664 | ||||||
6,206,507 | 3.50%, 9/20/46, Pool #MA3937 | 6,249,457 | ||||||
141,732 | 3.50%, 10/20/46, Pool #AX4343 | 142,779 | ||||||
336,857 | 3.50%, 10/20/46, Pool #AX4345 | 339,233 | ||||||
381,637 | 3.50%, 10/20/46, Pool #AX4344 | 384,355 | ||||||
166,641 | 3.50%, 10/20/46, Pool #AX4342 | 167,959 | ||||||
172,567 | 3.50%, 10/20/46, Pool #AX4341 | 174,123 | ||||||
32,404 | 4.00%, 10/20/46, Pool #AQ0542 | 33,282 | ||||||
166,712 | 3.00%, 11/20/46, Pool #MA4068 | 164,339 | ||||||
480,932 | 3.00%, 12/20/46, Pool #MA4126 | 474,010 | ||||||
163,742 | 4.50%, 3/15/47, Pool #AZ8560 | 171,104 | ||||||
256,167 | 4.50%, 4/15/47, Pool #AZ8596 | 267,845 | ||||||
170,313 | 4.50%, 4/15/47, Pool #AZ8597 | 177,976 | ||||||
152,214 | 4.50%, 5/15/47, Pool #BA7888 | 159,158 | ||||||
24,436 | 4.00%, 9/15/47, Pool #BC5919 | 25,113 | ||||||
35,273 | 4.00%, 10/15/47, Pool #BD3187 | 36,239 | ||||||
31,407 | 4.00%, 10/15/47, Pool #BE1031 | 32,278 | ||||||
24,529 | 4.00%, 11/15/47, Pool #BE1030 | 25,237 | ||||||
37,355 | 4.00%, 12/15/47, Pool #BE4664 | 38,391 | ||||||
26,627 | 4.00%, 1/15/48, Pool #BE0204 | 27,365 | ||||||
20,085,000 | 3.50%, 1/15/48, TBA | 20,219,162 | ||||||
42,334 | 4.00%, 1/15/48, Pool #BE0143 | 43,507 | ||||||
8,260,000 | 3.00%, 1/15/48, TBA | 8,139,004 | ||||||
7,977,264 | 4.50%, 8/20/48, Pool #MA5399 | 8,260,422 | ||||||
818,294 | 4.50%, 9/20/48, Pool #BD0560 | 854,435 | ||||||
20,970,890 | 4.50%, 9/20/48, Pool #MA5467 | 21,715,112 | ||||||
1,000,000 | 5.00%, 1/15/49, TBA | 1,038,789 | ||||||
2,800,000 | 4.50%, 1/15/49, TBA | 2,897,289 | ||||||
47,327,000 | 4.00%, 1/20/49, TBA | 48,458,410 | ||||||
|
| |||||||
239,591,278 | ||||||||
|
| |||||||
Total U.S. Government Agency Mortgages (Cost $804,713,354) | 797,873,805 | |||||||
|
| |||||||
U.S. Treasury Obligations (21.4%): | ||||||||
U.S. Treasury Bonds (7.1%) | ||||||||
2,480,000 | 5.38%, 2/15/31^ | 3,150,763 | ||||||
20,525,000 | 4.75%, 2/15/37^ | 26,158,952 | ||||||
31,340,000 | 3.13%, 11/15/41 | 32,087,998 | ||||||
11,080,000 | 3.63%, 8/15/43 | 12,264,608 | ||||||
1,205,000 | 3.13%, 8/15/44 | 1,230,088 | ||||||
15,000 | 2.50%, 2/15/45 | 13,594 | ||||||
955,000 | 3.00%, 5/15/45 | 953,172 | ||||||
1,770,000 | 2.88%, 8/15/45 | 1,723,952 | ||||||
1,543,000 | 3.00%, 2/15/47 | 1,538,660 | ||||||
5,645,000 | 3.00%, 2/15/48 | 5,614,790 | ||||||
39,030,000 | 3.13%, 5/15/48(d) | 39,770,960 | ||||||
7,265,000 | 3.00%, 8/15/48^ | 7,230,662 | ||||||
1,150,000 | 3.38%, 11/15/48 | 1,229,781 | ||||||
|
| |||||||
132,967,980 | ||||||||
|
|
See accompanying notes to the financial statements.
25
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares or Principal | Fair Value | |||||||
U.S. Treasury Obligations, continued | ||||||||
U.S. Treasury Inflation Index Bonds (1.0%) | ||||||||
$ | 10,970,477 | 0.75%, 7/15/28^ | $ | 10,738,316 | ||||
8,495,770 | 1.00%, 2/15/48 | 8,051,430 | ||||||
|
| |||||||
18,789,746 | ||||||||
|
| |||||||
U.S. Treasury Notes (13.3%) | ||||||||
7,360,000 | 2.88%, 10/31/20^ | 7,406,000 | ||||||
23,295,000 | 2.75%, 11/30/20^ | 23,400,555 | ||||||
2,949,000 | 1.38%, 5/31/21^ | 2,873,202 | ||||||
3,686,000 | 2.63%, 7/15/21 | 3,699,103 | ||||||
30,000 | 2.75%, 8/15/21 | 30,203 | ||||||
37,255,000 | 2.88%, 11/15/21^ | 37,669,753 | ||||||
16,725,000 | 2.63%, 12/15/21 | 16,800,132 | ||||||
18,340,000 | 1.88%, 4/30/22^ | 17,988,961 | ||||||
8,375,000 | 2.88%, 11/30/23 | 8,520,908 | ||||||
4,550,000 | 2.63%, 12/31/23 | 4,573,816 | ||||||
21,290,000 | 2.13%, 7/31/24 | 20,826,776 | ||||||
32,537,000 | 2.13%, 9/30/24 | 31,794,750 | ||||||
890,000 | 3.13%, 10/31/25 | 913,050 | ||||||
1,550,000 | 2.88%, 11/30/25 | 1,577,791 | ||||||
46,000 | 2.00%, 11/15/26 | 43,910 | ||||||
50,815,000 | 2.88%, 8/15/28 | 51,601,044 | ||||||
32,180,000 | 3.13%, 11/15/28^ | 33,379,208 | ||||||
|
| |||||||
263,099,162 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $413,750,242) | 414,856,888 | |||||||
|
| |||||||
Commercial Paper (3.8%): | ||||||||
24,100,000 | Campbell Soup Co., 2.69%(c) | 24,087,394 | ||||||
20,000,000 | Ford Motor Credit Co., 3.17%(c) | 19,943,876 | ||||||
12,700,000 | Ford Motor Credit Co., 3.23%(c) | 12,642,067 | ||||||
1,584,000 | Ford Motor Credit Co., 3.38%(c) | 1,569,576 | ||||||
11,880,000 | Ford Motor Credit Co., 3.38%(c) | 11,770,686 | ||||||
4,540,000 | Ford Motor Credit Co., 3.40%(c) | 4,488,713 | ||||||
|
| |||||||
Total Commercial Paper (Cost $74,532,785) | 74,502,312 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.2%): | ||||||||
24,041,369 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(c) | 24,041,369 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $24,041,369) | 24,041,369 | |||||||
|
|
Shares or Principal | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan (8.9%)(e) | ||||||||
Floating Rate Notes (3.0%) | ||||||||
$ | 8,763,000 | Bedford Row Funding, 2.61%, 1/31/19 | $ | 8,763,000 | ||||
4,200,000 | Canadian Imperial Bank of Commerce, 2.59%, 1/11/19 | 4,200,000 | ||||||
4,034,000 | Commonwealth Bank Australia, 2.68%, 5/3/19 | 4,034,000 | ||||||
4,531,000 | Cooperatieve Rabobank UA, 2.65%, 2/8/19 | 4,531,000 | ||||||
3,800,000 | Credit Industriel et Commercial, 2.66%, 1/14/19 | 3,800,000 | ||||||
4,109,000 | HSBC Bank plc, 2.65%, 2/8/19 | 4,109,000 | ||||||
3,400,000 | National Bank of Canada, 2.60%, 1/7/19 | 3,400,000 | ||||||
4,291,000 | Nordea Bank Abp, 2.66%, 1/25/19 | 4,291,754 | ||||||
4,495,000 | Oversea-Chinese Banking Corp., Ltd., 2.60%, 4/10/19 | 4,495,000 | ||||||
4,100,000 | Societe Generale SA, 2.63%, 1/7/19 | 4,100,000 | ||||||
4,600,000 | Toronto-Dominion Bank, 2.71%, 2/14/19 | 4,600,000 | ||||||
3,900,000 | Toyota Motor Credit Corp., 2.69%, 11/14/19 | 3,902,090 | ||||||
3,500,000 | Wells Fargo Bank NA, 2.61%, 1/7/19 | 3,500,000 | ||||||
|
| |||||||
57,725,844 | ||||||||
|
| |||||||
Repurchase Agreements (1.0%) | ||||||||
20,051,459 | BNP Paribas SA, 3.00%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $20,054,801, Collateralized by U.S. Government Agency Obligations, 2.00% - 7.00%, 2/1/20 - 11/1/48, fair value of $20,452,488 | 20,051,459 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
94,810,793 | Short-Term Investments(f) | 94,810,793 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 172,588,096 | ||||||
|
| |||||||
Total Investment Securities (Cost $2,318,880,262) — 118.4%(g) | 2,292,494,130 | |||||||
Net other assets (liabilities) — (18.4)% | (356,176,387 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 1,936,317,743 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
TBA—To Be Announced Security
US0001M—1 Month US Dollar LIBOR
US0003M—3 Month US Dollar LIBOR
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $168,305,489. |
† | Represents less than 0.05%. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(b) | The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate presented is the rate in effect at December 31, 2018. |
(c) | The rate represents the effective yield at December 31, 2018. |
(d) | All or a portion of this security has been pledged as collateral for open derivative positions. |
(e) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(g) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
26
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Securities Sold Short(-16.5%):
At December 31, 2018, the Fund’s securities sold short were as follows:
Security Description | Coupon Rate | Maturity Date | Par Amount | Proceeds Received | Fair Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||
U.S. Government Agency Mortgages Federal Home Loan Mortgage Corporation | ||||||||||||||||||||||||
Federal Home Loan Mortgage Corporation, TBA | 2.50 | % | 1/15/33 | $ | (2,543,000 | ) | $ | (2,467,107 | ) | $ | (2,482,107 | ) | $ | (15,000 | ) | |||||||||
Federal Home Loan Mortgage Corporation, TBA | 3.00 | 1/15/33 | (1,217,000 | ) | (1,204,260 | ) | (1,212,693 | ) | (8,433 | ) | ||||||||||||||
Federal Home Loan Mortgage Corporation, TBA | 3.50 | 1/15/48 | (44,819,057 | ) | (44,242,661 | ) | (44,793,264 | ) | (550,603 | ) | ||||||||||||||
Federal Home Loan Mortgage Corporation, TBA | 5.00 | 1/15/48 | (51,000 | ) | (53,321 | ) | (53,409 | ) | (88 | ) | ||||||||||||||
Federal National Mortgage Association | ||||||||||||||||||||||||
Federal National Mortgage Association, TBA | 3.50 | 1/25/32 | (8,704,766 | ) | (8,748,880 | ) | (8,809,325 | ) | (60,445 | ) | ||||||||||||||
Federal National Mortgage Association, TBA | 3.50 | 1/25/49 | (2,892,000 | ) | (2,880,138 | ) | (2,891,492 | ) | (11,354 | ) | ||||||||||||||
Federal National Mortgage Association, TBA | 3.50 | 2/25/48 | (30,780,888 | ) | (30,453,590 | ) | (30,752,221 | ) | (298,631 | ) | ||||||||||||||
Federal National Mortgage Association, TBA | 4.00 | 1/25/33 | (3,926,000 | ) | (3,995,932 | ) | (4,018,629 | ) | (22,697 | ) | ||||||||||||||
Federal National Mortgage Association, TBA | 4.00 | 1/25/49 | (28,312,000 | ) | (28,493,337 | ) | (28,860,545 | ) | (367,208 | ) | ||||||||||||||
Federal National Mortgage Association, TBA | 4.50 | 1/25/49 | (22,726,000 | ) | (23,481,265 | ) | (23,532,507 | ) | (51,242 | ) | ||||||||||||||
Federal National Mortgage Association, TBA | 5.50 | 1/25/49 | (900,000 | ) | (955,652 | ) | (952,313 | ) | 3,339 | |||||||||||||||
Government National Mortgage Association | ||||||||||||||||||||||||
Government National Mortgage Association, TBA | 3.00 | 2/20/49 | (29,641,500 | ) | (28,995,725 | ) | (29,176,615 | ) | (180,890 | ) | ||||||||||||||
Government National Mortgage Association, TBA | 3.50 | 2/20/49 | (25,421,203 | ) | (25,422,031 | ) | (25,563,203 | ) | (141,172 | ) | ||||||||||||||
Government National Mortgage Association, TBA | 4.50 | 1/20/48 | (11,275,000 | ) | (11,646,723 | ) | (11,666,762 | ) | (20,039 | ) | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | (213,040,622 | ) | $ | (214,765,085 | ) | $ | (1,724,463 | ) | ||||||||||||||||
|
|
|
|
|
|
Futures Contracts
At December 31, 2018, the Fund’s futures contracts were as follows:
Short Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Euro-Bobl March Futures (Euro) | 3/7/19 | 162 | $ | (24,593,876 | ) | $ | (51,718 | ) | ||||||||
Euro-Bund March Futures (Euro) | 3/7/19 | 91 | (17,048,882 | ) | (98,345 | ) | ||||||||||
Long Gilt March Futures (British Pound) | 3/27/19 | 36 | (5,650,864 | ) | (24,484 | ) | ||||||||||
U.S. Treasury10-Year Note March Futures (U.S. Dollar) | 3/20/19 | 475 | (57,957,410 | ) | (1,194,915 | ) | ||||||||||
U.S. Treasury5-Year Note April Futures (U.S. Dollar) | 3/29/19 | 151 | (17,317,813 | ) | (56,216 | ) | ||||||||||
Ultra Long Term US Treasury Bond March Futures (U.S. Dollar) | 3/20/19 | 22 | (3,534,439 | ) | 976 | |||||||||||
|
| |||||||||||||||
$ | (1,424,702 | ) | ||||||||||||||
|
|
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
U.S. Treasury10-Year Note March Futures(U.S. Dollar) | 3/20/19 | 81 | 10,536,326 | $ | 213,730 | |||||||||||
U.S. Treasury2-Year Note April Futures (U.S. Dollar) | 3/29/19 | 759 | 161,145,263 | 1,052,113 | ||||||||||||
U.S. Treasury30-Year Bond March Futures (U.S. Dollar) | 3/20/19 | 114 | 16,644,000 | 774,196 | ||||||||||||
|
| |||||||||||||||
$ | 2,040,039 | |||||||||||||||
|
| |||||||||||||||
Total Net Futures Contracts | $ | 615,337 | ||||||||||||||
|
|
See accompanying notes to the financial statements.
27
AZL Enhanced Bond Index Fund
Schedule of Portfolio Investments
December 31, 2018
Forward Currency Contracts
At December 31, 2018, the Fund’s open forward currency contracts were as follows:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Net Unrealized Appreciation/ (Depreciation) | ||||||||
U.S. Dollar | 4,237,315 | British Pound | 3,311,000 | Westpac Pollack | 5/2/19 | $10,153 | ||||||
| ||||||||||||
Total Net Forward Currency Contracts | $10,153 | |||||||||||
|
Balances Reported in the Statement of Assets and Liabilities for Forward Currency Contracts
Unrealized Appreciation | ||||
Forward currency contracts | $ | 10,153 |
See accompanying notes to the financial statements.
28
AZL Enhanced Bond Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 2,318,880,262 | |||
|
| ||||
Investment securities, at value(a) | $ | 2,292,494,130 | |||
Interest and dividends receivable | 12,446,424 | ||||
Foreign currency, at value (cost $4,420,469) | 4,409,099 | ||||
Unrealized appreciation on forward currency contracts | 10,153 | ||||
Receivable for investments sold | 385,189,046 | ||||
Prepaid expenses | 19,891 | ||||
|
| ||||
Total Assets | 2,694,568,743 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 388 | ||||
Payable for investments purchased | 369,457,955 | ||||
Payable for capital shares redeemed | 321,422 | ||||
Payable for collateral received on loaned securities | 172,588,096 | ||||
Securities sold short (Proceeds received $213,040,622) | 214,765,085 | ||||
Payable for variation margin on futures contracts | 12,352 | ||||
Manager fees payable | 577,188 | ||||
Administration fees payable | 34,831 | ||||
Distribution fees payable | 412,278 | ||||
Custodian fees payable | 7,051 | ||||
Administrative and compliance services fees payable | 8,230 | ||||
Transfer agent fees payable | 725 | ||||
Trustee fees payable | 3,152 | ||||
Other accrued liabilities | 62,247 | ||||
|
| ||||
Total Liabilities | 758,251,000 | ||||
|
| ||||
Net Assets | $ | 1,936,317,743 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 1,975,051,675 | |||
Total distributable earnings/(losses) | (38,733,932 | ) | |||
|
| ||||
Net Assets | $ | 1,936,317,743 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 182,831,657 | ||||
Net Asset Value (offering and redemption price per share) | $ | 10.59 | |||
|
|
(a) | Includes securities on loan of $168,305,489. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Interest | $ | 59,839,272 | |||
Dividends | 641,944 | ||||
Income from securities lending | 892,436 | ||||
|
| ||||
Total Investment Income | 61,373,652 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 7,008,893 | ||||
Administration fees | 682,436 | ||||
Distribution fees | 5,006,362 | ||||
Custodian fees | 64,098 | ||||
Administrative and compliance services fees | 33,264 | ||||
Transfer agent fees | 7,650 | ||||
Trustee fees | 103,353 | ||||
Professional fees | 100,127 | ||||
Shareholder reports | 26,340 | ||||
Other expenses | 43,432 | ||||
|
| ||||
Total expenses | 13,075,955 | ||||
|
| ||||
Net Investment Income/(Loss) | 48,297,697 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | (33,717,585 | ) | |||
Net realized gains/(losses) on futures contracts | (4,692,271 | ) | |||
Net realized gains/(losses) on securities held short | 3,052,946 | ||||
Change in net unrealized appreciation/depreciation on securities | (25,429,760 | ) | |||
Change in net unrealized appreciation/depreciation on forward currency contracts | 10,153 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | 905,966 | ||||
Change in net unrealized appreciation/depreciation on securities sold short | (1,790,989 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (61,661,540 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (13,363,843 | ) | ||
|
|
See accompanying notes to the financial statements.
29
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 48,297,697 | $ | 37,515,313 | ||||||
Net realized gains/(losses) on investments | (35,356,910 | ) | (10,092,281 | ) | ||||||
Change in unrealized appreciation/depreciation on investments | (26,304,630 | ) | 32,694,031 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (13,363,843 | ) | 60,117,063 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (43,264,943 | ) | (18,214,095 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (43,264,943 | ) | (18,214,095 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 93,845,414 | 187,627,945 | ||||||||
Proceeds from dividends reinvested | 43,264,943 | 18,214,095 | ||||||||
Value of shares redeemed | (192,843,088 | ) | (208,787,058 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (55,732,731 | ) | (2,945,018 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (112,361,517 | ) | 38,957,950 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 2,048,679,260 | 2,009,721,310 | ||||||||
|
|
|
| |||||||
End of period | $ | 1,936,317,743 | $ | 2,048,679,260 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 8,778,364 | 17,317,900 | ||||||||
Dividends reinvested | 4,180,188 | 1,671,018 | ||||||||
Shares redeemed | (18,255,752 | ) | (19,261,705 | ) | ||||||
|
|
|
| |||||||
Change in shares | (5,297,200 | ) | (272,787 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
30
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.89 | $ | 10.67 | $ | 10.78 | $ | 11.13 | $ | 10.67 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.28 | 0.20 | 0.09 | 0.27 | 0.14 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.35 | ) | 0.12 | 0.16 | (0.24 | ) | 0.43 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.07 | ) | 0.32 | 0.25 | 0.03 | 0.57 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.23 | ) | (0.10 | ) | (0.22 | ) | (0.24 | ) | (0.11 | ) | |||||||||||||||
Net Realized Gains | — | — | (0.14 | ) | (0.14 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.23 | ) | (0.10 | ) | (0.36 | ) | (0.38 | ) | (0.11 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 10.59 | $ | 10.89 | $ | 10.67 | $ | 10.78 | $ | 11.13 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (0.58 | )% | 3.01 | % | 2.28 | % | 0.23 | % | 5.35 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 1,936,318 | $ | 2,048,679 | $ | 2,009,721 | $ | 682,269 | $ | 949,426 | |||||||||||||||
Net Investment Income/(Loss) | 2.41 | % | 1.87 | % | 1.93 | % | 1.65 | % | 1.49 | % | |||||||||||||||
Expenses Before Reductions(b) | 0.65 | % | 0.65 | % | 0.67 | % | 0.66 | % | 0.65 | % | |||||||||||||||
Expenses Net of Reductions | 0.65 | % | 0.65 | % | 0.67 | % | 0.66 | % | 0.65 | % | |||||||||||||||
Portfolio Turnover Rate | 144 | % | 214 | % | 288 | % | 342 | % | 564 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
See accompanying notes to the financial statements.
31
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Enhanced Bond Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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
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.
Securities Purchased on a When-Issued Basis
The Fund may purchase securities on a when-issued basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield and thereby involve risk that the yield obtained in the transaction will be less than that available in the market when the delivery takes place. A Fund will not pay for such securities or start earning interest on them until they are received. When a Fund agrees to purchase securities on a when-issued basis, the Fund will segregate or designate cash or liquid assets equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in the value based upon changes in the general level of interest rates. A Fund may sell when-issued securities before they are delivered, which may result in a capital gain or loss.
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.
32
AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
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 Fund of Funds Trust.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $87,575 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $172,747,001 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
TBA Purchase and Sale Commitments
The Fund may enter intoto-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 “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 December 31, 2018, no collateral had been posted by the Fund to counterparties for TBAs.
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 year ended December 31, 2018, the Fund participated in following cross-trade transactions:
Purchases | Sales | Realized Gain/(Loss) | |||||||||||||
AZL Enhanced Bond Index Fund | $ | 3,246,202 | $ | — | $ | — |
33
AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
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.
Forward Currency Contracts
During the year ended December 31, 2018, 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 year ended December 31, 2018, the monthly average notional amount for short contracts was $0.4 million. Realized gains and losses are reported as “Net realized gains/(losses) on forward currency contracts” on the Statement of Operations.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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. For the year ended December 31, 2018, the monthly average notional amount for long contracts was $223.6 million and the monthly average notional amount for short contracts was $74.7 million. 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 December 31, 2018:
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* | ||||||||
Interest Rate Risk | ||||||||||||
Interest Rate Contracts | Receivable for variation margin on futures contracts | $ | 2,041,015 | Payable for variation margin on futures contracts | $ | 1,425,678 | ||||||
Foreign Exchange Risk | ||||||||||||
Forward Currency Contracts | Unrealized appreciation on forward currency contracts | 10,153 | Unrealized depreciation on forward currency contracts | — |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the 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 year ended December 31, 2018:
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 | |||||||
Interest Rate Risk |
| |||||||||
Interest Rate Contracts | Net realized gains/(losses) on futures contracts/ Change in net unrealized appreciation/depreciation on futures contracts | $ | (4,692,271 | ) | $ | 905,966 | ||||
Foreign Exchange Risk | ||||||||||
Forward Currency Contracts | Net realized gains/(losses) on forward currency contracts/ Change in net unrealized appreciation/depreciation on forward currency contracts | — | 10,153 |
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 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 December 31, 2018. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to master netting arrangements in the Statement of Assets and Liabilities. This table also summarizes the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of December 31, 2018.
34
AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
As of December 31, 2018, the Fund’s derivative assets and liabilities by type were as follows:
Assets | Liabilities | |||||||||
Derivative Financial Instruments: | ||||||||||
Futures contracts | $ | — | $ | 12,352 | ||||||
Forward currency contracts | 10,153 | — | ||||||||
|
|
|
| |||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | 10,153 | 12,352 | ||||||||
Derivatives not subject to a master netting agreement or similar agreement (“MNA”) | — | (12,352 | ) | |||||||
|
|
|
| |||||||
Total assets and liabilities subject to a MNA | $ | 10,153 | $ | — | ||||||
|
|
|
|
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 December 31, 2018:
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 | ||||||||||||||||||||
Westpac Pollack | $ | 10,153 | $ | — | $ | — | $ | — | $ | 10,153 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 10,153 | $ | — | $ | — | $ | — | $ | 10,153 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
* | 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 Statement of Assets and Liabilities. |
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (18,214,095 | ) | ||
From net realized gains | — | ||||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (18,214,095 | ) | ||
|
|
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 Financial Management, Inc. (“BlackRock Financial”), BlackRock Financial 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Enhanced Bond Index Fund | 0.35 | % | 0.70 | % |
35
AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $15,856 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
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.
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
36
AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 66,281,993 | $ | — | $ | 66,281,993 | ||||||||||||
Collateralized Mortgage Obligations | — | 71,389,647 | — | 71,389,647 | ||||||||||||||||
Corporate Bonds+ | — | 500,150,176 | — | 500,150,176 | ||||||||||||||||
Yankee Dollars+ | — | 168,476,657 | — | 168,476,657 | ||||||||||||||||
Municipal Bonds | — | 2,333,187 | — | 2,333,187 | ||||||||||||||||
U.S. Government Agency Mortgages | — | 797,873,805 | — | 797,873,805 | ||||||||||||||||
U.S. Treasury Obligations | — | 414,856,888 | — | 414,856,888 | ||||||||||||||||
Commercial Paper | — | 74,502,312 | — | 74,502,312 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 172,588,096 | — | 172,588,096 | ||||||||||||||||
Unaffiliated Investment Company | 24,041,369 | — | — | 24,041,369 | ||||||||||||||||
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|
|
|
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|
| |||||||||||||
Total Investment Securities | 24,041,369 | 2,268,452,761 | — | 2,292,494,130 | ||||||||||||||||
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|
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| |||||||||||||
Securities Sold Short | — | (214,765,085 | ) | — | (214,765,085 | ) | ||||||||||||||
Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | $ | 615,337 | $ | — | $ | — | $ | 615,337 | ||||||||||||
Forward Currency Contracts | — | 10,153 | — | 10,153 | ||||||||||||||||
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|
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|
| |||||||||||||
Total Investments | $ | 24,656,706 | $ | 2,053,697,829 | $ | — | $ | 2,078,354,535 | ||||||||||||
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|
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts and forward currency contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Enhanced Bond Index Fund | $ | 2,726,688,668 | $ | 2,728,902,405 |
For the year ended December 31, 2018, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL Enhanced Bond Index Fund | $ | 2,017,382,431 | $ | 2,163,930,819 |
6. Investment Risks
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 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.
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.
37
AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
Mortgage-Related and Other Asset-Backed Risk: The Fund may invest in a variety of mortgage-related and other asset-backed securities, which are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to call risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless. An unexpectedly high or low rate of prepayments on a pool’s underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk ofnon-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. A Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
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.
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 December 31, 2018 is $2,107,212,439. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 9,741,335 | ||
Unrealized (depreciation) | (39,224,729 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | (29,483,394 | ) | |
|
|
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 December 31, 2018, the Fund utilized $32,885,338 in CLCFs to offset capital gains.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL Enhanced Bond Index Fund | $ | 38,814,787 | $ | 17,016,204 | $ | 55,830,991 |
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Enhanced Bond Index Fund | $ | 43,264,943 | $ | — | $ | 43,264,943 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Enhanced Bond Index Fund | $ | 18,214,095 | $ | — | $ | 18,214,095 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
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AZL Enhanced Bond Index Fund
Notes to the Financial Statements
December 31, 2018
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/ | Total Earnings/ | |||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 48,427,455 | $ | — | $ | (55,830,992 | ) | $ | (29,494,764 | ) | $ | (36,898,301 | ) |
(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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 30% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Enhanced Bond Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Enhanced Bond Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with VIP and VIP FOF Trust | Term of Office(2)/ Length | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) Minneapolis, MN 55416 | Chief Compliance Officer(4) andAnti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
47
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Fidelity Institutional Asset Management
Multi-Strategy Fund
(formerly known as AZL® Pyramis® Multi-Strategy Fund)
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 20
Page 20
Statements of Changes in Net Assets
Page 21
Page 22
Notes to the Financial Statements
Page 23
Report of Independent Registered Public Accounting Firm
Page 30
Other Federal Income Tax Information
Page 31
Page 32
Approval of Investment Advisory and Subadvisory Agreements
Page 33
Information about the Board of Trustees and Officers
Page 36
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® Fidelity Institutional Asset Management Multi-Strategy Fund Review (Unaudited)
(formerly known as AZL® Pyramis® Multi-Strategy Fund)
Allianz Investment Management LLC serves as the Manager for the AZL®Fidelity Institutional Asset Management Multi-Strategy Fund. FIAM LLC and Geode Capital Management, LLC serve as the Subadviser andSub-Subadviser, respectively, to the Fidelity Institutional Asset Management Fixed-Income Strategy and Geode Equity Strategy, respectively.
|
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Fidelity Institutional Asset Management Multi-Strategy Fund (Class 2 Shares) (the “Fund”) returned-2.02%. That compared to a-4.38%, 0.01% and-1.39% total return for its benchmarks, the S&P 500 Index1, the Bloomberg Barclays U.S. Aggregate Bond Index1, and the Income & Growth Composite Index1, respectively.
The Fund’s primary subadviser changed its name during the period from Pyramis to FIAM (Fidelity Institutional Asset Management). As a result, the Fund’s name was changed to the AZL® Fidelity Institutional Asset Management Multi-Strategy Fund.
Approximately 60% of the underlying Fund’s assets are managed by its subadviser, FIAM, LLC, investing primarily in investment-grade fixed-income securities, and approximately 40% of the underlying Fund’s assets are managed by another subadviser, Geode Capital Management, LLC, investing primarily inlarge-cap common stocks.*
Early in the period, U.S. stocks rallied amid the tailwinds of federal tax cuts and accelerating economic growth. However, economic growth slowed in the eurozone and other major markets, and investor confidence fell as the period wore on. Increasing global trade tensions and worries about global economic growth pushed stock markets sharply lower during the final quarter of the year. The S&P 500 Index (S&P 500) oflarge-cap stocks declined 4.38% during the12-month period, marking the first annual loss in nine years.Mid- andsmall-cap stocks also fell into negative territory for the year: The S&P MidCap 400 Index2 returned-11.08% and the S&P SmallCap 600 Index3 returned-8.48%.
The U.S. bond market was marked by rising yields and the Federal Reserve Board’s (the Fed) tightening of monetary policy. The Fed raised short-term interest rates four times during the period, ending at a target range of 2.25% to 2.50%. Yields rose due to a combination of Fed moves and stronger economic growth, and higher yields pushed down bond prices. That muted bond returns during much of the period, and a flattening yield curve brought the gap between short- and long-term Treasury yields closer together. However, an uptick in stock market volatility late in the period drove investors toward relative safe investments such as Treasury bonds. That demand pushed yields lower and prices higher. Meanwhile, credit spreads on corporate bonds widened late in the period amid investors’ flight to safety. High-yield bonds were hurt by worries about rising corporate debt loads and lower oil prices.
The Fund underperformed its composite benchmark during the12-month period. However, the Fund’s equity component outperformed the equity benchmark, the S&P 500. Stock selection was a leading contributor to relative results, particularly in the healthcare and industrials sectors. However, stock selection within the materials and information technology sectors dragged on relative returns.*
The Fund’s overweight position in the strong-performing healthcare sector and an underweight to an underperforming financials sector also contributed positively to relative returns. The Fund’s value-oriented investment style dragged on relative results, however, as value stocks underperformed their growth counterparts.*
In a market characterized by higher interest rates and wider spreads across mostnon-U.S. Treasury sectors, the Fund’s fixed income component underperformed its fixed income benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index. The Fund’s exposure to high-yield bonds detracted from relative results, as did an overweight to investment-grade credits in the banking sector. Anoff-benchmark allocation to Treasury Inflation-Protected Securities also hurt relative returns as inflation expectations declined late in the period.*
The Fund held futures to equitize its cash positions during the period. The exposure to this form of derivatives did not materially impact the Fund’s performance.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmarks please refer to page 2 of this report. |
2 | The Standard & Poor’s MidCap 400 Index (S&P 400) is the most widely used index formid-sized companies. The S&P 400 covers 7% of the U.S. equities market, and is part of a series of S&P U.S. indexes that can be used as building blocks for portfolio composition. |
3 | The Standard & Poor’s SmallCap 600 Index covers approximately 3% of the domestic equities market. Measuring thesmall-cap segment of the market that is typically renowned for poor trading liquidity and financial instability, the index is designed to be an efficient portfolio of companies that meet specific inclusion criteria to ensure that they are investable and financially viable. |
Investors cannot invest directly in an index the indexes defined above are unmanaged.
1
AZL® Fidelity Institutional Asset Management Multi-Strategy Fund Review (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek a high level of current income while maintaining prospects for capital appreciation. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in a combination of subportfolios or strategies. | ||||
Investment Concerns | ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
Emerging market investing may be subject to additional economic, political, liquidity, and currency risks not associated with more developed countries. | ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. | ||||
Bonds offer a relatively stable level of income, although bond prices will fluctuate, providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. | ||||
Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities. | ||||
The performance of investments in real estate depends on the overall strength of the real estate market, the management of real estate investments trusts (REITs), real estate operating companies (REOCs), and foreign real estate companies, and property management, all of which can be affected by a variety of factors, including national and regional economic conditions. | ||||
High-yield bonds have a higher risk of default or other adverse credit events, but have the potential to pay higher earnings over investment-grade bonds. The higher risk of default, or the inability of the creditor to repay its debt, is the primary reason for the higher interest rates on high-yield bonds. | ||||
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmarks and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | 5 Year | Since Inception (10/23/09) | |||||||||||||
AZL®Fidelity Institutional Asset Management Multi-Strategy Fund (Class 2 Shares) | -2.02 | % | 5.06 | % | 2.29 | % | 5.81 | % | ||||||||
S&P 500 Index | -4.38 | % | 9.26 | % | 8.49 | % | 11.92 | % | ||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 0.01 | % | 2.06 | % | 2.52 | % | 3.17 | % | ||||||||
Income & Growth Composite Index | -1.39 | % | 5.07 | % | 5.02 | % | 6.86 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®Fidelity Institutional Asset Management Multi-Strategy Fund (Class 2 Shares) | 1.00 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.45% on all assets. The Manager and the Funds have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.71% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Standard and Poor’s 500 Index (“S&P 500”) and the Bloomberg Barclays U.S. Aggregate Bond Index. The S&P 500 is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. The Bloomberg Barclays U.S. Aggregate Bond Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Income & Growth Composite Index is a blended index comprised of (40%) of the S&P 500 and (60%) of the Bloomberg Barclays U.S. Aggregate Bond Index. These indexes are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Fidelity Institutional Asset Management 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 1,000.00 | $ | 976.90 | $ | 3.54 | 0.71 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 1,000.00 | $ | 1,021.63 | $ | 3.62 | 0.71 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Common Stocks | 40.7 | % | |||
Corporate Bonds | 17.6 | ||||
U.S. Government Agency Mortgages | 15.9 | ||||
U.S. Treasury Obligations | 15.0 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 11.7 | ||||
Yankee Dollars | 7.0 | ||||
Collateralized Mortgage Obligations | 1.4 | ||||
Money Markets | 1.4 | ||||
Municipal Bonds | 0.9 | ||||
Asset Backed Securities | 0.8 | ||||
Foreign Bonds | — | ^ | |||
|
| ||||
Total Investment Securities | 112.4 | ||||
Net other assets (liabilities) | (12.4 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (40.7%): | ||||||||
Aerospace & Defense (0.7%): | ||||||||
9,094 | Boeing Co. (The) | $ | 2,932,815 | |||||
6,159 | Raytheon Co. | 944,483 | ||||||
|
| |||||||
3,877,298 | ||||||||
|
| |||||||
Auto Components (0.2%): | ||||||||
55,401 | Gentex Corp.^ | 1,119,654 | ||||||
|
| |||||||
Automobiles (0.2%): | ||||||||
116,093 | Ford Motor Co. | 888,111 | ||||||
|
| |||||||
Banks (2.6%): | ||||||||
136,635 | Bank of America Corp. | 3,366,686 | ||||||
4,052 | CIT Group, Inc.^ | 155,070 | ||||||
39,317 | Citigroup, Inc. | 2,046,843 | ||||||
46,202 | JPMorgan Chase & Co. | 4,510,239 | ||||||
1,350 | M&T Bank Corp. | 193,226 | ||||||
68,173 | Wells Fargo & Co. | 3,141,412 | ||||||
|
| |||||||
13,413,476 | ||||||||
|
| |||||||
Beverages (0.7%): | ||||||||
454 | Boston Beer Co., Inc. (The), Class A*^ | 109,341 | ||||||
14,444 | Coca-Cola Co. (The) | 683,923 | ||||||
25,109 | PepsiCo, Inc. | 2,774,043 | ||||||
|
| |||||||
3,567,307 | ||||||||
|
| |||||||
Biotechnology (1.5%): | ||||||||
29,347 | AbbVie, Inc. | 2,705,499 | ||||||
12,945 | Amgen, Inc. | 2,520,003 | ||||||
3,450 | Biogen Idec, Inc.* | 1,038,174 | ||||||
17,640 | Celgene Corp.* | 1,130,548 | ||||||
1,753 | Genomic Health, Inc.* | 112,911 | ||||||
943 | Gilead Sciences, Inc. | 58,985 | ||||||
1,738 | Regeneron Pharmaceuticals, Inc.* | 649,143 | ||||||
|
| |||||||
8,215,263 | ||||||||
|
| |||||||
Capital Markets (0.4%): | ||||||||
491 | BlackRock, Inc., Class A | 192,875 | ||||||
7,644 | LPL Financial Holdings, Inc. | 466,895 | ||||||
28,032 | Morgan Stanley | 1,111,468 | ||||||
3,748 | SEI Investments Co. | 173,158 | ||||||
2,485 | State Street Corp. | 156,729 | ||||||
|
| |||||||
2,101,125 | ||||||||
|
| |||||||
Chemicals (0.5%): | ||||||||
1,547 | Celanese Corp., Series A | 139,184 | ||||||
25,111 | CF Industries Holdings, Inc. | 1,092,579 | ||||||
2,458 | DowDuPont, Inc. | 131,454 | ||||||
2,181 | Eastman Chemical Co. | 159,453 | ||||||
53,906 | Huntsman Corp. | 1,039,847 | ||||||
498 | Linde plc | 77,708 | ||||||
390 | Westlake Chemical Corp. | 25,806 | ||||||
|
| |||||||
2,666,031 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.3%): | ||||||||
13,887 | KAR Auction Services, Inc. | 662,688 | ||||||
14,641 | Republic Services, Inc., Class A | 1,055,469 | ||||||
|
| |||||||
1,718,157 | ||||||||
|
| |||||||
Communications Equipment (0.9%): | ||||||||
6,130 | Ciena Corp.* | 207,868 | ||||||
73,347 | Cisco Systems, Inc. | 3,178,126 | ||||||
3,073 | F5 Networks, Inc.* | 497,918 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Communications Equipment, continued | ||||||||
44,764 | Juniper Networks, Inc. | $ | 1,204,599 | |||||
|
| |||||||
5,088,511 | ||||||||
|
| |||||||
Construction & Engineering (0.2%): | ||||||||
16,164 | EMCOR Group, Inc. | 964,829 | ||||||
|
| |||||||
Consumer Finance (0.4%): | ||||||||
13,380 | American Express Co. | 1,275,381 | ||||||
3,222 | Capital One Financial Corp. | 243,551 | ||||||
10,611 | Discover Financial Services | 625,837 | ||||||
2,373 | Synchrony Financial | 55,671 | ||||||
|
| |||||||
2,200,440 | ||||||||
|
| |||||||
Diversified Financial Services (0.5%): | ||||||||
14,076 | Berkshire Hathaway, Inc., Class B* | 2,874,038 | ||||||
|
| |||||||
Diversified Telecommunication Services (1.3%): | ||||||||
112,744 | AT&T, Inc. | 3,217,714 | ||||||
2,610 | CenturyLink, Inc. | 39,542 | ||||||
63,099 | Verizon Communications, Inc. | 3,547,425 | ||||||
|
| |||||||
6,804,681 | ||||||||
|
| |||||||
Electric Utilities (0.7%): | ||||||||
36,439 | Exelon Corp. | 1,643,399 | ||||||
30,321 | OGE Energy Corp.^ | 1,188,280 | ||||||
13,390 | Portland General Electric Co. | 613,932 | ||||||
10,755 | PPL Corp. | 304,689 | ||||||
|
| |||||||
3,750,300 | ||||||||
|
| |||||||
Electrical Equipment (0.0%)†: | ||||||||
3,602 | Emerson Electric Co. | 215,220 | ||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.1%): | ||||||||
3,747 | CDW Corp. | 303,695 | ||||||
1,080 | SYNNEX Corp. | 87,307 | ||||||
915 | Zebra Technologies Corp., Class A* | 145,695 | ||||||
|
| |||||||
536,697 | ||||||||
|
| |||||||
Entertainment (0.9%): | ||||||||
18,070 | Cinemark Holdings, Inc.^ | 646,906 | ||||||
3,958 | Netflix, Inc.* | 1,059,398 | ||||||
3,785 | Twenty-First Century Fox, Inc. | 182,134 | ||||||
25,834 | Walt Disney Co. (The) | 2,832,699 | ||||||
|
| |||||||
4,721,137 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.5%): | ||||||||
3,213 | National Retail Properties, Inc. | 155,863 | ||||||
4,210 | Parks Hotels & Resorts, Inc.^ | 109,376 | ||||||
63 | Public Storage, Inc.^ | 12,752 | ||||||
16,010 | RLJ Lodging Trust | 262,564 | ||||||
6,339 | Senior Housing Properties Trust | 74,293 | ||||||
3,197 | Simon Property Group, Inc. | 537,064 | ||||||
9,583 | Spirit Realty Capital, Inc. | 337,801 | ||||||
55,150 | Weyerhaeuser Co. | 1,205,578 | ||||||
|
| |||||||
2,695,291 | ||||||||
|
| |||||||
Food & Staples Retailing (1.3%): | ||||||||
9,671 | Costco Wholesale Corp. | 1,970,079 | ||||||
47,837 | Kroger Co. (The) | 1,315,518 | ||||||
16,325 | Walgreens Boots Alliance, Inc. | 1,115,487 | ||||||
26,999 | Wal-Mart Stores, Inc. | 2,514,957 | ||||||
|
| |||||||
6,916,041 | ||||||||
|
|
See accompanying notes to the financial statements.
4
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products (0.2%): | ||||||||
31,472 | Archer-Daniels-Midland Co. | $ | 1,289,408 | |||||
|
| |||||||
Gas Utilities (0.1%): | ||||||||
8,021 | UGI Corp. | 427,920 | ||||||
|
| |||||||
Health Care Equipment & Supplies (0.6%): | ||||||||
28,529 | Abbott Laboratories | 2,063,503 | ||||||
8,089 | Baxter International, Inc. | 532,418 | ||||||
7,666 | Boston Scientific Corp.* | 270,916 | ||||||
703 | Medtronic plc | 63,945 | ||||||
1,722 | ResMed, Inc. | 196,084 | ||||||
256 | Varian Medical Systems, Inc.* | 29,007 | ||||||
|
| |||||||
3,155,873 | ||||||||
|
| |||||||
Health Care Providers & Services (2.1%): | ||||||||
3,155 | Amedisys, Inc.* | 369,482 | ||||||
6,825 | Anthem, Inc. | 1,792,450 | ||||||
8,871 | Cigna Corp. | 1,684,780 | ||||||
28,966 | CVS Health Corp. | 1,897,852 | ||||||
427 | HCA Healthcare, Inc. | 53,140 | ||||||
5,226 | Humana, Inc. | 1,497,144 | ||||||
3,455 | Quest Diagnostics, Inc. | 287,698 | ||||||
14,482 | UnitedHealth Group, Inc. | 3,607,757 | ||||||
|
| |||||||
11,190,303 | ||||||||
|
| |||||||
Health Care Technology (0.0%)†: | ||||||||
1,395 | Veeva Systems, Inc., Class A* | 124,601 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.1%): | ||||||||
1,271 | McDonald’s Corp. | 225,692 | ||||||
2,911 | Starbucks Corp. | 187,468 | ||||||
2,183 | Yum! Brands, Inc. | 200,661 | ||||||
|
| |||||||
613,821 | ||||||||
|
| |||||||
Household Durables (0.0%)†: | ||||||||
1,822 | PulteGroup, Inc.^ | 47,354 | ||||||
|
| |||||||
Household Products (0.9%): | ||||||||
23,328 | Colgate-Palmolive Co. | 1,388,483 | ||||||
709 | Kimberly-Clark Corp. | 80,783 | ||||||
38,927 | Procter & Gamble Co. (The) | 3,578,170 | ||||||
|
| |||||||
5,047,436 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.2%): | ||||||||
30,762 | NRG Energy, Inc. | 1,218,175 | ||||||
|
| |||||||
Industrial Conglomerates (0.1%): | ||||||||
101 | 3M Co., Class C | 19,245 | ||||||
4,104 | Honeywell International, Inc. | 542,220 | ||||||
|
| |||||||
561,465 | ||||||||
|
| |||||||
Insurance (0.8%): | ||||||||
16,414 | Aflac, Inc. | 747,822 | ||||||
12,770 | Allstate Corp. (The) | 1,055,185 | ||||||
1,011 | American National Insurance Co. | 128,640 | ||||||
18,415 | First American Financial Corp. | 822,046 | ||||||
1,122 | Hartford Financial Services Group, Inc. (The) | 49,873 | ||||||
24,590 | Progressive Corp. (The) | 1,483,514 | ||||||
|
| |||||||
4,287,080 | ||||||||
|
| |||||||
Interactive Media & Services (1.8%): | ||||||||
3,100 | Alphabet, Inc., Class A* | 3,239,376 | ||||||
3,655 | Alphabet, Inc., Class C* | 3,785,155 | ||||||
5,511 | Cargurus, Inc.*^ | 185,886 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Interactive Media & Services, continued | ||||||||
21,000 | Facebook, Inc., Class A* | $ | 2,752,890 | |||||
|
| |||||||
9,963,307 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (1.4%): | ||||||||
4,404 | Amazon.com, Inc.* | 6,614,675 | ||||||
31,380 | eBay, Inc.* | 880,837 | ||||||
|
| |||||||
7,495,512 | ||||||||
|
| |||||||
IT Services (2.1%): | ||||||||
1,518 | Alliance Data Systems Corp.^ | 227,821 | ||||||
6,955 | Amdocs, Ltd. | 407,424 | ||||||
792 | Automatic Data Processing, Inc. | 103,847 | ||||||
5,296 | Booz Allen Hamilton Holding Corp. | 238,691 | ||||||
534 | Cognizant Technology Solutions Corp., Class A | 33,898 | ||||||
22,384 | DXC Technology Co. | 1,190,157 | ||||||
19,220 | International Business Machines Corp. | 2,184,737 | ||||||
11,948 | MasterCard, Inc., Class A | 2,253,991 | ||||||
10,755 | Maximus, Inc. | 700,043 | ||||||
10,362 | Paychex, Inc. | 675,084 | ||||||
25,094 | Visa, Inc., Class A^ | 3,310,903 | ||||||
|
| |||||||
11,326,596 | ||||||||
|
| |||||||
Machinery (0.9%): | ||||||||
20,629 | AGCO Corp. | 1,148,416 | ||||||
17,621 | Allison Transmission Holdings, Inc.^ | 773,738 | ||||||
14,198 | Caterpillar, Inc. | 1,804,140 | ||||||
10,098 | Cummins, Inc. | 1,349,497 | ||||||
|
| |||||||
5,075,791 | ||||||||
|
| |||||||
Media (0.8%): | ||||||||
2,111 | AMC Networks, Inc., Class A*^ | 115,852 | ||||||
79,581 | Comcast Corp., Class A | 2,709,733 | ||||||
2,731 | DISH Network Corp., Class A*^ | 68,193 | ||||||
8,617 | Interpublic Group of Cos., Inc. (The)^ | 177,769 | ||||||
17,831 | Omnicom Group, Inc.^ | 1,305,942 | ||||||
|
| |||||||
4,377,489 | ||||||||
|
| |||||||
Metals & Mining (0.4%): | ||||||||
116,372 | Freeport-McMoRan Copper & Gold, Inc. | 1,199,795 | ||||||
23,392 | Nucor Corp.^ | 1,211,940 | ||||||
|
| |||||||
2,411,735 | ||||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (0.3%): | ||||||||
119,144 | Annaly Capital Management, Inc. | 1,169,994 | ||||||
103,377 | MFA Financial, Inc. | 690,558 | ||||||
|
| |||||||
1,860,552 | ||||||||
|
| |||||||
Multiline Retail (0.3%): | ||||||||
14,837 | Kohl’s Corp.^ | 984,287 | ||||||
17,531 | Macy’s, Inc.^ | 522,073 | ||||||
1,132 | Target Corp. | 74,814 | ||||||
|
| |||||||
1,581,174 | ||||||||
|
| |||||||
Multi-Utilities (0.1%): | ||||||||
17,490 | CenterPoint Energy, Inc. | 493,743 | ||||||
9,399 | MDU Resources Group, Inc. | 224,072 | ||||||
|
| |||||||
717,815 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.1%): | ||||||||
29,418 | Chevron Corp. | 3,200,384 | ||||||
28,605 | ConocoPhillips Co. | 1,783,522 | ||||||
57,738 | Exxon Mobil Corp. | 3,937,154 | ||||||
17,208 | HollyFrontier Corp. | 879,673 |
See accompanying notes to the financial statements.
5
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
12,523 | Marathon Petroleum Corp. | $ | 738,982 | |||||
713 | PBF Energy, Inc., Class A | 23,294 | ||||||
2,619 | Phillips 66 | 225,627 | ||||||
10,157 | Valero Energy Corp. | 761,470 | ||||||
|
| |||||||
11,550,106 | ||||||||
|
| |||||||
Paper & Forest Products (0.1%): | ||||||||
10,264 | Domtar Corp. | 360,575 | ||||||
16,083 | Louisiana-Pacific Corp. | 357,364 | ||||||
|
| |||||||
717,939 | ||||||||
|
| |||||||
Pharmaceuticals (3.1%): | ||||||||
1,648 | Allergan plc | 220,272 | ||||||
39,396 | Bristol-Myers Squibb Co. | 2,047,804 | ||||||
19,032 | Eli Lilly & Co. | 2,202,383 | ||||||
434 | Jazz Pharmaceuticals plc* | 53,799 | ||||||
33,454 | Johnson & Johnson Co. | 4,317,238 | ||||||
43,348 | Merck & Co., Inc. | 3,312,221 | ||||||
545 | Mylan NV* | 14,933 | ||||||
87,559 | Pfizer, Inc. | 3,821,950 | ||||||
|
| |||||||
15,990,600 | ||||||||
|
| |||||||
Professional Services (0.2%): | ||||||||
20,631 | Robert Half International, Inc. | 1,180,093 | ||||||
|
| |||||||
Road & Rail (0.3%): | ||||||||
12,895 | Union Pacific Corp. | 1,782,476 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (1.1%): | ||||||||
73,375 | Intel Corp. | 3,443,489 | ||||||
9,385 | Lam Research Corp. | 1,277,955 | ||||||
28,622 | Micron Technology, Inc.* | 908,176 | ||||||
2,326 | QUALCOMM, Inc. | 132,373 | ||||||
|
| |||||||
5,761,993 | ||||||||
|
| |||||||
Software (2.4%): | ||||||||
152 | Adobe Systems, Inc.* | 34,388 | ||||||
19,641 | Cadence Design Systems, Inc.* | 853,991 | ||||||
513 | Citrix Systems, Inc. | 52,562 | ||||||
1,363 | Fortinet, Inc.* | 95,996 | ||||||
5,115 | Intuit, Inc. | 1,006,888 | ||||||
90,036 | Microsoft Corp. | 9,144,957 | ||||||
40,108 | Oracle Corp. | 1,810,876 | ||||||
444 | Red Hat, Inc.* | 77,984 | ||||||
|
| |||||||
13,077,642 | ||||||||
|
| |||||||
Specialty Retail (1.2%): | ||||||||
11,106 | Best Buy Co., Inc.^ | 588,174 | ||||||
7,554 | Dick’s Sporting Goods, Inc.^ | 235,685 | ||||||
18,508 | Home Depot, Inc. (The) | 3,180,044 | ||||||
333 | Lowe’s Cos., Inc. | 30,756 | ||||||
14,132 | Ross Stores, Inc. | 1,175,782 | ||||||
29,912 | TJX Cos., Inc. (The) | 1,338,263 | ||||||
|
| |||||||
6,548,704 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (2.3%): | ||||||||
52,299 | Apple, Inc. | 8,249,645 | ||||||
2,253 | Dell Technologies, Inc., Class C* | 110,104 | ||||||
68,664 | HP, Inc. | 1,404,865 | ||||||
11,401 | NetApp, Inc.^ | �� | 680,298 | |||||
31,505 | Seagate Technology plc^ | 1,215,778 | ||||||
11,817 | Western Digital Corp.^ | 436,874 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Technology Hardware, Storage & Peripherals, continued | ||||||||
11,076 | Xerox Corp. | $ | 218,862 | |||||
|
| |||||||
12,316,426 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.5%): | ||||||||
5,233 | Deckers Outdoor Corp.* | 669,562 | ||||||
19,329 | Nike, Inc., Class B | 1,433,053 | ||||||
4,518 | Ralph Lauren Corp. | 467,432 | ||||||
|
| |||||||
2,570,047 | ||||||||
|
| |||||||
Tobacco (0.0%)†: | ||||||||
1,387 | Philip Morris International, Inc. | 92,596 | ||||||
|
| |||||||
Trading Companies & Distributors (0.3%): | ||||||||
4,562 | W.W. Grainger, Inc.^ | 1,288,126 | ||||||
5,893 | WESCO International, Inc.* | 282,864 | ||||||
|
| |||||||
1,570,990 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.0%)†: | ||||||||
838 | T-Mobile US, Inc.* | 53,305 | ||||||
|
| |||||||
Total Common Stocks (Cost $212,008,495) | 220,319,931 | |||||||
|
| |||||||
Asset Backed Securities (0.8%): | ||||||||
$ | 1,499,930 | Aaset Trust, Class A, Series 2017-1A, 3.97%, 5/16/42(a) | 1,497,349 | |||||
|
| |||||||
255,876 | Aaset Trust, Class A, Series 2018-1A, 3.84%, 1/16/38(a) | 256,781 | ||||||
|
| |||||||
190,104 | Blackbird Capital Aircraft, Class AA, Series 2016-1A, 2.49%, 12/16/41, Callable 12/15/24 @ 100(a)(b) | 185,961 | ||||||
|
| |||||||
683,042 | Blackbird Capital Aircraft, Class A, Series 2016-1A, 4.21%, 12/16/41, Callable 12/15/24 @ 100(a)(b) | 695,627 | ||||||
|
| |||||||
391,506 | Castlelake Aircraft Securitization Trust, Class A, Series 2018-1A, 4.13%, 6/15/43(a) | 397,679 | ||||||
|
| |||||||
217,800 | DB Master Finance LLC, Class A2I, Series 2017-1A, 3.63%, 11/20/47, Callable 11/20/21 @ 100(a) | 210,443 | ||||||
|
| |||||||
364,320 | DB Master Finance LLC, Class A2II, Series 2017-1A, 4.03%, 11/20/47, Callable 11/20/23 @ 100(a) | 351,889 | ||||||
|
| |||||||
250,000 | Horizon Aircraft Finance, Ltd., Class A, Series 2018-1, 4.46%, 12/15/38(a) | 254,832 | ||||||
|
| |||||||
344,816 | Thunderbolt Aircraft Lease, Ltd., Class A, Series 2017-A, 4.21%, 5/17/32, Callable 4/15/24 @ 100(a)(b) | 350,155 | ||||||
|
| |||||||
Total Asset Backed Securities (Cost $4,198,490) | 4,200,716 | |||||||
|
| |||||||
Collateralized Mortgage Obligations (1.4%): | ||||||||
575,000 | Benchmark 2018-B8 Mortgage Trust, Class A5, Series 2018-B8, 4.23%, 1/15/52 | 597,616 | ||||||
|
| |||||||
134,799 | BX Trust, Class F, Series 2018-IND, 4.26%(LIBOR01M+180bps), 11/15/35(a) | 133,283 | ||||||
|
| |||||||
109,000 | BX Trust, Class D, Series 2018-EXCL, 5.08%(LIBOR01M+263bps), 9/15/20(a) | 107,171 | ||||||
|
| |||||||
186,000 | Citigroup Commercial Mortgage Trust, Class A4, Series 2018-C6, 4.41%, 11/10/51 | 197,729 | ||||||
|
|
See accompanying notes to the financial statements.
6
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Collateralized Mortgage Obligations, continued | ||||||||
$ | 153,000 | CSAIL Commercial Mortgage Trust, Class A4, Series 2018-C14, 4.42%, 11/15/51 | $ | 161,030 | ||||
|
| |||||||
860,000 | CSMC Trust, Class D, Series 2017-PFHP, 4.71%(LIBOR01M+225bps), 12/15/30(a) | 853,443 | ||||||
|
| |||||||
205,000 | CSMC Trust, Class A, Series 2018, 4.28%, 12/1/99(a) | 209,099 | ||||||
|
| |||||||
100,000 | CSMC Trust, Class B, Series 2018, 4.53%, 12/1/99(a) | 102,000 | ||||||
|
| |||||||
100,000 | CSMC Trust, Class C, Series 2018, 4.78%, 12/1/99(a) | 101,141 | ||||||
|
| |||||||
100,000 | CSMC Trust, Class D, Series 2018, 4.78%, 12/1/99(a) | 98,842 | ||||||
|
| |||||||
1,900,000 | GAHR Commercial Mortgage Trust, Class DFX, Series 2015-NRF, 3.38%, 12/15/34(a)(b) | 1,875,567 | ||||||
|
| |||||||
41,000 | J.P. Morgan Chase Commercial Mortgage Securities Trust, Class CFX, Series 2018-WPT, 4.95%, 7/5/23(a) | 42,358 | ||||||
|
| |||||||
64,000 | J.P. Morgan Chase Commercial Mortgage Securities Trust, Class DFX, Series 2018-WPT, 5.35%, 7/5/23(a) | 65,961 | ||||||
|
| |||||||
87,000 | J.P. Morgan Chase Commercial Mortgage Securities Trust, Class EFX, Series 2018-WPT, 5.54%, 7/5/23(a) | 88,406 | ||||||
|
| |||||||
578,000 | Morgan Stanley Capital I Trust, Class A4, Series 2018-H4, 4.31%, 12/15/51 | 602,939 | ||||||
|
| |||||||
245,000 | Morgan Stanley Capital I Trust, Class B,Series 2018-BOP, 3.71%(LIBOR01M+125bps), 6/15/35(a) | 244,774 | ||||||
|
| |||||||
589,000 | Morgan Stanley Capital I Trust, Class C,Series 2018-BOP, 3.96%(LIBOR01M+150bps), 6/15/35(a) | 587,963 | ||||||
|
| |||||||
295,297 | MSCG Trust, Class A, Series 2016-SNR, 3.35%, 11/15/34(a)(b) | 287,746 | ||||||
|
| |||||||
124,100 | MSCG Trust, Class B, Series 2016-SNR, 4.18%, 11/15/34(a) | 121,860 | ||||||
|
| |||||||
87,550 | MSCG Trust, Class C, Series 2016-SNR, 5.21%, 11/15/34(a) | 86,589 | ||||||
|
| |||||||
394,821 | Thunderbolt II Aircraft Lease, Ltd., Class A, Series 2018, 4.15%, 9/15/38(a)(b) | 398,334 | ||||||
|
| |||||||
435,000 | Wells Fargo Commercial Mortgage Trust, Class A5, Series 2018-C48, 4.30%, 1/15/52 | 453,818 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations (Cost $7,459,919) | 7,417,669 | |||||||
|
| |||||||
Corporate Bonds (17.6%): | ||||||||
Aerospace & Defense (0.1%): | ||||||||
235,000 | BBA US Holdings, Inc., 5.38%, 5/1/26, Callable 5/1/21 @ 102.69^(a) | 222,660 | ||||||
210,000 | BWX Technologies, Inc., 5.38%, 7/15/26, Callable 7/15/21 @ 102.69^(a) | 202,062 | ||||||
155,000 | TransDigm, Inc., 6.50%, 7/15/24, Callable 7/15/19 @ 103.25 | 150,738 | ||||||
|
| |||||||
575,460 | ||||||||
|
| |||||||
Banks (1.8%): | ||||||||
640,000 | Bank of America Corp., 4.20%, 8/26/24 | 634,752 | ||||||
410,000 | Bank of America Corp., Series L, 3.95%, 4/21/25 | 397,263 | ||||||
151,000 | Bank of America Corp., Series G, 4.45%, 3/3/26 | 149,278 | ||||||
396,000 | Bank of America Corp., Series G, 3.50%, 4/19/26 | 381,085 | ||||||
397,000 | Bank of America Corp., 4.25%, 10/22/26 | 386,122 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Banks, continued | ||||||||
$ | 543,000 | Bank of America Corp., 3.42% (US0003M+104 bps), 12/20/28, Callable 12/20/27 @ 100 | $ | 507,243 | ||||
170,000 | Bank of America Corp., Series AA, 6.10% (US0003M+390 bps), Callable 3/17/25 @ 100 | 167,450 | ||||||
50,000 | Bank of America Corp., Series X, 6.25% (US0003M+371 bps), 12/31/49, Callable 9/5/24 @ 100 | 49,400 | ||||||
235,000 | Bank of America Corp., Series U, 5.20% (US0003M+314 bps), 12/31/99, Callable 6/1/23 @ 100^ | 226,282 | ||||||
495,000 | CIT Group, Inc., 6.13%, 3/9/28^ | 492,525 | ||||||
730,000 | Citigroup, Inc., 4.05%, 7/30/22^ | 733,318 | ||||||
1,098,000 | Citigroup, Inc., 4.30%, 11/20/26 | 1,055,860 | ||||||
250,000 | Citizens Bank NA, 2.55%, 5/13/21, Callable 4/13/21 @ 100 | 244,520 | ||||||
190,000 | Comstock Escrow Corp., 9.75%, 8/15/26, Callable 8/15/21 @ 107.31^(a) | 160,550 | ||||||
2,005,000 | JPMorgan Chase & Co., 3.88%, 9/10/24 | 1,972,871 | ||||||
231,000 | JPMorgan Chase & Co., 2.95%, 10/1/26, Callable 7/1/26 @ 100 | 213,335 | ||||||
1,422,000 | JPMorgan Chase & Co., 4.13%, 12/15/26 | 1,387,418 | ||||||
550,000 | Regions Financial Corp., 3.20%, 2/8/21, Callable 1/8/21 @ 100 | 546,482 | ||||||
190,000 | Wells Fargo & Co., Series S, 5.90% (US0003M+311 bps), Callable 6/15/24 @ 100 | 181,023 | ||||||
|
| |||||||
9,886,777 | ||||||||
|
| |||||||
Beverages (0.4%): | ||||||||
992,000 | Anheuser-Busch InBev NV, 3.30%, 2/1/23, Callable 12/1/22 @ 100^ | 964,569 | ||||||
939,000 | Anheuser-Busch InBev NV, 4.70%, 2/1/36, Callable 8/1/35 @ 100 | 870,827 | ||||||
333,000 | Anheuser-Busch InBev Worldwide, Inc., 4.75%, 4/15/58, Callable 10/15/57 @ 100 | 289,786 | ||||||
|
| |||||||
2,125,182 | ||||||||
|
| |||||||
Capital Markets (1.2%): | ||||||||
128,000 | Goldman Sachs Group, Inc. (The), 6.75%, 10/1/37 | 144,548 | ||||||
399,000 | Goldman Sachs Group, Inc.(The), 2.88% (US0003M+82 bps), 10/31/22, Callable 10/31/21 @ 100 | 387,512 | ||||||
154,000 | Intercontinental Exchange, Inc., 2.75%, 12/1/20, Callable 11/1/20 @ 100^ | 152,965 | ||||||
148,000 | Moody’s Corp., 4.88%, 2/15/24, Callable 11/15/23 @ 100 | 155,728 | ||||||
523,000 | Morgan Stanley, 4.88%, 11/1/22 | 538,948 | ||||||
4,600,000 | Morgan Stanley, 3.74% (US0003M+85 bps), 4/24/24, Callable 4/24/23 @ 100^ | 4,560,828 | ||||||
192,000 | Morgan Stanley, 5.00%, 11/24/25 | 195,776 | ||||||
145,000 | MSCI, Inc., 4.75%, 8/1/26, Callable 8/1/21 @ 102.38(a) | 137,388 | ||||||
|
| |||||||
6,273,693 | ||||||||
|
|
See accompanying notes to the financial statements.
7
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Chemicals (0.2%): | ||||||||
$ | 120,000 | Chemours Co., 5.38%, 5/15/27, Callable 2/15/27 @ 100^ | $ | 108,000 | ||||
245,000 | Platform Specialty Products Corp., 5.88%, 12/1/25, Callable 12/1/20 @ 102.94^(a) | 229,075 | ||||||
385,000 | TPC Group, Inc., 8.75%, 12/15/20, Callable 2/11/19 @ 100(a) | 365,750 | ||||||
130,000 | Valvoline, Inc., 4.38%, 8/15/25, Callable 8/15/20 @ 103.28 | 119,600 | ||||||
200,000 | W R Grace & Co., 5.63%, 10/1/24(a) | 199,000 | ||||||
|
| |||||||
1,021,425 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.1%): | ||||||||
200,000 | ADT Corp., 4.88%, 7/15/32(a) | 148,000 | ||||||
200,000 | Aramark Services, Inc., 5.00%, 4/1/25, Callable 4/1/20 @ 103.75^(a) | 195,500 | ||||||
200,000 | Tempo Finance, Corp., 6.75%, 6/1/25, Callable 6/1/20 @ 103.38(a) | 185,000 | ||||||
|
| |||||||
528,500 | ||||||||
|
| |||||||
Construction & Engineering (0.1%): | ||||||||
250,000 | AECOM, 5.88%, 10/15/24, Callable 7/15/24 @ 100^ | 246,250 | ||||||
270,000 | AECOM, 5.13%, 3/15/27, Callable 12/15/26 @ 100 | 230,850 | ||||||
150,000 | Brand Industrial Services, Inc., 8.50%, 7/15/25, Callable 7/15/20 @ 106.34^(a) | 127,875 | ||||||
200,000 | Summit Midstream Holdings LLC, 5.75%, 4/15/25, Callable 4/15/20 @ 104.31 | 184,000 | ||||||
|
| |||||||
�� | 788,975 | |||||||
|
| |||||||
Consumer Finance (1.6%): | ||||||||
505,000 | Ally Financial, Inc., 5.75%, 11/20/25, Callable 10/21/25 @ 100^ | 502,475 | ||||||
260,000 | Capital One Financial Corp., 3.80%, 1/31/28, Callable 12/31/27 @ 100 | 240,282 | ||||||
534,000 | Capital One NA, Series BNKT, 2.95%, 7/23/21, Callable 6/23/21 @ 100^ | 525,217 | ||||||
1,000,000 | Discover Bank, 3.20%, 8/9/21, Callable 7/9/21 @ 100 | 989,611 | ||||||
250,000 | Discover Bank, Series B, 4.68% (USSW5+173 bps), 8/9/28, Callable 8/9/23 @ 100 | 244,650 | ||||||
1,000,000 | Discover Financial Services, 5.20%, 4/27/22 | 1,037,434 | ||||||
1,000,000 | Ford Motor Credit Co. LLC, 2.60%, 11/4/19 | 988,964 | ||||||
300,000 | General Motors Acceptance Corp., 8.00%, 11/1/31 | 333,000 | ||||||
383,000 | General Motors Financial Co., 3.50%, 7/10/19 | 382,942 | ||||||
500,000 | General Motors Financial Co., 4.20%, 3/1/21, Callable 2/1/21 @ 100 | 499,731 | ||||||
378,000 | Hyundai Capital America, 2.55%, 2/6/19(a) | 377,782 | ||||||
20,000 | Navient Corp., 7.25%, 1/25/22, MTN | 19,300 | ||||||
30,000 | Navient Corp., 5.50%, 1/25/23 | 26,250 | ||||||
420,000 | Navient Corp., 7.25%, 9/25/23 | 385,350 | ||||||
30,000 | Navient Corp., 6.13%, 3/25/24, MTN^ | 25,725 | ||||||
15,000 | Navient Corp., 5.88%, 10/25/24^ | 12,525 | ||||||
60,000 | Springleaf Finance Corp., 6.88%, 3/15/25 | 53,700 | ||||||
180,000 | Springleaf Finance Corp., 7.13%, 3/15/26 | 160,650 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Consumer Finance, continued | ||||||||
$ | 271,000 | Synchrony Bank, Series B, 3.65%, 5/24/21, Callable 4/24/21 @ 100 | $ | 265,159 | ||||
510,000 | Synchrony Financial, 3.75%, 8/15/21, Callable 6/15/21 @ 100 | 496,330 | ||||||
610,000 | Synchrony Financial, 4.25%, 8/15/24, Callable 5/15/24 @ 100 | 561,245 | ||||||
405,000 | Synchrony Financial, 3.95%, 12/1/27, Callable 9/1/27 @ 100^ | 341,123 | ||||||
|
| |||||||
8,469,445 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
80,000 | Crown Americas LLC, 4.75%, 2/1/26, Callable 2/1/21 @ 103.56^(a) | 75,400 | ||||||
65,000 | Crown Americas LLC, 4.25%, 9/30/26, Callable 3/31/26 @ 100^ | 58,338 | ||||||
50,000 | Crown Cork & Seal Co., Inc., 7.38%, 12/15/26^ | 53,250 | ||||||
200,000 | Reynolds Group Issuer, Inc., 5.13%, 7/15/23, Callable 7/15/19 @ 102.56^(a) | 190,499 | ||||||
115,000 | Silgan Holdings, Inc., 4.75%, 3/15/25, Callable 3/15/20 @ 102.38 | 107,238 | ||||||
|
| |||||||
484,725 | ||||||||
|
| |||||||
Diversified Consumer Services (0.2%): | ||||||||
150,000 | APX Group, Inc., 8.75%, 12/1/20, Callable 2/11/19 @ 100 | 142,875 | ||||||
415,000 | APX Group, Inc., 7.63%, 9/1/23, Callable 9/1/19 @ 105.72^ | 335,113 | ||||||
110,000 | Ascend Learning LLC, 6.88%, 8/1/25, Callable 8/1/20 @ 103.44(a) | 105,325 | ||||||
40,000 | Frontdoor, Inc., 6.75%, 8/15/26, Callable 8/15/21 @ 105.06(a) | 38,000 | ||||||
460,000 | Laureate Education, Inc., 8.25%, 5/1/25, Callable 5/1/20 @ 106.19(a) | 472,650 | ||||||
|
| |||||||
1,093,963 | ||||||||
|
| |||||||
Diversified Financial Services (0.3%): | ||||||||
60,000 | AXA Equitable Holdings, Inc., 3.90%, 4/20/23, Callable 3/20/23 @ 100(a) | 59,257 | ||||||
165,000 | Everest Acquisition Finance, Inc., 8.00%, 11/29/24, Callable 11/30/19 @ 106^(a) | 122,925 | ||||||
50,000 | Flex Acquisition Co., Inc., 6.88%, 1/15/25, Callable 1/15/20 @ 103.44(a) | 44,500 | ||||||
555,000 | Level 3 Financing, Inc., 5.38%, 1/15/24, Callable 2/11/19 @ 102.69 | 528,638 | ||||||
200,000 | Level 3 Financing, Inc., 5.38%, 5/1/25, Callable 5/1/20 @ 102.69 | 187,500 | ||||||
500,000 | Peachtree Funding Trust, 3.98%, 2/15/25(a) | 485,008 | ||||||
15,000 | Sally Holdings LLC / Sally Capital, Inc., 5.63%, 12/1/25, Callable 12/1/20 @ 102.81 | 13,800 | ||||||
185,000 | Voya Financial, Inc., 3.13%, 7/15/24, Callable 5/15/24 @ 100 | 174,445 | ||||||
|
| |||||||
1,616,073 | ||||||||
|
|
See accompanying notes to the financial statements.
8
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Diversified Telecommunication Services (0.6%): | ||||||||
$ | 322,000 | AT&T, Inc., 2.45%, 6/30/20, Callable 5/30/20 @ 100 | $ | 317,810 | ||||
580,000 | AT&T, Inc., 3.60%, 2/17/23, Callable 12/17/22 @ 100^ | 576,406 | ||||||
28,000 | AT&T, Inc., 4.45%, 4/1/24, Callable 1/1/24 @ 100 | 28,465 | ||||||
255,000 | Frontier Communications Corp., 7.05%, 10/1/46 | 107,100 | ||||||
130,000 | Qwest Corp., 7.25%, 9/15/25 | 133,846 | ||||||
325,000 | Verizon Communications, Inc., 5.50%, 3/16/47^ | 345,610 | ||||||
603,000 | Verizon Communications, Inc., 5.01%, 4/15/49 | 600,830 | ||||||
930,000 | Verizon Communications, Inc., 5.01%, 8/21/54 | 898,639 | ||||||
500,000 | Zayo Group LLC / Zayo Capital, Inc., 6.38%, 5/15/25, Callable 5/15/20 @ 103.19^ | 465,000 | ||||||
|
| |||||||
3,473,706 | ||||||||
|
| |||||||
Electric Utilities (0.3%): | ||||||||
110,000 | Emera US Finance LP, 2.15%, 6/15/19 | 109,101 | ||||||
109,000 | Emera US Finance LP, 2.70%, 6/15/21, Callable 5/15/21 @ 100 | 106,187 | ||||||
174,000 | Emera US Finance LP, 3.55%, 6/15/26, Callable 3/15/26 @ 100 | 165,002 | ||||||
500,000 | IPALCO Enterprises, Inc., 3.45%, 7/15/20, Callable 6/15/20 @ 100^ | 499,363 | ||||||
136,000 | IPALCO Enterprises, Inc., 3.70%, 9/1/24, Callable 7/1/24 @ 100 | 132,396 | ||||||
115,000 | NextEra Energy Operating Partners LP, 4.25%, 9/15/24, Callable 7/15/24 @ 100^(a) | 106,375 | ||||||
171,447 | NSG Holdings LLC / NSG Holdings Inc., 7.75%, 12/15/25(a) | 180,877 | ||||||
117,000 | NV Energy, Inc., 6.25%, 11/15/20 | 122,927 | ||||||
150,000 | Vistra Operations Co. LLC, 5.50%, 9/1/26, Callable 9/1/21 @ 102.75(a) | 144,375 | ||||||
|
| |||||||
1,566,603 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.0%)†: | ||||||||
255,000 | TTM Technologies, Inc., 5.63%, 10/1/25, Callable 10/1/20 @ 102.81(a) | 237,150 | ||||||
|
| |||||||
Energy Equipment & Services (0.0%)†: | ||||||||
110,000 | Nabors Industries, Inc., 5.50%, 1/15/23, Callable 11/15/22 @ 100^ | 87,309 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts (2.2%): | ||||||||
500,000 | American Tower Corp., 2.80%, 6/1/20, Callable 5/1/20 @ 100 | 496,158 | ||||||
217,000 | Boston Properties LP, 4.50%, 12/1/28, Callable 9/1/28 @ 100 | 221,871 | ||||||
1,000,000 | Brandywine Operating Partnership LP, 4.10%, 10/1/24, Callable 7/1/24 @ 100 | 989,175 | ||||||
265,000 | Brandywine Operating Partnership LP, 3.95%, 11/15/27, Callable 8/15/27 @ 100 | 251,779 | ||||||
528,000 | Brixmor Operating Partners LP, 3.25%, 9/15/23, Callable 7/15/23 @ 100 | 509,959 | ||||||
355,000 | Brixmor Operating Partners LP, 3.85%, 2/1/25, Callable 11/1/24 @ 100 | 343,145 | ||||||
717,000 | Corporate Office Properties LP, 5.25%, 2/15/24, Callable 11/15/23 @ 100 | 743,321 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Equity Real Estate Investment Trusts, continued | ||||||||
$ | 110,000 | Corrections Corp. of America, 5.00%, 10/15/22, Callable 7/15/22 @ 100 | $ | 105,325 | ||||
244,000 | DDR Corp., 4.63%, 7/15/22, Callable 4/15/22 @ 100^ | 250,530 | ||||||
900,000 | Digital Realty Trust LP, 4.75%, 10/1/25, Callable 7/1/25 @ 100 | 919,541 | ||||||
183,000 | Duke Realty LP, 3.63%, 4/15/23, Callable 1/15/23 @ 100 | 182,859 | ||||||
300,000 | Equinix, Inc., 5.75%, 1/1/25, Callable 1/1/20 @ 102.88 | 302,250 | ||||||
160,000 | GLP Capital LP, 5.25%, 6/1/25, Callable 3/1/25 @ 100 | 158,867 | ||||||
500,000 | Health Care REIT, Inc., 4.13%, 4/1/19, Callable 2/11/19 @ 100^ | 500,140 | ||||||
735,000 | Lexington Realty Trust, 4.40%, 6/15/24, Callable 3/15/24 @ 100 | 724,045 | ||||||
430,000 | MGM Growth Properties LLC, 4.50%, 9/1/26, Callable 6/1/26 @ 100 | 389,150 | ||||||
200,000 | MPT Operating Partnership LP/MPT Finance Corp., 5.25%, 8/1/26, Callable 8/1/21 @ 102.63 | 188,500 | ||||||
549,000 | Omega Healthcare Investors, Inc., 4.38%, 8/1/23, Callable 6/1/23 @ 100 | 551,312 | ||||||
101,000 | Omega Healthcare Investors, Inc., 4.50%, 1/15/25, Callable 10/15/24 @ 100 | 99,468 | ||||||
526,000 | Omega Healthcare Investors, Inc., 5.25%, 1/15/26, Callable 10/15/25 @ 100 | 535,255 | ||||||
1,628,000 | Omega Healthcare Investors, Inc., 4.50%, 4/1/27, Callable 1/1/27 @ 100^ | 1,572,136 | ||||||
494,000 | Omega Healthcare Investors, Inc., 4.75%, 1/15/28, Callable 10/15/27 @ 100 | 483,971 | ||||||
700,000 | Tanger Properties LP, 3.88%, 12/1/23, Callable 9/1/23 @ 100 | 689,558 | ||||||
275,000 | Tanger Properties LP, 3.75%, 12/1/24, Callable 9/1/24 @ 100 | 266,698 | ||||||
118,000 | Ventas Realty LP, 3.13%, 6/15/23, Callable 3/15/23 @ 100 | 115,026 | ||||||
131,000 | Ventas Realty LP, 4.00%, 3/1/28, Callable 12/1/27 @ 100 | 126,961 | ||||||
|
| |||||||
11,717,000 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
65,000 | US Foods, Inc., 5.88%, 6/15/24, Callable 6/15/19 @ 102.94(a) | 63,213 | ||||||
271,000 | Walgreens Boots Alliance, Inc., 3.30%, 11/18/21, Callable 9/18/21 @ 100 | 269,753 | ||||||
|
| |||||||
332,966 | ||||||||
|
| |||||||
Food Products (0.1%): | ||||||||
100,000 | JBS USA Finance, Inc., 5.88%, 7/15/24, Callable 7/15/19 @ 102.94(a) | 98,500 | ||||||
390,000 | JBS USA Finance, Inc., 5.75%, 6/15/25, Callable 6/15/20 @ 102.88(a) | 372,450 |
See accompanying notes to the financial statements.
9
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Food Products, continued | ||||||||
$ | 200,000 | Post Holding, Inc., 5.00%, 8/15/26, Callable 8/15/21 @ 102.5(a) | $ | 182,000 | ||||
|
| |||||||
652,950 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.1%): | ||||||||
191,000 | Becton Dickinson And Co., 3.70%, 6/6/27, Callable 3/6/27 @ 100 | 180,655 | ||||||
125,000 | Teleflex, Inc., 4.88%, 6/1/26, Callable 6/1/21 @ 102.44^ | 119,375 | ||||||
|
| |||||||
300,030 | ||||||||
|
| |||||||
Health Care Providers & Services (1.6%): | ||||||||
295,000 | Community Health Systems, Inc., 5.13%, 8/1/21, Callable 2/11/19 @ 101.28^ | 273,613 | ||||||
440,000 | Community Health Systems, Inc., 6.25%, 3/31/23, Callable 3/31/20 @ 103.13^ | 399,872 | ||||||
120,000 | Community Health Systems, Inc., 8.63%, 1/15/24, Callable 1/15/21 @ 104.31^(a) | 118,500 | ||||||
300,000 | CVS Health Corp., 3.70%, 3/9/23, Callable 2/9/23 @ 100 | 296,789 | ||||||
670,000 | CVS Health Corp., 4.10%, 3/25/25, Callable 1/25/25 @ 100 | 663,315 | ||||||
779,000 | CVS Health Corp., 4.30%, 3/25/28, Callable 12/25/27 @ 100 | 761,557 | ||||||
347,000 | CVS Health Corp., 4.78%, 3/25/38, Callable 9/25/37 @ 100 | 332,515 | ||||||
510,000 | CVS Health Corp., 5.05%, 3/25/48, Callable 9/25/47 @ 100 | 496,031 | ||||||
273,000 | Halfmoon Parent, Inc., 3.75%, 7/15/23, Callable 6/15/23 @ 100(a) | 272,091 | ||||||
132,000 | Halfmoon Parent, Inc., 4.13%, 11/15/25, Callable 9/15/25 @ 100(a) | 131,814 | ||||||
341,000 | Halfmoon Parent, Inc., 4.38%, 10/15/28, Callable 7/15/28 @ 100(a) | 342,903 | ||||||
212,000 | Halfmoon Parent, Inc., 4.80%, 8/15/38, Callable 2/15/38 @ 100(a) | 208,208 | ||||||
212,000 | Halfmoon Parent, Inc., 4.90%, 12/15/48, Callable 6/15/48 @ 100(a) | 207,420 | ||||||
1,900,000 | HCA, Inc., 6.50%, 2/15/20 | 1,947,499 | ||||||
25,000 | HCA, Inc., 5.88%, 3/15/22^ | 25,625 | ||||||
20,000 | HCA, Inc., 4.75%, 5/1/23 | 19,700 | ||||||
300,000 | HCA, Inc., 5.38%, 2/1/25 | 292,500 | ||||||
200,000 | Tenet Healthcare Corp., 4.50%, 4/1/21 | 194,500 | ||||||
665,000 | Tenet Healthcare Corp., 8.13%, 4/1/22 | 666,663 | ||||||
100,000 | Tenet Healthcare Corp., 6.75%, 6/15/23^ | 93,875 | ||||||
150,000 | Tenet Healthcare Corp., 7.00%, 8/1/25, Callable 8/1/20 @ 103.5^ | 138,750 | ||||||
117,000 | Toledo Hospital (The), Series B, 5.33%, 11/15/28 | 117,431 | ||||||
559,000 | Toledo Hospital (The), 6.02%, 11/15/48 | 565,853 | ||||||
130,000 | Vizient, Inc., 10.38%, 3/1/24, Callable 3/1/19 @ 107.78(a) | 137,800 | ||||||
30,000 | WellCare Health Plans, Inc., 5.38%, 8/15/26, Callable 8/15/21 @ 104.03(a) | 28,950 | ||||||
|
| |||||||
8,733,774 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Hotels, Restaurants & Leisure (0.3%): | ||||||||
$ | 325,000 | Caesars Resort Collection LLC, 5.25%, 10/15/25, Callable 10/15/20 @ 102.63(a) | $ | 279,499 | ||||
20,000 | Delta Merger Sub, Inc., 6.00%, 9/15/26, Callable 9/15/21 @ 104.5^(a) | 18,900 | ||||||
95,000 | Eldorado Resorts, Inc., 7.00%, 8/1/23, Callable 2/11/19 @ 105.25 | 97,613 | ||||||
95,000 | Eldorado Resorts, Inc., 6.00%, 4/1/25, Callable 4/1/20 @ 104.5 | 91,641 | ||||||
100,000 | Hilton Worldwide Finance LLC, 4.63%, 4/1/25, Callable 4/1/20 @ 102.31 | 94,750 | ||||||
100,000 | Penn National Gaming, Inc., 5.63%, 1/15/27, Callable 1/15/22 @ 102.81^(a) | 89,500 | ||||||
115,000 | Scientific Games International, Inc., 6.63%, 5/15/21, Callable 2/11/19 @ 103.31 | 108,963 | ||||||
170,000 | Scientific Games International, Inc., 10.00%, 12/1/22, Callable 2/11/19 @ 105^ | 172,549 | ||||||
175,000 | Scientific Games International, Inc., 5.00%, 10/15/25, Callable 10/15/20 @ 103.75^(a) | 156,188 | ||||||
95,000 | Station Casinos LLC, 5.00%, 10/1/25, Callable 10/1/20 @ 102.5(a) | 85,975 | ||||||
115,000 | Wyndham Hotels & Resorts, Inc., 5.38%, 4/15/26, Callable 4/15/21 @ 102.69(a) | 110,400 | ||||||
100,000 | Wynn Las Vegas LLC, 5.50%, 3/1/25, Callable 12/1/24 @ 100^(a) | 93,250 | ||||||
|
| |||||||
1,399,228 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.1%): | ||||||||
230,000 | AES Corp., 5.50%, 4/15/25, Callable 4/15/20 @ 102.75 | 228,275 | ||||||
75,000 | Clearway Energy Operating LLC, 5.75%, 10/15/25, Callable 10/15/21 @ 102.88(a) | 71,625 | ||||||
230,000 | NRG Energy, 6.25%, 5/1/24, Callable 5/1/19 @ 103.13^ | 233,450 | ||||||
|
| |||||||
533,350 | ||||||||
|
| |||||||
Industrial Conglomerates (0.1%): | ||||||||
330,000 | Icahn Enterprises LP, 5.88%, 2/1/22, Callable 2/11/19 @ 101.47 | 323,400 | ||||||
260,000 | Icahn Enterprises LP, 6.75%, 2/1/24, Callable 2/1/20 @ 103.38^ | 257,400 | ||||||
|
| |||||||
580,800 | ||||||||
|
| |||||||
Insurance (0.6%): | ||||||||
218,000 | American International Group, Inc., 3.30%, 3/1/21, Callable 2/1/21 @ 100 | 217,261 | ||||||
809,000 | American International Group, Inc., 3.75%, 7/10/25, Callable 4/10/25 @ 100 | 774,576 | ||||||
135,000 | AmWINS Group, Inc., 7.75%, 7/1/26, Callable 7/1/21 @ 105.81(a) | 127,575 | ||||||
436,000 | Pacific Lifecorp, 5.13%, 1/30/43^(a) | 445,153 | ||||||
497,000 | Teachers Insurance & Annuity Association of America, 4.90%, 9/15/44(a) | 515,350 | ||||||
1,042,000 | Unum Group, 5.75%, 8/15/42 | 1,038,502 |
See accompanying notes to the financial statements.
10
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Insurance, continued | ||||||||
$ | 130,000 | USIS Merger Sub, Inc., 6.88%, 5/1/25, Callable 5/1/20 @ 103.44(a) | $ | 119,353 | ||||
|
| |||||||
3,237,770 | ||||||||
|
| |||||||
IT Services (0.0%)†: | ||||||||
140,000 | First Data Corp., 5.75%, 1/15/24, Callable 1/22/19 @ 102.88(a) | 136,500 | ||||||
90,000 | Refinitiv US Holdings, Inc., 6.25%, 5/15/26, Callable 11/15/21 @ 103.13^(a) | 86,850 | ||||||
|
| |||||||
223,350 | ||||||||
|
| |||||||
Leisure Products (0.0%)†: | ||||||||
240,000 | Mattel, Inc., 6.75%, 12/31/25, Callable 12/31/20 @ 105.06^(a) | 214,126 | ||||||
|
| |||||||
Life Sciences Tools & Services (0.1%): | ||||||||
90,000 | Charles River Laboratories International, Inc., 5.50%, 4/1/26, Callable 4/1/21 @ 104.13(a) | 88,650 | ||||||
200,000 | IMS Health, Inc., 5.00%, 10/15/26, Callable 10/15/21 @ 102.5(a) | 191,000 | ||||||
|
| |||||||
279,650 | ||||||||
|
| |||||||
Media (1.8%): | ||||||||
395,000 | 21st Century Fox America, 7.75%, 12/1/45 | 579,939 | ||||||
320,000 | CCO Holdings LLC, 5.88%, 4/1/24, Callable 4/1/19 @ 104.41(a) | 318,400 | ||||||
65,000 | CCO Holdings LLC, 5.38%, 5/1/25, Callable 5/1/20 @ 102.68(a) | 62,319 | ||||||
430,000 | CCO Holdings LLC, 5.75%, 2/15/26, Callable 2/15/21 @ 102.88(a) | 421,400 | ||||||
270,000 | CCO Holdings LLC, 5.50%, 5/1/26, Callable 5/1/21 @ 102.75^(a) | 259,538 | ||||||
400,000 | CCO Holdings LLC, 5.88%, 5/1/27, Callable 5/1/21 @ 102.94^(a) | 388,000 | ||||||
61,000 | Comcast Corp., 3.90%, 3/1/38, Callable 9/1/37 @ 100 | 56,468 | ||||||
144,000 | Comcast Corp., 4.65%, 7/15/42 | 142,490 | ||||||
161,000 | Comcast Corp., 4.60%, 8/15/45, Callable 2/15/45 @ 100 | 156,869 | ||||||
197,000 | Comcast Corp., 3.97%, 11/1/47, Callable 5/1/47 @ 100 | 176,089 | ||||||
112,000 | Comcast Corp., 4.00%, 3/1/48, Callable 9/1/47 @ 100 | 102,057 | ||||||
224,000 | Comcast Corp., 4.00%, 11/1/49, Callable 5/1/49 @ 100 | 200,718 | ||||||
500,000 | CSC Holdings LLC, 5.38%, 7/15/23, Callable 1/22/19 @ 104.03(a) | 487,600 | ||||||
200,000 | CSC Holdings LLC, 7.75%, 7/15/25, Callable 7/15/20 @ 103.88^(a) | 203,000 | ||||||
105,000 | CSC Holdings LLC, 7.50%, 4/1/28, Callable 4/1/23 @ 103.75(a) | 104,738 | ||||||
200,000 | DISH DBS Corp., 5.00%, 3/15/23^ | 166,500 | ||||||
200,000 | DISH DBS Corp., 5.88%, 11/15/24^ | 161,000 | ||||||
140,000 | DISH Network Corp., 3.38%, 8/15/26 | 113,052 | ||||||
80,000 | NBCUniversal Media LLC, 5.95%, 4/1/41 | 91,821 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Media, continued | ||||||||
$ | 114,000 | NBCUniversal Media LLC, 4.45%, 1/15/43 | $ | 109,888 | ||||
700,000 | Neptune Finco Corp., 6.63%, 10/15/25, Callable 10/15/20 @ 103.31(a) | 708,750 | ||||||
400,000 | Radiate Holdco LLC/Radiate Finance, Inc., 6.63%, 2/15/25, Callable 2/15/20 @ 103.31^(a) | 346,000 | ||||||
200,000 | Sirius XM Radio, Inc., 4.63%, 5/15/23, Callable 2/11/19 @ 102.31^(a) | 191,500 | ||||||
105,000 | Sirius XM Radio, Inc., 6.00%, 7/15/24, Callable 7/15/19 @ 103(a) | 105,263 | ||||||
495,000 | Sirius XM Radio, Inc., 5.38%, 4/15/25, Callable 4/15/20 @ 102.69(a) | 469,013 | ||||||
130,000 | Sirius XM Radio, Inc., 5.38%, 7/15/26, Callable 7/15/21 @ 102.69(a) | 121,550 | ||||||
716,000 | Time Warner Cable, Inc., 8.25%, 4/1/19 | 724,035 | ||||||
623,000 | Time Warner Cable, Inc., 4.00%, 9/1/21, Callable 6/1/21 @ 100 | 619,214 | ||||||
155,000 | Time Warner Cable, Inc., 6.55%, 5/1/37 | 159,067 | ||||||
280,000 | Time Warner Cable, Inc., 7.30%, 7/1/38 | 303,535 | ||||||
1,500,000 | Time Warner Cable, Inc., 6.75%, 6/15/39 | 1,524,187 | ||||||
69,000 | Time Warner Cable, Inc., 5.50%, 9/1/41, Callable 3/1/41 @ 100 | 62,879 | ||||||
|
| |||||||
9,636,879 | ||||||||
|
| |||||||
Metals & Mining (0.1%): | ||||||||
400,000 | Freeport-McMoRan, Inc., 3.55%, 3/1/22, Callable 12/1/21 @ 100 | 378,500 | ||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (0.0%)†: | ||||||||
45,000 | Starwood Property Trust, Inc., 4.75%, 3/15/25, Callable 9/15/24 @ 100 | 40,500 | ||||||
|
| |||||||
Multi-Utilities (0.1%): | ||||||||
339,000 | Sempra Energy, 6.00%, 10/15/39 | 376,886 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.4%): | ||||||||
149,000 | Anadarko Petroleum Corp., 4.85%, 3/15/21, Callable 2/15/21 @ 100 | 152,558 | ||||||
308,000 | Anadarko Petroleum Corp., 5.55%, 3/15/26, Callable 12/15/25 @ 100 | 322,580 | ||||||
738,000 | Anadarko Petroleum Corp., 7.50%, 5/1/31 | 872,718 | ||||||
78,000 | Anadarko Petroleum Corp., 6.45%, 9/15/36 | 84,240 | ||||||
410,000 | Anadarko Petroleum Corp., 6.60%, 3/15/46, Callable 9/15/45 @ 100 | 452,713 | ||||||
280,000 | California Resources Corp., 8.00%, 12/15/22, Callable 2/11/19 @ 104^(a) | 189,700 | ||||||
315,000 | Cheniere Corpus Christi Holdings LLC, 7.00%, 6/30/24, Callable 1/1/24 @ 100 | 332,325 | ||||||
475,000 | Cheniere Energy Partners LP, 5.25%, 10/1/25, Callable 10/1/20 @ 102.63^ | 442,938 | ||||||
50,000 | Cheniere Energy Partners LP, 5.63%, 10/1/26, Callable 10/1/21 @ 102.81(a) | 46,750 | ||||||
360,000 | Chesapeake Energy Corp., 8.00%, 1/15/25, Callable 1/15/20 @ 106^ | 317,700 | ||||||
425,000 | Citgo Petroleum Corp., 6.25%, 8/15/22, Callable 2/11/19 @ 103.13^(a) | 411,188 |
See accompanying notes to the financial statements.
11
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 132,000 | Columbia Pipeline Group, 4.50%, 6/1/25, Callable 3/1/25 @ 100 | $ | 132,951 | ||||
195,000 | Crestwood Midstream Partners LP, 6.25%, 4/1/23, Callable 1/28/19 @ 104.69 | 187,688 | ||||||
100,000 | Crestwood Midstream Partners LP, 5.75%, 4/1/25, Callable 4/1/20 @ 104.31 | 92,750 | ||||||
100,000 | CVR Refining LLC/Coffeyville Finance, Inc., 6.50%, 11/1/22, Callable 2/11/19 @ 102.17 | 98,500 | ||||||
275,000 | DCP Midstream Operating LLC, 8.13%, 8/16/30 | 308,000 | ||||||
125,000 | DCP Midstream Operating LP, 5.38%, 7/15/25, Callable 4/15/25 @ 100^ | 122,188 | ||||||
350,000 | DCP Midstream Operating LP, 5.85% (US0003M+385 bps), 5/21/43, Callable 5/21/23 @ 100(a) | 280,000 | ||||||
300,000 | Denbury Resources, Inc., 9.25%, 3/31/22, Callable 3/31/19 @ 109.25(a) | 276,750 | ||||||
105,000 | Denbury Resources, Inc., 4.63%, 7/15/23, Callable 2/11/19 @ 101.54 | 61,688 | ||||||
117,000 | Enable Midstream Partners LP, 2.40%, 5/15/19, Callable 4/15/19 @ 100 | 116,337 | ||||||
124,000 | Enable Midstream Partners LP, 3.90%, 5/15/24, Callable 2/15/24 @ 100 | 118,945 | ||||||
67,000 | Energy Transfer Partners LP, 4.20%, 9/15/23, Callable 8/15/23 @ 100^ | 66,031 | ||||||
229,000 | Energy Transfer Partners LP, 4.95%, 6/15/28, Callable 3/15/28 @ 100^ | 224,057 | ||||||
128,000 | Energy Transfer Partners LP, 5.80%, 6/15/38, Callable 12/15/37 @ 100 | 124,591 | ||||||
83,000 | Energy Transfer Partners LP, 6.00%, 6/15/48, Callable 12/15/47 @ 100 | 80,826 | ||||||
200,000 | Global Partners LP, 6.25%, 7/15/22, Callable 2/11/19 @ 103.13^ | 189,000 | ||||||
220,000 | Hess Infrastructure Partners LP/Finance Corp., 5.63%, 2/15/26, Callable 2/15/21 @ 104.22(a) | 212,850 | ||||||
205,000 | Hilcorp Energy LP, 5.00%, 12/1/24, Callable 6/1/19 @ 102.5(a) | 181,425 | ||||||
50,000 | Indigo Natural Resources LLC, 6.88%, 2/15/26, Callable 2/15/21 @ 103.44(a) | 43,000 | ||||||
155,000 | Jonah Energy LLC/Jonah Energy Finance Corp., 7.25%, 10/15/25, Callable 10/15/20 @ 105.44^(a) | 99,200 | ||||||
111,000 | Kinder Morgan (Delaware), Inc., 3.05%, 12/1/19, Callable 11/1/19 @ 100 | 110,360 | ||||||
112,000 | Kinder Morgan (Delaware), Inc., 5.05%, 2/15/46, Callable 8/15/45 @ 100 | 102,271 | ||||||
195,000 | Kinder Morgan Energy Partners LP, 2.65%, 2/1/19 | 194,896 | ||||||
42,000 | Kinder Morgan Energy Partners LP, 6.55%, 9/15/40 | 45,334 | ||||||
479,000 | Kinder Morgan Energy Partners LP, 5.50%, 3/1/44, Callable 9/1/43 @ 100^ | 461,600 | ||||||
105,000 | Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp., 6.00%, 8/1/26, Callable 8/1/21 @ 103(a) | 101,325 | ||||||
113,000 | MPLX LP, 4.50%, 7/15/23, Callable 4/15/23 @ 100 | 114,131 | ||||||
159,000 | MPLX LP, 4.88%, 12/1/24, Callable 9/1/24 @ 100 | 161,851 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 63,000 | MPLX LP, 4.80%, 2/15/29, Callable 11/15/28 @ 100 | $ | 62,845 | ||||
188,000 | MPLX LP, 5.50%, 2/15/49, Callable 8/15/48 @ 100 | 182,870 | ||||||
190,000 | Parsley Energy LLC, 5.25%, 8/15/25, Callable 8/15/20 @ 103.94^(a) | 171,950 | ||||||
265,000 | PBF Holding Co. LLC/PBF Finance Corp., 7.00%, 11/15/23, Callable 2/11/19 @ 105.25 | 253,075 | ||||||
38,000 | Phillips 66 Partners LP, 2.65%, 2/15/20, Callable 1/15/20 @ 100 | 37,673 | ||||||
10,000 | Rose Rock Midstream, 5.63%, 11/15/23, Callable 5/15/19 @ 102.81 | 9,100 | ||||||
200,000 | Rose Rock Midstream LP, 5.63%, 7/15/22, Callable 1/28/19 @ 102.81^ | 188,500 | ||||||
310,000 | Sanchez Energy Corp., 7.25%, 2/15/23, Callable 2/15/20 @ 103.63^(a) | 252,650 | ||||||
240,000 | Semgroup Corp., 6.38%, 3/15/25, Callable 3/15/20 @ 103.19^ | 221,400 | ||||||
70,000 | Semgroup Corp., 7.25%, 3/15/26, Callable 3/15/21 @ 103.63 | 65,450 | ||||||
233,000 | Southwestern Energy Co., 6.70%, 1/23/25, Callable 10/23/24 @ 100^ | 208,244 | ||||||
548,000 | Sunoco Logistics Partners Operations LP, 5.40%, 10/1/47, Callable 4/1/47 @ 100 | 496,601 | ||||||
65,000 | Sunoco LP/ Sunoco Finance Corp., 4.88%, 1/15/23, Callable 1/15/20 @ 102.44 | 63,375 | ||||||
120,000 | Sunoco LP/ Sunoco Finance Corp., 5.50%, 2/15/26, Callable 2/15/21 @ 102.75 | 113,700 | ||||||
130,000 | Targa Resources Partners LP, 5.13%, 2/1/25, Callable 2/1/20 @ 103.84 | 121,875 | ||||||
125,000 | Targa Resources Partners LP, 5.88%, 4/15/26, Callable 4/15/21 @ 104.41(a) | 121,563 | ||||||
130,000 | Targa Resources Partners LP, 5.38%, 2/1/27, Callable 2/1/22 @ 102.69 | 121,875 | ||||||
103,000 | Western Gas Partners LP, 4.65%, 7/1/26, Callable 4/1/26 @ 100 | 99,607 | ||||||
1,000,000 | Western Gas Partners LP, 4.50%, 3/1/28, Callable 12/1/27 @ 100 | 934,723 | ||||||
66,000 | Western Gas Partners, LP, 4.75%, 8/15/28, Callable 5/15/28 @ 100^ | 62,826 | ||||||
239,000 | Williams Partners LP, 3.60%, 3/15/22, Callable 1/15/22 @ 100^ | 234,509 | ||||||
162,000 | Williams Partners LP, 4.50%, 11/15/23, Callable 8/15/23 @ 100 | 162,853 | ||||||
285,000 | Williams Partners LP, 4.30%, 3/4/24, Callable 12/4/23 @ 100 | 284,007 | ||||||
|
| |||||||
12,405,226 | ||||||||
|
| |||||||
Pharmaceuticals (0.1%): | ||||||||
115,000 | Catalent Pharma Solutions, Inc., 4.88%, 1/15/26, Callable 10/15/20 @ 102.44(a) | 108,963 | ||||||
57,000 | Elanco Animal Health, Inc., 3.91%, 8/27/21(a) | 57,355 | ||||||
180,000 | Elanco Animal Health, Inc., 4.27%, 8/28/23, Callable 7/28/23 @ 100(a) | 179,847 |
See accompanying notes to the financial statements.
12
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Pharmaceuticals, continued | ||||||||
$ | 76,000 | Elanco Animal Health, Inc., 4.90%, 8/28/28, Callable 5/28/28 @ 100(a) | $ | 77,336 | ||||
110,000 | Valeant Pharmaceuticals International, 9.25%, 4/1/26, Callable 4/1/22 @ 104.63(a) | 110,000 | ||||||
|
| |||||||
533,501 | ||||||||
|
| |||||||
Real Estate Management & Development (0.0%)†: | ||||||||
200,000 | Howard Hughes Corp. (The), 5.38%, 3/15/25, Callable 3/15/20 @ 104.03^(a) | 188,000 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.0%)†: | ||||||||
90,000 | Qorvo, Inc., 5.50%, 7/15/26, Callable 7/15/21 @ 102.75(a) | 85,950 | ||||||
|
| |||||||
Software (0.2%): | ||||||||
80,000 | CDK Global, Inc., 5.88%, 6/15/26, Callable 6/15/21 @ 102.94 | 80,324 | ||||||
135,000 | Fair Isaac Corp., 5.25%, 5/15/26, Callable 2/15/26 @ 100(a) | 130,613 | ||||||
90,000 | Nuance Communications, Inc., 5.63%, 12/15/26, Callable 12/15/21 @ 102.81^ | 85,500 | ||||||
290,000 | Solera LLC, 10.50%, 3/1/24, Callable 3/1/19 @ 107.88(a) | 308,849 | ||||||
250,000 | Sophia LP/Finance, Inc., 9.00%, 9/30/23, Callable 2/11/19 @ 104.5(a) | 250,000 | ||||||
125,000 | Symantec Corp., 5.00%, 4/15/25, Callable 4/15/20 @ 102.5(a) | 116,585 | ||||||
|
| |||||||
971,871 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.1%): | ||||||||
28,000 | Dell International LLC/ EMC Corp., 6.02%, 6/15/26, Callable 3/15/26 @ 100(a) | 28,127 | ||||||
441,000 | HP Enterprise Co., 3.60%, 10/15/20, Callable 9/15/20 @ 100 | 442,141 | ||||||
|
| |||||||
470,268 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.0%)†: | ||||||||
125,000 | USA Compression Partners LP, 6.88%, 4/1/26, Callable 4/1/21 @ 105.16^(a) | 120,000 | ||||||
|
| |||||||
Thrifts & Mortgage Finance (0.0%)†: | ||||||||
235,000 | Quicken Loans, Inc., 5.25%, 1/15/28, Callable 1/15/23 @ 102.63^(a) | 207,975 | ||||||
|
| |||||||
Tobacco (0.3%): | ||||||||
212,000 | Altria Group, Inc., 4.00%, 1/31/24 | 208,342 | ||||||
69,000 | Altria Group, Inc., 4.25%, 8/9/42 | 55,653 | ||||||
27,000 | Altria Group, Inc., 3.88%, 9/16/46, Callable 3/16/46 @ 100 | 20,566 | ||||||
94,000 | Reynolds American, Inc., 3.25%, 6/12/20 | 93,423 | ||||||
320,000 | Reynolds American, Inc., 4.00%, 6/12/22 | 316,551 | ||||||
232,000 | Reynolds American, Inc., 4.45%, 6/12/25, Callable 3/12/25 @ 100 | 223,702 | ||||||
120,000 | Reynolds American, Inc., 5.70%, 8/15/35, Callable 2/15/35 @ 100 | 117,171 | ||||||
700,000 | Vector Group, Ltd., 6.13%, 2/1/25, Callable 2/1/20 @ 103.06(a) | 595,001 | ||||||
|
| |||||||
1,630,409 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Trading Companies & Distributors (0.0%)†: | ||||||||
$ | 240,000 | AerCap Global Aviation Trust, 6.50% (US0003M+430 bps), 6/15/45, Callable 6/15/25 @ 100^(a) | $ | 230,400 | ||||
|
| |||||||
Wireless Telecommunication Services (0.2%): | ||||||||
200,000 | Sprint Corp., 7.25%, 9/15/21 | 204,700 | ||||||
380,000 | Sprint Corp., 7.88%, 9/15/23 | 389,975 | ||||||
280,000 | Sprint Corp., 7.13%, 6/15/24 | 277,295 | ||||||
85,000 | Sprint Corp., 7.63%, 3/1/26, Callable 11/1/25 @ 100 | 83,938 | ||||||
65,000 | Sprint Nextel Corp., 6.00%, 11/15/22 | 63,786 | ||||||
200,000 | T-Mobile USA, Inc., 5.13%, 4/15/25, Callable 4/15/20 @ 102.56 | 194,250 | ||||||
|
| |||||||
1,213,944 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $99,973,548) | 94,924,289 | |||||||
|
| |||||||
Foreign Bond (0.0%)†: | ||||||||
Sovereign Bond (0.0%)†: | ||||||||
50,000 | Korea Treasury Bond, Series 2103, 2.00%, 3/10/21+ | 45 | ||||||
|
| |||||||
Total Foreign Bond (Cost $43) | 45 | |||||||
|
| |||||||
Yankee Dollars (7.0%): | ||||||||
Aerospace & Defense (0.2%): | ||||||||
80,000 | Avolon Holdings FNDG, Ltd., 5.50%, 1/15/23, Callable 12/15/22 @ 100(a) | 77,600 | ||||||
150,000 | Avolon Holdings Funding, Ltd., 5.13%, 10/1/23, Callable 9/1/23 @ 100(a) | 143,249 | ||||||
140,000 | Bombardier, Inc., 6.00%, 10/15/22, Callable 2/11/19 @ 103^(a) | 131,250 | ||||||
210,000 | Bombardier, Inc., 6.13%, 1/15/23^(a) | 196,875 | ||||||
|
| |||||||
548,974 | ||||||||
|
| |||||||
Banks (1.3%): | ||||||||
430,000 | Barclays Bank plc, 3.25%, 1/12/21 | 421,098 | ||||||
585,000 | Barclays Bank plc, 4.38%, 1/12/26 | 555,710 | ||||||
800,000 | Barclays Bank plc, 7.88%, Callable 3/15/22 @ 100(a) | 800,000 | ||||||
205,000 | HSBC Holdings plc, 4.25%, 3/14/24 | 203,444 | ||||||
200,000 | Intesa Sanpaolo SpA, 5.02%, 6/26/24(a) | 181,377 | ||||||
656,000 | Intesa Sanpaolo SpA, 5.71%, 1/15/26(a) | 601,340 | ||||||
530,000 | Rabobank Nederland NY, 4.38%, 8/4/25 | 520,545 | ||||||
2,550,000 | Royal Bank of Scotland Group plc, 6.13%, 12/15/22 | 2,584,323 | ||||||
452,000 | Royal Bank of Scotland Group plc, 6.10%, 6/10/23 | 459,138 | ||||||
425,000 | Royal Bank of Scotland Group plc, 6.00%, 12/19/23 | 430,144 | ||||||
155,000 | Royal Bank of Scotland Group plc, 7.50% (USSW5+580 bps), 12/29/49, Callable 8/10/20 @ 100 | 153,450 | ||||||
|
| |||||||
6,910,569 | ||||||||
|
| |||||||
Beverages (0.0%)†: | ||||||||
80,000 | Cott Corp., 5.50%, 4/1/25, Callable 4/1/20 @ 104.13(a) | 75,400 | ||||||
|
| |||||||
Capital Markets (0.8%): | ||||||||
470,000 | Credit Suisse Group Fun, Ltd., 2.75%, 3/26/20 | 464,929 | ||||||
670,000 | Credit Suisse Group Fun, Ltd., 3.80%, 9/15/22 | 665,112 | ||||||
787,000 | Credit Suisse Group Fun, Ltd., 3.80%, 6/9/23 | 772,273 | ||||||
470,000 | Credit Suisse Group Fun, Ltd., 3.75%, 3/26/25 | 448,172 | ||||||
860,000 | Deutsche Bank AG, 3.30%, 11/16/22 | 797,005 |
See accompanying notes to the financial statements.
13
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Capital Markets, continued | ||||||||
$ | 979,000 | Deutsche Bank AG, 4.50%, 4/1/25^ | $ | 858,944 | ||||
491,000 | UBS Group AG, 4.13%, 9/24/25(a) | 489,185 | ||||||
|
| |||||||
4,495,620 | ||||||||
|
| |||||||
Chemicals (0.1%): | ||||||||
400,000 | Consolidated Energy Finance SA, 6.88%, 6/15/25, Callable 6/15/20 @ 105.16(a) | 381,000 | ||||||
150,000 | Consolidated Energy Finance SA, 6.50%, 5/15/26, Callable 5/15/21 @ 104.88^(a) | 143,625 | ||||||
225,000 | Nova Chemicals Corp., 4.88%, 6/1/24, Callable 3/3/24 @ 100(a) | 203,063 | ||||||
105,000 | Nufarm Australia, Ltd., 5.75%, 4/30/26, Callable 4/30/21 @ 102.88(a) | 95,708 | ||||||
150,000 | OCI NV, 6.63%, 4/15/23, Callable 4/15/20 @ 103.31(a) | 147,375 | ||||||
115,000 | Tronox Finance plc, 5.75%, 10/1/25, Callable 10/1/20 @ 104.31^(a) | 93,150 | ||||||
|
| |||||||
1,063,921 | ||||||||
|
| |||||||
Containers & Packaging (0.0%)†: | ||||||||
270,000 | Ardagh Packaging Finance plc/Ardagh Holdings USA, Inc., 7.25%, 5/15/24, Callable 5/15/19 @ 105.44(a) | 269,325 | ||||||
200,000 | Ardagh Packaging Finance plc/Ardagh Holdings USA, Inc., 6.00%, 2/15/25, Callable 2/15/20 @ 104.5(a) | 184,624 | ||||||
|
| |||||||
453,949 | ||||||||
|
| |||||||
Diversified Financial Services (0.4%): | ||||||||
400,000 | Altice Financing SA, 7.50%, 5/15/26, Callable 5/15/21 @ 103.75(a) | 365,000 | ||||||
200,000 | Altice Finco SA, 8.13%, 1/15/24, Callable 2/11/19 @ 104.06^(a) | 186,500 | ||||||
280,000 | C&W Senior Financing Dac, 7.50%, 10/15/26, Callable 10/15/21 @ 103.75(a) | 269,150 | ||||||
120,000 | Camelot Finance SA, 7.88%, 10/15/24, Callable 10/15/19 @ 103.94^(a) | 115,800 | ||||||
260,000 | Intelsat Jackson Holdings SA, 8.00%, 2/15/24, Callable 2/15/19 @ 104(a) | 267,800 | ||||||
155,000 | Intelsat Jackson Holdings SA, 8.50%, 10/15/24, Callable 10/15/20 @ 106.38(a) | 150,350 | ||||||
220,000 | Nielsen Co. Luxembourg SARL (The), 5.00%, 2/1/25, Callable 2/1/20 @ 103.75^(a) | 205,700 | ||||||
75,000 | Park Aerospace Holdings, 5.25%, 8/15/22(a) | 72,563 | ||||||
20,000 | Park Aerospace Holdings, 4.50%, 3/15/23, Callable 2/15/23 @ 100(a) | 18,700 | ||||||
55,000 | Park Aerospace Holdings, 5.50%, 2/15/24(a) | 53,075 | ||||||
20,000 | Tervita Escrow Corp., 7.63%, 12/1/21, Callable 2/11/19 @ 103.81(a) | 19,050 | ||||||
|
| |||||||
1,723,688 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.2%): | ||||||||
200,000 | Altice France SA, 8.13%, 2/1/27, Callable 2/1/22 @ 106.09^(a) | 188,500 | ||||||
200,000 | Sable International Finance, Ltd., 6.88%, 8/1/22, Callable 2/11/19 @ 105.16(a) | 204,100 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Diversified Telecommunication Services, continued | ||||||||
$ | 200,000 | SFR Group SA, 7.38%, 5/1/26, Callable 5/1/21 @ 103.69(a) | $ | 183,500 | ||||
|
| |||||||
576,100 | ||||||||
|
| |||||||
Energy Equipment & Services (0.0%)†: | ||||||||
200,000 | Ensco plc, 4.50%, 10/1/24, Callable 7/1/24 @ 100^ | 130,000 | ||||||
100,000 | Ensco plc, 7.75%, 2/1/26, Callable 11/1/25 @ 100^ | 74,000 | ||||||
113,000 | Noble Holding International, Ltd., 7.75%, 1/15/24, Callable 10/15/23 @ 100^ | 85,598 | ||||||
130,000 | Noble Holding International, Ltd., 7.88%, 2/1/26, Callable 2/1/21 @ 105.91^(a) | 110,825 | ||||||
215,000 | Weatherford International, Ltd., 9.88%, 2/15/24, Callable 11/15/23 @ 100^ | 131,150 | ||||||
215,000 | Weatherford International, Ltd., 6.50%, 8/1/36 | 111,800 | ||||||
|
| |||||||
643,373 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.0%)†: | ||||||||
115,000 | 1011778 BC ULC New Red Finance, Inc., 4.25%, 5/15/24, Callable 5/15/20 @ 102.13^(a) | 105,800 | ||||||
205,000 | Stars Group Holdings BV, 7.00%, 7/15/26, Callable 7/15/21 @ 103.5^(a) | 199,363 | ||||||
200,000 | Studio City Co., Ltd., 7.25%, 11/30/21, Callable 2/11/19 @ 103.63(a) | 203,670 | ||||||
145,000 | Wynn Macau, Ltd., 4.88%, 10/1/24, Callable 10/1/20 @ 102.44(a) | 129,050 | ||||||
|
| |||||||
637,883 | ||||||||
|
| |||||||
Media (0.2%): | ||||||||
325,000 | MDC Partners, Inc., 6.50%, 5/1/24, Callable 5/1/19 @ 104.88^(a) | 295,750 | ||||||
415,000 | Ziggo Bond Finance BV, 5.88%, 1/15/25, Callable 1/15/20 @ 102.94(a) | 374,538 | ||||||
120,000 | Ziggo Secured Finance BV, 5.50%, 1/15/27, Callable 1/15/22 @ 102.75(a) | 107,400 | ||||||
|
| |||||||
777,688 | ||||||||
|
| |||||||
Metals & Mining (0.2%): | ||||||||
200,000 | BHP Billiton Finance USA, Ltd., 6.25% (USSW5+497 bps), 10/19/75, Callable 10/19/20 @ 100(a) | 204,214 | ||||||
456,000 | BHP Billiton Finance USA, Ltd., 6.75% (USSW5+509 bps), 10/19/75, Callable 10/20/25 @ 100(a) | 472,862 | ||||||
200,000 | First Quantum Minerals, Ltd., 7.25%, 5/15/22, Callable 2/11/19 @ 103.63^(a) | 185,500 | ||||||
200,000 | First Quantum Minerals, Ltd., 6.50%, 3/1/24, Callable 9/1/20 @ 103.25(a) | 166,000 | ||||||
95,000 | First Quantum Minerals, Ltd., 7.50%, 4/1/25, Callable 4/1/20 @ 105.63^(a) | 78,375 | ||||||
|
| |||||||
1,106,951 | ||||||||
|
| |||||||
Multi-Utilities (0.0%)†: | ||||||||
243,000 | InterGen NV, 7.00%, 6/30/23, Callable 2/11/19 @ 103.5(a) | 207,158 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.7%): | ||||||||
28,000 | Canadian Natural Resources, Ltd., 5.85%, 2/1/35 | 29,763 |
See accompanying notes to the financial statements.
14
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 362,000 | Cenovus Energy, Inc., 4.25%, 4/15/27, Callable 1/15/27 @ 100^ | $ | 329,717 | ||||
�� | 135,000 | Enbridge, Inc., 4.25%, 12/1/26, Callable 9/1/26 @ 100 | 133,491 | |||||
156,000 | Enbridge, Inc., 5.50%, 12/1/46, Callable 6/1/46 @ 100^ | 166,492 | ||||||
230,000 | LBC Tank Terminals Holding Netherlands BV, 6.88%, 5/15/23, Callable 2/11/19 @ 103.44(a) | 204,700 | ||||||
234,000 | Petrobras Global Finance Co., 4.38%, 5/20/23 | 223,206 | ||||||
1,793,000 | Petrobras Global Finance Co., 7.25%, 3/17/44^ | 1,767,018 | ||||||
97,000 | Petroleos Mexicanos, 6.00%, 3/5/20 | 98,770 | ||||||
1,169,000 | Petroleos Mexicanos, 4.88%, 1/18/24^ | 1,089,508 | ||||||
694,000 | Petroleos Mexicanos, 4.50%, 1/23/26^ | 598,228 | ||||||
566,000 | Petroleos Mexicanos, 6.50%, 3/13/27 | 532,040 | ||||||
696,000 | Petroleos Mexicanos, 6.50%, 6/2/41 | 576,288 | ||||||
563,000 | Petroleos Mexicanos, 5.50%, 6/27/44 | 426,855 | ||||||
673,000 | Petroleos Mexicanos, 5.63%, 1/23/46 | 509,387 | ||||||
2,228,000 | Petroleos Mexicanos, 6.75%, 9/21/47 | 1,842,311 | ||||||
130,000 | Teine Energy, Ltd., 6.88%, 9/30/22, Callable 2/11/19 @ 103.44(a) | 126,100 | ||||||
|
| |||||||
8,653,874 | ||||||||
|
| |||||||
Pharmaceuticals (0.5%): | ||||||||
1,050,000 | Actavis Funding SCS, 3.45%, 3/15/22, Callable 1/15/22 @ 100 | 1,033,245 | ||||||
123,000 | Mylan NV, 2.50%, 6/7/19 | 122,422 | ||||||
459,000 | Mylan NV, 3.15%, 6/15/21, Callable 5/15/21 @ 100 | 448,884 | ||||||
226,000 | Mylan NV, 3.95%, 6/15/26, Callable 3/15/26 @ 100 | 205,979 | ||||||
324,000 | Teva Pharmaceuticals Industries, Ltd., 2.20%, 7/21/21 | 297,825 | ||||||
127,000 | Teva Pharmaceuticals Industries, Ltd., 2.80%, 7/21/23^ | 109,378 | ||||||
120,000 | Valeant Pharmaceuticals International, Inc., 5.50%, 3/1/23, Callable 2/11/19 @ 102.75^(a) | 109,800 | ||||||
265,000 | Valeant Pharmaceuticals International, Inc., 7.00%, 3/15/24, Callable 3/15/20 @ 103.5(a) | 267,650 | ||||||
195,000 | VRX Escrow Corp., 6.13%, 4/15/25, Callable 4/15/20 @ 103.06^(a) | 170,138 | ||||||
|
| |||||||
2,765,321 | ||||||||
|
| |||||||
Sovereign Bond (0.4%): | ||||||||
900,000 | Dominican Republic, 5.50%, 1/27/25(a) | 892,125 | ||||||
150,000 | Dominican Republic, 6.00%, 7/19/28(a) | 149,625 | ||||||
1,000,000 | Republic of Argentina, 5.88%, 1/11/28 | 718,750 | ||||||
680,000 | Republic of Turkey, 7.25%, 12/23/23 | 699,910 | ||||||
|
| |||||||
2,460,410 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.0%)†: | ||||||||
200,000 | Corp. Nacional del Cobre, 3.63%, 8/1/27, Callable 5/1/27 @ 100(a) | 190,470 | ||||||
200,000 | Corp. Nacional del Cobre, 4.50%, 8/1/47, Callable 2/1/47 @ 100(a) | 192,852 | ||||||
|
| |||||||
383,322 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Tobacco (0.3%): | ||||||||
$ | 462,000 | Imperial Tobacco Finance, 3.75%, 7/21/22, Callable 5/21/22 @ 100(a) | $ | 458,280 | ||||
700,000 | Imperial Tobacco Finance, 4.25%, 7/21/25, Callable 4/21/25 @ 100(a) | 688,508 | ||||||
|
| |||||||
1,146,788 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.6%): | ||||||||
900,000 | AerCap Ireland Capital, Ltd./AerCap Global Aviation Trust, 5.00%, 10/1/21 | 914,151 | ||||||
1,450,000 | AerCap Ireland Capital, Ltd./AerCap Global Aviation Trust, 4.63%, 7/1/22 | 1,455,038 | ||||||
100,000 | Fly Leasing, Ltd., 6.38%, 10/15/21, Callable 2/11/19 @ 103.19 | 99,750 | ||||||
240,000 | Fly Leasing, Ltd., 5.25%, 10/15/24, Callable 10/15/20 @ 102.63 | 216,600 | ||||||
|
| |||||||
2,685,539 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.1%): | ||||||||
330,000 | Empresa Nacional del Pet, 4.38%, 10/30/24(a) | 324,473 | ||||||
200,000 | Millicom International Cellular, 6.63%, 10/15/26, Callable 10/15/21 @ 104.97(a) | 202,520 | ||||||
|
| |||||||
526,993 | ||||||||
|
| |||||||
Total Yankee Dollars (Cost $40,239,538) | 37,843,521 | |||||||
|
| |||||||
Municipal Bonds (0.9%): | ||||||||
California (0.3%): | ||||||||
1,150,000 | California State, Build America Bonds, GO, 7.50%, 4/1/34 | 1,618,984 | ||||||
|
| |||||||
Illinois (0.6%): | ||||||||
3,465,000 | Chicago Illinois, Taxable Project, Build America Bonds, GO, Series B, 5.43%, 1/1/42 | 3,304,345 | ||||||
|
| |||||||
Total Municipal Bonds (Cost $5,013,684) | 4,923,329 | |||||||
|
| |||||||
U.S. Government Agency Mortgages (15.9%): | ||||||||
Federal National Mortgage Association (8.4%) | ||||||||
1,000,000 | 2.50%, 1/25/32, TBA | 976,582 | ||||||
3,200,000 | 3.50%, 1/25/32, TBA | 3,238,437 | ||||||
139,808 | 3.50%, 8/1/33, Pool #AL4227 | 141,955 | ||||||
765,116 | 6.00%, 5/1/36, Pool #745512 | 834,714 | ||||||
367,591 | 6.00%, 7/1/39, Pool #BF0030 | 404,896 | ||||||
43,160 | 3.50%, 12/1/40, Pool #AH1556 | 43,497 | ||||||
19,276 | 3.50%, 6/1/42, Pool #AO6387 | 19,427 | ||||||
564,387 | 3.00%, 9/1/42, Pool #AB6126 | 555,272 | ||||||
773,329 | 3.00%, 10/1/42, Pool #AB6504 | 760,480 | ||||||
458,638 | 3.00%, 10/1/42, Pool #AB6509 | 451,231 | ||||||
39,869 | 3.50%, 11/1/42, Pool #MA1236 | 40,230 | ||||||
1,774,264 | 3.50%, 11/1/42, Pool# AL2866 | 1,787,055 | ||||||
798,025 | 3.00%, 11/1/42, Pool #AB6976 | 784,765 | ||||||
305,235 | 3.00%, 12/1/42, Pool #AB7282 | 300,235 | ||||||
1,393,512 | 3.00%, 1/1/43, Pool #AB7586 | 1,370,217 | ||||||
360,474 | 3.00%, 2/1/43, Pool# AT0223 | 354,361 | ||||||
18,978 | 3.50%, 3/1/43, Pool #AB8733 | 19,126 | ||||||
20,160 | 3.50%, 3/1/43, Pool #AR4461 | 20,317 | ||||||
58,302 | 3.50%, 7/1/43, Pool #AT8975 | 58,757 |
See accompanying notes to the financial statements.
15
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 77,858 | 3.50%, 11/1/43, Pool #AL9612 | $ | 78,465 | ||||
844,374 | 4.50%, 3/1/44, Pool #AV0957 | 879,204 | ||||||
983,303 | 4.50%, 7/1/44, Pool #AS3062 | 1,023,859 | ||||||
350,271 | 4.50%, 10/1/44, Pool #AV8856 | 364,266 | ||||||
388,922 | 4.50%, 12/1/44, Pool #AS4176 | 403,307 | ||||||
119,036 | 3.50%, 2/1/45, Pool #BM1014 | 119,965 | ||||||
182,906 | 4.00%, 5/1/45, Pool #AZ1207 | 186,706 | ||||||
269,396 | 4.00%, 6/1/45, Pool #AY8126 | 274,951 | ||||||
475,938 | 4.00%, 6/1/45, Pool #AY8096 | 485,899 | ||||||
713,862 | 3.50%, 7/1/45, Pool #AZ0814 | 716,451 | ||||||
481,312 | 3.50%, 8/1/45, Pool #AY8424 | 483,033 | ||||||
547,002 | 4.50%, 12/1/45, Pool #BA6997 | 566,515 | ||||||
86,949 | 4.00%, 12/1/45, Pool #AS6352 | 88,841 | ||||||
36,084 | 4.50%, 1/1/46, Pool #AY3890 | 37,653 | ||||||
300,977 | 4.00%, 2/1/46, Pool #BC1578 | 307,106 | ||||||
40,322 | 4.00%, 2/1/46, Pool # BC2310 | 41,413 | ||||||
311,235 | 3.50%, 3/1/46, Pool# BM4621 | 313,953 | ||||||
11,873 | 4.50%, 3/1/46, Pool #BC0287 | 12,309 | ||||||
647,088 | 4.00%, 4/1/46, Pool #AL8468 | 665,981 | ||||||
81,447 | 4.00%, 4/1/46, Pool #AS7024 | 83,191 | ||||||
26,370 | 4.00%, 5/1/46, Pool # BD0975 | 27,044 | ||||||
232,314 | 4.00%, 5/1/46, Pool # BC0909 | 238,428 | ||||||
595,912 | 4.00%, 6/1/46, Pool #AL9282 | 607,987 | ||||||
19,833 | 4.00%, 6/1/46, Pool # BD3862 | 20,348 | ||||||
147,513 | 4.50%, 6/1/46, Pool #BD1238 | 154,204 | ||||||
461,389 | 3.50%, 7/1/46, Pool #BC6149 | 462,634 | ||||||
616,758 | 3.50%, 7/1/46, Pool #AL9515 | 618,486 | ||||||
231,753 | 4.00%, 7/1/46, Pool # BC1443 | 237,765 | ||||||
25,559 | 4.00%, 7/1/46, Pool # BD3861 | 26,211 | ||||||
241,312 | 4.00%, 8/1/46, Pool # BC1497 | 247,482 | ||||||
29,261 | 3.50%, 8/1/46, Pool #BD5247 | 29,338 | ||||||
120,099 | 3.00%, 8/1/46, Pool #AS8320 | 117,131 | ||||||
17,386 | 3.50%, 9/1/46, Pool #BD0711 | 17,417 | ||||||
47,076 | 3.50%, 9/1/46, Pool #BD7792 | 47,200 | ||||||
247,403 | 4.00%, 9/1/46, Pool # BC2843 | 253,708 | ||||||
944,224 | 3.00%, 9/1/46, Pool #AS7844 | 921,178 | ||||||
99,281 | 4.00%, 9/1/46, Pool #BD1489 | 101,256 | ||||||
539,955 | 3.00%, 10/1/46, Pool #AL9397 | 526,776 | ||||||
322,637 | 3.50%, 10/1/46, Pool #AL9285 | 323,489 | ||||||
210,106 | 4.00%, 10/1/46, Pool # BC4754 | 215,465 | ||||||
68,347 | 4.50%, 10/1/46, Pool #BE1671 | 71,354 | ||||||
35,642 | 4.00%, 10/1/46, Pool #BD7599 | 36,349 | ||||||
1,776,525 | 3.50%, 10/1/46, Pool #BC4760 | 1,781,133 | ||||||
74,262 | 4.50%, 11/1/46, Pool #BE2386 | 77,529 | ||||||
268,875 | 3.00%, 11/1/46, Pool# BM3627 | 264,188 | ||||||
1,093,304 | 3.00%, 11/1/46, Pool# MA2806 | 1,066,280 | ||||||
144,070 | 4.50%, 12/1/46, Pool #BE4488 | 150,604 | ||||||
377,550 | 3.00%, 12/1/46, Pool #BE0757 | 368,242 | ||||||
16,663 | 4.50%, 12/1/46, Pool #BC9079 | 17,357 | ||||||
41,185 | 3.50%, 12/1/46, Pool #BE5877 | 41,284 | ||||||
652,797 | 3.50%, 12/1/46, Pool #BC9077 | 654,457 | ||||||
1,057,081 | 3.50%, 12/1/46, Pool #BD8504 | 1,059,768 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 504,566 | 3.50%, 1/1/47, Pool #BE1526 | $ | 505,902 | ||||
26,540 | 3.50%, 1/1/47, Pool #BE7834 | 26,604 | ||||||
91,650 | 4.50%, 1/1/47, Pool #BE6506 | 95,779 | ||||||
115,835 | 4.50%, 1/1/47, Pool #BE7087 | 121,086 | ||||||
387,462 | 3.50%, 1/1/47, Pool #AL9776 | 388,468 | ||||||
398,872 | 3.50%, 1/1/47, Pool #BE5530 | 399,639 | ||||||
127,181 | 4.50%, 2/1/47, Pool #BE8498 | 132,947 | ||||||
922,635 | 4.00%, 2/1/47, Pool #AL9779 | 944,984 | ||||||
198,661 | 4.50%, 3/1/47, Pool #BE9261 | 207,667 | ||||||
285,480 | 2.50%, 4/1/47, Pool #BM3707 | 269,624 | ||||||
141,808 | 4.00%, 5/1/47, Pool #BM1277 | 145,078 | ||||||
142,631 | 4.50%, 6/1/47, Pool #BE3663 | 148,575 | ||||||
21,793 | 4.00%, 6/1/47, Pool #BH4269 | 22,293 | ||||||
40,148 | 4.50%, 6/1/47, Pool #BH0561 | 41,678 | ||||||
24,323 | 4.50%, 6/1/47, Pool #BE9387 | 25,337 | ||||||
1,407,088 | 4.00%, 6/1/47, Pool #BE3702 | 1,434,842 | ||||||
93,299 | 4.00%, 7/1/47, Pool #AS9968 | 95,392 | ||||||
125,654 | 4.50%, 7/1/47, Pool #BE3749 | 130,888 | ||||||
741,810 | 3.50%, 7/1/47, Pool #BM3041 | 746,250 | ||||||
351,692 | 4.00%, 7/1/47, Pool #BE9653 | 358,612 | ||||||
1,987,736 | 4.00%, 10/1/47, Pool# BH4095 | 2,026,689 | ||||||
23,424 | 4.00%, 12/1/47, Pool #BJ2132 | 23,966 | ||||||
23,068 | 4.00%, 12/1/47, Pool #BJ4279 | 23,602 | ||||||
399,632 | 3.50%, 12/1/47, Pool #CA0854 | 400,463 | ||||||
438,216 | 3.50%, 12/1/47, Pool #CA0855 | 438,787 | ||||||
23,738 | 4.00%, 2/1/48, Pool #CA1199 | 24,288 | ||||||
24,697 | 4.00%, 3/1/48, Pool #BK3214 | 25,270 | ||||||
24,682 | 4.00%, 3/1/48, Pool #BK1867 | 25,255 | ||||||
999,901 | 4.50%, 3/1/48, Pool# BJ6041 | 1,036,131 | ||||||
133,437 | 4.50%, 4/1/48, Pool #BJ5454 | 138,671 | ||||||
23,385 | 4.00%, 4/1/48, Pool #BJ8805 | 23,928 | ||||||
31,804 | 4.00%, 4/1/48, Pool #CA1545 | 32,542 | ||||||
23,809 | 4.00%, 4/1/48, Pool #BK4838 | 24,362 | ||||||
31,038 | 4.00%, 4/1/48, Pool #BK3836 | 31,758 | ||||||
651,141 | 4.00%, 4/1/48, Pool #BJ9939 | 665,064 | ||||||
169,090 | 4.00%, 4/1/48, Pool #BM3700 | 172,957 | ||||||
23,492 | 4.00%, 4/1/48, Pool #BK2485 | 24,038 | ||||||
680,137 | 4.00%, 4/1/48, Pool # MA3333 | 695,809 | ||||||
409,307 | 3.00%, 5/1/48, Pool# BJ6849 | 399,062 | ||||||
44,555 | 4.50%, 5/1/48, Pool #BJ5507 | 46,264 | ||||||
87,692 | 4.00%, 5/1/48, Pool #BM3877 | 89,985 | ||||||
24,728 | 4.00%, 5/1/48, Pool #BK2527 | 25,303 | ||||||
299,562 | 4.00%, 9/1/48, Pool# BN0637 | 305,431 | ||||||
497,073 | 3.00%, 9/1/48, Pool# MA3479 | 484,737 | ||||||
998,696 | 4.00%, 9/1/48, Pool# BN0643 | 1,018,262 | ||||||
195,846 | 4.50%, 10/25/48, Pool # BM4548 | 205,216 | ||||||
996,477 | 4.00%, 12/1/48, Pool# MA3536 | 1,015,999 | ||||||
|
| |||||||
45,742,198 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation (3.5%) | ||||||||
475,894 | 3.50%, 3/1/32, Pool #C91403 | 484,556 | ||||||
1,253,473 | 3.50%, 7/1/32, Pool #C91467 | 1,276,294 | ||||||
1,198,013 | 4.00%, 5/1/37, Pool #C91938 | 1,235,599 |
See accompanying notes to the financial statements.
16
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal Home Loan Mortgage Corporation, continued | ||||||||
$ | 386,816 | 5.00%, 2/1/38, Pool #G60365 | $ | 410,704 | ||||
488,822 | 4.00%, 11/1/40, Pool #A95150 | 502,054 | ||||||
503,716 | 3.50%, 1/1/44, Pool #G60271 | 507,447 | ||||||
1,010,087 | 3.50%, 1/1/44, Pool #G07922 | 1,017,579 | ||||||
175,383 | 4.00%, 2/1/45, Pool # G07949 | 179,814 | ||||||
154,387 | 3.50%, 11/1/45, Pool #Q37467 | 154,911 | ||||||
45,437 | 4.00%, 4/1/46, Pool #V82292 | 46,516 | ||||||
17,083 | 4.00%, 4/1/46, Pool #Q39975 | 17,477 | ||||||
28,100 | 3.00%, 6/1/46, Pool #G08710 | 27,421 | ||||||
308,375 | 3.50%, 9/1/46, Pool #Q43257 | 309,103 | ||||||
160,847 | 3.00%, 11/1/46, Pool #Q44452 | 156,908 | ||||||
3,411,135 | 3.00%, 12/1/46, Pool #G08737 | 3,328,663 | ||||||
20,193 | 4.50%, 12/1/46, Pool #Q45028 | 21,022 | ||||||
446,492 | 3.00%, 12/1/46, Pool #G60989 | 435,692 | ||||||
19,197 | 4.50%, 1/1/47, Pool #Q45635 | 19,985 | ||||||
694,289 | 3.00%, 1/1/47, Pool #G08741 | 676,899 | ||||||
46,172 | 4.50%, 2/1/47, Pool #Q46222 | 48,071 | ||||||
89,303 | 4.50%, 5/1/47, Pool #Q48095 | 92,974 | ||||||
101,016 | 4.50%, 5/1/47, Pool #Q47935 | 105,169 | ||||||
39,816 | 4.50%, 5/1/47, Pool #Q47942 | 41,459 | ||||||
681,246 | 4.00%, 6/1/47, Pool #G08767 | 695,116 | ||||||
801,942 | 4.00%, 6/1/47, Pool #Q48877 | 821,600 | ||||||
109,040 | 4.50%, 6/1/47, Pool #Q48759 | 113,538 | ||||||
83,070 | 4.50%, 7/1/47, Pool #Q49393 | 86,496 | ||||||
919,601 | 4.00%, 7/1/47, Pool #G08771 | 938,818 | ||||||
615,872 | 3.50%, 10/1/47, Pool #G08784 | 615,887 | ||||||
456,028 | 3.50%, 11/1/47, Pool #Q52086 | 456,128 | ||||||
2,397,898 | 3.50%, 12/1/47, Pool #V83817 | 2,397,425 | ||||||
189,280 | 4.50%, 12/1/47, Pool #Q53017 | 196,624 | ||||||
44,477 | 3.50%, 12/1/47, Pool #Q53293 | 44,468 | ||||||
325,519 | 4.00%, 12/1/47, Pool #G61305 | 332,001 | ||||||
77,140 | 4.00%, 1/1/48, Pool #V83906 | 78,670 | ||||||
26,098 | 4.50%, 1/1/48, Pool #Q53730 | 27,110 | ||||||
200,000 | 4.50%, 1/15/48, TBA | 207,018 | ||||||
21,262 | 4.00%, 2/1/48, Pool #Q54499 | 21,728 | ||||||
70,627 | 4.00%, 2/1/48, Pool #V83994 | 72,028 | ||||||
89,073 | 4.00%, 2/1/48, Pool #G61343 | 90,869 | ||||||
189,322 | 4.50%, 4/1/48, Pool #Q55724 | 196,677 | ||||||
130,762 | 4.50%, 4/1/48, Pool #Q55500 | 135,884 | ||||||
160,275 | 4.50%, 4/1/48, Pool #Q55660 | 166,502 | ||||||
289,356 | 4.50%, 5/1/48, Pool #Q55839 | 300,596 | ||||||
423,681 | 4.00%, 5/1/48, Pool #Q55992 | 433,543 | ||||||
|
| |||||||
19,525,043 | ||||||||
|
| |||||||
Government National Mortgage Association (4.0%) | ||||||||
146,403 | 4.00%, 8/15/41, Pool #430354 | 150,947 | ||||||
1,673,035 | 4.00%, 1/20/42, Pool #5280 | 1,728,013 | ||||||
26,939 | 4.00%, 11/20/42, Pool #AB9233 | 27,855 | ||||||
401,835 | 3.00%, 12/20/42, Pool #AA5872 | 397,666 | ||||||
3,553,902 | 3.50%, 1/20/43, Pool #MA0699 | 3,594,387 | ||||||
60,570 | 3.50%, 3/20/43, Pool #AD8884 | 61,278 | ||||||
262,051 | 3.00%, 3/20/43, Pool #AA6146 | 259,412 | ||||||
109,748 | 3.00%, 3/20/43, Pool #AD8812 | 108,676 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Government National Mortgage Association, continued | ||||||||
$ | 23,964 | 3.50%, 4/20/43, Pool #AB9891 | $ | 24,276 | ||||
63,931 | 3.50%, 4/20/43, Pool #AD9075 | 64,717 | ||||||
349,097 | 3.50%, 6/20/46, Pool #MA3736 | 351,675 | ||||||
89,663 | 3.50%, 7/20/46, Pool #MA3803 | 90,298 | ||||||
596,059 | 3.00%, 7/20/46, Pool #MA3802 | 587,941 | ||||||
815,871 | 3.00%, 9/20/46, Pool #MA3936 | 805,007 | ||||||
164,038 | 3.00%, 11/20/46, Pool #MA4068 | 161,702 | ||||||
1,026,573 | 3.00%, 12/20/46, Pool #MA4126 | 1,011,798 | ||||||
305,975 | 4.00%, 1/15/47, Pool #AX5857 | 314,345 | ||||||
314,416 | 4.00%, 1/15/47, Pool #AX5831 | 322,374 | ||||||
2,099,776 | 3.00%, 1/20/47, Pool #MA4195 | 2,069,453 | ||||||
250,415 | 3.00%, 2/20/47, Pool #MA4261 | 246,795 | ||||||
219,391 | 4.00%, 4/20/47, Pool #784304 | 225,015 | ||||||
189,894 | 4.00%, 4/20/47, Pool #784303 | 194,742 | ||||||
156,258 | 4.00%, 5/20/47, Pool #MA4452 | 160,103 | ||||||
166,049 | 4.00%, 7/20/47, Pool #MA4587 | 170,182 | ||||||
47,468 | 3.50%, 7/20/47, Pool #MA4586 | 47,784 | ||||||
4,529,801 | 3.50%, 9/20/47, Pool #MA4719 | 4,559,884 | ||||||
379,238 | 3.50%, 1/20/48, Pool #MA4962 | 381,757 | ||||||
2,400,000 | 4.50%, 2/20/48, TBA | 2,480,391 | ||||||
|
| |||||||
20,598,473 | ||||||||
|
| |||||||
Total U.S. Government Agency Mortgages (Cost $87,066,220) | 85,865,714 | |||||||
|
| |||||||
U.S. Treasury Obligations (15.0%): | ||||||||
U.S. Treasury Inflation Index Bonds (1.5%) | ||||||||
1,551,564 | 1.38%, 2/15/44 | 1,601,836 | ||||||
6,708,278 | 0.75%, 2/15/45^ | 5,997,662 | ||||||
453,564 | 1.00%, 2/15/46 | 429,993 | ||||||
|
| |||||||
8,029,491 | ||||||||
|
| |||||||
U.S. Treasury Bonds (2.2%) | ||||||||
2,197,000 | 3.00%, 5/15/47 | 2,187,560 | ||||||
1,347,000 | 2.75%, 11/15/47 | 1,274,546 | ||||||
8,102,000 | 3.38%, 11/15/48^ | 8,664,075 | ||||||
|
| |||||||
12,126,181 | ||||||||
|
| |||||||
U.S. Treasury Inflation Index Notes (3.0%) | ||||||||
2,389,334 | 0.25%, 1/15/25 | 2,288,117 | ||||||
5,321,100 | 0.63%, 1/15/26 | 5,179,704 | ||||||
3,512,950 | 0.13%, 7/15/26^ | 3,298,244 | ||||||
5,531,646 | 0.38%, 7/15/27 | 5,247,899 | ||||||
|
| |||||||
16,013,964 | ||||||||
|
| |||||||
U.S. Treasury Notes (8.3%) | ||||||||
3,824,000 | 1.75%, 12/31/20^ | 3,769,478 | ||||||
1,851,000 | 1.25%, 3/31/21 | 1,801,833 | ||||||
910,000 | 1.38%, 4/30/21 | 887,534 | ||||||
8,364,000 | 1.13%, 9/30/21^ | 8,067,013 | ||||||
4,686,000 | 2.00%, 12/31/21 | 4,621,934 | ||||||
1,431,000 | 1.75%, 6/30/22^ | 1,396,343 | ||||||
15,386,000 | 1.88%, 7/31/22 | 15,066,860 | ||||||
4,764,000 | 1.88%, 9/30/22 | 4,660,346 | ||||||
2,314,000 | 2.25%, 12/31/24 | 2,273,505 | ||||||
2,068,000 | 2.25%, 11/15/27 | 1,997,640 | ||||||
|
| |||||||
44,542,486 | ||||||||
|
|
See accompanying notes to the financial statements.
17
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
U.S. Treasury Obligations, continued | ||||||||
U.S. Treasury Bills (0.0%) | ||||||||
$ | 46,000 | 0.75%, 1/3/19(c) | $ | 45,997 | ||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $83,219,230) | 80,758,119 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.4%): | ||||||||
7,136,632 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(c) | 7,136,632 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $7,136,632) | 7,136,632 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (11.7%)(d) | ||||||||
Floating Rate Notes (3.6%) | ||||||||
803,000 | Australia & New Zealand Banking Group, 2.61%, 4/15/19 | 803,000 | ||||||
900,000 | Bank of Nova Scotia, 2.83%, 2/21/19 | 900,000 | ||||||
820,000 | Bank of Nova Scotia, 2.76%, 5/16/19 | 820,000 | ||||||
921,000 | Bedford Row Funding, 2.82%, 5/23/19 | 921,000 | ||||||
850,000 | Bedford Row Funding, 2.72%, 8/15/19 | 850,000 | ||||||
856,000 | BNP Paribas, 2.86%, 4/22/19 | 856,000 | ||||||
1,085,000 | BNP Paribas, 2.88%, 6/4/19 | 1,085,000 | ||||||
1,000,000 | Canadian Imperial Bank of Commerce, 2.59%, 1/11/19 | 1,000,000 | ||||||
1,292,000 | Commonwealth Bank of Australia, 2.68%, 5/3/19 | 1,292,043 | ||||||
900,000 | Commonwealth Bank of Australia, 2.87%, 6/7/19 | 900,000 | ||||||
800,000 | Credit Agricole CIB, 2.75%, 4/23/19 | 800,000 | ||||||
800,000 | DNB Bank ASA, 2.57%, 4/24/19 | 800,000 | ||||||
821,000 | Lloyds Bank plc, 2.67%, 5/8/19 | 821,000 | ||||||
800,000 | Mizuho Bank, Ltd., 2.64%, 5/2/19 | 800,000 | ||||||
861,000 | Natixis SA, 2.63%, 5/2/19 | 861,000 | ||||||
882,000 | Societe Generale SA, 2.69%, 5/9/19 | 882,000 | ||||||
800,000 | Sumitomo Mitsui Banking Corp., 2.68%, 5/8/19 | 800,000 | ||||||
800,000 | Toyota Motor Credit Corp., 2.69%, 11/14/19 | 800,429 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
$ | 839,000 | UBS AG, 2.77%, 8/9/19 | $ | 839,000 | ||||
800,000 | US Bank NA, 2.76%, 7/23/19 | 800,000 | ||||||
800,000 | Wells Fargo Bank NA, 2.82%, 2/20/19 | 800,000 | ||||||
900,000 | Wells Fargo Bank NA, 2.82%, 10/23/19 | 900,000 | ||||||
|
| |||||||
19,330,472 | ||||||||
|
| |||||||
Repurchase Agreements (3.0%) | ||||||||
1,939,058 | BNP Paribas SA, 2.54%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $1,939,332, Collateralized by U.S. Treasury Obligations and Corporate Debt Securities, 0.00% - 7.55%, 1/17/19 - 9/15/56, fair value of $2,024,815 | 1,939,058 | ||||||
14,132,617 | RBC Dominion Securities Inc., 3.02%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $14,134,988, Collateralized by U.S. Government Agency Obligations, 3.00% - 7.00%, 10/1/25 - 10/20/48, fair value of $14,415,269 | 14,132,617 | ||||||
|
| |||||||
16,071,675 | ||||||||
|
| |||||||
Time Deposits (0.2%) | ||||||||
900,000 | Societe Generale SA, 2.40%, 1/2/19 | 900,000 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
26,553,023 | Short-Term Investments(e) | 26,553,023 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 62,855,170 | ||||||
|
| |||||||
Total Investment Securities (Cost $609,170,969) — 112.4%(f) | 606,245,135 | |||||||
Net other assets (liabilities) — (12.4)% | (66,889,950 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 539,355,185 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
GO—General Obligation
LIBOR—London Interbank Offered Rate
LIBOR01M—1 Month US Dollar LIBOR
MTN—Medium Term Note
TBA—To Be Announced Security
US0003M—3 Month US Dollar LIBOR
USSW5—USD 5 Year Swap Rate
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $60,619,360. |
+ | The principal amount is disclosed in local currency and the fair value is disclosed in U.S. Dollars. |
† | Represents less than 0.05%. |
(a) | 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. |
(b) | The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate presented is the rate in effect at December 31, 2018. |
(c) | The rate represents the effective yield at December 31, 2018. |
(d) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
18
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Securities Sold Short (-0.7%):
At December 31, 2018, the Fund’s securities sold short were as follows:
Security Description | Coupon Rate | Maturity Date | Par Amount | Proceeds Received | Fair Value | |||||||||||||||
U.S. Government Agency Mortgages Federal National Mortgage Association | ||||||||||||||||||||
Federal National Mortgage Association, TBA | 3.50 | % | 1/25/49 | $ | (850,000 | ) | $ | (844,765 | ) | $ | (849,850 | ) | ||||||||
Federal National Mortgage Association, TBA | 4.00 | % | 1/25/49 | (2,000,000 | ) | (2,019,570 | ) | (2,038,750 | ) | |||||||||||
Federal National Mortgage Association, TBA | 4.50 | % | 1/25/49 | (925,000 | ) | (955,020 | ) | (957,827 | ) | |||||||||||
|
|
|
| |||||||||||||||||
$ | (3,819,355 | ) | $ | (3,846,427 | ) | |||||||||||||||
|
|
|
|
Futures Contracts
Cash of $104,479 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 Index E-Mini March Futures (U.S. Dollar) | 3/15/19 | 25 | $ | 3,131,500 | $ | (113,158 | ) | |||||||||
|
| |||||||||||||||
$ | (113,158 | ) | ||||||||||||||
|
|
See accompanying notes to the financial statements.
19
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 609,170,969 | |||
|
| ||||
Investment securities, at value(a) | $ | 606,245,135 | |||
Cash | 231,959 | ||||
Segregated cash for collateral | 104,479 | ||||
Interest and dividends receivable | 2,888,328 | ||||
Receivable for investments sold | 9,816,321 | ||||
Receivable for variation margin on futures contracts | 24,000 | ||||
Reclaims receivable | 155,613 | ||||
Prepaid expenses | 6,731 | ||||
|
| ||||
Total Assets | 619,472,566 | ||||
|
| ||||
Liabilities: | |||||
Foreign currency, at value (cost $92) | 92 | ||||
Payable for investments purchased | 12,859,787 | ||||
Payable for capital shares redeemed | 226,927 | ||||
Payable for collateral received on loaned securities | 62,855,170 | ||||
Securities sold short (Proceeds received $3,819,355) | 3,846,427 | ||||
Manager fees payable | 187,023 | ||||
Administration fees payable | 10,073 | ||||
Distribution fees payable | 115,962 | ||||
Custodian fees payable | 1,744 | ||||
Administrative and compliance services fees payable | 1,235 | ||||
Transfer agent fees payable | 304 | ||||
Trustee fees payable | 473 | ||||
Other accrued liabilities | 12,164 | ||||
|
| ||||
Total Liabilities | 80,117,381 | ||||
|
| ||||
Net Assets | $ | 539,355,185 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 508,292,789 | |||
Total distributable earnings | 31,062,396 | ||||
|
| ||||
Net Assets | $ | 539,355,185 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 43,979,249 | ||||
Net Asset Value (offering and redemption price per share) | $ | 12.26 | |||
|
|
(a) | Includes securities on loan of $60,619,360. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Interest | $ | 11,932,468 | |||
Dividends | 5,294,013 | ||||
Income from securities lending | 266,039 | ||||
Foreign withholding tax | (76,674 | ) | |||
|
| ||||
Total Investment Income | 17,415,846 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 4,141,072 | ||||
Administration fees | 219,340 | ||||
Distribution fees | 1,478,950 | ||||
Custodian fees | 29,852 | ||||
Administrative and compliance services fees | 8,931 | ||||
Transfer agent fees | 5,291 | ||||
Trustee fees | 26,020 | ||||
Professional fees | 26,084 | ||||
Shareholder reports | 15,528 | ||||
Other expenses | 11,742 | ||||
|
| ||||
Total expenses before reductions | 5,962,810 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (1,478,950 | ) | |||
Less expenses contractually waived/reimbursed by the Manager | (287,302 | ) | |||
|
| ||||
Net expenses | 4,196,558 | ||||
|
| ||||
Net Investment Income/(Loss) | 13,219,288 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities transactions and foreign currencies | 22,212,266 | ||||
Net realized gains/(losses) on futures contracts | (697,763 | ) | |||
Net realized gains/(losses) on securities sold short | 49,028 | ||||
Change in net unrealized appreciation/depreciation on investments and foreign currencies | (44,986,344 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (152,306 | ) | |||
Change in net unrealized appreciation/depreciation on securities sold short | (27,072 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (23,602,191 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (10,382,903 | ) | ||
|
|
See accompanying notes to the financial statements.
20
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 13,219,288 | $ | 13,232,000 | ||||||
Net realized gains/(losses) on investments | 21,563,531 | 22,009,963 | ||||||||
Change in unrealized appreciation/depreciation on investments | (45,165,722 | ) | 32,662,848 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (10,382,903 | ) | 67,904,811 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (35,700,076 | ) | (21,250,085 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (35,700,076 | ) | (21,250,085 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 12,053,647 | 3,203,380 | ||||||||
Proceeds from dividends reinvested | 35,700,076 | 21,250,085 | ||||||||
Value of shares redeemed | (89,690,641 | ) | (101,460,476 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (41,936,918 | ) | (77,007,011 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (88,019,897 | ) | (30,352,285 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 627,375,082 | 657,727,367 | ||||||||
|
|
|
| |||||||
End of period | $ | 539,355,185 | $ | 627,375,082 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 913,011 | 243,838 | ||||||||
Dividends reinvested | 2,826,609 | 1,649,851 | ||||||||
Shares redeemed | (6,745,825 | ) | (7,827,925 | ) | ||||||
|
|
|
| |||||||
Change in shares | (3,006,205 | ) | (5,934,236 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
21
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.35 | $ | 12.43 | $ | 12.06 | $ | 13.72 | $ | 13.86 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.34 | 0.28 | 0.34 | 0.32 | 0.32 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.58 | ) | 1.09 | 0.44 | (1.07 | ) | (0.01 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.24 | ) | 1.37 | 0.78 | (0.75 | ) | 0.31 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.32 | ) | — | (0.18 | ) | (0.56 | ) | (0.22 | ) | ||||||||||||||||
Net Realized Gains | (0.53 | ) | (0.45 | ) | (0.23 | ) | (0.35 | ) | (0.23 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.85 | ) | (0.45 | ) | (0.41 | ) | (0.91 | ) | (0.45 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 12.26 | $ | 13.35 | $ | 12.43 | $ | 12.06 | $ | 13.72 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (2.02 | )% | 11.12 | % | 6.52 | % | (5.46 | )% | 2.14 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 539,355 | $ | 627,375 | $ | 657,727 | $ | 735,431 | $ | 795,513 | |||||||||||||||
Net Investment Income/(Loss) | 2.24 | % | 2.06 | % | 2.48 | % | 2.31 | % | 2.51 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.01 | % | 1.00 | % | 1.04 | % | 1.04 | % | 1.04 | % | |||||||||||||||
Expenses Net of Reductions | 0.71 | % | 0.71 | % | 0.97 | % | 1.04 | % | 1.04 | % | |||||||||||||||
Portfolio Turnover Rate | 66 | % | 82 | % | 148 | %(c) | 35 | % | 23 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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.
22
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Fidelity Institutional Asset Management Multi-Strategy Fund (formerly, AZL Pyramis® Multi-Strategy Fund) (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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.
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 year, 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.
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.
Structured Notes
The Fund may invest in structured notes, the values of which are based on the price movements of a reference security or index. Structured notes are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. The terms of the structured notes may provide that in certain circumstances no principal is due at maturity and therefore, may result in a loss of invested capital. Structured notes may be positively or negatively indexed, so that appreciation of the reference may produce an increase or a decrease in the interest rate or the value of the structured note at maturity may be calculated as a specified multiple of the change in the value of the reference; therefore, the value of such security may be very volatile. Structured notes may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference. Structured notes may also be more volatile, less liquid, and more difficult to accurately price than less complex securities or more traditional debt securities.
23
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
Securities Purchased on a When-Issued Basis
The Fund may purchase securities on a when-issued basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield and thereby involve risk that the yield obtained in the transaction will be less than that available in the market when the delivery takes place. A Fund will not pay for such securities or start earning interest on them until they are received. When a Fund agrees to purchase securities on a when-issued basis, the Fund will segregate or designate cash or liquid assets equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in the value based upon changes in the general level of interest rates. A Fund may sell when-issued securities before they are delivered, which may result in a capital gain or loss.
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 Fund of Funds Trust.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $26,220 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $62,850,408 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, 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
24
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
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 “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 December 31, 2018, 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 year ended December 31, 2018, 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.
Futures Contracts
The Fund may enter into futures contracts to manage its exposure to the securities markets or to movements in market conditions or foreign exchange rates. 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 $3.8 million for the year ended December 31, 2018. 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 December 31, 2018:
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 |
| |||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | — | Payable for variation margin on futures contracts | $ | 113,158 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the 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 year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | (697,763 | ) | $ | (152,306 | ) |
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”), which shortens the premium amortization period for purchased non-contingently callable debt securities. ASU 2017-08 specifies that the premium amortization period ends at the earliest call date for purchased non-contingently callable debt securities. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU 2017-08 will materially impact the Fund’s financial statements.
25
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
In August 2018, FASB issued ASU No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU 2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU 2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under Regulation S-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | — | |||
From net realized gains | (21,250,085 | ) | |||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (21,250,085 | ) | ||
|
|
3. Fees and Transactions with Affiliates and Other Parties
The Manager provides investment advisory and management services for the Fund. The Manager has retained two independent money management organizations (the “Subadviser”), FIAM LLC (“FIAM”) and Geode Capital Management, LLC (“Geode”) to make investment decisions on behalf of the Fund. Pursuant to subadvisory agreements with the Manager and FIAM, and the Manager and Geode provide 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | 0.70 | % | 0.71 | % |
* | The Manager voluntarily reduced the management fee to 0.45% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.”
At December 31, 2018, 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 Total | |||||||||||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 134,642 | $ | 268,430 | $ | 287,302 | $ | 690,374 |
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.
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 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 value 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.”
26
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
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 Fund’s average daily net assets, 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 year ended December 31, 2018, $4,524 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 Fund of Funds Trust, each non-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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.
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.
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.
For the year ended December 31, 2018, 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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Common Stocks+ | $ | 220,319,931 | $ | — | $ | 220,319,931 | |||||||||
Asset Backed Securities | — | 4,200,716 | 4,200,716 | ||||||||||||
Collateralized Mortgage Obligations | — | 7,417,669 | 7,417,669 | ||||||||||||
Corporate Bonds+ | — | 94,924,289 | 94,924,289 | ||||||||||||
Foreign Bond | — | 45 | 45 | ||||||||||||
Yankee Dollars+ | — | 37,843,521 | 37,843,521 | ||||||||||||
Municipal Bonds | — | 4,923,329 | 4,923,329 | ||||||||||||
U.S. Government Agency Mortgages | — | 85,865,714 | 85,865,714 |
27
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
U.S. Treasury Obligations | $ | — | $ | 80,758,119 | $ | 80,758,119 | |||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 62,855,170 | 62,855,170 | ||||||||||||
Unaffiliated Investment Company | 7,136,632 | — | | 7,136,632 | |||||||||||
|
|
|
|
|
| ||||||||||
Total Investment Securities | 227,456,563 | 378,788,572 | 606,245,135 | ||||||||||||
|
|
|
|
|
| ||||||||||
Securities Sold Short | — | (3,846,477 | ) | (3,846,477 | ) | ||||||||||
Other Financial Instruments:* | |||||||||||||||
Futures Contracts | (113,158 | ) | — | (113,158 | ) | ||||||||||
|
|
|
|
|
| ||||||||||
Total Investments | $ | 227,343,405 | $ | 374,942,095 | $ | 602,285,500 | |||||||||
|
|
|
|
|
|
+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 384,049,618 | $ | 443,232,796 |
For the year ended December 31, 2018, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 91,100,098 | $ | 134,048,036 |
6. Investment Risks
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 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.
Mortgage-Related and Other Asset-Backed Risk: The Fund may invest in a variety of mortgage-related and other asset-backed securities, which are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to call risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless. An unexpectedly high or low rate of prepayments on a pool’s underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk of non-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. A Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
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
28
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Notes to the Financial Statements
December 31, 2018
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.
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 December 31, 2018 is $606,846,582. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 21,242,407 | ||
Unrealized (depreciation) | (25,690,281 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | (4,447,874 | ) | |
|
|
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 24,240,658 | $ | 11,459,418 | $ | 35,700,076 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 21,250,085 | $ | — | $ | 21,250,085 |
(a) | Total distributions paid may differ from the 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 Fidelity Institutional Asset Management Multi-Strategy Fund | $ | 15,385,962 | $ | 20,111,017 | $ | — | $ | (4,434,583 | ) | $ | 31,062,396 |
(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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership in excess of 95% 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.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Fidelity Institutional Asset Management Multi-Strategy Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Fidelity Institutional Asset Management Multi-Strategy Fund (formerly known as AZL Pyramis Multi-Strategy Fund) (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 22.19% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $10,896,207.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $11,459,418.
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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.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex During Past 5 Years | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex During Past 5 Years | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive | Chief Compliance Officer(4) and Anti-Money Laundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
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The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Fidelity Institutional Asset Management
Total Bond Fund
(formerly known as AZL® Pyramis® Total Bond Fund)
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 18
Page 18
Statements of Changes in Net Assets
Page 19
Page 20
Notes to the Financial Statements
Page 21
Report of Independent Registered Public Accounting Firm
Page 27
Page 28
Approval of Investment Advisory and Subadvisory Agreements
Page 29
Information about the Board of Trustees and Officers
Page 32
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® Fidelity Institutional Asset Management Total Bond Fund Review (Unaudited)
(formerly known as AZL® Pyramis® Total Bond Fund)
Allianz Investment Management LLC serves as the Manager for the AZL® Fidelity Institutional Asset Management Total Bond Fund and FIAM LLC serves as Subadviser to the Fund.
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What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Fidelity Institutional Asset Management Total Bond Fund (Class 2 Shares) (the “Fund”) returned-1.25%. That compared to a 0.01% total return for its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index1.
The Fund’s subadviser’s name changed during the period from Pyramis to FIAM (Fidelity Institutional Asset Management). As a result, the Fund’s name was changed to the AZL® FIAM Total Bond Fund.
The U.S. fixed income market was marked by rising yields and the Federal Reserve Board’s (the Fed) tightening of monetary policy. The Fed raised short-term interest rates four times during the period, ending at a target range of 2.25% to 2.50%. Yields rose due to a combination of Fed moves and stronger economic growth, and higher yields pushed down bond prices. That muted bond returns during much of the period, and a flattening yield curve brought the gap between short- and long-term Treasury yields closer together. However, an uptick in stock market volatility late in the period drove investors toward relative safe investments such as Treasury bonds. That demand pushed yields lower and prices higher.
Exposure to U.S. Treasury securities and mortgage-backed securities were the primary contributors to absolute performance.*
The Fund underperformed its benchmark in a market characterized by higher interest rates and wider spreads across mostnon-U.S. Treasury sectors. Exposure to high-yield bonds detracted from relative results, as did an overweight to investment-grade credits in the banking sector. Anoff-benchmark allocation to Treasury Inflation-Protected Securities also hurt relative returns as inflation expectations declined late in the period.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
1
AZL® Fidelity Institutional Asset Management Total Bond Fund Review (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek a high level of current income. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in investment-grade debt securities (those of medium and high quality) of all types and repurchase agreements for those securities. | ||||
Investment Concerns
| ||||
Bonds offer a relatively stable level of income, although bond prices will fluctuate, providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. | ||||
Emerging market investing may be subject to additional economic, political, liquidity, and currency risks not associated with more developed countries. | ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. | ||||
Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities. | ||||
The performance of investments in real estate depends on the overall strength of the real estate market, the management of real estate investments trusts (REITs), real estate operating companies (REOCs), and foreign real estate companies, and property management, all of which can be affected by a variety of factors, including national and regional economic conditions. | ||||
High-yield bonds have a higher risk of default or other adverse credit events, but have the potential to pay higher earnings over investment-grade bonds. The higher risk of default, or the inability of the creditor to repay its debt, is the primary reason for the higher interest rates on high-yield bonds. | ||||
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception Date | 1 Year | 3 Year | 5 Year | Since Inception | ||||||||||||||
AZL® Fidelity Institutional Asset Management Total Bond Fund (Class 1 Shares) | 10/28/16 | -1.00 | % | — | — | 0.51 | % | |||||||||||
AZL® Fidelity Institutional Asset Management Total Bond Fund (Class 2 Shares) | 9/5/12 | -1.25 | % | 2.80 | % | 2.56 | % | 1.75 | % | |||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 9/5/12 | 0.01 | % | 2.06 | % | 2.52 | % | 1.73 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL® Fidelity Institutional Asset Management Total Bond Fund (Class 1 Shares) | 0.57 | % | ||
AZL® Fidelity Institutional Asset Management Total Bond Fund (Class 2 Shares) | 0.82 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses such as interest expense and acquired fund fees and expenses to 0.70% for Class 1 Shares and 0.95% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
Acquired fund fees and expenses are incurred indirectly by the Fund through the valuation of the Fund’s investments in other investment companies. Accordingly, acquired fund fees and expenses affect the Fund’s total returns. Because these fees and expenses are not included in the Fund’s financial highlights, the Fund’s total annual fund operating expenses, as shown in the prospectus, do not correlate to the ratios of expenses to average net assets shown in the Financial Highlights. Without acquired fund fees and expenses the Fund’s gross expense ratio would be 0.56% and 0.81% for Class 1 Shares and Class 2 Shares, respectively.
The Fund’s performance is measured against the Bloomberg Barclays U.S. Aggregate Bond Index, which is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Fidelity Institutional Asset Management Total Bond Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Fidelity Institutional Asset Management Total Bond 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 1,000.00 | $ | 1,003.10 | $ | 4.09 | 0.81 | % | ||||||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 1,000.00 | $ | 1,005.10 | $ | 2.83 | 0.56 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 1,000.00 | $ | 1,021.12 | $ | 4.13 | 0.81 | % | ||||||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 1,000.00 | $ | 1,022.38 | $ | 2.86 | 0.56 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Corporate Bonds | 30.0 | % | |||
U.S. Government Agency Mortgages | 27.0 | ||||
U.S. Treasury Obligations | 27.1 | ||||
Yankee Dollars | 11.3 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 6.9 | ||||
Collateralized Mortgage Obligations | 2.6 | ||||
Municipal Bonds | 1.7 | ||||
Money Markets | 1.4 | ||||
Asset Backed Securities | 1.3 | ||||
Common Stocks | — | ^ | |||
Warrants | — | ^ | |||
|
| ||||
Total Investment Securities | 109.3 | ||||
Net other assets (liabilities) | (9.3 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Shares or Principal Amount | Fair Value | |||||||
Common Stock (0.0%)†: | ||||||||
Oil, Gas & Consumable Fuels (0.0%)†: | ||||||||
13 | Midstates Petroleum Co., Inc.* | $ | 98 | |||||
|
| |||||||
Total Common Stock (Cost $–) | 98 | |||||||
|
| |||||||
Warrant (0.0%)†: | ||||||||
Oil, Gas & Consumable Fuels (0.0%)†: | ||||||||
3,841 | Midstates Petroleum Co., Inc., 4/21/20 | 38 | ||||||
|
| |||||||
Total Warrant (Cost $8,435) | 38 | |||||||
|
| |||||||
Asset Backed Securities (1.3%): | ||||||||
$ | 2,301,736 | Aaset Trust, Class A, Series2017-1A, 3.97%, 5/16/42(b) | 2,297,775 | |||||
398,838 | Aaset Trust, Class A, Series2018-1A, 3.84%, 1/16/38(b) | 400,250 | ||||||
190,104 | Blackbird Capital Aircraft, Class AA, Series2016-1A, 2.49%, 12/16/41, Callable 12/15/24 @ 100(b)(c) | 185,961 | ||||||
713,849 | Blackbird Capital Aircraft, Class A, Series2016-1A, 4.21%, 12/16/41, Callable 12/15/24 @ 100(b)(c) | 727,002 | ||||||
596,902 | Castlelake Aircraft Securitization Trust, Class A, Series2018-1A, 4.13%, 6/15/43(b) | 606,313 | ||||||
13,917 | Countrywide Asset-Backed Certificates Trust, Class AF5, Series2004-7, 4.78%, 1/25/35, Callable 1/25/19 @ 100(c) | 13,960 | ||||||
337,590 | DB Master Finance LLC, Class A2I, Series2017-1A, 3.63%, 11/20/47, Callable 11/20/21 @ 100(b) | 326,186 | ||||||
567,270 | DB Master Finance LLC, Class A2II, Series2017-1A, 4.03%, 11/20/47, Callable 11/20/23 @ 100(b) | 547,915 | ||||||
256,000 | Horizon Aircraft Finance I, Ltd., Class A,Series 2018-1, 4.46%, 12/15/38(b) | 260,948 | ||||||
522,222 | Thunderbolt Aircraft Lease, Ltd., Class A,Series 2017-A, 4.21%, 5/17/32, Callable 4/15/24 @ 100(b)(c) | 530,307 | ||||||
602,054 | Thunderbolt II Aircraft Lease, Ltd., Class A,Series 2018-A, 4.15%, 9/15/38(b)(c) | 607,410 | ||||||
|
| |||||||
Total Asset Backed Securities (Cost $6,502,760) | 6,504,027 | |||||||
|
| |||||||
Collateralized Mortgage Obligations (2.6%): | ||||||||
871,000 | Benchmark Mortgage Trust, Class A5,Series 2018-B8, 4.23%, 1/15/52 | 905,258 | ||||||
208,689 | BX Commercial Mortgage Trust, Class F,Series 2018-IND, 4.26%(LIBOR01M+180bps), 11/15/35(b) | 206,342 | ||||||
170,000 | BX Trust, Class D, Series 2018-EXCL, 5.08%(LIBOR01M+263bps), 9/15/20(b) | 167,148 | ||||||
282,000 | Citigroup Commercial Mortgage Trust, Class A4, Series2018-C6, 4.41%, 11/10/51 | 299,783 | ||||||
232,000 | CSAIL Commercial Mortgage Trust, Class A4,Series 2018-C14, 4.42%, 11/15/51 | 244,176 | ||||||
1,384,000 | CSMC Trust, Class D, Series 2017-PFHP, 4.71%(US0001M+225bps), 12/15/30(b) | 1,373,448 | ||||||
309,000 | CSMC Trust, Class A, Series 18, 4.28%, 12/1/99(b) | 315,179 | ||||||
100,000 | CSMC Trust, Class B, Series 18, 4.53%, 12/1/99(b) | 102,000 | ||||||
100,000 | CSMC Trust, Class C, Series 18, 4.78%, 12/1/99(b) | 101,141 | ||||||
128,000 | CSMC Trust, Class D, Series 18, 4.78%, 12/1/99(b) | 126,518 | ||||||
2,000,000 | GAHR Commercial Mortgage Trust, Class BFX,Series 2015-NRF, 3.38%, 12/15/34(b)(c) | 1,990,984 | ||||||
390,000 | GAHR Commercial Mortgage Trust, Class CFX,Series 2015-NRF, 3.38%, 12/15/34(b) | 386,626 |
Principal Amount | Fair Value | |||||||
Collateralized Mortgage Obligations, continued | ||||||||
$ | 2,930,000 | GAHR Commercial Mortgage Trust, Class DFX,Series 2015-NRF, 3.38%, 12/15/34(b)(c) | $ | 2,892,320 | ||||
63,000 | JPMorgan Chase Commercial Mortgage Securities Trust, Class CFX, Series2018-WPT, 4.95%, 7/5/23(b) | 65,087 | ||||||
97,000 | JPMorgan Chase Commercial Mortgage Securities Trust, Class DFX, Series2018-WPT, 5.35%, 7/5/23(b) | 99,973 | ||||||
133,000 | JPMorgan Chase Commercial Mortgage Securities Trust, Class EFX, Series2018-WPT, 5.54%, 7/5/23(b) | 135,149 | ||||||
872,000 | Morgan Stanley Capital I Trust, Class A4,Series 2018-H4, 4.31%, 12/15/51 | 909,625 | ||||||
375,000 | Morgan Stanley Capital I Trust, Class B,Series 2018-BOP, 3.71%(LIBOR01M+125bps), 6/15/35(b) | 374,653 | ||||||
904,000 | Morgan Stanley Capital I Trust, Class C,Series 2018-BOP, 3.96%(LIBOR01M+150bps), 6/15/35(b) | 902,409 | ||||||
475,756 | MSCG Trust, Class A, Series2016-SNR, 3.35%, 11/15/34(b)(c) | 463,590 | ||||||
199,750 | MSCG Trust, Class B, Series2016-SNR, 4.18%, 11/15/34(b) | 196,144 | ||||||
140,250 | MSCG Trust, Class C, Series2016-SNR, 5.21%, 11/15/34(b) | 138,711 | ||||||
658,000 | Wells Fargo Commercial Mortgage Trust, Class A5, Series2018-C48, 4.30%, 1/15/52 | 686,465 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations (Cost $13,199,936) | 13,082,729 | |||||||
|
| |||||||
Corporate Bonds (30.0%): | ||||||||
Aerospace & Defense (0.2%): | ||||||||
365,000 | BBA US Holdings, Inc., 5.38%, 5/1/26, Callable 5/1/21 @ 102.69^(b) | 345,834 | ||||||
315,000 | BWX Technologies, Inc., 5.38%, 7/15/26, Callable 7/15/21 @ 102.69^(b) | 303,093 | ||||||
250,000 | TransDigm, Inc., 6.50%, 7/15/24, Callable 7/15/19 @ 103.25 | 243,125 | ||||||
|
| |||||||
892,052 | ||||||||
|
| |||||||
Banks (2.9%): | ||||||||
656,000 | Bank of America Corp., 4.20%, 8/26/24 | 650,621 | ||||||
612,000 | Bank of America Corp., Series L, 3.95%, 4/21/25^ | 592,988 | ||||||
128,000 | Bank of America Corp., Series G, 4.45%, 3/3/26 | 126,540 | ||||||
690,000 | Bank of America Corp., 3.50%, 4/19/26 | 664,012 | ||||||
593,000 | Bank of America Corp., 4.25%, 10/22/26 | 576,751 | ||||||
811,000 | Bank of America Corp., 3.42%(US0003M+104bps), 12/20/28, Callable 12/20/27 @ 100 | 757,595 | ||||||
250,000 | Bank of America Corp., 6.10%(US0003M+390bps), 12/29/49, Callable 3/17/25 @ 100 | 246,250 | ||||||
75,000 | Bank of America Corp., 6.25%(US0003M+371bps), 12/31/49, Callable 9/5/24 @ 100 | 74,100 | ||||||
360,000 | Bank of America Corp., 5.20%(US0003M+314bps), 12/31/99, Callable 6/1/23 @ 100^ | 346,644 | ||||||
755,000 | CIT Group, Inc., 6.13%, 3/9/28^ | 751,225 | ||||||
1,090,000 | Citigroup, Inc., 4.05%, 7/30/22 | 1,094,955 | ||||||
1,642,000 | Citigroup, Inc., 4.30%, 11/20/26 | 1,578,982 | ||||||
250,000 | Citizens Bank NA/RI, 2.55%, 5/13/21, Callable 4/13/21 @ 100 | 244,520 | ||||||
253,000 | Citizens Bank of Rhode Island, 2.50%, 3/14/19, Callable 2/14/19 @ 100, MTN | 252,759 | ||||||
290,000 | Comstock Escrow Corp., 9.75%, 8/15/26, Callable 8/15/21 @ 107.31^(b) | 245,050 | ||||||
2,994,000 | JPMorgan Chase & Co., 3.88%, 9/10/24 | 2,946,022 |
See accompanying notes to the financial statements.
4
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Banks, continued | ||||||||
$ | 759,000 | JPMorgan Chase & Co., 2.95%, 10/1/26, Callable 7/1/26 @ 100 | $ | 700,958 | ||||
1,109,000 | JPMorgan Chase & Co., 4.13%, 12/15/26 | 1,082,030 | ||||||
400,000 | JPMorgan Chase & Co., 4.45%(US0003M+133bps), 12/5/29, Callable 12/5/28 @ 100 | 406,858 | ||||||
500,000 | Regions Bank, 6.45%, 6/26/37 | 585,173 | ||||||
260,000 | Regions Financial Corp., 3.20%, 2/8/21, Callable 1/8/21 @ 100 | 258,337 | ||||||
290,000 | Wells Fargo & Co., Series S, 5.90%(US0003M+311bps), 12/31/49, Callable 6/15/24 @ 100 | 276,298 | ||||||
|
| |||||||
14,458,668 | ||||||||
|
| |||||||
Beverages (0.6%): | ||||||||
1,481,000 | Anheuser-Busch InBev NV, 3.30%, 2/1/23, Callable 12/1/22 @ 100^ | 1,440,048 | ||||||
1,402,000 | Anheuser-Busch InBev NV, 4.70%, 2/1/36, Callable 8/1/35 @ 100 | 1,300,212 | ||||||
509,000 | Anheuser-Busch InBev Worldwide, Inc., 4.75%, 4/15/58, Callable 10/15/57 @ 100 | 442,946 | ||||||
|
| |||||||
3,183,206 | ||||||||
|
| |||||||
Capital Markets (2.1%): | ||||||||
282,000 | Affiliated Managers Group, Inc., 4.25%, 2/15/24 | 287,704 | ||||||
572,000 | Affiliated Managers Group, Inc., 3.50%, 8/1/25 | 555,841 | ||||||
194,000 | Goldman Sachs Group, Inc., 6.75%, 10/1/37 | 219,081 | ||||||
596,000 | Goldman Sachs Group, Inc.(The), 2.88%(US0003M+82bps), 10/31/22, Callable 10/31/21 @ 100 | 578,840 | ||||||
230,000 | IntercontinentalExchange, 2.75%, 12/1/20, Callable 11/1/20 @ 100 | 228,455 | ||||||
178,000 | Lazard Group LLC, 4.25%, 11/14/20 | 180,368 | ||||||
227,000 | Moody’s Corp., 4.88%, 2/15/24, Callable 11/15/23 @ 100 | 238,853 | ||||||
781,000 | Morgan Stanley, 4.88%, 11/1/22 | 804,815 | ||||||
7,000,000 | Morgan Stanley, 3.74%(US0003M+85bps), 4/24/24, Callable 4/24/23 @ 100 | 6,940,391 | ||||||
308,000 | Morgan Stanley, 5.00%, 11/24/25 | 314,057 | ||||||
220,000 | MSCI, Inc., 4.75%, 8/1/26, Callable 8/1/21 @ 102.38(b) | 208,450 | ||||||
|
| |||||||
10,556,855 | ||||||||
|
| |||||||
Chemicals (0.3%): | ||||||||
200,000 | Chemours Co., 5.38%, 5/15/27, Callable 2/15/27 @ 100^ | 180,000 | ||||||
370,000 | Platform Specialty Products Corp., 5.88%, 12/1/25, Callable 12/1/20 @ 102.94^(b) | 345,950 | ||||||
565,000 | TPC Group, Inc., 8.75%, 12/15/20, Callable 2/7/19 @ 100(b) | 536,750 | ||||||
200,000 | Valvoline, Inc., 4.38%, 8/15/25, Callable 8/15/20 @ 103.28 | 184,000 | ||||||
300,000 | W R Grace & Co., 5.63%, 10/1/24(b) | 298,500 | ||||||
|
| |||||||
1,545,200 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.2%): | ||||||||
280,000 | ADT Corp., 4.88%, 7/15/32(b) | 207,200 | ||||||
300,000 | Aramark Services, Inc., 5.00%, 4/1/25, Callable 4/1/20 @ 103.75^(b) | 293,250 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Commercial Services & Supplies, continued | ||||||||
$ | 300,000 | Tempo Finance, Corp., 6.75%, 6/1/25, Callable 6/1/20 @ 103.38^(b) | $ | 277,500 | ||||
|
| |||||||
777,950 | ||||||||
|
| |||||||
Construction & Engineering (0.2%): | ||||||||
375,000 | AECOM, 5.88%, 10/15/24, Callable 7/15/24 @ 100^ | 369,375 | ||||||
405,000 | AECOM, 5.13%, 3/15/27, Callable 12/15/26 @ 100 | 346,275 | ||||||
220,000 | Brand Industrial Services, Inc., 8.50%, 7/15/25, Callable 7/15/20 @ 106.34(b) | 187,550 | ||||||
300,000 | Summit Midstream Holdings LLC, 5.75%, 4/15/25, Callable 4/15/20 @ 104.31 | 276,000 | ||||||
|
| |||||||
1,179,200 | ||||||||
|
| |||||||
Consumer Finance (2.3%): | ||||||||
760,000 | Ally Financial, Inc., 5.75%, 11/20/25, Callable 10/21/25 @ 100^ | 756,200 | ||||||
406,000 | Capital One Financial Corp., 3.80%, 1/31/28, Callable 12/31/27 @ 100 | 375,210 | ||||||
797,000 | Capital One NA, Series B, 2.95%, 7/23/21, Callable 6/23/21 @ 100^ | 783,891 | ||||||
250,000 | Discover Bank, 7.00%, 4/15/20 | 260,273 | ||||||
644,000 | Discover Bank, Series B, 3.20%, 8/9/21, Callable 7/9/21 @ 100 | 637,310 | ||||||
250,000 | Discover Bank, Series B, 4.68%(USSW5+173bps), 8/9/28, Callable 8/9/23 @ 100 | 244,650 | ||||||
1,000,000 | Discover Financial Services, 5.20%, 4/27/22 | 1,037,433 | ||||||
457,000 | Discover Financial Services, 4.10%, 2/9/27, Callable 11/9/26 @ 100 | 426,641 | ||||||
1,493,000 | Ford Motor Credit Co. LLC, 2.60%, 11/4/19 | 1,476,522 | ||||||
500,000 | General Motors Acceptance Corp., 8.00%, 11/1/31 | 555,000 | ||||||
572,000 | General Motors Financial Co., 3.50%, 7/10/19^ | 571,913 | ||||||
747,000 | General Motors Financial Co., 4.20%, 3/1/21, Callable 2/1/21 @ 100 | 746,599 | ||||||
564,000 | Hyundai Capital America, 2.55%, 2/6/19(b) | 563,675 | ||||||
30,000 | Navient Corp., 7.25%, 1/25/22, MTN | 28,950 | ||||||
50,000 | Navient Corp., 5.50%, 1/25/23 | 43,750 | ||||||
575,000 | Navient Corp., 7.25%, 9/25/23 | 527,563 | ||||||
45,000 | Navient Corp., 6.13%, 3/25/24, MTN^ | 38,588 | ||||||
25,000 | Navient Corp., 5.88%, 10/25/24^ | 20,875 | ||||||
90,000 | Springleaf Finance Corp., 6.88%, 3/15/25 | 80,550 | ||||||
270,000 | Springleaf Finance Corp., 7.13%, 3/15/26 | 240,975 | ||||||
415,000 | Synchrony Bank, Series B, 3.65%, 5/24/21, Callable 4/24/21 @ 100 | 406,055 | ||||||
206,000 | Synchrony Financial, 3.00%, 8/15/19, Callable 7/15/19 @ 100 | 204,640 | ||||||
510,000 | Synchrony Financial, 3.75%, 8/15/21, Callable 6/15/21 @ 100 | 496,330 | ||||||
314,000 | Synchrony Financial, 4.25%, 8/15/24, Callable 5/15/24 @ 100 | 288,903 | ||||||
624,000 | Synchrony Financial, 3.95%, 12/1/27, Callable 9/1/27 @ 100 | 525,582 | ||||||
|
| |||||||
11,338,078 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
125,000 | Crown Americas LLC, 4.75%, 2/1/26, Callable 2/1/21 @ 103.56^(b) | 117,813 | ||||||
100,000 | Crown Americas LLC, 4.25%, 9/30/26, Callable 3/31/26 @ 100^ | 89,750 |
See accompanying notes to the financial statements.
5
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Containers & Packaging, continued | ||||||||
$ | 80,000 | Crown Cork & Seal Co., Inc., 7.38%, 12/15/26 | $ | 85,200 | ||||
300,000 | Reynolds Group Issuer, Inc., 5.13%, 7/15/23, Callable 7/15/19 @ 102.56^(b) | 285,750 | ||||||
170,000 | Silgan Holdings, Inc., 4.75%, 3/15/25, Callable 3/15/20 @ 102.38 | 158,525 | ||||||
|
| |||||||
737,038 | ||||||||
|
| |||||||
Diversified Consumer Services (0.3%): | ||||||||
200,000 | APX Group, Inc., 8.75%, 12/1/20, Callable 2/7/19 @ 100 | 190,500 | ||||||
640,000 | APX Group, Inc., 7.63%, 9/1/23, Callable 9/1/19 @ 105.72^ | 516,800 | ||||||
170,000 | Ascend Learning LLC, 6.88%, 8/1/25, Callable 8/1/20 @ 103.44(b) | 162,775 | ||||||
60,000 | Frontdoor, Inc., 6.75%, 8/15/26, Callable 8/15/21 @ 105.06(b) | 57,000 | ||||||
690,000 | Laureate Education, Inc., 8.25%, 5/1/25, Callable 5/1/20 @ 106.19(b) | 708,975 | ||||||
|
| |||||||
1,636,050 | ||||||||
|
| |||||||
Diversified Financial Services (0.4%): | ||||||||
91,000 | AXA Equitable Holdings, Inc., 3.90%, 4/20/23, Callable 3/20/23 @ 100(b) | 89,872 | ||||||
250,000 | Everest Acquisition Finance, Inc., 8.00%, 11/29/24, Callable 11/30/19 @ 106^(b) | 186,250 | ||||||
70,000 | Flex Acquisition Co., Inc., 6.88%, 1/15/25, Callable 1/15/20 @ 103.44(b) | 62,300 | ||||||
830,000 | Level 3 Financing, Inc., 5.38%, 1/15/24, Callable 2/7/19 @ 102.69 | 790,576 | ||||||
300,000 | Level 3 Financing, Inc., 5.38%, 5/1/25, Callable 5/1/20 @ 102.69 | 281,250 | ||||||
500,000 | Peachtree Funding Trust, 3.98%, 2/15/25(b) | 485,008 | ||||||
25,000 | Sally Holdings LLC/Sally Capital, Inc., 5.63%, 12/1/25, Callable 12/1/20 @ 102.81 | 23,000 | ||||||
285,000 | Voya Financial, Inc., 3.13%, 7/15/24, Callable 5/15/24 @ 100 | 268,740 | ||||||
|
| |||||||
2,186,996 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.1%): | ||||||||
481,000 | AT&T, Inc., 2.45%, 6/30/20, Callable 5/30/20 @ 100 | 474,741 | ||||||
867,000 | AT&T, Inc., 3.60%, 2/17/23, Callable 12/17/22 @ 100^ | 861,627 | ||||||
42,000 | AT&T, Inc., 4.45%, 4/1/24, Callable 1/1/24 @ 100 | 42,697 | ||||||
385,000 | Frontier Communications Corp., 7.05%, 10/1/46 | 161,700 | ||||||
200,000 | Qwest Corp., 7.25%, 9/15/25 | 205,916 | ||||||
1,116,000 | Verizon Communications, Inc., 5.50%, 3/16/47 | 1,186,772 | ||||||
900,000 | Verizon Communications, Inc., 5.01%, 4/15/49 | 896,762 | ||||||
889,000 | Verizon Communications, Inc., 5.01%, 8/21/54 | 859,022 | ||||||
747,000 | Zayo Group LLC/Zayo Capital, 6.38%, 5/15/25, Callable 5/15/20 @ 103.19^ | 694,710 | ||||||
|
| |||||||
5,383,947 | ||||||||
|
| |||||||
Electric Utilities (0.9%): | ||||||||
164,000 | Emera US Finance LP, 2.15%, 6/15/19 | 162,659 | ||||||
163,000 | Emera US Finance LP, 2.70%, 6/15/21, Callable 5/15/21 @ 100 | 158,794 | ||||||
260,000 | Emera US Finance LP, 3.55%, 6/15/26, Callable 3/15/26 @ 100 | 246,554 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Electric Utilities, continued | ||||||||
$ | 2,306,000 | FirstEnergy, Inc., Series B, 4.25%, 3/15/23, Callable 12/15/22 @ 100 | $ | 2,342,895 | ||||
763,000 | IPALCO Enterprises, Inc., 3.45%, 7/15/20, Callable 6/15/20 @ 100 | 762,029 | ||||||
211,000 | IPALCO Enterprises, Inc., 3.70%, 9/1/24, Callable 7/1/24 @ 100 | 205,408 | ||||||
175,000 | NextEra Energy Operating Partners LP, 4.25%, 9/15/24, Callable 7/15/24 @ 100(b) | 161,875 | ||||||
255,266 | NSG Holdings LLC/NSG Holdings, Inc., 7.75%, 12/15/25(b) | 269,305 | ||||||
175,000 | NV Energy, Inc., 6.25%, 11/15/20 | 183,865 | ||||||
230,000 | Vistra Operations Co. LLC, 5.50%, 9/1/26, Callable 9/1/21 @ 102.75(b) | 221,375 | ||||||
|
| |||||||
4,714,759 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.1%): | ||||||||
380,000 | TTM Technologies, Inc., 5.63%, 10/1/25, Callable 10/1/20 @ 102.81(b) | 353,400 | ||||||
|
| |||||||
Energy Equipment & Services (0.0%)†: | ||||||||
170,000 | Nabors Industries, Inc., 5.50%, 1/15/23, Callable 11/15/22 @ 100^ | 134,933 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts (4.0%): | ||||||||
82,000 | Alexandria Real Estate Equities, Inc., 2.75%, 1/15/20, Callable 12/15/19 @ 100 | 81,359 | ||||||
152,000 | American Campus Communities, Inc., 3.75%, 4/15/23, Callable 1/15/23 @ 100 | 150,902 | ||||||
747,000 | American Tower Corp., 2.80%, 6/1/20, Callable 5/1/20 @ 100 | 741,260 | ||||||
161,000 | AvalonBay Communities, Inc., 3.63%, 10/1/20, Callable 7/1/20 @ 100 | 161,924 | ||||||
328,000 | Boston Properties LP, 4.50%, 12/1/28, Callable 9/1/28 @ 100 | 335,363 | ||||||
514,000 | BPG Subsidiary, Inc., 3.88%, 8/15/22, Callable 6/15/22 @ 100 | 512,493 | ||||||
394,000 | Brandywine Operating Partners LP, 4.10%, 10/1/24, Callable 7/1/24 @ 100 | 389,735 | ||||||
421,000 | Brandywine Operating Partners LP, 3.95%, 11/15/27, Callable 8/15/27 @ 100 | 399,996 | ||||||
426,000 | Brandywine Operating Partners LP, 4.55%, 10/1/29, Callable 7/1/29 @ 100 | 419,503 | ||||||
489,000 | Brandywine Realty Trust, 3.95%, 2/15/23, Callable 11/15/22 @ 100 | 486,345 | ||||||
788,000 | Brixmor Operating Partners LP, 3.25%, 9/15/23, Callable 7/15/23 @ 100 | 761,076 | ||||||
134,000 | Camden Property Trust, 2.95%, 12/15/22, Callable 9/15/22 @ 100 | 131,089 | ||||||
381,000 | Corporate Office Properties Trust, 3.70%, 6/15/21, Callable 4/15/21 @ 100 | 377,776 | ||||||
414,000 | Corporate Office Properties Trust, 5.00%, 7/1/25, Callable 4/1/25 @ 100 | 421,523 | ||||||
155,000 | Corrections Corp. of America, 5.00%, 10/15/22, Callable 7/15/22 @ 100 | 148,413 | ||||||
350,000 | DDR Corp., 4.63%, 7/15/22, Callable 4/15/22 @ 100 | 359,367 | ||||||
491,000 | Digital Realty Trust LP, 4.75%, 10/1/25, Callable 7/1/25 @ 100 | 501,661 | ||||||
458,000 | Digital Realty Trust, Inc., 3.40%, 10/1/20, Callable 9/1/20 @ 100 | 456,538 |
See accompanying notes to the financial statements.
6
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Equity Real Estate Investment Trusts, continued | ||||||||
$ | 256,000 | Duke Realty LP, 3.88%, 10/15/22, Callable 7/15/22 @ 100^ | $ | 258,459 | ||||
273,000 | Duke Realty LP, 3.63%, 4/15/23, Callable 1/15/23 @ 100 | 272,789 | ||||||
146,000 | Duke Realty LP, 3.75%, 12/1/24, Callable 9/1/24 @ 100 | 144,898 | ||||||
747,000 | Equinix, Inc., 5.75%, 1/1/25, Callable 1/1/20 @ 102.88^ | 752,603 | ||||||
70,000 | Equity Commonwealth, 5.88%, 9/15/20, Callable 3/15/20 @ 100 | 71,706 | ||||||
500,000 | Equity One, Inc., 3.75%, 11/15/22, Callable 8/15/22 @ 100 | 499,205 | ||||||
240,000 | GLP Capital, LP/Finance II, Inc., 5.25%, 6/1/25, Callable 3/1/25 @ 100 | 238,301 | ||||||
1,000,000 | Government Properties Income Trust, 3.75%, 8/15/19, Callable 7/15/19 @ 100 | 1,000,980 | ||||||
500,000 | Health Care REIT, Inc., 4.13%, 4/1/19, Callable 2/7/19 @ 100^ | 500,140 | ||||||
135,000 | Lexington Realty Trust, 4.40%, 6/15/24, Callable 3/15/24 @ 100 | 132,988 | ||||||
500,000 | Mack-Cali Realty LP, 4.50%, 4/18/22, Callable 1/18/22 @ 100 | 482,492 | ||||||
401,000 | Mack-Cali Realty LP, 3.15%, 5/15/23, Callable 2/15/23 @ 100 | 355,429 | ||||||
595,000 | MGM Growth Properties LLC, 4.50%, 9/1/26, Callable 6/1/26 @ 100 | 538,475 | ||||||
300,000 | MPT Operating Partnership LP/MPT Finance Corp., 5.25%, 8/1/26, Callable 8/1/21 @ 102.63 | 282,750 | ||||||
820,000 | OMEGA Healthcare Investors, Inc., 4.38%, 8/1/23, Callable 6/1/23 @ 100 | 823,452 | ||||||
126,000 | OMEGA Healthcare Investors, Inc., 4.95%, 4/1/24, Callable 1/1/24 @ 100^ | 127,871 | ||||||
281,000 | OMEGA Healthcare Investors, Inc., 4.50%, 1/15/25, Callable 10/15/24 @ 100 | 276,737 | ||||||
785,000 | OMEGA Healthcare Investors, Inc., 5.25%, 1/15/26, Callable 10/15/25 @ 100 | 798,812 | ||||||
2,431,000 | OMEGA Healthcare Investors, Inc., 4.50%, 4/1/27, Callable 1/1/27 @ 100^ | 2,347,580 | ||||||
748,000 | OMEGA Healthcare Investors, Inc., 4.75%, 1/15/28, Callable 10/15/27 @ 100 | 732,814 | ||||||
70,000 | Post Apartment Homes LP, 3.38%, 12/1/22, Callable 9/1/22 @ 100 | 69,193 | ||||||
68,000 | Retail Opportunity Investments Corp., 5.00%, 12/15/23, Callable 9/15/23 @ 100 | 68,275 | ||||||
104,000 | Retail Opportunity Investments Corp., 4.00%, 12/15/24, Callable 9/15/24 @ 100 | 98,228 | ||||||
161,000 | Tanger Properties LP, 3.88%, 12/1/23, Callable 9/1/23 @ 100 | 158,598 | ||||||
411,000 | Tanger Properties LP, 3.75%, 12/1/24, Callable 9/1/24 @ 100 | 398,593 | ||||||
387,000 | Tanger Properties LP, 3.13%, 9/1/26, Callable 6/1/26 @ 100 | 345,064 | ||||||
118,000 | Ventas Realty LP, 3.13%, 6/15/23, Callable 3/15/23 @ 100 | 115,026 | ||||||
199,000 | Ventas Realty LP, 4.00%, 3/1/28, Callable 12/1/27 @ 100 | 192,864 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Equity Real Estate Investment Trusts, continued | ||||||||
$ | 67,000 | Weingarten Realty Investors, 3.38%, 10/15/22, Callable 7/15/22 @ 100 | $ | 66,060 | ||||
814,000 | WP Carey, Inc., 4.00%, 2/1/25, Callable 11/1/24 @ 100 | 792,028 | ||||||
|
| |||||||
19,778,733 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
100,000 | US Foods, Inc., 5.88%, 6/15/24, Callable 6/15/19 @ 102.94(b) | 97,250 | ||||||
405,000 | Walgreens Boots Alliance, Inc., 3.30%, 11/18/21, Callable 9/18/21 @ 100^ | 403,137 | ||||||
|
| |||||||
500,387 | ||||||||
|
| |||||||
Food Products (0.2%): | ||||||||
200,000 | JBS USA Finance, Inc., 5.88%, 7/15/24, Callable 7/15/19 @ 102.94(b) | 197,000 | ||||||
585,000 | JBS USA Finance, Inc., 5.75%, 6/15/25, Callable 6/15/20 @ 102.88(b) | 558,675 | ||||||
300,000 | Post Holding, Inc., 5.00%, 8/15/26, Callable 8/15/21 @ 102.5^(b) | 273,000 | ||||||
|
| |||||||
1,028,675 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.1%): | ||||||||
291,000 | Becton Dickinson And Co., 3.70%, 6/6/27, Callable 3/6/27 @ 100 | 275,239 | ||||||
190,000 | Teleflex, Inc., 4.88%, 6/1/26, Callable 6/1/21 @ 102.44^ | 181,450 | ||||||
|
| |||||||
456,689 | ||||||||
|
| |||||||
Health Care Providers & Services (2.6%): | ||||||||
435,000 | Community Health Systems, Inc., 5.13%, 8/1/21, Callable 2/7/19 @ 101.28^ | 403,463 | ||||||
620,000 | Community Health Systems, Inc., 6.25%, 3/31/23, Callable 3/31/20 @ 103.13^ | 563,456 | ||||||
185,000 | Community Health Systems, Inc., 8.63%, 1/15/24, Callable 1/15/21 @ 104.31^(b) | 182,688 | ||||||
400,000 | CVS Health Corp., 3.70%, 3/9/23, Callable 2/9/23 @ 100 | 395,718 | ||||||
1,017,000 | CVS Health Corp., 4.10%, 3/25/25, Callable 1/25/25 @ 100 | 1,006,853 | ||||||
1,181,000 | CVS Health Corp., 4.30%, 3/25/28, Callable 12/25/27 @ 100 | 1,154,556 | ||||||
526,000 | CVS Health Corp., 4.78%, 3/25/38, Callable 9/25/37 @ 100 | 504,042 | ||||||
773,000 | CVS Health Corp., 5.05%, 3/25/48, Callable 9/25/47 @ 100 | 751,827 | ||||||
421,000 | Halfmoon Parent, Inc., 3.75%, 7/15/23, Callable 6/15/23 @ 100(b) | 419,598 | ||||||
204,000 | Halfmoon Parent, Inc., 4.13%, 11/15/25, Callable 9/15/25 @ 100(b) | 203,713 | ||||||
526,000 | Halfmoon Parent, Inc., 4.38%, 10/15/28, Callable 7/15/28 @ 100(b) | 528,936 | ||||||
327,000 | Halfmoon Parent, Inc., 4.80%, 8/15/38, Callable 2/15/38 @ 100(b) | 321,151 | ||||||
327,000 | Halfmoon Parent, Inc., 4.90%, 12/15/48, Callable 6/15/48 @ 100(b) | 319,936 | ||||||
2,837,000 | HCA, Inc., 6.50%, 2/15/20 | 2,907,924 | ||||||
37,000 | HCA, Inc., 5.88%, 3/15/22 | 37,925 | ||||||
30,000 | HCA, Inc., 4.75%, 5/1/23 | 29,550 |
See accompanying notes to the financial statements.
7
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Health Care Providers & Services, continued | ||||||||
$ | 500,000 | HCA, Inc., 5.38%, 2/1/25 | $ | 487,500 | ||||
300,000 | Tenet Healthcare Corp., 4.50%, 4/1/21 | 291,750 | ||||||
1,042,000 | Tenet Healthcare Corp., 8.13%, 4/1/22 | 1,044,605 | ||||||
150,000 | Tenet Healthcare Corp., 6.75%, 6/15/23^ | 140,813 | ||||||
235,000 | Tenet Healthcare Corp., 7.00%, 8/1/25, Callable 8/1/20 @ 103.5^ | 217,375 | ||||||
181,000 | Toledo Hospital (The), Series B, 5.33%, 11/15/28 | 181,666 | ||||||
870,000 | Toledo Hospital (The), 6.02%, 11/15/48 | 880,666 | ||||||
200,000 | Vizient, Inc., 10.38%, 3/1/24, Callable 3/1/19 @ 107.78(b) | 212,000 | ||||||
45,000 | WellCare Health Plans, Inc., 5.38%, 8/15/26, Callable 8/15/21 @ 104.03(b) | 43,425 | ||||||
|
| |||||||
13,231,136 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.4%): | ||||||||
495,000 | Caesars Resort Collection LLC, 5.25%, 10/15/25, Callable 10/15/20 @ 102.63(b) | 425,699 | ||||||
30,000 | Delta Merger Sub, Inc., 6.00%, 9/15/26, Callable 9/15/21 @ 104.5^(b) | 28,350 | ||||||
145,000 | Eldorado Resorts, Inc., 7.00%, 8/1/23, Callable 2/7/19 @ 105.25 | 148,988 | ||||||
145,000 | Eldorado Resorts, Inc., 6.00%, 4/1/25, Callable 4/1/20 @ 104.5 | 139,873 | ||||||
155,000 | Hilton Worldwide Finance LLC, 4.63%, 4/1/25, Callable 4/1/20 @ 102.31 | 146,863 | ||||||
150,000 | Penn National Gaming, Inc., 5.63%, 1/15/27, Callable 1/15/22 @ 102.81^(b) | 134,250 | ||||||
175,000 | Scientific Games International, Inc., 6.63%, 5/15/21, Callable 2/7/19 @ 103.31 | 165,813 | ||||||
250,000 | Scientific Games International, Inc., 10.00%, 12/1/22, Callable 2/7/19 @ 105^ | 253,749 | ||||||
270,000 | Scientific Games International, Inc., 5.00%, 10/15/25, Callable 10/15/20 @ 103.75^(b) | 240,975 | ||||||
145,000 | Station Casinos LLC, 5.00%, 10/1/25, Callable 10/1/20 @ 102.5(b) | 131,225 | ||||||
170,000 | Wyndham Hotels & Resorts, Inc., 5.38%, 4/15/26, Callable 4/15/21 @ 102.69(b) | 163,200 | ||||||
155,000 | Wynn Las Vegas LLC, 5.50%, 3/1/25, Callable 12/1/24 @ 100^(b) | 144,538 | ||||||
|
| |||||||
2,123,523 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.2%): | ||||||||
350,000 | AES Corp., 5.50%, 4/15/25, Callable 4/15/20 @ 102.75 | 347,375 | ||||||
200,000 | Calpine Corp., 5.38%, 1/15/23, Callable 2/7/19 @ 102.69 | 187,500 | ||||||
115,000 | Clearway Energy Operating LLC, 5.75%, 10/15/25, Callable 10/15/21 @ 102.88^(b) | 109,825 | ||||||
391,000 | NRG Energy, 6.25%, 5/1/24, Callable 5/1/19 @ 103.13^ | 396,865 | ||||||
|
| |||||||
1,041,565 | ||||||||
|
| |||||||
Industrial Conglomerates (0.2%): | ||||||||
300,000 | Icahn Enterprises LP, 6.00%, 8/1/20, Callable 2/7/19 @ 101.5^ | 299,625 | ||||||
495,000 | Icahn Enterprises LP, 5.88%, 2/1/22, Callable 2/7/19 @ 101.47^ | 485,100 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Industrial Conglomerates, continued | ||||||||
$ | 395,000 | Icahn Enterprises LP, 6.75%, 2/1/24, Callable 2/1/20 @ 103.38^ | $ | 391,050 | ||||
|
| |||||||
1,175,775 | ||||||||
|
| |||||||
Insurance (1.1%): | ||||||||
326,000 | American International Group, Inc., 3.30%, 3/1/21, Callable 2/1/21 @ 100 | 324,894 | ||||||
1,208,000 | American International Group, Inc., 3.75%, 7/10/25, Callable 4/10/25 @ 100 | 1,156,598 | ||||||
200,000 | AmWINS Group, Inc., 7.75%, 7/1/26, Callable 7/1/21 @ 105.81(b) | 189,000 | ||||||
180,000 | Liberty Mutual Group, Inc., 4.25%, 6/15/23(b) | 181,479 | ||||||
651,000 | Pacific Lifecorp, 5.13%, 1/30/43(b) | 664,666 | ||||||
497,000 | Teachers Insurance & Annuity Association of America, 4.90%, 9/15/44(b) | 515,350 | ||||||
165,000 | Tiaa Asset Management Finance LLC, 4.13%, 11/1/24(b) | 168,068 | ||||||
463,000 | Unum Group, 3.88%, 11/5/25 | 451,636 | ||||||
1,556,000 | Unum Group, 5.75%, 8/15/42 | 1,550,778 | ||||||
195,000 | Usis Merger Sub, Inc., 6.88%, 5/1/25, Callable 5/1/20 @ 103.44(b) | 179,030 | ||||||
|
| |||||||
5,381,499 | ||||||||
|
| |||||||
IT Services (0.1%): | ||||||||
215,000 | First Data Corp., 5.75%, 1/15/24, Callable 1/18/19 @ 102.88(b) | 209,625 | ||||||
135,000 | Refinitiv US Holdings, Inc., 6.25%, 5/15/26, Callable 11/15/21 @ 103.13^(b) | 130,275 | ||||||
|
| |||||||
339,900 | ||||||||
|
| |||||||
Leisure Products (0.1%): | ||||||||
355,000 | Mattel, Inc., 6.75%, 12/31/25, Callable 12/31/20 @ 105.06^(b) | 316,727 | ||||||
|
| |||||||
Life Sciences Tools & Services (0.1%): | ||||||||
145,000 | Charles River Laboratories International, Inc., 5.50%, 4/1/26, Callable 4/1/21 @ 104.13(b) | 142,825 | ||||||
300,000 | IMS Health, Inc., 5.00%, 10/15/26, Callable 10/15/21 @ 102.5(b) | 286,500 | ||||||
|
| |||||||
429,325 | ||||||||
|
| |||||||
Media (2.8%): | ||||||||
390,000 | 21st Century Fox America, 7.75%, 12/1/45 | 572,598 | ||||||
1,237,000 | CCO Holdings LLC, 5.88%, 4/1/24, Callable 4/1/19 @ 104.41(b) | 1,230,816 | ||||||
95,000 | CCO Holdings LLC, 5.38%, 5/1/25, Callable 5/1/20 @ 102.68(b) | 91,081 | ||||||
300,000 | CCO Holdings LLC, 5.50%, 5/1/26, Callable 5/1/21 @ 102.75(b) | 288,375 | ||||||
700,000 | CCO Holdings LLC, 5.88%, 5/1/27, Callable 5/1/21 @ 102.94^(b) | 679,000 | ||||||
92,000 | Comcast Corp., 3.90%, 3/1/38, Callable 9/1/37 @ 100 | 85,165 | ||||||
219,000 | Comcast Corp., 4.65%, 7/15/42 | 216,704 | ||||||
245,000 | Comcast Corp., 4.60%, 8/15/45, Callable 2/15/45 @ 100 | 238,714 | ||||||
299,000 | Comcast Corp., 3.97%, 11/1/47, Callable 5/1/47 @ 100 | 267,262 | ||||||
169,000 | Comcast Corp., 4.00%, 3/1/48, Callable 9/1/47 @ 100^ | 153,997 |
See accompanying notes to the financial statements.
8
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Media, continued | ||||||||
$ | 342,000 | Comcast Corp., 4.00%, 11/1/49, Callable 5/1/49 @ 100 | $ | 306,453 | ||||
747,000 | CSC Holdings LLC, 5.38%, 7/15/23, Callable 1/18/19 @ 104.03(b) | 728,474 | ||||||
200,000 | CSC Holdings LLC, 7.75%, 7/15/25, Callable 7/15/20 @ 103.88^(b) | 203,000 | ||||||
160,000 | CSC Holdings LLC, 7.50%, 4/1/28, Callable 4/1/23 @ 103.75(b) | 159,600 | ||||||
300,000 | DISH DBS Corp., 5.00%, 3/15/23^ | 249,750 | ||||||
300,000 | DISH DBS Corp., 5.88%, 11/15/24^ | 241,500 | ||||||
210,000 | DISH Network Corp., 3.38%, 8/15/26 | 169,578 | ||||||
121,000 | NBCUniversal, 5.95%, 4/1/41 | 138,879 | ||||||
174,000 | NBCUniversal Media LLC, 4.45%, 1/15/43 | 167,724 | ||||||
1,000,000 | Neptune Finco Corp., 6.63%, 10/15/25, Callable 10/15/20 @ 103.31^(b) | 1,012,500 | ||||||
600,000 | Radiate Holdco LLC/Radiate Finance, Inc., 6.63%, 2/15/25, Callable 2/15/20 @ 103.31^(b) | 519,000 | ||||||
300,000 | Sirius XM Radio, Inc., 4.63%, 5/15/23, Callable 2/7/19 @ 102.31^(b) | 287,250 | ||||||
160,000 | Sirius XM Radio, Inc., 6.00%, 7/15/24, Callable 7/15/19 @ 103(b) | 160,400 | ||||||
792,000 | Sirius XM Radio, Inc., 5.38%, 4/15/25, Callable 4/15/20 @ 102.69(b) | 750,420 | ||||||
195,000 | Sirius XM Radio, Inc., 5.38%, 7/15/26, Callable 7/15/21 @ 102.69^(b) | 182,325 | ||||||
1,069,000 | Time Warner Cable, Inc., 8.25%, 4/1/19 | 1,080,997 | ||||||
930,000 | Time Warner Cable, Inc., 4.00%, 9/1/21, Callable 6/1/21 @ 100 | 924,348 | ||||||
231,000 | Time Warner Cable, Inc., 6.55%, 5/1/37 | 237,061 | ||||||
418,000 | Time Warner Cable, Inc., 7.30%, 7/1/38 | 453,135 | ||||||
2,240,000 | Time Warner Cable, Inc., 6.75%, 6/15/39 | 2,276,122 | ||||||
103,000 | Time Warner Cable, Inc., 5.50%, 9/1/41, Callable 3/1/41 @ 100 | 93,862 | ||||||
|
| |||||||
14,166,090 | ||||||||
|
| |||||||
Metals & Mining (0.1%): | ||||||||
600,000 | Freeport-McMoRan, Inc., 3.55%, 3/1/22, Callable 12/1/21 @ 100 | 567,750 | ||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (0.0%)†: | ||||||||
65,000 | Starwood Property Trust, Inc., 4.75%, 3/15/25, Callable 9/15/24 @ 100 | 58,500 | ||||||
|
| |||||||
Multi-Utilities (0.4%): | ||||||||
1,371,000 | Dominion Resources, Inc., Series06-B, 5.10%(US0003M+230bps), 9/30/66, Callable 1/28/19 @ 100 | 1,220,189 | ||||||
49,000 | Puget Energy, Inc., 6.00%, 9/1/21 | 51,834 | ||||||
506,000 | Sempra Energy, 6.00%, 10/15/39 | 562,550 | ||||||
|
| |||||||
1,834,573 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (3.8%): | ||||||||
222,000 | Anadarko Petroleum Corp., 4.85%, 3/15/21, Callable 2/15/21 @ 100^ | 227,301 | ||||||
460,000 | Anadarko Petroleum Corp., 5.55%, 3/15/26, Callable 12/15/25 @ 100 | 481,776 | ||||||
722,000 | Anadarko Petroleum Corp., Series B, 7.50%, 5/1/31 | 853,798 | ||||||
283,000 | Anadarko Petroleum Corp., 6.45%, 9/15/36 | 305,639 | ||||||
712,000 | Anadarko Petroleum Corp., 6.60%, 3/15/46, Callable 9/15/45 @ 100 | 786,174 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 430,000 | California Resources Corp., 8.00%, 12/15/22, Callable 2/7/19 @ 104^(b) | $ | 291,325 | ||||
480,000 | Cheniere Corpus Christi Holdings LLC, 7.00%, 6/30/24, Callable 1/1/24 @ 100^ | 506,400 | ||||||
725,000 | Cheniere Energy Partners LP, 5.25%, 10/1/25, Callable 10/1/20 @ 102.63^ | 676,063 | ||||||
80,000 | Cheniere Energy Partners LP, 5.63%, 10/1/26, Callable 10/1/21 @ 102.81(b) | 74,800 | ||||||
550,000 | Chesapeake Energy Corp., 8.00%, 1/15/25, Callable 1/15/20 @ 106^ | 485,375 | ||||||
630,000 | Citgo Petroleum Corp., 6.25%, 8/15/22, Callable 2/7/19 @ 103.13(b) | 609,525 | ||||||
434,000 | Columbia Pipeline Group, 3.30%, 6/1/20, Callable 5/1/20 @ 100 | 432,507 | ||||||
197,000 | Columbia Pipeline Group, 4.50%, 6/1/25, Callable 3/1/25 @ 100 | 198,419 | ||||||
290,000 | Crestwood Midstream Partners LP, 6.25%, 4/1/23, Callable 1/23/19 @ 104.69 | 279,125 | ||||||
150,000 | Crestwood Midstream Partners LP, 5.75%, 4/1/25, Callable 4/1/20 @ 104.31^ | 139,125 | ||||||
150,000 | CVR Refining LLC/Coffeyville Finance, Inc., 6.50%, 11/1/22, Callable 2/7/19 @ 102.17 | 147,750 | ||||||
163,000 | DCP Midstream Operating LLC, 3.88%, 3/15/23, Callable 12/15/22 @ 100^ | 152,813 | ||||||
410,000 | DCP Midstream Operating LLC, 8.13%, 8/16/30 | 459,200 | ||||||
185,000 | DCP Midstream Operating LLC, 5.60%, 4/1/44, Callable 10/1/43 @ 100 | 160,025 | ||||||
200,000 | DCP Midstream Operating LP, 5.38%, 7/15/25, Callable 4/15/25 @ 100^ | 195,500 | ||||||
150,000 | DCP Midstream Operating LP, 5.85%(US0003M+385bps), 5/21/43, Callable 5/21/23 @ 100(b) | 120,000 | ||||||
455,000 | Denbury Resources, Inc., 9.25%, 3/31/22, Callable 3/31/19 @ 109.25(b) | 419,738 | ||||||
160,000 | Denbury Resources, Inc., 4.63%, 7/15/23, Callable 2/7/19 @ 101.54 | 94,000 | ||||||
175,000 | Enable Midstream Partners LP, 2.40%, 5/15/19, Callable 4/15/19 @ 100 | 174,008 | ||||||
124,000 | Enable Midstream Partners LP, 3.90%, 5/15/24, Callable 2/15/24 @ 100 | 118,945 | ||||||
103,000 | Energy Transfer Partners LP, 4.20%, 9/15/23, Callable 8/15/23 @ 100^ | 101,511 | ||||||
350,000 | Energy Transfer Partners LP, 4.95%, 6/15/28, Callable 3/15/28 @ 100 | 342,445 | ||||||
195,000 | Energy Transfer Partners LP, 5.80%, 6/15/38, Callable 12/15/37 @ 100 | 189,806 | ||||||
127,000 | Energy Transfer Partners LP, 6.00%, 6/15/48, Callable 12/15/47 @ 100 | 123,674 | ||||||
300,000 | Global Partners LP, 6.25%, 7/15/22, Callable 2/7/19 @ 103.13^ | 283,500 | ||||||
335,000 | Hess Infrastructure Partners LP/Finance Corp., 5.63%, 2/15/26, Callable 2/15/21 @ 104.22(b) | 324,113 | ||||||
310,000 | Hilcorp Energy LP, 5.00%, 12/1/24, Callable 6/1/19 @ 102.5(b) | 274,350 | ||||||
80,000 | Indigo Natural Resources LLC, 6.88%, 2/15/26, Callable 2/15/21 @ 103.44(b) | 68,800 | ||||||
240,000 | Jonah Energy LLC/Jonah Energy Finance Corp., 7.25%, 10/15/25, Callable 10/15/20 @ 105.44^(b) | 153,600 |
See accompanying notes to the financial statements.
9
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 49,000 | Kinder Morgan (Delaware), Inc., 3.05%, 12/1/19, Callable 11/1/19 @ 100 | $ | 48,718 | ||||
167,000 | Kinder Morgan (Delaware), Inc., 5.05%, 2/15/46, Callable 8/15/45 @ 100 | 152,494 | ||||||
63,000 | Kinder Morgan Energy Partners LP, 6.55%, 9/15/40 | 68,001 | ||||||
712,000 | Kinder Morgan Energy Partners LP, 5.50%, 3/1/44, Callable 9/1/43 @ 100 | 686,135 | ||||||
165,000 | Magnolia Oil & Gas Operating LLC, 6.00%, 8/1/26, Callable 8/1/21 @ 103(b) | 159,225 | ||||||
1,163,000 | Midstates Petroleum Co., Inc., 10.75%, 10/1/20(a)(d) | — | ||||||
172,000 | MPLX LP, 4.50%, 7/15/23, Callable 4/15/23 @ 100 | 173,722 | ||||||
242,000 | MPLX LP, 4.88%, 12/1/24, Callable 9/1/24 @ 100 | 246,339 | ||||||
95,000 | MPLX LP, 4.80%, 2/15/29, Callable 11/15/28 @ 100 | 94,766 | ||||||
285,000 | MPLX LP, 5.50%, 2/15/49, Callable 8/15/48 @ 100 | 277,223 | ||||||
290,000 | Parsley Energy LLC, 5.25%, 8/15/25, Callable 8/15/20 @ 103.94(b) | 262,450 | ||||||
405,000 | PBF Holding Co. LLC/PBF Finance Corp., 7.00%, 11/15/23, Callable 2/7/19 @ 105.25 | 386,775 | ||||||
57,000 | Phillips 66 Partners LP, 2.65%, 2/15/20, Callable 1/15/20 @ 100 | 56,509 | ||||||
20,000 | Rose Rock Finance Corp., 5.63%, 11/15/23, Callable 5/15/19 @ 102.81 | 18,200 | ||||||
300,000 | Rose Rock Midstream LP, 5.63%, 7/15/22, Callable 1/23/19 @ 102.81^ | 282,750 | ||||||
455,000 | Sanchez Energy Corp., 7.25%, 2/15/23, Callable 2/15/20 @ 103.63^(b) | 370,825 | ||||||
355,000 | Semgroup Corp., 6.38%, 3/15/25, Callable 3/15/20 @ 103.19 | 327,488 | ||||||
105,000 | Semgroup Corp., 7.25%, 3/15/26, Callable 3/15/21 @ 103.63 | 98,175 | ||||||
346,000 | Southeast Supply Header LLC, 4.25%, 6/15/24, Callable 3/15/24 @ 100(b) | 348,836 | ||||||
348,000 | Southwestern Energy Co., 6.70%, 1/23/25, Callable 10/23/24 @ 100^ | 311,025 | ||||||
105,000 | Sunoco Finance Corp., 4.88%, 1/15/23, Callable 1/15/20 @ 102.44 | 102,375 | ||||||
180,000 | Sunoco Finance Corp., 5.50%, 2/15/26, Callable 2/15/21 @ 102.75 | 170,550 | ||||||
848,000 | Sunoco Logistics Partners Operations LP, 5.40%, 10/1/47, Callable 4/1/47 @ 100 | 768,462 | ||||||
195,000 | Targa Resources Partners LP, 5.13%, 2/1/25, Callable 2/1/20 @ 103.84 | 182,813 | ||||||
195,000 | Targa Resources Partners LP, 5.88%, 4/15/26, Callable 4/15/21 @ 104.41(b) | 189,638 | ||||||
195,000 | Targa Resources Partners LP, 5.38%, 2/1/27, Callable 2/1/22 @ 102.69 | 182,813 | ||||||
574,000 | Western Gas Partners LP, 5.38%, 6/1/21, Callable 3/1/21 @ 100 | 591,206 | ||||||
154,000 | Western Gas Partners LP, 4.65%, 7/1/26, Callable 4/1/26 @ 100 | 148,928 | ||||||
900,000 | Western Gas Partners LP, 4.50%, 3/1/28, Callable 12/1/27 @ 100 | 841,251 | ||||||
101,000 | Western Gas Partners LP, 4.75%, 8/15/28, Callable 5/15/28 @ 100^ | 96,143 | ||||||
222,000 | Williams Partners LP, 4.00%, 11/15/21, Callable 8/15/21 @ 100 | 222,863 | ||||||
357,000 | Williams Partners LP, 3.60%, 3/15/22, Callable 1/15/22 @ 100^ | 350,292 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 242,000 | Williams Partners LP, 4.50%, 11/15/23, Callable 8/15/23 @ 100 | $ | 243,275 | ||||
426,000 | Williams Partners LP, 4.30%, 3/4/24, Callable 12/4/23 @ 100 | 424,515 | ||||||
|
| |||||||
19,135,910 | ||||||||
|
| |||||||
Pharmaceuticals (0.2%): | ||||||||
175,000 | Catalent Pharma Solutions, Inc., 4.88%, 1/15/26, Callable 10/15/20 @ 102.44(b) | 165,813 | ||||||
87,000 | Elanco Animal Health, Inc., 3.91%, 8/27/21(b) | 87,541 | ||||||
275,000 | Elanco Animal Health, Inc., 4.27%, 8/28/23, Callable 7/28/23 @ 100(b) | 274,767 | ||||||
116,000 | Elanco Animal Health, Inc., 4.90%, 8/28/28, Callable 5/28/28 @ 100(b) | 118,039 | ||||||
165,000 | Valeant Pharmaceuticals International, 9.25%, 4/1/26, Callable 4/1/22 @ 104.63(b) | 165,000 | ||||||
|
| |||||||
811,160 | ||||||||
|
| |||||||
Real Estate Management & Development (0.1%): | ||||||||
300,000 | Howard Hughes Corp. (The), 5.38%, 3/15/25, Callable 3/15/20 @ 104.03(b) | 282,000 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.0%)†: | ||||||||
140,000 | Qorvo, Inc., 5.50%, 7/15/26, Callable 7/15/21 @ 102.75(b) | 133,700 | ||||||
|
| |||||||
Software (0.3%): | ||||||||
125,000 | CDK Global, Inc., 5.88%, 6/15/26, Callable 6/15/21 @ 102.94 | 125,506 | ||||||
42,000 | Dell International LLC, 6.02%, 6/15/26, Callable 3/15/26 @ 100(b) | 42,190 | ||||||
195,000 | Fair Isaac Corp., 5.25%, 5/15/26, Callable 2/15/26 @ 100(b) | 188,663 | ||||||
140,000 | Nuance Communications, Inc., 5.63%, 12/15/26, Callable 12/15/21 @ 102.81^ | 133,000 | ||||||
440,000 | Solera LLC, 10.50%, 3/1/24, Callable 3/1/19 @ 107.88(b) | 468,599 | ||||||
437,000 | Sophia LP/Finance, Inc., 9.00%, 9/30/23, Callable 2/7/19 @ 104.5(b) | 437,000 | ||||||
190,000 | Symantec Corp., 5.00%, 4/15/25, Callable 4/15/20 @ 102.5(b) | 177,209 | ||||||
|
| |||||||
1,572,167 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.0%)†: | ||||||||
190,000 | USA Compression Partners LP, 6.88%, 4/1/26, Callable 4/1/21 @ 105.16^(b) | 182,400 | ||||||
|
| |||||||
Thrifts & Mortgage Finance (0.1%): | ||||||||
355,000 | Quicken Loans, Inc., 5.25%, 1/15/28, Callable 1/15/23 @ 102.63(b) | 314,175 | ||||||
|
| |||||||
Tobacco (0.6%): | ||||||||
317,000 | Altria Group, Inc., 4.00%, 1/31/24 | 311,530 | ||||||
103,000 | Altria Group, Inc., 4.25%, 8/9/42 | 83,076 | ||||||
40,000 | Altria Group, Inc., 3.88%, 9/16/46, Callable 3/16/46 @ 100 | 30,469 | ||||||
140,000 | Reynolds American, Inc., 3.25%, 6/12/20 | 139,140 | ||||||
478,000 | Reynolds American, Inc., 4.00%, 6/12/22 | 472,848 | ||||||
346,000 | Reynolds American, Inc., 4.45%, 6/12/25, Callable 3/12/25 @ 100 | 333,625 | ||||||
179,000 | Reynolds American, Inc., 5.70%, 8/15/35, Callable 2/15/35 @ 100 | 174,781 | ||||||
600,000 | Reynolds American, Inc., 7.25%, 6/15/37 | 654,859 |
See accompanying notes to the financial statements.
10
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Tobacco, continued | ||||||||
$ | 1,000,000 | Vector Group, Ltd., 6.13%, 2/1/25, Callable 2/1/20 @ 103.06(b) | $ | 850,000 | ||||
|
| |||||||
3,050,328 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.3%): | ||||||||
365,000 | Aercap Global Aviation Trust, 6.50%(US0003M+430bps), 6/15/45, Callable 6/15/25 @ 100^(b) | 350,400 | ||||||
499,000 | Air Lease Corp., 4.75%, 3/1/20 | 505,875 | ||||||
297,000 | Air Lease Corp., 3.88%, 4/1/21, Callable 3/1/21 @ 100 | 297,378 | ||||||
348,000 | Air Lease Corp., 3.38%, 6/1/21, Callable 5/1/21 @ 100^ | 344,680 | ||||||
82,000 | Air Lease Corp., 3.00%, 9/15/23, Callable 7/15/23 @ 100^ | 77,000 | ||||||
|
| |||||||
1,575,333 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.4%): | ||||||||
300,000 | Sprint Communications, Inc., 7.25%, 9/15/21^ | 307,050 | ||||||
100,000 | Sprint Communications, Inc., 6.00%, 11/15/22 | 98,133 | ||||||
575,000 | Sprint Communications, Inc., 7.88%, 9/15/23 | 590,094 | ||||||
420,000 | Sprint Communications, Inc., 7.13%, 6/15/24 | 415,943 | ||||||
130,000 | Sprint Corp., 7.63%, 3/1/26, Callable 11/1/25 @ 100 | 128,375 | ||||||
300,000 | T-Mobile USA, Inc., 5.13%, 4/15/25, Callable 4/15/20 @ 102.56 | 291,375 | ||||||
|
| |||||||
1,830,970 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $156,155,420) | 150,397,322 | |||||||
|
| |||||||
Yankee Dollars (11.3%): | ||||||||
Aerospace & Defense (0.2%): | ||||||||
115,000 | Avolon Holdings Funding, Ltd., 5.50%, 1/15/23, Callable 12/15/22 @ 100(b) | 111,550 | ||||||
225,000 | Avolon Holdings Funding, Ltd., 5.13%, 10/1/23, Callable 9/1/23 @ 100(b) | 214,875 | ||||||
215,000 | Bombardier, Inc., 6.00%, 10/15/22, Callable 2/7/19 @ 103^(b) | 201,563 | ||||||
320,000 | Bombardier, Inc., 6.13%, 1/15/23^(b) | 300,000 | ||||||
|
| |||||||
827,988 | ||||||||
|
| |||||||
Banks (2.2%): | ||||||||
642,000 | Barclays Bank plc, 3.25%, 1/12/21 | 628,709 | ||||||
874,000 | Barclays Bank plc, 4.38%, 1/12/26 | 830,241 | ||||||
800,000 | Barclays plc, 7.88%(USSW5+677bps), 12/31/99, Callable 3/15/22 @ 100(b) | 800,000 | ||||||
205,000 | HSBC Holdings plc, 4.25%, 3/14/24 | 203,444 | ||||||
200,000 | Intesa Sanpaolo SpA, 5.02%, 6/26/24(b) | 181,377 | ||||||
1,180,000 | Intesa Sanpaolo SpA, 5.71%, 1/15/26(b) | 1,081,679 | ||||||
791,000 | Rabobank Nederland NY, 4.38%, 8/4/25 | 776,889 | ||||||
200,000 | RBS Citizens Financial Group, Inc., 4.15%, 9/28/22(b) | 201,029 | ||||||
3,808,000 | Royal Bank of Scotland Group plc, 6.13%, 12/15/22 | 3,859,255 | ||||||
675,000 | Royal Bank of Scotland Group plc, 6.10%, 6/10/23 | 685,660 | ||||||
847,000 | Royal Bank of Scotland Group plc, 6.00%, 12/19/23 | 857,251 | ||||||
235,000 | Royal Bank of Scotland Group plc, 7.50%(USSW5+580bps), 12/29/49, Callable 8/10/20 @ 100 | 232,650 | ||||||
|
| |||||||
10,338,184 | ||||||||
|
| |||||||
Beverages (0.0%)†: | ||||||||
125,000 | Cott Corp., 5.50%, 4/1/25, Callable 4/1/20 @ 104.13(b) | 117,813 | ||||||
|
|
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Capital Markets (1.3%): | ||||||||
$ | 720,000 | Credit Suisse Group Fun, Ltd., 2.75%, 3/26/20 | $ | 712,232 | ||||
1,000,000 | Credit Suisse Group Fun, Ltd., 3.80%, 9/15/22 | 992,705 | ||||||
1,175,000 | Credit Suisse Group Fun, Ltd., 3.80%, 6/9/23 | 1,153,012 | ||||||
720,000 | Credit Suisse Group Fun, Ltd., 3.75%, 3/26/25 | 686,561 | ||||||
1,462,000 | Deutsche Bank AG, 4.50%, 4/1/25^ | 1,282,713 | ||||||
1,284,000 | Deutsche Bank NY, 3.30%, 11/16/22 | 1,189,947 | ||||||
733,000 | UBS Group AG, 4.13%, 9/24/25(b) | 730,290 | ||||||
|
| |||||||
6,747,460 | ||||||||
|
| |||||||
Chemicals (0.2%): | ||||||||
575,000 | Consolidated Energy Finance SA, 6.88%, 6/15/25, Callable 6/15/20 @ 105.16(b) | 547,688 | ||||||
150,000 | Consolidated Energy Finance SA, 6.50%, 5/15/26, Callable 5/15/21 @ 104.88^(b) | 143,625 | ||||||
500,000 | Nova Chemicals Corp., 4.88%, 6/1/24, Callable 3/3/24 @ 100(b) | 451,250 | ||||||
160,000 | Nufarm Australia, Ltd., 5.75%, 4/30/26, Callable 4/30/21 @ 102.88^(b) | 145,840 | ||||||
210,000 | OCI NV, 6.63%, 4/15/23, Callable 4/15/20 @ 103.31(b) | 206,325 | ||||||
170,000 | Tronox Finance plc, 5.75%, 10/1/25, Callable 10/1/20 @ 104.31^(b) | 137,700 | ||||||
|
| |||||||
1,632,428 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
410,000 | Ardagh Packaging Finance plc/Ardagh Holdings USA, Inc., 7.25%, 5/15/24, Callable 5/15/19 @ 105.44(b) | 408,975 | ||||||
300,000 | Ardagh Packaging Finance plc/Ardagh Holdings USA, Inc., 6.00%, 2/15/25, Callable 2/15/20 @ 104.5(b) | 276,936 | ||||||
|
| |||||||
685,911 | ||||||||
|
| |||||||
Diversified Financial Services (0.6%): | ||||||||
600,000 | Altice Financing SA, 7.50%, 5/15/26, Callable 5/15/21 @ 103.75(b) | 547,499 | ||||||
300,000 | Altice Finco SA, 8.13%, 1/15/24, Callable 2/7/19 @ 104.06^(b) | 279,750 | ||||||
325,000 | C&W Senior Financing DAC, 7.50%, 10/15/26, Callable 10/15/21 @ 103.75(b) | 312,406 | ||||||
180,000 | Camelot Finance SA, 7.88%, 10/15/24, Callable 10/15/19 @ 103.94^(b) | 173,700 | ||||||
495,000 | Intelsat Jackson Holdings SA, 8.00%, 2/15/24, Callable 2/15/19 @ 104(b) | 509,850 | ||||||
240,000 | Intelsat Jackson Holdings SA, 8.50%, 10/15/24, Callable 10/15/20 @ 106.38(b) | 232,800 | ||||||
280,000 | Nielsen Co. Luxembourg SARLl (The), 5.00%, 2/1/25, Callable 2/1/20 @ 103.75^(b) | 261,800 | ||||||
115,000 | Park Aerospace Holdings, Ltd., 5.25%, 8/15/22(b) | 111,263 | ||||||
30,000 | Park Aerospace Holdings, Ltd., 4.50%, 3/15/23, Callable 2/15/23 @ 100(b) | 28,050 | ||||||
85,000 | Park Aerospace Holdings, Ltd., 5.50%, 2/15/24(b) | 82,025 | ||||||
30,000 | Tervita Escrow Corp., 7.63%, 12/1/21, Callable 2/7/19 @ 103.81(b) | 28,575 | ||||||
|
| |||||||
2,567,718 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.1%): | ||||||||
200,000 | Altice France SA/France, 8.13%, 2/1/27, Callable 2/1/22 @ 106.09^(b) | 188,500 | ||||||
200,000 | Sable International Finance, Ltd., 6.88%, 8/1/22, Callable 2/7/19 @ 105.16(b) | 204,100 |
See accompanying notes to the financial statements.
11
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Diversified Telecommunication Services, continued | ||||||||
$ | 300,000 | SFR Group SA, 7.38%, 5/1/26, Callable 5/1/21 @ 103.69(b) | $ | 275,250 | ||||
|
| |||||||
667,850 | ||||||||
|
| |||||||
Energy Equipment & Services (0.3%): | ||||||||
305,000 | Ensco plc, 4.50%, 10/1/24, Callable 7/1/24 @ 100^ | 198,250 | ||||||
200,000 | Ensco plc, 7.75%, 2/1/26, Callable 11/1/25 @ 100^ | 148,000 | ||||||
169,000 | Noble Holding International, Ltd., 7.75%, 1/15/24, Callable 10/15/23 @ 100^ | 128,018 | ||||||
195,000 | Noble Holding International, Ltd., 7.88%, 2/1/26, Callable 2/1/21 @ 105.91^(b) | 166,237 | ||||||
325,000 | Weatherford International, Ltd., 9.88%, 2/15/24, Callable 11/15/23 @ 100 | 198,250 | ||||||
330,000 | Weatherford International, Ltd., 6.50%, 8/1/36 | 171,600 | ||||||
|
| |||||||
1,010,355 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.2%): | ||||||||
175,000 | 1011778 BC ULC New Red Finance, Inc., 4.25%, 5/15/24, Callable 5/15/20 @ 102.13^(b) | 161,000 | ||||||
325,000 | Stars Group Holdings BV, 7.00%, 7/15/26, Callable 7/15/21 @ 103.5^(b) | 316,063 | ||||||
300,000 | Studio City Co., Ltd., 7.25%, 11/30/21, Callable 2/7/19 @ 103.63(b) | 305,505 | ||||||
225,000 | Wynn Macau, Ltd., 4.88%, 10/1/24, Callable 10/1/20 @ 102.44(b) | 200,250 | ||||||
|
| |||||||
982,818 | ||||||||
|
| |||||||
Insurance (0.0%)†: | ||||||||
200,000 | AIA Group, Ltd., 2.25%, 3/11/19(b) | 199,630 | ||||||
|
| |||||||
Machinery (0.0%)†: | ||||||||
107,000 | Ingersoll-Rand Lux Financial Holding, 2.63%, 5/1/20, Callable 4/1/20 @ 100 | 105,952 | ||||||
|
| |||||||
Marine (0.0%)†: | ||||||||
244,000 | Navios Maritime Holdings/Finance, 7.38%, 1/15/22, Callable 2/7/19 @ 101.84(b) | 153,720 | ||||||
|
| |||||||
Media (0.2%): | ||||||||
495,000 | MDC Partners, Inc., 6.50%, 5/1/24, Callable 5/1/19 @ 104.88^(b) | 450,450 | ||||||
640,000 | Ziggo Bond Finance BV, 5.88%, 1/15/25, Callable 1/15/20 @ 102.94(b) | 577,600 | ||||||
180,000 | Ziggo Secured Finance BV, 5.50%, 1/15/27, Callable 1/15/22 @ 102.75(b) | 161,100 | ||||||
|
| |||||||
1,189,150 | ||||||||
|
| |||||||
Metals & Mining (0.4%): | ||||||||
400,000 | BHP Billiton Finance USA, Ltd., 6.25%(USSW5+497bps), 10/19/75, Callable 10/19/20 @ 100(b) | 408,428 | ||||||
681,000 | BHP Billiton Finance USA, Ltd., 6.75%(USSW5+509bps), 10/19/75, Callable 10/20/25 @ 100(b) | 706,183 | ||||||
300,000 | First Quantum Minerals, Ltd., 7.25%, 5/15/22, Callable 2/7/19 @ 103.63^(b) | 278,250 | ||||||
200,000 | First Quantum Minerals, Ltd., 6.50%, 3/1/24, Callable 9/1/20 @ 103.25(b) | 166,000 | ||||||
145,000 | First Quantum Minerals, Ltd., 7.50%, 4/1/25, Callable 4/1/20 @ 105.63^(b) | 119,625 | ||||||
|
| |||||||
1,678,486 | ||||||||
|
|
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Multi-Utilities (0.1%): | ||||||||
$ | 355,000 | Intergen NV, 7.00%, 6/30/23, Callable 2/7/19 @ 103.5(b) | $ | 302,638 | ||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.6%): | ||||||||
$ | 309,000 | Canadian Natural Resources, Ltd., 5.85%, 2/1/35 | 328,458 | |||||
558,000 | Cenovus Energy, Inc., 4.25%, 4/15/27, Callable 1/15/27 @ 100^ | 508,238 | ||||||
218,000 | Enbridge, Inc., 4.25%, 12/1/26, Callable 9/1/26 @ 100 | 215,564 | ||||||
252,000 | Enbridge, Inc., 5.50%, 12/1/46, Callable 6/1/46 @ 100^ | 268,949 | ||||||
340,000 | LBC Tank Terminals Holding Netherlands BV, 6.88%, 5/15/23, Callable 2/7/19 @ 103.44(b) | 302,600 | ||||||
349,000 | Petrobras Global Finance Co., 4.38%, 5/20/23 | 332,901 | ||||||
2,677,000 | Petrobras Global Finance Co., 7.25%, 3/17/44^ | 2,638,209 | ||||||
144,000 | Petroleos Mexicanos, 6.00%, 3/5/20^ | 146,628 | ||||||
1,471,000 | Petroleos Mexicanos, 4.88%, 1/18/24^ | 1,370,972 | ||||||
1,036,000 | Petroleos Mexicanos, 4.50%, 1/23/26 | 893,032 | ||||||
1,700,000 | Petroleos Mexicanos, 6.50%, 3/13/27 | 1,598,000 | ||||||
1,039,000 | Petroleos Mexicanos, 6.50%, 6/2/41 | 860,292 | ||||||
841,000 | Petroleos Mexicanos, 5.50%, 6/27/44 | 637,629 | ||||||
1,005,000 | Petroleos Mexicanos, 5.63%, 1/23/46 | 760,674 | ||||||
2,762,000 | Petroleos Mexicanos, 6.75%, 9/21/47 | 2,283,871 | ||||||
222,000 | Teine Energy, Ltd., 6.88%, 9/30/22, Callable 2/7/19 @ 103.44(b) | 215,340 | ||||||
|
| |||||||
13,361,357 | ||||||||
|
| |||||||
Pharmaceuticals (0.9%): | ||||||||
1,489,000 | Actavis Funding SCS, 3.45%, 3/15/22, Callable 1/15/22 @ 100 | 1,465,240 | ||||||
186,000 | Mylan NV, 2.50%, 6/7/19 | 185,125 | ||||||
685,000 | Mylan NV, 3.15%, 6/15/21, Callable 5/15/21 @ 100 | 669,904 | ||||||
337,000 | Mylan NV, 3.95%, 6/15/26, Callable 3/15/26 @ 100 | 307,146 | ||||||
484,000 | Teva Pharmaceuticals Industries, Ltd., 2.20%, 7/21/21 | 444,899 | ||||||
191,000 | Teva Pharmaceuticals Industries, Ltd., 2.80%, 7/21/23^ | 164,498 | ||||||
185,000 | Valeant Pharmaceuticals, 5.50%, 3/1/23, Callable 2/7/19 @ 102.75^(b) | 169,275 | ||||||
405,000 | Valeant Pharmaceuticals International, Inc., 7.00%, 3/15/24, Callable 3/15/20 @ 103.5(b) | 409,050 | ||||||
202,000 | VRX Escrow Corp., 6.13%, 4/15/25, Callable 4/15/20 @ 103.06^(b) | 176,245 | ||||||
|
| |||||||
3,991,382 | ||||||||
|
| |||||||
Sovereign Bond (0.7%): | ||||||||
1,500,000 | Argentine Republic Government International Bond, 5.88%, 1/11/28 | 1,078,125 | ||||||
1,344,000 | Dominican Republic, 5.50%, 1/27/25(b) | 1,332,240 | ||||||
250,000 | Dominican Republic, 6.00%, 7/19/28(b) | 249,375 | ||||||
1,055,000 | Turkey Government International Bond, 7.25%, 12/23/23 | 1,085,890 | ||||||
|
| |||||||
3,745,630 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.0%)†: | ||||||||
200,000 | Corp. Nacional del Cobre de Chile, 3.63%, 8/1/27, Callable 5/1/27 @ 100(b) | 190,470 | ||||||
200,000 | Corp. Nacional del Cobre de Chile, 4.50%, 8/1/47, Callable 2/1/47 @ 100(b) | 192,852 | ||||||
|
| |||||||
383,322 | ||||||||
|
|
See accompanying notes to the financial statements.
12
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Tobacco (0.3%): | ||||||||
$ | 690,000 | Imperial Tobacco Finance, 3.75%, 7/21/22, Callable 5/21/22 @ 100(b) | $ | 684,443 | ||||
690,000 | Imperial Tobacco Finance, 4.25%, 7/21/25, Callable 4/21/25 @ 100(b) | 678,673 | ||||||
|
| |||||||
1,363,116 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.8%): | ||||||||
1,344,000 | AerCap Ireland Capital, Ltd./AerCap Global Aviation Trust, 5.00%, 10/1/21 | 1,365,132 | ||||||
2,165,000 | AerCap Ireland Capital, Ltd./AerCap Global Aviation Trust, 4.63%, 7/1/22 | 2,172,522 | ||||||
147,000 | Fly Leasing, Ltd., 6.38%, 10/15/21, Callable 2/7/19 @ 103.19 | 146,633 | ||||||
355,000 | Fly Leasing, Ltd., 5.25%, 10/15/24, Callable 10/15/20 @ 102.63 | 320,387 | ||||||
|
| |||||||
4,004,674 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.1%): | ||||||||
330,000 | Empresa Nacional del Petroleo, 4.38%, 10/30/24(b) | 324,473 | ||||||
200,000 | Millicom International Cellular SA, 6.63%, 10/15/26, Callable 10/15/21 @ 104.97(b) | 202,520 | ||||||
|
| |||||||
526,993 | ||||||||
|
| |||||||
Total Yankee Dollars (Cost $60,243,250) | 56,584,575 | |||||||
|
| |||||||
Municipal Bonds (1.7%): | ||||||||
California (0.5%): | ||||||||
400,000 | California State, Build America Bonds, GO, 7.50%, 4/1/34 | 545,092 | ||||||
965,000 | California State, Build America Bonds, GO, 7.55%, 4/1/39 | 1,382,410 | ||||||
460,000 | California State, Build America Bonds, GO, 7.30%, 10/1/39 | 631,451 | ||||||
10,000 | California State, Build America Bonds, GO, 7.35%, 11/1/39 | 13,805 | ||||||
|
| |||||||
2,572,758 | ||||||||
|
| |||||||
Illinois (1.2%): | ||||||||
80,000 | Chicago Illinois, Taxable Project, Build America Bonds, GO, Series B, 5.63%, 1/1/22 | 80,924 | ||||||
395,000 | Chicago Illinois, Taxable Project, Build America Bonds, GO, Series C1, 7.78%, 1/1/35 | 445,651 | ||||||
105,000 | Chicago Illinois, Taxable Project, Build America Bonds, GO, Series B, 5.43%, 1/1/42 | 93,081 | ||||||
125,000 | Illinois State, Build America Bonds, GO, 4.95%, 6/1/23 | 126,918 | ||||||
295,000 | Illinois State, Build America Bonds, GO, 5.10%, 6/1/33 | 281,262 | ||||||
315,000 | Illinois State, Build America Bonds, GO, 6.63%, 2/1/35 | 334,952 | ||||||
425,000 | Illinois State, Build America Bonds, GO, Series 3, 6.73%, 4/1/35 | 455,205 | ||||||
10,000 | Illinois State, Build America Bonds, GO, Series 3, 5.55%, 4/1/19 | 10,056 | ||||||
132,000 | Illinois State, Build America Bonds, GO, 6.20%, 7/1/21 | 136,747 | ||||||
1,935,000 | Illinois State, Build America Bonds, GO, 7.35%, 7/1/35 | 2,144,811 | ||||||
1,340,000 | Illinois State, Build America Bonds, GO, 5.88%, 3/1/19 | 1,345,923 |
Principal Amount | Fair Value | |||||||
Municipal Bonds, continued | ||||||||
Illinois, continued | ||||||||
$ | 420,000 | Illinois State, Build America Bonds, GO, 4.00%, 12/1/20 | $ | 421,252 | ||||
|
| |||||||
5,876,782 | ||||||||
|
| |||||||
Total Municipal Bonds (Cost $8,464,694) | 8,449,540 | |||||||
|
| |||||||
U.S. Government Agency Mortgages (27.0%): | ||||||||
Federal Home Loan Mortgage Corporation (6.5%) | ||||||||
648,947 | 3.50%, 3/1/32, Pool #C91403 | 660,758 | ||||||
1,709,282 | 3.50%, 7/1/32, Pool #C91467 | 1,740,401 | ||||||
301,637 | 4.00%, 6/1/33, Pool #G30718 | 309,777 | ||||||
1,497,517 | 4.00%, 5/1/37, Pool #C91938 | 1,544,499 | ||||||
1,998,541 | 5.00%, 2/1/38, Pool #G60365 | 2,121,964 | ||||||
99,713 | 3.50%, 4/1/40, Pool #V81744 | 100,453 | ||||||
124,197 | 3.50%, 5/1/40, Pool #V81750 | 125,118 | ||||||
211,537 | 3.50%, 6/1/40, Pool #V81792 | 213,105 | ||||||
93,119 | 3.50%, 8/1/40, Pool #V81886 | 93,809 | ||||||
77,087 | 3.50%, 9/1/40, Pool #V81958 | 77,658 | ||||||
816,548 | 4.00%, 1/1/41, Pool #A96413 | 840,178 | ||||||
686,586 | 4.00%, 2/1/41, Pool #A96807 | 706,455 | ||||||
79,857 | 4.50%, 3/1/41, Pool #A97673 | 83,615 | ||||||
131,081 | 4.50%, 4/1/41, Pool #A97942 | 137,250 | ||||||
360,826 | 5.00%, 6/1/41, Pool #G06596 | 385,687 | ||||||
1,788,155 | 4.50%, 1/1/42, Pool #G60517 | 1,872,171 | ||||||
69,236 | 3.50%, 8/1/42, Pool #Q10434 | 69,744 | ||||||
52,431 | 3.50%, 8/1/42, Pool #Q10392 | 52,820 | ||||||
60,108 | 3.50%, 8/1/42, Pool #Q10164 | 60,554 | ||||||
73,347 | 3.50%, 8/1/42, Pool #Q10047 | 73,891 | ||||||
76,101 | 3.50%, 9/1/42, Pool #Q11244 | 76,664 | ||||||
46,236 | 3.50%, 11/1/42, Pool #G07231 | 46,579 | ||||||
55,461 | 4.00%, 11/1/42, Pool #Q13121 | 57,100 | ||||||
155,944 | 3.00%, 12/1/42, Pool #C04320 | 153,335 | ||||||
564,058 | 3.50%, 4/1/43, Pool #Q17209 | 568,241 | ||||||
625,370 | 3.50%, 4/1/43, Pool #G07921 | 629,432 | ||||||
102,924 | 4.00%, 5/1/43, Pool #Q18481 | 105,966 | ||||||
51,595 | 4.00%, 7/1/43, Pool #Q19597 | 53,120 | ||||||
63,605 | 4.00%, 10/1/43, Pool #Q22499 | 65,486 | ||||||
679,829 | 3.00%, 10/1/43, Pool #G08553 | 667,873 | ||||||
378,785 | 3.50%, 1/1/44, Pool #G07922 | 381,594 | ||||||
188,891 | 3.50%, 1/1/44, Pool #G60271 | 190,290 | ||||||
117,845 | 4.00%, 1/1/44, Pool #V80950 | 121,328 | ||||||
368,646 | 4.00%, 1/1/45, Pool #Q30720 | 376,800 | ||||||
263,074 | 4.00%, 2/1/45, Pool #G07949 | 269,722 | ||||||
61,832 | 3.50%, 3/1/45, Pool #Q32328 | 62,077 | ||||||
136,128 | 3.50%, 3/1/45, Pool #Q32008 | 136,667 | ||||||
64,202 | 3.50%, 3/1/45, Pool #Q31974 | 64,438 | ||||||
352,125 | 3.50%, 5/1/45, Pool #Q33547 | 353,292 | ||||||
42,357 | 3.00%, 5/1/45, Pool #Q33468 | 41,572 | ||||||
64,165 | 3.50%, 6/1/45, Pool #Q33791 | 64,383 | ||||||
274,708 | 3.00%, 6/1/45, Pool #Q34156 | 268,812 | ||||||
413,299 | 3.50%, 6/1/45, Pool #Q34164 | 414,701 | ||||||
415,453 | 3.50%, 6/1/45, Pool #Q34311 | 416,863 | ||||||
22,112 | 3.00%, 7/1/45, Pool #Q34979 | 21,609 | ||||||
72,043 | 3.00%, 7/1/45, Pool #Q34759 | 70,516 | ||||||
115,237 | 4.00%, 8/1/45, Pool #Q35845 | 117,763 | ||||||
24,838 | 4.00%, 9/1/45, Pool #Q37853 | 25,428 | ||||||
18,982 | 4.00%, 11/1/45, Pool #Q38812 | 19,385 | ||||||
463,128 | 3.50%, 11/1/45, Pool #Q37467 | 464,700 |
See accompanying notes to the financial statements.
13
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal Home Loan Mortgage Corporation, continued | ||||||||
$ | 23,301 | 4.00%, 2/1/46, Pool #Q38782 | $ | 23,854 | ||||
12,061 | 4.00%, 2/1/46, Pool #Q38879 | 12,321 | ||||||
31,317 | 4.00%, 2/1/46, Pool #Q38783 | 31,971 | ||||||
17,082 | 4.00%, 4/1/46, Pool #Q39975 | 17,476 | ||||||
85,074 | 4.00%, 4/1/46, Pool #V82292 | 87,094 | ||||||
170,659 | 3.50%, 5/1/46, Pool #Q40647 | 171,150 | ||||||
157,336 | 3.50%, 5/1/46, Pool #G60603 | 157,837 | ||||||
505,165 | 3.50%, 5/1/46, Pool #G60553 | 507,348 | ||||||
28,100 | 3.00%, 6/1/46, Pool #G08710 | 27,420 | ||||||
462,562 | 3.50%, 9/1/46, Pool #Q43257 | 463,654 | ||||||
823,294 | 3.00%, 10/1/46, Pool #Q43734 | 803,389 | ||||||
160,847 | 3.00%, 11/1/46, Pool #Q44452 | 156,908 | ||||||
50,944 | 3.00%, 12/1/46, Pool #Q44977 | 49,700 | ||||||
2,949,421 | 3.00%, 12/1/46, Pool #G08737 | 2,878,112 | ||||||
2,201,741 | 3.00%, 1/1/47, Pool #G08741 | 2,146,593 | ||||||
1,320,014 | 3.00%, 2/1/47, Pool #G08747 | 1,287,459 | ||||||
24,478 | 4.00%, 9/1/47, Pool #Q50433 | 25,046 | ||||||
370,590 | 3.50%, 10/1/47, Pool #V83497 | 370,528 | ||||||
24,495 | 4.00%, 10/1/47, Pool #Q51189 | 25,064 | ||||||
273,617 | 3.50%, 11/1/47, Pool #Q52086 | 273,677 | ||||||
1,630,883 | 3.50%, 12/1/47, Pool #V83817 | 1,630,561 | ||||||
2,600,000 | 3.50%, 1/15/48, TBA | 2,598,503 | ||||||
22,746 | 4.00%, 2/1/48, Pool #Q54192 | 23,275 | ||||||
521,756 | 4.00%, 5/1/48, Pool #Q55992 | 533,900 | ||||||
|
| |||||||
31,878,483 | ||||||||
|
| |||||||
Federal National Mortgage Association (12.9%) | ||||||||
1,600,000 | 2.50%, 1/25/32, TBA | 1,562,531 | ||||||
3,500,000 | 3.50%, 1/25/32, TBA | 3,542,040 | ||||||
4,773 | 4.50%, 7/1/33, Pool #720240 | 4,942 | ||||||
7,960 | 4.50%, 7/1/33, Pool #729327 | 8,275 | ||||||
8,926 | 4.50%, 8/1/33, Pool #727160 | 9,328 | ||||||
6,235 | 4.50%, 8/1/33, Pool #727029 | 6,482 | ||||||
14,624 | 4.50%, 8/1/33, Pool #726956 | 15,189 | ||||||
17,195 | 4.50%, 8/1/33, Pool #726928 | 17,963 | ||||||
6,785 | 4.50%, 8/1/33, Pool #723124 | 7,037 | ||||||
9,461 | 4.50%, 8/1/33, Pool #729713 | 9,817 | ||||||
45,935 | 4.50%, 8/1/33, Pool #729380 | 48,001 | ||||||
279,616 | 3.50%, 8/1/33, Pool #AL4227 | 283,909 | ||||||
33,349 | 4.50%, 9/1/33, Pool #727147 | 34,848 | ||||||
14,323 | 4.50%, 9/1/33, Pool #734922 | 14,966 | ||||||
45,425 | 4.50%, 12/1/33, Pool #AL5321 | 47,481 | ||||||
19,631 | 3.50%, 1/1/34, Pool #AS1614 | 19,996 | ||||||
154,467 | 3.50%, 1/1/34, Pool #AS1611 | 157,340 | ||||||
48,137 | 3.50%, 1/1/34, Pool #AS1406 | 49,033 | ||||||
102,812 | 3.50%, 1/1/34, Pool #AS1612 | 104,725 | ||||||
38,372 | 6.00%, 10/1/34, Pool #AL2130 | 42,075 | ||||||
81,687 | 4.50%, 9/1/35, Pool #AB8198 | 85,330 | ||||||
765,116 | 6.00%, 5/1/36, Pool #745512 | 834,714 | ||||||
370,594 | 6.00%, 1/1/37, Pool #932030 | 403,878 | ||||||
71,295 | 6.00%, 3/1/37, Pool #889506 | 77,774 | ||||||
99,637 | 6.00%, 1/1/38, Pool #889371 | 110,103 | ||||||
294,692 | 5.00%, 2/1/38, Pool #310165 | 312,867 | ||||||
34,146 | 6.00%, 3/1/38, Pool #889219 | 37,656 | ||||||
19,764 | 6.00%, 7/1/38, Pool #889733 | 21,279 | ||||||
113,271 | 4.50%, 3/1/39, Pool #AB0051 | 118,362 | ||||||
544,748 | 4.50%, 4/1/39, Pool #AB0043 | 569,390 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 193,444 | 5.00%, 6/1/39, Pool #AL7550 | $ | 205,382 | ||||
523,293 | 5.00%, 6/1/39, Pool #AL7521 | 552,005 | ||||||
643,284 | 6.00%, 7/1/39, Pool #BF0030 | 708,569 | ||||||
135,105 | 6.00%, 5/1/40, Pool #AL2129 | 149,325 | ||||||
80,366 | 4.00%, 12/1/40, Pool #AA4757 | 82,637 | ||||||
11,748 | 6.00%, 1/1/42, Pool #AL2128 | 12,954 | ||||||
276,869 | 3.00%, 9/1/42, Pool #AB6126 | 272,397 | ||||||
107,536 | 3.50%, 9/1/42, Pool #AP4100 | 108,375 | ||||||
379,369 | 3.00%, 10/1/42, Pool #AB6504 | 373,066 | ||||||
224,993 | 3.00%, 10/1/42, Pool #AB6509 | 221,359 | ||||||
391,484 | 3.00%, 11/1/42, Pool #AB6976 | 384,979 | ||||||
2,858,536 | 3.50%, 11/1/42, Pool #AL2866 | 2,879,144 | ||||||
22,128 | 3.50%, 12/1/42, Pool #AQ9054 | 22,301 | ||||||
149,738 | 3.00%, 12/1/42, Pool #AB7282 | 147,285 | ||||||
777,075 | 3.00%, 1/1/43, Pool #AL3181 | 764,163 | ||||||
683,609 | 3.00%, 1/1/43, Pool #AB7586 | 672,182 | ||||||
132,869 | 3.50%, 1/1/43, Pool #AQ9328 | 133,903 | ||||||
255,459 | 3.00%, 2/1/43, Pool #AB7846 | 251,344 | ||||||
331,039 | 2.50%, 2/1/43, Pool #AB8465 | 313,996 | ||||||
26,544 | 3.50%, 2/1/43, Pool #AR1797 | 26,751 | ||||||
781,028 | 3.00%, 2/1/43, Pool #AT0223 | 767,784 | ||||||
32,164 | 3.50%, 3/1/43, Pool #AR6751 | 32,415 | ||||||
89,980 | 3.50%, 3/1/43, Pool #AL3409 | 90,683 | ||||||
33,949 | 3.50%, 3/1/43, Pool #AR7567 | 34,203 | ||||||
165,395 | 3.50%, 8/1/43, Pool #AL7261 | 166,683 | ||||||
368,311 | 3.00%, 9/1/43, Pool #AL5059 | 362,107 | ||||||
409,317 | 4.50%, 3/1/44, Pool #AL5082 | 426,201 | ||||||
451,123 | 3.00%, 6/1/44, Pool #AL7195 | 443,524 | ||||||
418,948 | 5.00%, 11/1/44, Pool #AL7307 | 444,828 | ||||||
39,878 | 4.00%, 12/1/44, Pool #AW9502 | 40,730 | ||||||
191,445 | 4.00%, 12/1/44, Pool #AX8459 | 196,466 | ||||||
22,691 | 4.00%, 12/1/44, Pool #AY0045 | 23,176 | ||||||
310,649 | 4.00%, 3/1/45, Pool #AL6541 | 318,795 | ||||||
102,061 | 3.50%, 3/1/45, Pool #AY5352 | 102,421 | ||||||
129,659 | 3.50%, 5/1/45, Pool #AY9324 | 130,116 | ||||||
107,419 | 3.00%, 5/1/45, Pool #AS4972 | 105,321 | ||||||
100,389 | 3.50%, 5/1/45, Pool #AY9074 | 100,768 | ||||||
117,042 | 3.50%, 5/1/45, Pool #AZ0727 | 117,472 | ||||||
121,884 | 3.50%, 5/1/45, Pool #AZ1192 | 122,344 | ||||||
149,983 | 4.00%, 5/1/45, Pool #AZ1207 | 153,099 | ||||||
63,677 | 4.00%, 5/1/45, Pool #AZ1876 | 65,231 | ||||||
154,824 | 3.50%, 5/1/45, Pool #AY9287 | 155,402 | ||||||
1,143,933 | 3.50%, 6/1/45, Pool #AY5622 | 1,148,141 | ||||||
68,964 | 4.00%, 6/1/45, Pool #AZ3341 | 70,647 | ||||||
47,524 | 5.00%, 6/1/45, Pool #AZ3448 | 49,785 | ||||||
56,784 | 4.00%, 6/1/45, Pool #AZ2719 | 58,170 | ||||||
390,269 | 4.00%, 6/1/45, Pool #AY8096 | 398,437 | ||||||
220,905 | 4.00%, 6/1/45, Pool #AY8126 | 225,460 | ||||||
197,128 | 3.50%, 7/1/45, Pool #AZ3198 | 197,843 | ||||||
274,934 | 4.00%, 7/1/45, Pool #AZ1783 | 280,615 | ||||||
329,398 | 4.00%, 7/1/45, Pool #AZ0833 | 337,417 | ||||||
28,361 | 3.50%, 7/1/45, Pool #AS5312 | 28,461 | ||||||
744,624 | 3.50%, 7/1/45, Pool #AZ0814 | 747,325 | ||||||
105,112 | 3.00%, 8/1/45, Pool #AZ8288 | 102,775 | ||||||
217,392 | 3.50%, 8/1/45, Pool #AY8424 | 218,169 | ||||||
45,956 | 3.00%, 8/1/45, Pool #AZ3728 | 45,048 |
See accompanying notes to the financial statements.
14
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 253,020 | 3.00%, 8/1/45, Pool #AS5634 | $ | 247,603 | ||||
152,401 | 4.00%, 10/1/45, Pool #AL7413 | 156,369 | ||||||
780,901 | 4.00%, 10/1/45, Pool #AL7593 | 801,157 | ||||||
65,701 | 4.00%, 11/1/45, Pool #AZ0560 | 67,042 | ||||||
118,310 | 3.50%, 12/1/45, Pool #AL7890 | 118,721 | ||||||
100,581 | 4.00%, 12/1/45, Pool #BA6404 | 102,650 | ||||||
28,281 | 4.00%, 12/1/45, Pool #BC0997 | 28,863 | ||||||
60,132 | 4.00%, 12/1/45, Pool #AS6350 | 61,675 | ||||||
1,426,847 | 4.00%, 2/1/46, Pool #BC1578 | 1,455,899 | ||||||
43,409 | 4.00%, 2/1/46, Pool #BC2310 | 44,584 | ||||||
48,536 | 4.00%, 4/1/46, Pool #BC3920 | 49,511 | ||||||
61,862 | 4.00%, 4/1/46, Pool #BC7809 | 63,088 | ||||||
323,519 | 3.50%, 4/1/46, Pool #BC0823 | 324,458 | ||||||
28,608 | 4.00%, 5/1/46, Pool #BD0975 | 29,339 | ||||||
718,990 | 3.50%, 5/1/46, Pool #BC0880 | 721,078 | ||||||
18,714 | 4.00%, 5/1/46, Pool #BC2276 | 19,090 | ||||||
249,071 | 4.00%, 5/1/46, Pool #BC0909 | 255,625 | ||||||
19,833 | 4.00%, 6/1/46, Pool #BD3862 | 20,348 | ||||||
670,401 | 4.00%, 6/1/46, Pool #AL9282 | 683,985 | ||||||
469,553 | 4.00%, 6/1/46, Pool #BC0960 | 479,018 | ||||||
27,727 | 4.00%, 7/1/46, Pool #BD3861 | 28,435 | ||||||
693,853 | 3.50%, 7/1/46, Pool #AL9515 | 695,796 | ||||||
93,112 | 4.00%, 7/1/46, Pool #BC6148 | 94,951 | ||||||
248,471 | 4.00%, 7/1/46, Pool #BC1443 | 254,917 | ||||||
134,427 | 3.50%, 8/1/46, Pool #AL8970 | 134,628 | ||||||
115,290 | 4.00%, 8/1/46, Pool #BD1451 | 117,594 | ||||||
43,890 | 3.50%, 8/1/46, Pool #BD5247 | 44,006 | ||||||
258,549 | 4.00%, 8/1/46, Pool #BC1497 | 265,160 | ||||||
115,760 | 4.50%, 8/1/46, Pool #AL9111 | 120,529 | ||||||
241,175 | 3.50%, 8/1/46, Pool #AL8990 | 241,863 | ||||||
1,210,183 | 3.00%, 9/1/46, Pool #AS7844 | 1,180,646 | ||||||
1,409,691 | 3.00%, 9/1/46, Pool #BC2817 | 1,375,283 | ||||||
265,220 | 4.00%, 9/1/46, Pool #BC2843 | 271,979 | ||||||
70,614 | 3.50%, 9/1/46, Pool #BD7792 | 70,801 | ||||||
23,676 | 3.50%, 9/1/46, Pool #BD0711 | 23,719 | ||||||
124,101 | 4.00%, 9/1/46, Pool #BD1489 | 126,570 | ||||||
322,637 | 3.50%, 10/1/46, Pool #AL9285 | 323,489 | ||||||
225,113 | 4.00%, 10/1/46, Pool #BC4754 | 230,855 | ||||||
403,756 | 3.50%, 10/1/46, Pool #BC4760 | 404,803 | ||||||
1,169,893 | 3.00%, 10/1/46, Pool #AL9397 | 1,141,339 | ||||||
496,497 | 3.00%, 10/1/46, Pool #BC4764 | 484,225 | ||||||
44,312 | 4.00%, 10/1/46, Pool #BD7599 | 45,191 | ||||||
2,484,768 | 3.00%, 11/1/46, Pool #MA2806 | 2,423,349 | ||||||
168,255 | 3.50%, 11/1/46, Pool #BC9014 | 168,683 | ||||||
582,561 | 3.00%, 11/1/46, Pool #BM3627 | 572,407 | ||||||
61,777 | 3.50%, 12/1/46, Pool #BE5877 | 61,927 | ||||||
815,995 | 3.50%, 12/1/46, Pool #BC9077 | 818,069 | ||||||
1,626,278 | 3.50%, 12/1/46, Pool #BD8504 | 1,630,413 | ||||||
697,432 | 3.50%, 1/1/47, Pool #AL9776 | 699,242 | ||||||
39,810 | 3.50%, 1/1/47, Pool #BE7834 | 39,906 | ||||||
2,844,790 | 4.00%, 2/1/47, Pool #AL9779 | 2,913,700 | ||||||
193,333 | 3.50%, 2/1/47, Pool #BE5696 | 193,586 | ||||||
1,511,596 | 4.50%, 2/1/47, Pool #AL9846 | 1,573,870 | ||||||
95,163 | 2.50%, 4/1/47, Pool #BM3707 | 89,878 | ||||||
209,906 | 4.00%, 5/1/47, Pool #BM1277 | 214,747 | ||||||
21,793 | 4.00%, 6/1/47, Pool #BH4269 | 22,293 | ||||||
2,251,338 | 4.00%, 6/1/47, Pool #BE3702 | 2,295,745 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 151,882 | 4.00%, 7/1/47, Pool #AS9968 | $ | 155,289 | ||||
837,302 | 3.50%, 7/1/47, Pool #BM3041 | 842,313 | ||||||
1,632,169 | 4.00%, 7/1/47, Pool #BE3774 | 1,664,322 | ||||||
23,341 | 4.00%, 12/1/47, Pool #BJ4279 | 23,882 | ||||||
39,845 | 4.00%, 12/1/47, Pool #BJ2132 | 40,769 | ||||||
47,021 | 4.00%, 1/1/48, Pool #BM2006 | 47,946 | ||||||
1,892,852 | 3.50%, 1/1/48, Pool #MA3238 | 1,892,994 | ||||||
488,078 | 3.50%, 1/1/48, Pool #CA1053 | 488,116 | ||||||
924,460 | 3.50%, 2/1/48, Pool #BJ3436 | 924,527 | ||||||
23,738 | 4.00%, 2/1/48, Pool #CA1199 | 24,288 | ||||||
209,469 | 3.00%, 3/1/48, Pool #BJ2997 | 204,283 | ||||||
24,682 | 4.00%, 3/1/48, Pool #BK1867 | 25,255 | ||||||
24,697 | 4.00%, 3/1/48, Pool #BK3214 | 25,270 | ||||||
23,492 | 4.00%, 4/1/48, Pool #BK2485 | 24,038 | ||||||
23,809 | 4.00%, 4/1/48, Pool #BK4838 | 24,362 | ||||||
680,137 | 4.00%, 4/1/48, Pool #MA3333 | 695,809 | ||||||
56,941 | 4.00%, 4/1/48, Pool #BK3836 | 58,262 | ||||||
106,403 | 4.00%, 4/1/48, Pool #CA1545 | 108,872 | ||||||
220,916 | 4.00%, 4/1/48, Pool #BM3700 | 225,968 | ||||||
23,385 | 4.00%, 4/1/48, Pool #BJ8805 | 23,928 | ||||||
196,531 | 4.00%, 5/1/48, Pool #BK4160 | 200,381 | ||||||
24,728 | 4.00%, 5/1/48, Pool #BK2527 | 25,303 | ||||||
143,697 | 4.00%, 5/1/48, Pool #BM3877 | 147,454 | ||||||
900,916 | 4.00%, 5/1/48, Pool #BJ2731 | 921,824 | ||||||
103,216 | 4.00%, 6/1/48, Pool #MA3384 | 105,238 | ||||||
1,582,354 | 3.00%, 6/1/48, Pool #MA3425 | 1,542,763 | ||||||
696,704 | 4.00%, 7/1/48, Pool #BK5328 | 710,354 | ||||||
375,026 | 4.50%, 7/1/48, Pool #BK7877 | 388,502 | ||||||
199,510 | 3.50%, 8/1/48, Pool #BK4778 | 199,530 | ||||||
293,767 | 4.50%, 10/25/48, Pool #BM4548 | 307,823 | ||||||
3,100,000 | 4.50%, 1/25/49, TBA | 3,210,013 | ||||||
|
| |||||||
67,551,885 | ||||||||
|
| |||||||
Government National Mortgage Association (7.6%) | ||||||||
14,391 | 5.00%, 6/15/34, Pool #629493 | 15,233 | ||||||
9,204 | 5.00%, 3/15/38, Pool #676766 | 9,750 | ||||||
3,421 | 5.00%, 4/15/38, Pool #672672 | 3,585 | ||||||
15,203 | 5.00%, 8/15/38, Pool #687818 | 16,021 | ||||||
110,734 | 5.00%, 1/15/39, Pool #705997 | 117,391 | ||||||
234,183 | 5.00%, 3/15/39, Pool #646746 | 248,192 | ||||||
1,650 | 5.00%, 3/15/39, Pool #697946 | 1,749 | ||||||
265,753 | 4.00%, 10/15/40, Pool #783143 | 273,978 | ||||||
625,443 | 4.50%, 3/20/41, Pool #4978 | 656,310 | ||||||
221,128 | 4.50%, 5/20/41, Pool #005055 | 232,026 | ||||||
454,235 | 4.00%, 5/20/41, Pool #5054 | 469,170 | ||||||
202,400 | 4.50%, 6/15/41, Pool #366975 | 211,299 | ||||||
144,105 | 4.50%, 6/20/41, Pool #005082 | 151,198 | ||||||
513,461 | 4.00%, 10/20/41, Pool #5203 | 530,328 | ||||||
559,278 | 3.50%, 12/20/41, Pool #5258 | 566,217 | ||||||
988,617 | 4.00%, 1/20/42, Pool #5280 | 1,021,103 | ||||||
59,266 | 4.00%, 11/20/42, Pool #AB9233 | 61,282 | ||||||
401,835 | 3.00%, 12/20/42, Pool #AA5872 | 397,666 | ||||||
333,090 | 3.00%, 12/20/42, Pool #MA0624 | 330,768 | ||||||
59,588 | 3.00%, 1/20/43, Pool #MA0698 | 59,173 | ||||||
3,244,867 | 3.50%, 1/20/43, Pool #MA0699 | 3,281,832 | ||||||
716,628 | 3.50%, 2/20/43, Pool #MA0783 | 727,878 | ||||||
109,748 | 3.00%, 3/20/43, Pool #AD8812 | 108,676 | ||||||
262,051 | 3.00%, 3/20/43, Pool #AA6146 | 259,412 |
See accompanying notes to the financial statements.
15
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Government National Mortgage Association, continued | ||||||||
$ | 90,855 | 3.50%, 3/20/43, Pool #AD8884 | $ | 91,917 | ||||
605,599 | 3.50%, 4/20/43, Pool #783976 | 612,495 | ||||||
35,946 | 3.50%, 4/20/43, Pool #AB9891 | 36,413 | ||||||
95,896 | 3.50%, 4/20/43, Pool #AD9075 | 97,076 | ||||||
414,685 | 4.00%, 4/15/46, Pool #784232 | 425,746 | ||||||
98,574 | 3.00%, 5/20/46, Pool #MA3662 | 97,293 | ||||||
38,643 | 3.50%, 5/20/46, Pool #AS4272 | 38,912 | ||||||
28,369 | 3.50%, 5/20/46, Pool #AR9166 | 28,572 | ||||||
36,977 | 3.50%, 5/20/46, Pool #AR9028 | 37,242 | ||||||
91,003 | 3.00%, 6/20/46, Pool #MA3735 | 89,750 | ||||||
485,264 | 3.50%, 6/20/46, Pool #MA3736 | 488,847 | ||||||
144,900 | 3.50%, 6/20/46, Pool #AT4139 | 145,934 | ||||||
32,615 | 3.50%, 6/20/46, Pool #AT4134 | 32,847 | ||||||
45,322 | 3.50%, 6/20/46, Pool #AS4285 | 45,638 | ||||||
49,613 | 3.50%, 7/20/46, Pool #784391 | 50,181 | ||||||
268,990 | 3.50%, 7/20/46, Pool #MA3803 | 270,893 | ||||||
316,494 | 3.00%, 8/20/46, Pool #MA3873 | 312,135 | ||||||
895,115 | 3.00%, 9/20/46, Pool #MA3936 | 883,197 | ||||||
47,273 | 3.00%, 10/20/46, Pool #MA4003 | 46,608 | ||||||
287,067 | 3.00%, 11/20/46, Pool #MA4068 | 282,980 | ||||||
3,056,398 | 3.00%, 12/20/46, Pool #MA4126 | 3,012,406 | ||||||
420,715 | 4.00%, 1/15/47, Pool #AX5857 | 432,223 | ||||||
432,322 | 4.00%, 1/15/47, Pool #AX5831 | 443,265 | ||||||
748,931 | 3.00%, 1/20/47, Pool #MA4195 | 738,116 | ||||||
417,359 | 3.00%, 2/20/47, Pool #MA4261 | 411,325 | ||||||
417,770 | 4.00%, 4/20/47, Pool #784303 | 428,435 | ||||||
482,659 | 4.00%, 4/20/47, Pool #784304 | 495,033 | ||||||
78,130 | 4.00%, 5/20/47, Pool #MA4452 | 80,052 | ||||||
326,285 | 4.00%, 6/20/47, Pool #MA4511 | 334,315 | ||||||
4,808,933 | 3.50%, 9/20/47, Pool #MA4719 | 4,840,870 | ||||||
1,546,830 | 3.00%, 10/20/47, Pool #MA4777 | 1,523,785 | ||||||
188,471 | 3.00%, 11/20/47, Pool #MA4836 | 185,653 | ||||||
1,899,298 | 3.50%, 1/20/48, Pool #MA4962 | 1,911,912 | ||||||
329,176 | 3.00%, 1/20/48, Pool #MA4961 | 324,237 | ||||||
5,400,000 | 4.50%, 2/20/48, TBA | 5,580,878 | ||||||
147,220 | 3.50%, 8/20/48, Pool #MA5397 | 148,197 | ||||||
1,296,344 | 4.00%, 9/20/48, Pool #MA5466 | 1,328,243 | ||||||
246,751 | Class JA, Series2015-H21, 2.50%, 6/20/65, Callable 5/20/21 @ 100 | 245,276 | ||||||
|
| |||||||
36,329,134 | ||||||||
|
| |||||||
Total U.S. Government Agency Mortgages (Cost $137,702,382) | 135,759,502 | |||||||
|
| |||||||
U.S. Treasury Obligations (27.1%): | ||||||||
U.S. Treasury Bonds (3.8%) | ||||||||
3,535,000 | 2.50%, 2/15/46 | 3,191,442 | ||||||
3,368,000 | 3.00%, 5/15/47 | 3,353,528 | ||||||
726,000 | 2.75%, 11/15/47 | 686,949 | ||||||
11,272,000 | 3.38%, 11/15/48 | 12,053,995 | ||||||
|
| |||||||
19,285,914 | ||||||||
|
|
Shares or Principal Amount | Fair Value | |||||||
U.S. Treasury Obligations, continued | ||||||||
U.S. Treasury Inflation Index Bonds (2.9%) | ||||||||
$ | 4,732,814 | 1.38%, 2/15/44 | $ | 4,886,161 | ||||
10,337,858 | 0.75%, 2/15/45 | 9,242,755 | ||||||
658,469 | 1.00%, 2/15/46 | 624,249 | ||||||
|
| |||||||
14,753,165 | ||||||||
|
| |||||||
U.S. Treasury Inflation Index Notes (3.7%) | ||||||||
3,567,986 | 0.25%, 1/15/25 | 3,416,839 | ||||||
7,945,467 | 0.63%, 1/15/26 | 7,734,334 | ||||||
5,245,162 | 0.13%, 7/15/26 | 4,924,585 | ||||||
2,585,797 | 0.38%, 7/15/27 | 2,453,158 | ||||||
|
| |||||||
18,528,916 | ||||||||
|
| |||||||
U.S. Treasury Notes (16.7%) | ||||||||
1,847,000 | 1.25%, 3/31/21 | 1,797,939 | ||||||
5,324,000 | 1.38%, 4/30/21 | 5,192,564 | ||||||
33,191,000 | 1.88%, 3/31/22 | 32,568,669 | ||||||
5,498,000 | 1.75%, 6/30/22 | 5,364,845 | ||||||
16,633,000 | 1.88%, 7/31/22 | 16,287,995 | ||||||
2,392,000 | 1.88%, 9/30/22 | 2,339,955 | ||||||
2,734,000 | 2.13%, 7/31/24 | 2,674,514 | ||||||
2,158,000 | 2.25%, 12/31/24 | 2,120,235 | ||||||
8,497,000 | 2.25%, 2/15/27 | 8,250,720 | ||||||
6,671,000 | 2.25%, 11/15/27 | 6,444,030 | ||||||
|
| |||||||
83,041,466 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $138,578,104) | 135,609,461 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.4%): | ||||||||
6,887,364 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(e) | 6,887,364 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $6,887,364) | 6,887,364 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (6.9%)(f) | ||||||||
Floating Rate Notes (0.5%) | ||||||||
1,259,000 | Bedford Row Funding, 2.61%, 1/31/19 | 1,259,000 | ||||||
490,000 | Bedford Row Funding, 2.72%, 8/15/19 | 490,000 | ||||||
504,000 | HSBC Bank USA NA, 2.71%, 2/1/19 | 504,000 | ||||||
|
| |||||||
2,253,000 | ||||||||
|
| |||||||
Repurchase Agreements (1.5%) | ||||||||
7,547,647 | RBC Dominion Securities Inc., 3.02%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $7,548,913, Collateralized by U.S. Government Agency Obligations, 3.00% - 7.00%, 10/1/25 - 10/20/48, fair value of $7,698,600 | 7,547,647 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
24,799,840 | Short-Term Investments(g) | 24,799,840 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 34,600,487 | ||||||
|
| |||||||
Total Investment Securities (Cost $562,342,832) — 109.3%(h) | 547,875,143 | |||||||
Net other assets (liabilities) — (9.3)% | (47,408,143 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 500,467,000 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
GO—General Obligation
LIBOR—London Interbank Offered Rate
LIBOR01M—1 Month US Dollar LIBOR
MTN—Medium Term Note
See accompanying notes to the financial statements.
16
AZL Fidelity Institutional Asset Management Total Bond Fund
Schedule of Portfolio Investments
December 31, 2018
TBA—To Be Announced Security
US0001M—1 Month US Dollar LIBOR
US0003M—3 Month US Dollar LIBOR
USSW5—USD 5 Year Swap Rate
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $33,155,391. |
† | Represents less than 0.05%. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.00% of the net assets of the fund. |
(b) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(c) | The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate presented is the rate in effect at December 31, 2018. |
(d) | Defaulted bond. |
(e) | The rate represents the effective yield at December 31, 2018. |
(f) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(g) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(h) | See Federal Tax Information listed in the Notes to the Financial Statements. |
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 December 31, 2018:
(Unaudited)
Country | Percentage | ||||
Argentina | 0.3 | % | |||
Australia | 0.2 | % | |||
Bermuda | 0.2 | % | |||
Canada | 0.9 | % | |||
Cayman Islands | 0.2 | % | |||
Chile | 0.1 | % | |||
Dominican Republic | 0.3 | % | |||
France | 0.1 | % | |||
Germany | 0.5 | % | |||
Guernsey | 0.7 | % | |||
Hong Kong | — | %^ | |||
Ireland | 0.9 | % |
Country | Percentage | ||||
Italy | 0.3 | % | |||
Jersey | 0.1 | % | |||
Luxembourg | 0.9 | % | |||
Marshall Islands | — | %^ | |||
Mexico | 1.7 | % | |||
Netherlands | 1.5 | % | |||
Turkey | 0.2 | % | |||
United Kingdom | 2.0 | % | |||
United States | 88.8 | % | |||
Virgin Islands, British | 0.1 | % | |||
|
| ||||
100.0 | % | ||||
|
|
^ | Represents less than 0.05%. |
Securities Sold Short(-0.9%):
At December 31, 2018, the Fund’s securities sold short were as follows:
Security Description | Coupon Rate | Maturity Date | Par Amount | Proceeds Received | Fair Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||
U.S. Government Agency Mortgages Federal National Mortgage Association | ||||||||||||||||||||||||
Federal National Mortgage Association, TBA | 3.00 | % | 1/25/49 | $ | (2,400,000 | ) | $ | (2,306,500 | ) | $ | (2,339,290 | ) | $ | (32,791 | ) | |||||||||
Federal National Mortgage Association, TBA | 3.50 | % | 1/25/49 | (1,700,000 | ) | (1,689,547 | ) | (1,699,701 | ) | (10,154 | ) | |||||||||||||
Government National Mortgage Association | ||||||||||||||||||||||||
Government National Mortgage Association, TBA | 4.00 | % | 1/20/49 | (1,200,000 | ) | (1,224,656 | ) | (1,228,688 | ) | (4,032 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | (5,220,703 | ) | $ | (5,267,679 | ) | $ | (46,977 | ) | ||||||||||||||||
|
|
|
|
|
|
See accompanying notes to the financial statements.
17
AZL Fidelity Institutional Asset Management Total Bond Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 562,342,832 | |||
|
| ||||
Investment securities, at value(a) | $ | 547,875,143 | |||
Cash | 16,776 | ||||
Interest and dividends receivable | 4,287,723 | ||||
Receivable for investments sold | 12,651,512 | ||||
Prepaid expenses | 6,218 | ||||
|
| ||||
Total Assets | 564,837,372 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 23,861,677 | ||||
Payable for capital shares redeemed | 289,508 | ||||
Payable for collateral received on loaned securities | 34,600,487 | ||||
Securities sold short (Proceeds received $5,220,703) | 5,267,679 | ||||
Interest payable on securities sold short | 7,682 | ||||
Manager fees payable | 214,883 | ||||
Administration fees payable | 10,590 | ||||
Distribution fees payable | 102,857 | ||||
Custodian fees payable | 926 | ||||
Administrative and compliance services fees payable | 1,192 | ||||
Transfer agent fees payable | 592 | ||||
Trustee fees payable | 457 | ||||
Other accrued liabilities | 11,842 | ||||
|
| ||||
Total Liabilities | 64,370,372 | ||||
|
| ||||
Net Assets | $ | 500,467,000 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 513,256,119 | |||
Total distributable earnings/(losses) | (12,789,119 | ) | |||
|
| ||||
Net Assets | $ | 500,467,000 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 21,475,829 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 2,251,793 | ||||
Net Asset Value (offering and redemption price per share) | $ | 9.54 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 478,991,171 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 48,830,450 | ||||
Net Asset Value (offering and redemption price per share) | $ | 9.81 | |||
|
|
(a) | Includes securities on loan of $33,155,391. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Interest | $ | 18,636,988 | |||
Dividends | 265,267 | ||||
Income from securities lending | 222,865 | ||||
Foreign tax reclaims received | 465 | ||||
|
| ||||
Total Investment Income | 19,125,585 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,714,180 | ||||
Administration fees | 231,188 | ||||
Distribution fees — Class 2 | 1,300,663 | ||||
Custodian fees | 15,188 | ||||
Administrative and compliance services fees | 8,236 | ||||
Transfer agent fees | 9,924 | ||||
Trustee fees | 25,794 | ||||
Professional fees | 24,349 | ||||
Shareholder reports | 16,040 | ||||
Other expenses | 10,009 | ||||
|
| ||||
Total expenses | 4,355,571 | ||||
|
| ||||
Net Investment Income/(Loss) | 14,770,014 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | (4,702,474 | ) | |||
Net realized gains/(losses) on securities sold short | 82,706 | ||||
Change in net unrealized appreciation/depreciation on securities | (17,968,006 | ) | |||
Change in net unrealized appreciation/depreciation on securities sold short | (45,945 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (22,633,719 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (7,863,705 | ) | ||
|
|
See accompanying notes to the financial statements.
18
AZL Fidelity Institutional Asset Management Total Bond Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 14,770,014 | $ | 11,741,844 | ||||||
Net realized gains/(losses) on investments | (4,619,768 | ) | 3,599,938 | |||||||
Change in unrealized appreciation/depreciation on investments | (18,013,951 | ) | 9,672,649 | |||||||
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|
|
| |||||||
Change in net assets resulting from operations | (7,863,705 | ) | 25,014,431 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (707,681 | ) | (609,952 | ) | ||||||
Class 2 | (14,621,912 | ) | (13,382,351 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (15,329,593 | ) | (13,992,303 | ) | ||||||
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|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 907,880 | 573,881 | ||||||||
Proceeds from dividends reinvested | 707,681 | 609,952 | ||||||||
Value of shares redeemed | (3,245,300 | ) | (3,595,755 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (1,629,739 | ) | (2,411,922 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 10,368,064 | 11,883,572 | ||||||||
Proceeds from dividends reinvested | 14,621,912 | 13,382,351 | ||||||||
Value of shares redeemed | (76,454,314 | ) | (51,318,244 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (51,464,338 | ) | (26,052,321 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (53,094,077 | ) | (28,464,243 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (76,287,375 | ) | (17,442,115 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 576,754,375 | 594,196,490 | ||||||||
|
|
|
| |||||||
End of period | $ | 500,467,000 | $ | 576,754,375 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 93,143 | 57,427 | ||||||||
Dividends reinvested | 75,046 | 61,302 | ||||||||
Shares redeemed | (333,055 | ) | (360,782 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (164,866 | ) | (242,053 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 1,034,907 | 1,161,305 | ||||||||
Dividends reinvested | 1,505,861 | 1,309,428 | ||||||||
Shares redeemed | (7,711,888 | ) | (4,993,336 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (5,171,120 | ) | (2,522,603 | ) | ||||||
|
|
|
| |||||||
Change in shares | (5,335,986 | ) | (2,764,656 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
19
AZL Fidelity Institutional Asset Management Total Bond Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016* | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.96 | $ | 9.77 | $ | 10.00 | |||||||||||||||||||
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|
|
|
|
| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.32 | 0.23 | 0.24 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | | (0.42 | ) | 0.21 | (0.47 | ) | |||||||||||||||||||
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|
|
|
|
| ||||||||||||||||||||
Total from Investment Activities | (0.10 | ) | 0.44 | (0.23 | ) | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.32 | ) | (0.25 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Dividends | (0.32 | ) | (0.25 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Net Asset Value, End of Period | $ | 9.54 | $ | 9.96 | $ | 9.77 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Return(a) | (1.00 | )% | 4.55 | % | (2.30 | )%(b) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 21,476 | $ | 24,077 | $ | 25,981 | |||||||||||||||||||
Net Investment Income/(Loss)(c) | 2.96 | % | 2.23 | % | 3.03 | % | |||||||||||||||||||
Expenses Before Reductions(c)(d) | 0.56 | % | 0.56 | % | 0.59 | % | |||||||||||||||||||
Expenses Net of Reductions(c) | 0.56 | % | 0.56 | % | 0.59 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 38 | % | 81 | % | 119 | % | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.23 | $ | 10.05 | $ | 9.85 | $ | 10.14 | $ | 9.78 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.31 | 0.22 | 0.26 | 0.31 | 0.18 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.44 | ) | 0.21 | 0.29 | (0.40 | ) | 0.34 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.13 | ) | 0.43 | 0.55 | (0.09 | ) | 0.52 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.29 | ) | (0.25 | ) | (0.34 | ) | (0.20 | ) | (0.16 | ) | |||||||||||||||
Net Realized Gains | — | — | (0.01 | ) | — | — | |||||||||||||||||||
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|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.29 | ) | (0.25 | ) | (0.35 | ) | (0.20 | ) | (0.16 | ) | |||||||||||||||
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|
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| ||||||||||||||||
Net Asset Value, End of Period | $ | 9.81 | $ | 10.23 | $ | 10.05 | $ | 9.85 | $ | 10.14 | |||||||||||||||
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| ||||||||||||||||
Total Return(a) | (1.25 | )% | 4.28 | % | 5.51 | % | (0.89 | )% | 5.37 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 478,991 | $ | 552,678 | $ | 568,216 | $ | 433,205 | $ | 457,287 | |||||||||||||||
Net Investment Income/(Loss) | 2.71 | % | 1.98 | % | 3.06 | % | 2.93 | % | 2.11 | % | |||||||||||||||
Expenses Before Reductions(d) | 0.81 | % | 0.81 | % | 0.83 | % | 0.82 | % | 0.81 | % | |||||||||||||||
Expenses Net of Reductions | 0.81 | % | 0.81 | % | 0.83 | % | 0.82 | % | 0.81 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 38 | % | 81 | % | 119 | % | 123 | % | 421 | % |
* | Class 1 activity is for the period October 31, 2016 (commencement of operations) to December 31, 2016. |
(a) | 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. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized for periods less than one year. |
(d) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. Not annualized for periods less than one year. |
See accompanying notes to the financial statements.
20
AZL Fidelity Institutional Asset Management Total Bond Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Fidelity Institutional Asset Management Total Bond Fund (formerly, AZL Pyramis® Total Bond Fund) (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
Securities Purchased on a When-Issued Basis
The Fund may purchase securities on a when-issued basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield and thereby involve risk that the yield obtained in the transaction will be less than that available in the market when the delivery takes place. A Fund will not pay for such securities or start earning interest on them until they are received. When a Fund agrees to purchase securities on a when-issued basis, the Fund will segregate or designate cash or liquid assets equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in the value based upon changes in the general level of interest rates. A Fund may sell when-issued securities before they are delivered, which may result in a capital gain or loss.
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.
21
AZL Fidelity Institutional Asset Management Total Bond Fund
Notes to the Financial Statements
December 31, 2018
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $21,967 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $34,562,976 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
TBA Purchase and Sale Commitments
The Fund may enter intoto-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 “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 December 31, 2018, no collateral had been posted by the Fund to counterparties for TBAs.
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
22
AZL Fidelity Institutional Asset Management Total Bond Fund
Notes to the Financial Statements
December 31, 2018
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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (609,952 | ) | ||
Class 2 | (13,382,351 | ) | |||
From net realized gains | |||||
Class 1 | — | ||||
Class 2 | — | ||||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (13,992,303 | ) | ||
|
|
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 FIAM LLC (“FIAM”), FIAM 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund Class 1 | 0.50 | % | 0.70 | % | ||||||
AZL Fidelity Institutional Asset Management Total Bond Fund Class 2 | 0.50 | % | 0.95 | % |
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
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 Trust-wide asset-based fee, which is
23
AZL Fidelity Institutional Asset Management Total Bond Fund
Notes to the Financial Statements
December 31, 2018
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 value 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 anannual 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 year ended December 31, 2018, $4,340 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 Fund of Funds Trust, eachnon-interested Trustee receives a $170,000 annual Board retainer, the Lead Director receives an additional $42,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $25,500 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stock+ | $ | 98 | $ | — | $ | — | $ | 98 | ||||||||||||
Warrant | — | 38 | — | 38 | ||||||||||||||||
Asset Backed Securities | — | 6,504,027 | — | 6,504,027 | ||||||||||||||||
Collateralized Mortgage Obligations | — | 13,082,729 | — | 13,082,729 | ||||||||||||||||
Corporate Bonds+ | — | 150,397,322 | — | # | 150,397,322 | |||||||||||||||
Yankee Dollars+ | — | 56,584,575 | — | 56,584,575 |
24
AZL Fidelity Institutional Asset Management Total Bond Fund
Notes to the Financial Statements
December 31, 2018
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Municipal Bonds | $ | — | $ | 8,449,540 | $ | — | $ | 8,449,540 | ||||||||||||
U.S. Government Agency Mortgages | — | 135,759,502 | — | 135,759,502 | ||||||||||||||||
U.S. Treasury Obligations | — | 135,609,461 | — | 135,609,461 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 34,600,487 | — | 34,600,487 | ||||||||||||||||
Unaffiliated Investment Company | 6,887,364 | — | — | 6,887,364 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||
Total Investment Securities | 6,887,462 | 540,987,681 | — | 547,875,143 | ||||||||||||||||
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|
|
|
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|
|
| |||||||||||||
Securities Sold Short | — | (5,267,679 | ) | — | (5,267,679 | ) | ||||||||||||||
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|
|
|
|
|
| |||||||||||||
Total Investments | $ | 6,887,462 | $ | 535,720,002 | $ | — | $ | 542,607,464 | ||||||||||||
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|
+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
# | Represents the interest in securities that were determined to have a value of zero at December 31, 2018. |
A reconciliation of assets in which Level 3 inputs are used in determining fair value, along with additional quantitative disclosures, are presented when there are significant Level 3 investments at the end of the period.
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 197,410,171 | $ | 231,136,634 |
For the year ended December 31, 2018, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 120,653,820 | $ | 159,788,815 |
6. Investment Risks
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.
Mortgage-Related and Other Asset-Backed Risk: The Fund may invest in a variety of mortgage-related and other asset-backed securities, which are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to call risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless. An unexpectedly high or low rate of prepayments on a pool’s underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk ofnon-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. A Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
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.
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.
25
AZL Fidelity Institutional Asset Management Total Bond Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 is $557,309,519. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 2,276,703 | ||
Unrealized (depreciation) | (16,978,758 | ) | ||
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| |||
Net unrealized appreciation/(depreciation) | $ | (14,702,055 | ) | |
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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.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 8,420,981 | $ | 4,436,088 | $ | 12,857,069 |
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 Fidelity Institutional Asset Management Total Bond Fund | $ | 15,329,593 | $ | — | $ | 15,329,593 |
(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, 2017, the tax character of dividends paid to shareholders was as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Fidelity Institutional Asset Management Total Bond Fund | $ | 13,992,303 | $ | — | $ | 13,992,303 |
(a) | Total distributions paid may differ from the 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 Fidelity Institutional Asset Management Total Bond Fund | $ | 14,770,005 | $ | — | $ | (12,857,069 | ) | $ | (14,702,055 | ) | $ | (12,789,119 | ) |
(a) The difference between book-basis andtax-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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership of 70% 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.
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Fidelity Institutional Asset Management Total Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Fidelity Institutional Asset Management Total Bond Fund (formerly known as AZL Pyramis Total Bond Fund) (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
27
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 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-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 calling800-SEC-0330.
28
Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
29
Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
30
The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
31
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
32
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
33
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Gateway Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 9
Page 9
Statements of Changes in Net Assets
Page 10
Page 11
Notes to the Financial Statements
Page 12
Report of Independent Registered Public Accounting Firm
Page 18
Other Federal Income Tax Information
Page 19
Page 20
Approval of Investment Advisory and Subadvisory Agreements
Page 21
Information about the Board of Trustees and Officers
Page 24
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® Gateway Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Gateway Fund and Gateway Investment Advisers, LLC serves as Subadviser to the Fund.
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What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Gateway Fund (the “Fund”) returned-4.65%. That compared to a-4.38% total return for its benchmark, the S&P 500 Index1. The Fund’s performance reflects its hedged-equity strategy, which seeks to reduce wide swings in the portfolio’s value that can be caused by stock market volatility.
The Fund seeks to capture the majority of the returns expected with equity market investments while also providing less risk. To accomplish this, the Fund invests in a diversified portfolio of common stocks. In addition, the Fund sells index call options in order to lower volatility and generate cash flow; the Fund then uses a portion of this cash flow to purchase index put options, which helps mitigate any sharp, sudden price declines in the equity portfolio.*
The year began and ended with significant market volatility. Rising interest rates sparked investor concerns early in the year, causing the market to dip. Equities ralliedmid-year amid strong corporate earnings. However, volatility returned in the fourth quarter. A drop in oil prices, downward revisions of earnings growth estimates and concerns about tightening monetary policy by the Federal Reserve Board drove the S&P 500 Index (S&P 500) down 13.52% in the final months of 2018.
The Fund slightly underperformed its primary benchmark for the year. Throughout 2018, the Fund’stwo-part option strategy helped it participate in equity gains during market advances while also mitigating losses during market declines. The Fund returned 1.28% through January 26, lagging the S&P 500 as the market advanced at an above-average rate with low implied volatility. The Fund then delivered downside protection from January 26 through February 8, declining 4.74%–less than half the loss of the S&P 500 during the same period. The Fund ended the first quarter with a return of-2.63%, narrowing January’s underperformance gap, but not enough to outpace the S&P 500 for the quarter. From March 31 through September 30, the Fund returned 6.09%, capturing more than half the return of its benchmark over the same period. In the fourth quarter, the Fund declined 7.70%, nearly half the loss of its benchmark.*
Despite steep equity market declines in the first and fourth quarters, implied volatility levels were relatively subdued for most of the year. As measured by the Chicago Board Options Exchange Volatility Index (the VIX)2, implied volatility averaged 16.64 for 2018. While higher than its 2017 average of 11.09, the VIX still fell below its long-term average of 19.27. The closing low for the VIX occurred in January when it dipped to 9.15; the sharp equity market correction then drove the VIX to its 2018 closing high of 37.32 in early February. Even in the tumultuous fourth quarter, it did not breach 30 until December 21.
The Fund’s equity portfolio returned-3.92% for the year, a performance differential of positive 46 basis points (0.46%) versus the S&P 500. Consistent with its investment objective, the measured risk of the Fund was low relative to the U.S. equity market, as its standard deviation3 for 2018 was 8.69% versus 17.06% for the S&P 500.*
The Fund held derivatives in the form of equity index options, which proved beneficial to the Fund. The options produced loss-mitigating gains during market declines and lowered the standard deviation of the Fund’s returns relative to the S&P 500.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | Chicago Board Options Exchange Market Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by the S&P 500 Index options. |
3 | Standard Deviation is a statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. |
1
AZL® Gateway Fund Review (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek to capture the majority of the returns associated with equity market investments, while exposing investors to less risk than other equity investments. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in a broadly diversified portfolio of common stocks, while also selling index call options. | ||||
Investment Concerns
| ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
| ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
| ||||
The performance of investments in real estate depends on the overall strength of the real estate market, the management of real estate investments trusts (REITs), real estate operating companies (REOCs), and foreign real estate companies, and property management, all of which can be affected by a variety of factors, including national and regional economic conditions.
| ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
| ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
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Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Since | ||||||||||||||||
1 | 3 | 5 | Inception | |||||||||||||
Year | Year | Year | (4/30/10) | |||||||||||||
AZL® Gateway Fund | -4.65 | % | 3.05 | % | 2.84 | % | 3.66 | % | ||||||||
S&P 500 Index | -4.38 | % | 9.26 | % | 8.49 | % | 11.32 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL® Gateway Fund | 1.10 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 1.25% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Standard & Poor’s 500 Index, an unmanaged index that is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, which is a measure of the U.S. Stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL Gateway 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL Gateway Fund | $ | 1,000.00 | $ | 956.40 | $ | 5.42 | 1.10 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL Gateway Fund | $ | 1,000.00 | $ | 1,019.66 | $ | 5.60 | 1.10 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Information Technology | 19.3 | % | |||
Health Care | 14.6 | ||||
Financials | 12.4 | ||||
Communication Services | 9.9 | ||||
Consumer Discretionary | 9.5 | ||||
Industrials | 9.4 | ||||
Consumer Staples | 7.2 | ||||
Energy | 5.2 | ||||
Utilities | 3.4 | ||||
Real Estate | 2.3 | ||||
Materials | 2.0 | ||||
|
| ||||
Total Common Stocks | 95.2 | ||||
Money Markets | 6.1 | ||||
Purchased Put Options | 0.6 | ||||
|
| ||||
Total Investment Securities | 101.9 | ||||
Net other assets (liabilities) | (1.9 | ) | |||
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Net Assets | 100.0 | % | |||
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3
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks+ (95.2%): | ||||||||
Aerospace & Defense (2.3%): | ||||||||
4,318 | Boeing Co. (The) | $ | 1,392,555 | |||||
1,094 | Huntington Ingalls Industries, Inc. | 208,199 | ||||||
4,684 | Raytheon Co. | 718,291 | ||||||
809 | TransDigm Group, Inc.* | 275,109 | ||||||
7,310 | United Technologies Corp. | 778,369 | ||||||
|
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3,372,523 | ||||||||
|
| |||||||
Air Freight & Logistics (0.5%): | ||||||||
7,389 | United Parcel Service, Inc., Class B | 720,649 | ||||||
838 | XPO Logistics, Inc.* | 47,800 | ||||||
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768,449 | ||||||||
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Airlines (0.5%): | ||||||||
1,962 | Alaska Air Group, Inc. | 119,388 | ||||||
6,245 | American Airlines Group, Inc. | 200,527 | ||||||
5,240 | JetBlue Airways Corp.* | 84,154 | ||||||
3,142 | United Continental Holdings, Inc.* | 263,080 | ||||||
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667,149 | ||||||||
|
| |||||||
Auto Components (0.1%): | ||||||||
750 | Adient plc | 11,295 | ||||||
890 | Autoliv, Inc. | 62,505 | ||||||
1,060 | Cooper Tire & Rubber Co. | 34,270 | ||||||
767 | Garrett Motion, Inc.* | 9,465 | ||||||
910 | Veoneer, Inc.* | 21,449 | ||||||
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138,984 | ||||||||
|
| |||||||
Automobiles (0.3%): | ||||||||
45,902 | Ford Motor Co. | 351,151 | ||||||
308 | Tesla Inc.* | 102,502 | ||||||
|
| |||||||
453,653 | ||||||||
|
| |||||||
Banks (5.8%): | ||||||||
6,563 | Associated Banc-Corp | 129,882 | ||||||
76,346 | Bank of America Corp. | 1,881,165 | ||||||
21,841 | Citigroup, Inc. | 1,137,042 | ||||||
1,057 | First Republic Bank | 91,853 | ||||||
25,194 | Huntington Bancshares, Inc. | 300,312 | ||||||
25,796 | JPMorgan Chase & Co. | 2,518,205 | ||||||
6,739 | Old National Bancorp | 103,781 | ||||||
1,190 | Signature Bank | 122,344 | ||||||
978 | SVB Financial Group* | 185,742 | ||||||
16,239 | U.S. Bancorp | 742,122 | ||||||
32,144 | Wells Fargo & Co. | 1,481,196 | ||||||
|
| |||||||
8,693,644 | ||||||||
|
| |||||||
Beverages (2.2%): | ||||||||
32,271 | Coca-Cola Co. (The) | 1,528,032 | ||||||
4,602 | Monster Beverage Corp.* | 226,510 | ||||||
13,120 | PepsiCo, Inc. | 1,449,498 | ||||||
|
| |||||||
3,204,040 | ||||||||
|
| |||||||
Biotechnology (3.0%): | ||||||||
11,312 | AbbVie, Inc. | 1,042,854 | ||||||
2,395 | Alexion Pharmaceuticals, Inc.* | 233,177 | ||||||
5,576 | Amgen, Inc. | 1,085,481 | ||||||
1,610 | Biogen, Inc.* | 484,481 | ||||||
6,672 | Celgene Corp.* | 427,608 | ||||||
9,955 | Gilead Sciences, Inc. | 622,685 | ||||||
800 | Seattle Genetics, Inc.* | 45,328 | ||||||
887 | Shire plc, ADR | 154,373 |
Shares | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Biotechnology, continued | ||||||||
524 | Tesaro, Inc.* | $ | 38,907 | |||||
2,216 | Vertex Pharmaceuticals, Inc.* | 367,213 | ||||||
|
| |||||||
4,502,107 | ||||||||
|
| |||||||
Building Products (0.4%): | ||||||||
4,258 | Fortune Brands Home & Security, Inc. | 161,761 | ||||||
7,619 | Johnson Controls International plc | 225,904 | ||||||
691 | Lennox International, Inc. | 151,232 | ||||||
1,287 | Resideo Technologies, Inc.* | 26,448 | ||||||
|
| |||||||
565,345 | ||||||||
|
| |||||||
Capital Markets (2.0%): | ||||||||
12,521 | Charles Schwab Corp. (The) | 519,997 | ||||||
4,163 | Eaton Vance Corp. | 146,454 | ||||||
3,745 | Goldman Sachs Group, Inc. (The) | 625,603 | ||||||
7,707 | Intercontinental Exchange, Inc. | 580,568 | ||||||
2,700 | Legg Mason, Inc. | 68,877 | ||||||
15,401 | Morgan Stanley | 610,650 | ||||||
1,564 | MSCI Inc., Class A | 230,581 | ||||||
2,217 | TD Ameritrade Holding Corp. | 108,544 | ||||||
2,393 | Waddell & Reed Financial, Inc., Class A | 43,265 | ||||||
|
| |||||||
2,934,539 | ||||||||
|
| |||||||
Chemicals (1.5%): | ||||||||
332 | AdvanSix, Inc.* | 8,081 | ||||||
2,113 | Ashland Global Holdings, Inc. | 149,938 | ||||||
1,212 | Celanese Corp., Series A | 109,044 | ||||||
1,074 | Chemours Co. (The) | 30,308 | ||||||
19,443 | DowDuPont, Inc. | 1,039,812 | ||||||
3,063 | Eastman Chemical Co. | 223,936 | ||||||
683 | Ingevity Corp.* | 57,160 | ||||||
3,969 | LyondellBasell Industries NV, Class A | 330,062 | ||||||
1,723 | Olin Corp. | 34,650 | ||||||
3,223 | RPM International, Inc. | 189,448 | ||||||
4,667 | Valvoline, Inc. | 90,306 | ||||||
|
| |||||||
2,262,745 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.5%): | ||||||||
1,871 | Copart, Inc.* | 89,396 | ||||||
1,871 | Waste Connections, Inc. | 138,922 | ||||||
5,915 | Waste Management, Inc. | 526,376 | ||||||
|
| |||||||
754,694 | ||||||||
|
| |||||||
Communications Equipment (1.4%): | ||||||||
443 | Arista Networks, Inc.* | 93,340 | ||||||
36,603 | Cisco Systems, Inc. | 1,586,007 | ||||||
2,164 | Motorola Solutions, Inc. | 248,947 | ||||||
448 | Palo Alto Networks, Inc.* | 84,381 | ||||||
|
| |||||||
2,012,675 | ||||||||
|
| |||||||
Consumer Finance (0.3%): | ||||||||
2,419 | Ally Financial, Inc. | 54,815 | ||||||
5,710 | Discover Financial Services | 336,775 | ||||||
|
| |||||||
391,590 | ||||||||
|
| |||||||
Containers & Packaging (0.3%): | ||||||||
2,300 | Avery Dennison Corp. | 206,610 | ||||||
2,596 | Sonoco Products Co. | 137,925 | ||||||
4,183 | WestRock Co. | 157,950 | ||||||
|
| |||||||
502,485 | ||||||||
|
|
See accompanying notes to the financial statements.
4
AZL Gateway Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Distributors (0.2%): | ||||||||
2,806 | Genuine Parts Co. | $ | 269,432 | |||||
|
| |||||||
Diversified Financial Services (2.1%): | ||||||||
15,383 | Berkshire Hathaway, Inc., Class B* | 3,140,901 | ||||||
|
| |||||||
Diversified Telecommunication Services (2.1%): | ||||||||
52,210 | AT&T, Inc. | 1,490,073 | ||||||
27,921 | Verizon Communications, Inc. | 1,569,719 | ||||||
|
| |||||||
3,059,792 | ||||||||
|
| |||||||
Electric Utilities (1.8%): | ||||||||
11,382 | Alliant Energy Corp. | 480,890 | ||||||
12,558 | American Electric Power Co., Inc. | 938,585 | ||||||
9,820 | Duke Energy Corp. | 847,466 | ||||||
2,484 | Evergy, Inc. | 141,017 | ||||||
1,812 | Hawaiian Electric Industries, Inc. | 66,355 | ||||||
3,496 | OGE Energy Corp. | 137,008 | ||||||
|
| |||||||
2,611,321 | ||||||||
|
| |||||||
Electrical Equipment (0.5%): | ||||||||
4,195 | Eaton Corp. plc | 288,029 | ||||||
6,425 | Emerson Electric Co. | 383,894 | ||||||
720 | Hubbell, Inc. | 71,525 | ||||||
1,517 | nVent Electric plc | 34,072 | ||||||
|
| |||||||
777,520 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.4%): | ||||||||
11,143 | Corning, Inc. | 336,630 | ||||||
4,202 | TE Connectivity, Ltd. | 317,797 | ||||||
|
| |||||||
654,427 | ||||||||
|
| |||||||
Energy Equipment & Services (0.7%): | ||||||||
5,381 | Baker Hughes, a GE Co. | 115,692 | ||||||
9,292 | Halliburton Co. | 246,981 | ||||||
5,621 | Patterson-UTI Energy, Inc. | 58,177 | ||||||
13,653 | Schlumberger, Ltd. | 492,600 | ||||||
|
| |||||||
913,450 | ||||||||
|
| |||||||
Entertainment (1.8%): | ||||||||
6,615 | Activision Blizzard, Inc. | 308,061 | ||||||
1,116 | Live Nation, Inc.* | 54,963 | ||||||
3,281 | Netflix, Inc.* | 878,192 | ||||||
1,127 | Take-Two Interactive Software, Inc.* | 116,013 | ||||||
11,831 | Walt Disney Co. (The) | 1,297,270 | ||||||
|
| |||||||
2,654,499 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (2.3%): | ||||||||
3,601 | Camden Property Trust | 317,068 | ||||||
3,340 | Digital Realty Trust, Inc. | 355,877 | ||||||
12,451 | Duke Realty Corp. | 322,481 | ||||||
4,057 | Extra Space Storage, Inc. | 367,077 | ||||||
4,691 | Healthcare Realty Trust, Inc. | 133,412 | ||||||
4,137 | Kilroy Realty Corp. | 260,135 | ||||||
5,023 | Liberty Property Trust | 210,363 | ||||||
4,966 | Mack-Cali Realty Corp. | 97,284 | ||||||
3,099 | Parks Hotels & Resorts, Inc. | 80,512 | ||||||
6,583 | Regency Centers Corp. | 386,290 | ||||||
4,083 | Sabra Health Care REIT, Inc. | 67,288 | ||||||
5,304 | Senior Housing Properties Trust | 62,163 | ||||||
11,464 | UDR, Inc. | 454,204 | ||||||
5,777 | Ventas, Inc. | 338,474 | ||||||
|
| |||||||
3,452,628 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Food & Staples Retailing (1.3%): | ||||||||
10,713 | Walgreens Boots Alliance, Inc. | $ | 732,019 | |||||
12,607 | Wal-Mart Stores, Inc. | 1,174,342 | ||||||
|
| |||||||
1,906,361 | ||||||||
|
| |||||||
Food Products (1.0%): | ||||||||
1,658 | Bunge, Ltd. | 88,604 | ||||||
7,668 | Conagra Brands, Inc. | 163,788 | ||||||
1,234 | Ingredion, Inc. | 112,788 | ||||||
5,848 | Kraft Heinz Co. (The) | 251,698 | ||||||
2,252 | Lamb Weston Holdings, Inc. | 165,657 | ||||||
14,961 | Mondelez International, Inc., Class A | 598,889 | ||||||
|
| |||||||
1,381,424 | ||||||||
|
| |||||||
Gas Utilities (0.1%): | ||||||||
1,778 | National Fuel Gas Co. | 90,998 | ||||||
|
| |||||||
Health Care Equipment & Supplies (3.1%): | ||||||||
14,283 | Abbott Laboratories | 1,033,089 | ||||||
900 | Align Technology, Inc.* | 188,487 | ||||||
6,275 | Baxter International, Inc. | 413,021 | ||||||
12,047 | Boston Scientific Corp.* | 425,741 | ||||||
5,501 | Hologic, Inc.* | 226,091 | ||||||
1,107 | Intuitive Surgical, Inc.* | 530,164 | ||||||
16,067 | Medtronic plc | 1,461,454 | ||||||
2,088 | ResMed, Inc. | 237,761 | ||||||
462 | Teleflex, Inc. | 119,418 | ||||||
|
| |||||||
4,635,226 | ||||||||
|
| |||||||
Health Care Providers & Services (3.0%): | ||||||||
2,701 | Anthem, Inc. | 709,364 | ||||||
1,415 | Cigna Corp. | 268,737 | ||||||
11,131 | CVS Health Corp. | 729,303 | ||||||
3,035 | HCA Healthcare, Inc. | 377,706 | ||||||
3,253 | Patterson Cos., Inc. | 63,954 | ||||||
1,991 | Quest Diagnostics, Inc. | 165,791 | ||||||
7,827 | UnitedHealth Group, Inc. | 1,949,861 | ||||||
1,342 | Universal Health Services, Inc., Class B | 156,424 | ||||||
|
| |||||||
4,421,140 | ||||||||
|
| |||||||
Health Care Technology (0.1%): | ||||||||
884 | Veeva Systems, Inc., Class A* | 78,959 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.7%): | ||||||||
636 | Domino’s Pizza, Inc. | 157,722 | ||||||
1,932 | Hilton Grand Vacations, Inc.* | 50,985 | ||||||
5,050 | Hilton Worldwide Holdings, Inc. | 362,590 | ||||||
1,165 | Las Vegas Sands Corp. | 60,638 | ||||||
7,419 | McDonald’s Corp. | 1,317,392 | ||||||
1,457 | Melco Resorts & Entertainment, Ltd., ADR | 25,672 | ||||||
7,611 | MGM Resorts International | 184,643 | ||||||
1,742 | Restaurant Brands International, Inc. | 91,018 | ||||||
754 | Vail Resorts, Inc. | 158,958 | ||||||
7,419 | Wendy’s Co. (The) | 115,811 | ||||||
|
| |||||||
2,525,429 | ||||||||
|
| |||||||
Household Durables (0.4%): | ||||||||
6,147 | Newell Brands, Inc. | 114,273 | ||||||
51 | NVR, Inc.* | 124,286 | ||||||
5,462 | Toll Brothers, Inc. | 179,864 | ||||||
936 | Tupperware Brands Corp. | 29,550 | ||||||
966 | Whirlpool Corp. | 103,236 | ||||||
|
| |||||||
551,209 | ||||||||
|
|
See accompanying notes to the financial statements.
5
AZL Gateway Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Household Products (1.7%): | ||||||||
10,846 | Colgate-Palmolive Co. | $ | 645,554 | |||||
19,829 | Procter & Gamble Co. (The) | 1,822,682 | ||||||
|
| |||||||
2,468,236 | ||||||||
|
| |||||||
Industrial Conglomerates (1.7%): | ||||||||
4,991 | 3M Co., Class C | 950,985 | ||||||
64,554 | General Electric Co. | 488,674 | ||||||
7,726 | Honeywell International, Inc. | 1,020,759 | ||||||
|
| |||||||
2,460,418 | ||||||||
|
| |||||||
Insurance (1.9%): | ||||||||
10,071 | Aflac, Inc. | 458,835 | ||||||
4,937 | Allstate Corp. (The) | 407,944 | ||||||
2,813 | American Financial Group, Inc. | 254,661 | ||||||
8,956 | American International Group, Inc. | 352,956 | ||||||
3,356 | Aon plc | 487,828 | ||||||
9,191 | Arch Capital Group, Ltd.* | 245,583 | ||||||
5,496 | Arthur J. Gallagher & Co. | 405,055 | ||||||
2,347 | FNF Group | 73,790 | ||||||
5,157 | Lincoln National Corp. | 264,606 | ||||||
|
| |||||||
2,951,258 | ||||||||
|
| |||||||
Interactive Media & Services (4.6%): | ||||||||
1,223 | Alphabet, Inc., Class A* | 1,277,986 | ||||||
3,149 | Alphabet, Inc., Class C* | 3,261,135 | ||||||
279 | Baidu, Inc., ADR* | 44,249 | ||||||
17,528 | Facebook, Inc., Class A* | 2,297,745 | ||||||
739 | Zillow Group, Inc., Class C* | 23,338 | ||||||
|
| |||||||
6,904,453 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (3.5%): | ||||||||
2,906 | Amazon.com, Inc.* | 4,364,725 | ||||||
366 | Booking Holdings, Inc.* | 630,406 | ||||||
8,591 | eBay, Inc.* | 241,149 | ||||||
148 | MercadoLibre, Inc.* | 43,342 | ||||||
|
| |||||||
5,279,622 | ||||||||
|
| |||||||
IT Services (4.2%): | ||||||||
3,442 | Automatic Data Processing, Inc. | 451,315 | ||||||
630 | Black Knight, Inc.* | 28,388 | ||||||
2,351 | Broadridge Financial Solutions, Inc. | 226,284 | ||||||
5,988 | Cognizant Technology Solutions Corp., Class A | 380,118 | ||||||
4,392 | Fidelity National Information Services, Inc. | 450,400 | ||||||
831 | FleetCor Technologies, Inc.* | 154,333 | ||||||
7,257 | International Business Machines Corp. | 824,903 | ||||||
485 | Jack Henry & Associates, Inc. | 61,362 | ||||||
3,953 | Paychex, Inc. | 257,538 | ||||||
10,527 | PayPal Holdings, Inc.* | 885,215 | ||||||
2,013 | VeriSign, Inc.* | 298,508 | ||||||
15,383 | Visa, Inc., Class A | 2,029,633 | ||||||
7,050 | Western Union Co. | 120,273 | ||||||
|
| |||||||
6,168,270 | ||||||||
|
| |||||||
Leisure Products (0.1%): | ||||||||
7,797 | Mattel, Inc.* | 77,892 | ||||||
707 | Polaris Industries, Inc. | 54,213 | ||||||
|
| |||||||
132,105 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.3%): | ||||||||
1,323 | Illumina, Inc.* | 396,807 | ||||||
|
|
Shares | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Machinery (1.7%): | ||||||||
5,312 | Caterpillar, Inc. | $ | 674,997 | |||||
2,149 | Cummins, Inc. | 287,192 | ||||||
3,222 | Deere & Co. | 480,626 | ||||||
2,474 | Parker Hannifin Corp. | 368,972 | ||||||
3,823 | Pentair plc | 144,433 | ||||||
1,135 | Snap-On, Inc. | 164,904 | ||||||
2,646 | Stanley Black & Decker, Inc. | 316,832 | ||||||
1,264 | Timken Co. | 47,172 | ||||||
|
| |||||||
2,485,128 | ||||||||
|
| |||||||
Media (1.3%): | ||||||||
35,906 | Comcast Corp., Class A | 1,222,598 | ||||||
1,928 | Liberty Broadband Corp., Class C* | 138,874 | ||||||
3,626 | Liberty Global plc, Class C* | 74,841 | ||||||
1,725 | Liberty Latin America, Ltd.* | 25,133 | ||||||
3,810 | News Corp., Class B | 44,006 | ||||||
3,570 | Omnicom Group, Inc. | 261,467 | ||||||
24,934 | Sirius XM Holdings, Inc. | 142,373 | ||||||
|
| |||||||
1,909,292 | ||||||||
|
| |||||||
Metals & Mining (0.2%): | ||||||||
3,284 | Southern Copper Corp. | 101,049 | ||||||
3,813 | Steel Dynamics, Inc. | 114,543 | ||||||
1,116 | Worthington Industries, Inc. | 38,881 | ||||||
|
| |||||||
254,473 | ||||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (0.3%): | ||||||||
12,137 | AGNC Investment Corp. | 212,883 | ||||||
23,250 | Annaly Capital Management, Inc. | 228,315 | ||||||
|
| |||||||
441,198 | ||||||||
|
| |||||||
Multiline Retail (0.4%): | ||||||||
2,942 | Nordstrom, Inc. | 137,127 | ||||||
6,741 | Target Corp. | 445,512 | ||||||
|
| |||||||
582,639 | ||||||||
|
| |||||||
Multi-Utilities (1.5%): | ||||||||
7,454 | Ameren Corp. | 486,224 | ||||||
11,577 | CenterPoint Energy, Inc. | 326,819 | ||||||
5,068 | Consolidated Edison, Inc. | 387,499 | ||||||
7,085 | Public Service Enterprise Group, Inc. | 368,774 | ||||||
10,065 | WEC Energy Group, Inc. | 697,103 | ||||||
|
| |||||||
2,266,419 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (4.5%): | ||||||||
2,341 | Cheniere Energy, Inc.* | 138,564 | ||||||
14,586 | Chevron Corp. | 1,586,811 | ||||||
3,761 | Concho Resources, Inc.* | 386,593 | ||||||
13,196 | ConocoPhillips | 822,771 | ||||||
4,782 | Continental Resources, Inc.* | 192,189 | ||||||
30,281 | Exxon Mobil Corp. | 2,064,861 | ||||||
9,066 | Gulfport Energy Corp.* | 59,382 | ||||||
2,635 | HollyFrontier Corp. | 134,701 | ||||||
8,624 | Occidental Petroleum Corp. | 529,341 | ||||||
5,298 | ONEOK, Inc. | 285,827 | ||||||
4,204 | Phillips 66 | 362,175 | ||||||
1,472 | Targa Resources Corp. | 53,021 | ||||||
|
| |||||||
6,616,236 | ||||||||
|
| |||||||
Personal Products (0.1%): | ||||||||
1,094 | Herbalife Nutrition, Ltd.* | 64,492 | ||||||
|
|
See accompanying notes to the financial statements.
6
AZL Gateway Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Pharmaceuticals (5.1%): | ||||||||
3,356 | Allergan plc | $ | 448,563 | |||||
11,361 | Bristol-Myers Squibb Co. | 590,545 | ||||||
7,247 | Eli Lilly & Co. | 838,623 | ||||||
533 | Jazz Pharmaceuticals plc* | 66,071 | ||||||
18,977 | Johnson & Johnson Co. | 2,448,981 | ||||||
19,535 | Merck & Co., Inc. | 1,492,669 | ||||||
41,676 | Pfizer, Inc. | 1,819,157 | ||||||
|
| |||||||
7,704,609 | ||||||||
|
| |||||||
Professional Services (0.4%): | ||||||||
988 | Dun & Bradstreet Corp. | 141,027 | ||||||
934 | ManpowerGroup, Inc. | 60,523 | ||||||
3,646 | Verisk Analytics, Inc.* | 397,560 | ||||||
|
| |||||||
599,110 | ||||||||
|
| |||||||
Road & Rail (0.8%): | ||||||||
2,812 | Avis Budget Group, Inc.* | 63,214 | ||||||
1,202 | Canadian Pacific Railway, Ltd. | 213,498 | ||||||
9,909 | CSX Corp. | 615,646 | ||||||
3,212 | Hertz Global Holdings, Inc.* | 43,844 | ||||||
2,178 | Old Dominion Freight Line, Inc. | 268,961 | ||||||
|
| |||||||
1,205,163 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.6%): | ||||||||
8,070 | Advanced Micro Devices, Inc.* | 148,972 | ||||||
4,292 | Analog Devices, Inc. | 368,382 | ||||||
13,018 | Applied Materials, Inc. | 426,209 | ||||||
33,091 | Intel Corp. | 1,552,961 | ||||||
3,216 | Microchip Technology, Inc. | 231,295 | ||||||
7,990 | Micron Technology, Inc.* | 253,523 | ||||||
4,211 | NVIDIA Corp. | 562,169 | ||||||
11,089 | QUALCOMM, Inc. | 631,075 | ||||||
3,003 | Skyworks Solutions, Inc. | 201,261 | ||||||
4,087 | Teradyne, Inc. | 128,250 | ||||||
8,454 | Texas Instruments, Inc. | 798,903 | ||||||
|
| |||||||
5,303,000 | ||||||||
|
| |||||||
Software (6.2%): | ||||||||
4,818 | Adobe Systems, Inc.* | 1,090,024 | ||||||
1,474 | ANSYS, Inc.* | 210,694 | ||||||
7,115 | Cadence Design Systems, Inc.* | 309,360 | ||||||
1,108 | Check Point Software Technologies, Ltd.* | 113,736 | ||||||
703 | Dell Technologies, Inc., Class V* | 62,067 | ||||||
2,653 | Fortinet, Inc.* | 186,851 | ||||||
52,978 | Microsoft Corp. | 5,380,975 | ||||||
6,789 | Nuance Communications, Inc.* | 89,818 | ||||||
23,432 | Oracle Corp. | 1,057,955 | ||||||
1,971 | PTC, Inc.* | 163,396 | ||||||
1,388 | ServiceNow, Inc.* | 247,133 | ||||||
7,713 | Symantec Corp. | 145,737 | ||||||
950 | VMware, Inc., Class A | 130,274 | ||||||
783 | Workday, Inc., Class A* | 125,029 | ||||||
|
| |||||||
9,313,049 | ||||||||
|
| |||||||
Specialty Retail (2.4%): | ||||||||
4,882 | American Eagle Outfitters, Inc. | 94,369 | ||||||
2,167 | Foot Locker, Inc. | 115,284 | ||||||
4,510 | Gap, Inc. (The) | 116,178 | ||||||
10,677 | Home Depot, Inc. (The) | 1,834,522 | ||||||
3,559 | L Brands, Inc. | 91,360 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks+, continued | ||||||||
Specialty Retail, continued | ||||||||
6,961 | Lowe’s Cos., Inc. | $ | 642,918 | |||||
1,566 | Tiffany & Co. | 126,079 | ||||||
12,434 | TJX Cos., Inc. (The) | 556,297 | ||||||
|
| |||||||
3,577,007 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (3.5%): | ||||||||
32,874 | Apple, Inc. | 5,185,545 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.4%): | ||||||||
1,150 | Lululemon Athletica, Inc.* | 139,852 | ||||||
4,048 | Michael Kors Holdings, Ltd.* | 153,501 | ||||||
12,843 | Under Armour, Inc., Class A* | 226,936 | ||||||
2,184 | Under Armour, Inc., Class C* | 35,315 | ||||||
|
| |||||||
555,604 | ||||||||
|
| |||||||
Tobacco (0.9%): | ||||||||
12,168 | Altria Group, Inc. | 600,978 | ||||||
10,727 | Philip Morris International, Inc. | 716,134 | ||||||
1,164 | Vector Group, Ltd. | 11,326 | ||||||
|
| |||||||
1,328,438 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.1%): | ||||||||
1,357 | GATX Corp. | 96,089 | ||||||
|
| |||||||
Wireless Telecommunication Services (0.1%): | ||||||||
2,648 | Sprint Corp.* | 15,411 | ||||||
1,372 | T-Mobile US, Inc.* | 87,273 | ||||||
|
| |||||||
102,684 | ||||||||
|
| |||||||
Total Common Stocks (Cost $98,758,212) | 140,700,682 | |||||||
|
| |||||||
Purchased Options (0.6%): | ||||||||
Total Purchased Options (Cost $1,456,758) | 987,940 | |||||||
|
| |||||||
Unaffiliated Investment Company (6.1%): | ||||||||
8,516,513 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(a) | 8,516,513 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $8,516,513) | 8,516,513 | |||||||
|
| |||||||
| Total Investment Securities (Cost $108,731,483) — | 150,205,135 | ||||||
Net other assets (liabilities) — (1.9)% | (2,413,273 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 147,791,862 | ||||||
|
|
See accompanying notes to the financial statements.
7
AZL Gateway Fund
Schedule of Portfolio Investments
December 31, 2018
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
* | Non-income producing security. |
+ | All or a portion of each common stock has been pledged as collateral for outstanding call options written. |
(a) | The rate represents the effective yield at December 31, 2018. |
(b) | See Federal Tax Information listed in the Notes to the Financial Statements. |
At December 31, 2018, the Fund’s exchange traded options purchased were as follows:
Description | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | ||||||||||||||||
S&P 500 Index | Put | 2225.00 USD | 1/22/19 | 82 | $ | 182,450 | $ | 35,670 | ||||||||||||||
S&P 500 Index | Put | 2125.00 USD | 2/19/19 | 73 | 155,125 | 60,225 | ||||||||||||||||
S&P 500 Index | Put | 2250.00 USD | 2/19/19 | 77 | 173,250 | 135,905 | ||||||||||||||||
S&P 500 Index | Put | 2325.00 USD | 2/19/19 | 62 | 144,150 | 173,290 | ||||||||||||||||
S&P 500 Index | Put | 2375.00 USD | 2/19/19 | 66 | 156,750 | 248,160 | ||||||||||||||||
S&P 500 Index | Put | 2200.00 USD | 3/18/19 | 73 | 160,600 | 163,885 | ||||||||||||||||
S&P 500 Index | Put | 2250.00 USD | 3/18/19 | 59 | 132,750 | 170,805 | ||||||||||||||||
|
| |||||||||||||||||||||
Total (Cost $1,456,758) | $ | 987,940 | ||||||||||||||||||||
|
|
At December 31, 2018, the Fund’s exchange traded options written were as follows:
Description | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | ||||||||||||||||
S&P 500 Index | Call | 2525.00 USD | 1/14/19 | 62 | $ | 156,550 | $ | (201,500 | ) | |||||||||||||
S&P 500 Index | Call | 2475.00 USD | 1/22/19 | 66 | 163,350 | (464,970 | ) | |||||||||||||||
S&P 500 Index | Call | 2500.00 USD | 1/22/19 | 64 | 160,000 | (351,040 | ) | |||||||||||||||
S&P 500 Index | Call | 2525.00 USD | 1/22/19 | 65 | 164,125 | (267,475 | ) | |||||||||||||||
S&P 500 Index | Call | 2575.00 USD | 1/22/19 | 62 | 159,650 | (125,550 | ) | |||||||||||||||
S&P 500 Index | Call | 2425.00 USD | 1/28/19 | 64 | 155,200 | (730,240 | ) | |||||||||||||||
S&P 500 Index | Call | 2525.00 USD | 2/19/19 | 58 | 146,450 | (391,790 | ) | |||||||||||||||
S&P 500 Index | Call | 2600.00 USD | 2/19/19 | 59 | 153,400 | (200,305 | ) | |||||||||||||||
S&P 500 Index | Call | 2625.00 USD | 2/19/19 | 59 | 154,875 | (151,630 | ) | |||||||||||||||
|
| |||||||||||||||||||||
Total (Premiums $3,293,097) | $ | (2,884,500 | ) | |||||||||||||||||||
|
|
(a) | Notional amount is expressed as the number of contracts multiplied by the strike price of the underlying asset. |
Balances Reported in the Statement of Assets and Liabilities for Options Written
Value | ||||
Options Written | $ | (2,884,500 | ) |
See accompanying notes to the financial statements.
8
AZL Gateway Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 108,731,483 | |||
|
| ||||
Investment securities, at value | $ | 150,205,135 | |||
Cash | 426,837 | ||||
Interest and dividends receivable | 195,298 | ||||
Reclaims receivable | 2,933 | ||||
Prepaid expenses | 2,178 | ||||
|
| ||||
Total Assets | 150,832,381 | ||||
|
| ||||
Liabilities: | |||||
Payable for capital shares redeemed | 12,852 | ||||
Written Options (Premiums received $3,293,097) | 2,884,500 | ||||
Manager fees payable | 102,282 | ||||
Administration fees payable | 2,529 | ||||
Distribution fees payable | 31,963 | ||||
Custodian fees payable | 460 | ||||
Administrative and compliance services fees payable | 469 | ||||
Transfer agent fees payable | 385 | ||||
Trustee fees payable | 180 | ||||
Other accrued liabilities | 4,899 | ||||
|
| ||||
Total Liabilities | 3,040,519 | ||||
|
| ||||
Net Assets | $ | 147,791,862 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 114,031,275 | |||
Total distributable earnings | 33,760,587 | ||||
|
| ||||
Net Assets | $ | 147,791,862 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 11,784,083 | ||||
Net Asset Value (offering and redemption price per share) | $ | 12.54 | |||
|
|
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 3,416,532 | |||
Foreign withholding tax | (1,087 | ) | |||
|
| ||||
Total Investment Income | 3,415,445 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 1,341,850 | ||||
Administration fees | 48,437 | ||||
Distribution fees | 419,328 | ||||
Custodian fees | 7,044 | ||||
Administrative and compliance services fees | 2,561 | ||||
Transfer agent fees | 4,955 | ||||
Trustee fees | 8,352 | ||||
Professional fees | 7,530 | ||||
Shareholder reports | 4,367 | ||||
Other expenses | 3,537 | ||||
|
| ||||
Total expenses | 1,847,961 | ||||
|
| ||||
Net Investment Income/(Loss) | 1,567,484 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 29,673,428 | ||||
Net realized gains/(losses) on written options contracts | (5,600,527 | ) | |||
Change in net unrealized appreciation/depreciation on securities | (33,692,324 | ) | |||
Change in net unrealized appreciation/depreciation on written options contracts | 1,232,791 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (8,386,632 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (6,819,148 | ) | ||
|
|
See accompanying notes to the financial statements.
9
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 1,567,484 | $ | 2,182,398 | ||||||
Net realized gains/(losses) on investments | 24,072,901 | 298,817 | ||||||||
Change in unrealized appreciation/depreciation on investments | (32,459,533 | ) | 15,856,221 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (6,819,148 | ) | 18,337,436 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (2,023,443 | ) | (2,139,703 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (2,023,443 | ) | (2,139,703 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 6,489,248 | 43,382,092 | ||||||||
Proceeds from dividends reinvested | 2,023,443 | 2,139,703 | ||||||||
Value of shares redeemed | (65,173,439 | ) | (27,375,086 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (56,660,748 | ) | 18,146,709 | |||||||
|
|
|
| |||||||
Change in net assets | (65,503,339 | ) | 34,344,442 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 213,295,201 | 178,950,759 | ||||||||
|
|
|
| |||||||
End of period | $ | 147,791,862 | $ | 213,295,201 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 488,214 | 3,413,870 | ||||||||
Dividends reinvested | 152,713 | 164,340 | ||||||||
Shares redeemed | (4,871,885 | ) | (2,123,780 | ) | ||||||
|
|
|
| |||||||
Change in shares | (4,230,958 | ) | 1,454,430 | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
10
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.32 | $ | 12.29 | $ | 11.96 | $ | 11.87 | $ | 11.65 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.18 | 0.12 | 0.17 | 0.15 | 0.13 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.79 | ) | 1.04 | 0.40 | 0.08 | 0.23 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.61 | ) | 1.16 | 0.57 | 0.23 | 0.36 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.17 | ) | (0.13 | ) | (0.24 | ) | (0.14 | ) | (0.14 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.17 | ) | (0.13 | ) | (0.24 | ) | (0.14 | ) | (0.14 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 12.54 | $ | 13.32 | $ | 12.29 | $ | 11.96 | $ | 11.87 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (4.65 | )% | 9.46 | % | 4.84 | % | 1.98 | % | 3.09 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 147,792 | $ | 213,295 | $ | 178,951 | $ | 200,708 | $ | 217,753 | |||||||||||||||
Net Investment Income/(Loss) | 0.93 | % | 1.06 | % | 1.19 | % | 1.11 | % | 1.14 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||||
Expenses Net of Reductions | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | %(c) | |||||||||||||||
Portfolio Turnover Rate | 9 | % | 24 | % | 20 | % | 5 | % | 18 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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 is used to pay certain Fund expenses. The Fund ceased participation in the program in June 2014. |
See accompanying notes to the financial statements.
11
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Gateway Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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.
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 Fund of Funds Trust.
12
AZL Gateway Fund
Notes to the Financial Statements
December 31, 2018
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 year ended December 31, 2018, 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.
Options Contracts
The Fund may purchase or write put and call options on a security or an index of securities. During the year ended December 31, 2018, 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.
Purchased Options Contracts — The Fund pays a premium which is included in “Investments, at value” on the 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.
For the year ended December 31, 2018, the monthly average notional amount for written options contracts was $1.7 million. Realized gains and losses are reported as “Net realized gains/(losses) on options 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 December 31, 2018:
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 | ||||||||||||
Options Contracts | $ | — | Written Options | $ | 2,884,500 |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 | ||||||||||
Options Contracts | Net realized gains/(losses) on written options contracts/ Change in net unrealized appreciation/depreciation on written options contracts | $ | (5,600,527 | ) | $ | 1,232,791 |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to
13
AZL Gateway Fund
Notes to the Financial Statements
December 31, 2018
conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (2,139,703 | ) | ||
From net realized gains | — | ||||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (2,139,703 | ) | ||
|
|
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 Gateway Investment Advisers, LLC (“Gateway”), Gateway 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL Gateway Fund | 0.80 | % | 1.25 | % |
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $1,353 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 in total for both trusts.
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AZL Gateway Fund
Notes to the Financial Statements
December 31, 2018
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 inopen-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.
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. For options where market quotations are not readily available, fair value procedures as described below may be applied.
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.
For the year ended December 31, 2018, 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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Common Stocks | |||||||||||||||
Software | $ | — | $ | 62,067 | $ | 62,067 | |||||||||
All Other Common Stocks+ | 140,638,615 | — | 140,638,615 | ||||||||||||
Purchased Options | 987,940 | — | 987,940 | ||||||||||||
Unaffiliated Investment Company | 8,516,513 | — | 8,516,513 | ||||||||||||
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Total Investment Securities | 150,143,068 | 62,067 | 150,205,135 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Written Options | (2,884,500 | ) | — | (2,884,500 | ) | ||||||||||
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Total Investments | $ | 147,258,568 | $ | 62,067 | $ | 147,320,635 | |||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as written options. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Gateway Fund | $ | 15,443,849 | $ | 79,495,966 |
6. Investment Risks
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 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
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AZL Gateway Fund
Notes to the Financial Statements
December 31, 2018
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.
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 December 31, 2018 is $105,457,040. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 48,330,554 | ||
Unrealized (depreciation) | (6,466,959 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 41,863,595 | ||
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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 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.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL Gateway Fund | $ | 8,242,170 | $ | — | $ | 8,242,170 |
During the year ended December 31, 2018, the Fund Utilized $25,274,496 in CLCFs to offset capital gains.
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Gateway Fund | $ | 2,023,443 | $ | — | $ | 2,023,443 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Gateway Fund | $ | 2,139,703 | $ | — | $ | 2,139,703 |
(a) | Total distributions paid may differ from the 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 Gateway Fund | $ | 1,535,699 | $ | — | $ | (8,242,170 | ) | $ | 40,467,058 | $ | 33,760,587 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership in excess of 75% of the Fund.
16
AZL Gateway Fund
Notes to the Financial Statements
December 31, 2018
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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Gateway Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Gateway Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 27, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 100.00% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
22
The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
23
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
24
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
25
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Government Money Market Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 6
Page 6
Statements of Changes in Net Assets
Page 7
Page 8
Notes to the Financial Statements
Page 9
Report of Independent Registered Public Accounting Firm
Page 13
Other Federal Income Tax Information
Page 14
Page 15
Approval of Investment Advisory and Subadvisory Agreements
Page 16
Information about the Board of Trustees and Officers
Page 19
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® Government Money Market Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Government Money Market Fund and BlackRock Advisors, LLC serves as Subadviser to the Fund.
|
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Government Money Market Fund (the “Fund”) returned 1.01%. That compared to a 1.94% total return for its benchmark, the Three-Month U.S. Treasury Bill Index1.
Fixed-income markets performed well despite a volatile year in financial markets. Noteworthy factors that drove market conditions during the period included the Federal Reserve Board’s (the Fed) steady removal of monetary accommodation, the ongoing reduction of the Fed’s balance sheet, a large increase in the supply of Treasuries and geopolitical events, including uncertainty surrounding Brexit and the rise of global trade tariffs.
The Fed raised short-term interest rates four times in 2018, bringing the target rate to a range of 2.25% to 2.50% byyear-end. Each move was widely anticipated due to the Fed’s efforts at forward guidance. In December 2018, the Fed revised its outlook for economic growth downwards while leaving its forecast for unemployment unchanged.
The net supply of Treasury bills reached $384 billion for calendar year 2018—anon-crisis record. Partly as a result of the higher supply, the Treasury introduced atwo-month bill in the fourth quarter of 2018 to help better schedule auction sizes. The Federal Home Loan Bank markets desk also issued inaugural floating rate notes indexed to the Secured Overnight Financing Rate2, which is expected to eventually replace London Interbank Offered Rate3 as a reference rate. Investor demand for these new bonds was strong.
In this environment, the Fund maintained a competitive yield throughout the12-month period. The Fund benefited from selectively increasing its exposure to fixed-rate Treasuries during the first quarter, as well as a relatively high allocation to floating-rate notes throughout the12-month period. The Fund held between 20% and 30% of its portfolio in floating-rate notes. Large allocations to overnighttri-party repurchase agreements also largely benefited performance due to the liquidity benefits and competitive rates available in this asset class.*
The Fund maintained a duration exposure that was longer than that of its peer group during the first quarter. That positioning benefited relative results as the market needed to absorb $360 billion in net new Treasury bills in a short period between February and late March. The Fund added exposure to agency floating-rate securities in the second and fourth quarters as credits spreads widened. In the fourth quarter, the Fund tilted toward the shorter end of the yield curve in anticipation of quarterly interest rate hikes in 2019. This positioning detracted from the Fund’s performance as longer duration fixed rates in the benchmark outperformed during the fourth quarter.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | Secured Overnight Financing Rate is a measure of the cost of borrowing cash on an overnight basis in the U.S. Treasury repurchase markets. It is the U.S. successor to the LIBOR. |
3 | London Interbank Offered Rate is a daily reference rate based on the interest rates at which banks borrow unsecured funds from other banks in the London wholesale money market. |
1
AZL® Government Money Market Fund Review (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek current income consistent with stability of principal. The Fund seeks to achieve its objective by investing in a broad range of short-term, high-quality U.S. dollar-denominated money market instruments, including government, U.S. and foreign bank, commercial and other obligations. | ||||
Investment Concerns | ||||
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. Past performance is not predictive of future performance as yields on money market funds fluctuate daily. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | 5 Year | 10 Years | |||||||||||||
AZL® Government Money Market Fund | 1.01 | % | 0.36 | % | 0.22 | % | 0.13 | % | ||||||||
Three-Month U.S. Treasury Bill Index | 1.94 | % | 1.06 | % | 0.65 | % | 0.38 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL® Government Money Market Fund | 0.65 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.34% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.87% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
Yield as of December 31, 2018
7 Day Average | 7 Day Effective | 30 Day Average | ||||||||||
AZL® Government Money Market Fund | 1.59 | % | 1.60 | % | 1.48 | % |
Prior to the year ended December 31, 2018, the Manager voluntarily agreed to waive, reimburse, or pay Fund expenses to the extent necessary in order to maintain a minimum daily net investment income for the Fund of 0.00% during such periods. The Distributor was also permitted to waive its Rule12b-1 fees during such periods. Amounts waived, reimbursed or paid by the Manager and/or the Distributor are subject to repayment to the Manager and/or the Distributor, subject to certain limitations as further described in Note 3 of the Notes to Financial Statements. The repayment of amounts previously waived, reimbursed or paid during 2018 served to reduce the Fund’s yield during the period.
The7-day yield quotation is as of December 31, 2018 and more closely reflects the current earnings of the Fund than the total return quotation.
The Fund’s performance is measured against the Three-Month U.S. Treasury Bill Index, which is an unmanaged index and does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Government Money Market Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Government Money Market 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Government Money Market Fund | $ | 1,000.00 | $ | 1,006.40 | $ | 4.40 | 0.87 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Government Money Market Fund | $ | 1,000.00 | $ | 1,020.82 | $ | 4.43 | 0.87 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
U.S. Government Agency Mortgages | 48.2 | % | |||
Repurchase Agreements | 41.3 | ||||
U.S. Treasury Obligations | 10.5 | ||||
|
| ||||
Total Investment Securities | 100.0 | ||||
Net other assets (liabilities) | — | ^ | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL Government Money Market Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages (48.2%): | ||||||||
Federal Home Loan Bank (31.1%): | ||||||||
$ | 1,795,000 | 2.15%, 1/4/19(a) | $ | 1,794,681 | ||||
6,305,000 | 2.29%, 1/9/19(a) | 6,301,805 | ||||||
3,790,000 | 2.26%, 1/11/19(a) | 3,787,594 | ||||||
10,500,000 | 2.33%, 1/16/19(a) | 10,489,854 | ||||||
1,415,000 | 2.35%, 1/23/19(a) | 1,412,972 | ||||||
4,260,000 | 2.42%(US0001M-9bps), 1/25/19 | 4,260,000 | ||||||
2,965,000 | 2.22%(US0001M-13bps), 2/1/19 | 2,965,000 | ||||||
1,425,000 | 2.36%, 2/5/19(a) | 1,421,751 | ||||||
8,795,000 | 2.36%, 2/6/19(a) | 8,774,145 | ||||||
1,140,000 | 2.64%(US0001M-7bps), 2/11/19 | 1,140,045 | ||||||
4,320,000 | 2.37%, 2/11/19(a) | 4,308,368 | ||||||
995,000 | 2.39%, 2/13/19(a) | 992,171 | ||||||
2,640,000 | 2.38%, 2/15/19(a) | 2,632,186 | ||||||
1,195,000 | 2.39%, 2/20/19(a) | 1,191,050 | ||||||
5,000,000 | 2.39%(US0001M-12bps), 2/25/19 | 5,000,000 | ||||||
660,000 | 2.27%, 3/6/19(a) | 657,362 | ||||||
4,250,000 | 2.31%, 3/20/19(a) | 4,228,610 | ||||||
1,000,000 | 2.39%(US0001M-12bps), 3/25/19 | 1,000,000 | ||||||
16,750,000 | 2.44%, 3/27/19(a) | 16,654,017 | ||||||
1,570,000 | 2.62%(US0003M-16bps), 6/12/19 | 1,569,819 | ||||||
2,310,000 | 2.63%(US0003M-16bps), 6/20/19 | 2,310,000 | ||||||
1,895,000 | 2.63%(US0003M-16bps), 6/20/19 | 1,895,000 | ||||||
7,000,000 | 2.63%(US0003M-16bps), 6/20/19 | 7,000,000 | ||||||
500,000 | 2.46%(US0001M-5bps), 6/20/19 | 500,000 | ||||||
745,000 | 2.48%(SOFR+4bps), 6/21/19 | 745,000 | ||||||
2,555,000 | 2.52%, 6/21/19(a) | 2,524,781 | ||||||
1,995,000 | 2.46%(US0001M-5bps), 6/24/19 | 1,995,000 | ||||||
995,000 | 2.46%(US0001M-5bps), 6/24/19 | 995,000 | ||||||
1,215,000 | 2.46%(US0001M-5bps), 6/28/19 | 1,215,000 | ||||||
500,000 | 2.46%(US0001M-5bps), 6/28/19 | 500,000 | ||||||
7,300,000 | 2.37%(US0001M-11bps), 7/19/19 | 7,300,000 | ||||||
3,470,000 | 2.43%(US0001M-8bps), 8/27/19 | 3,470,000 | ||||||
5,675,000 | 2.30%(US0001M-9bps), 9/9/19 | 5,675,000 | ||||||
5,000,000 | 2.34%(US0001M-6bps), 9/11/19 | 5,000,000 | ||||||
2,085,000 | 2.39%(US0001M-7bps), 9/17/19 | 2,085,000 | ||||||
2,015,000 | 2.66%(US0003M-14bps), 12/19/19 | 2,015,000 | ||||||
4,045,000 | 2.44%(US0001M-6bps), 2/24/20 | 4,045,000 | ||||||
6,080,000 | 2.42%(US0001M-4bps), 4/17/20 | 6,079,264 | ||||||
2,765,000 | 2.31%(US0003M-14bps), 4/20/20 | 2,765,000 | ||||||
2,935,000 | 2.67%(US0003M-13bps), 12/21/20 | 2,935,000 | ||||||
|
| |||||||
141,630,475 | ||||||||
|
| |||||||
Federal Farm Credit Bank (15.0%): | ||||||||
2,360,000 | 2.17%, 1/4/19(a) | 2,359,579 | ||||||
6,660,000 | 2.29%, 1/15/19(a) | 6,654,095 | ||||||
4,660,000 | 2.17%, 1/16/19(a) | 4,655,845 | ||||||
2,725,000 | 2.23%, 2/4/19(a) | 2,719,312 | ||||||
2,600,000 | 2.26%, 3/11/19(a) | 2,588,937 | ||||||
2,600,000 | 2.28%, 3/19/19(a) | 2,587,599 | ||||||
700,000 | 2.26%, 4/12/19(a) | 695,640 | ||||||
2,640,000 | 2.45%, 6/17/19(a) | 2,610,608 | ||||||
1,830,000 | 2.46%, 6/28/19(a) | 1,808,194 | ||||||
2,340,000 | 2.57%, 7/22/19(a) | 2,306,912 | ||||||
4,430,000 | 2.55%, 7/23/19(a) | 4,367,211 | ||||||
11,680,000 | 2.62%, 7/29/19(a) | 11,504,626 | ||||||
2,305,000 | 2.50%(US0001M-8bps), 7/30/19 | 2,304,185 | ||||||
2,485,000 | 2.46%, 8/15/19(a) | 2,447,559 |
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal Farm Credit Bank, continued | ||||||||
$ | 1,650,000 | 2.67%, 9/12/19(a) | $ | 1,619,615 | ||||
5,305,000 | 2.33%(US0001M-5bps), 2/7/20 | 5,304,940 | ||||||
865,000 | 2.48%(USBMMY3M+5bps), 4/30/20 | 864,978 | ||||||
4,000,000 | 2.42%(US0001M+0bps), 6/19/20 | 4,002,731 | ||||||
1,555,000 | 2.41%(US0001M-5bps), 8/17/20 | 1,555,000 | ||||||
2,180,000 | 2.36%(US0001M-4bps), 9/11/20 | 2,179,890 | ||||||
2,325,000 | 2.41%(US0001M+3bps), 12/14/20 | 2,324,815 | ||||||
|
| |||||||
67,462,271 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation (1.0%): | ||||||||
4,470,000 | 2.34%(US0001M-10bps), 8/8/19 | 4,468,670 | ||||||
|
| |||||||
Federal National Mortgage Association (1.1%): | ||||||||
4,890,000 | 2.25%, 1/9/19(a) | 4,887,566 | ||||||
|
| |||||||
Total U.S. Government Agency Mortgages (Cost $218,448,982) | 218,448,982 | |||||||
|
| |||||||
U.S. Treasury Obligations (10.5%): | ||||||||
U.S. Treasury Bills (9.4%) | ||||||||
27,615,000 | 2.19%, 1/17/19(a) | 27,588,583 | ||||||
2,075,000 | 2.40%, 1/29/19(a) | 2,071,199 | ||||||
7,320,000 | 2.23%, 2/7/19(a) | 7,303,599 | ||||||
3,315,000 | 2.24%, 2/21/19(a) | 3,304,739 | ||||||
1,910,000 | 2.56%, 6/6/19(a) | 1,889,350 | ||||||
|
| |||||||
42,157,470 | ||||||||
|
| |||||||
U.S. Treasury Notes (1.1%) | ||||||||
210,000 | 2.19%, 1/31/19(a) | 209,840 | ||||||
210,000 | 2.19%, 1/31/19(a) | 209,819 | ||||||
5,000,000 | 2.58%(USBMMY3M+5bps), 10/31/20 | 4,990,456 | ||||||
|
| |||||||
5,410,115 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $47,567,585) | 47,567,585 | |||||||
|
| |||||||
Repurchase Agreements (41.3%): | ||||||||
23,000,000 | Bank of Montreal, 2.90%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $23,003,706, Collateralized by U.S. Government Agency Obligations, 2.51% - 5.50%, 8/1/20 - 8/1/48, fair value of $23,645,044) | 23,000,000 | ||||||
17,000,000 | Bank of Nova Scotia, 2.90%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $17,002,739, Collateralized by U.S. Treasury Obligations, 1.13% - 7.88%, 1/15/21 - 11/15/42, fair value of $17,342,855) | 17,000,000 | ||||||
25,000,000 | BNP Paribas, 3.00%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $25,004,167, Collateralized by U.S. Government Agency Obligations, 3.00% - 6.00%, 1/15/29 - 11/20/48, fair value of $25,632,436) | 25,000,000 | ||||||
5,000,000 | Citigroup Global Markets, 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $5,000,819, Collateralized by U.S. Government Agency Obligations, 3.00% - 5.00%, 11/20/33 - 11/20/48, fair value of $5,100,930) | 5,000,000 | ||||||
30,000,000 | HSBC Securities (USA), Inc., 3.00%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $30,005,000, Collateralized by U.S. Treasury Obligations, 0.00% - 2.00%, 2/7/19 - 2/15/48, fair value of $30,600,000) | 30,000,000 |
See accompanying notes to the financial statements.
4
AZL Government Money Market Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Repurchase Agreements, continued | ||||||||
$ | 5,000,000 | Mistubishi UFJ Securities USA, Inc., 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $5,000,819, Collateralized by U.S. Treasury Obligations, 2.25% - 4.75%, 12/31/23 - 2/15/37, fair value of $5,100,062) | $ | 5,000,000 | ||||
26,000,000 | Mizuho Securities USA, Inc., 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $26,004,261, Collateralized by U.S. Treasury Notes, 1.75% - 2.13%, 8/15/21 - 4/30/22, fair value of $26,520,094) | 26,000,000 | ||||||
5,000,000 | Natixis S.A., 2.90%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $5,000,806, Collateralized by U.S. Government Agency Obligations, 0.00% - 3.75%, 3/27/19 - 12/1/47, fair value of $5,106,418) | 5,000,000 | ||||||
25,000,000 | Natixis S.A., 2.85%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $25,003,958, Collateralized by U.S. Treasury Obligations, 0.75% - 5.38%, 4/30/20 - 2/15/45, fair value of $25,500,013) | 25,000,000 |
Principal Amount | Fair Value | |||||||
Repurchase Agreements, continued | ||||||||
$ | 16,000,000 | Toronto Dominion Bank NY, 3.00%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $16,002,667, Collateralized by U.S. Government Agency Obligation, 3.50%, 7/1/48, fair value of $16,480,001) | $ | 16,000,000 | ||||
10,000,000 | Toronto Dominion Bank NY, 2.97%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $10,001,650, Collateralized by U.S. Treasury Notes, 1.88% - 2.63%, 8/31/20 - 8/31/22, fair value of $10,200,059) | 10,000,000 | ||||||
|
| |||||||
Total Repurchase Agreements (Cost $187,000,000) | 187,000,000 | |||||||
|
| |||||||
Total Investment Securities (Cost $453,016,567) — 100.0% | 453,016,567 | |||||||
Net other assets (liabilities) — 0.0% | 158,145 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 453,174,712 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
SOFR—Secured Overnight Financing Rate
US0001M—1 Month US Dollar LIBOR
US0003M—3 Month US Dollar LIBOR
USBMMY3M—3 Month Treasury Bill Rate
† | Represents less than 0.05%. |
(a) | The rate represents the effective yield at December 31, 2018. |
See accompanying notes to the financial statements.
5
AZL Government Money Market Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 266,016,567 | |||
|
| ||||
Investment securities, at value | $ | 266,016,567 | |||
Repurchase agreements, at value (cost $187,000,000) | 187,000,000 | ||||
Cash | 344,090 | ||||
Interest and dividends receivable | 146,185 | ||||
Receivable for capital shares issued | 561,273 | ||||
Prepaid expenses | 5,404 | ||||
|
| ||||
Total Assets | 454,073,519 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 561,274 | ||||
Manager fees payable | 220,449 | ||||
Administration fees payable | 3,969 | ||||
Distribution fees payable | 95,103 | ||||
Custodian fees payable | 221 | ||||
Administrative and compliance services fees payable | 1,427 | ||||
Transfer agent fees payable | 407 | ||||
Trustee fees payable | 546 | ||||
Other accrued liabilities | 15,411 | ||||
|
| ||||
Total Liabilities | 898,807 | ||||
|
| ||||
Net Assets | $ | 453,174,712 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 453,173,803 | |||
Total distributable earnings | 909 | ||||
|
| ||||
Net Assets | $ | 453,174,712 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 453,173,926 | ||||
Net Asset Value (offering and redemption price per share) | $ | 1.00 | |||
|
|
For the Year Ended December 31, 2018
Investment Income: | |||||
Interest | $ | 8,575,832 | |||
|
| ||||
Total Investment Income | 8,575,832 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 1,606,541 | ||||
Administration fees | 113,400 | ||||
Distribution fees | 1,147,531 | ||||
Custodian fees | 4,884 | ||||
Administrative and compliance services fees | 7,217 | ||||
Transfer agent fees | 5,297 | ||||
Trustee fees | 22,260 | ||||
Professional fees | 21,476 | ||||
Shareholder reports | 14,675 | ||||
Recoupment of prior expenses reimbursed by the manager | 1,041,005 | ||||
Other expenses | 9,253 | ||||
|
| ||||
Total expenses before reductions | 3,993,539 | ||||
|
| ||||
Net Investment Income/(Loss) | 4,582,293 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 909 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | 909 | ||||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 4,583,202 | |||
|
|
See accompanying notes to the financial statements.
6
AZL Government Money Market Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 4,582,293 | $ | 221,270 | ||||||
Net realized gains/(losses) on investments | 909 | 1,823 | ||||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 4,583,202 | 223,093 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (4,583,703 | ) | (254,530 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (4,583,703 | ) | (254,530 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 339,952,364 | 314,529,729 | ||||||||
Proceeds from dividends reinvested | 4,583,703 | 254,530 | ||||||||
Value of shares redeemed | (381,992,986 | ) | (487,124,200 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (37,456,919 | ) | (172,339,941 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (37,457,420 | ) | (172,371,378 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 490,632,132 | 663,003,510 | ||||||||
|
|
|
| |||||||
End of period | $ | 453,174,712 | $ | 490,632,132 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 339,952,364 | 314,529,729 | ||||||||
Dividends reinvested | 4,583,703 | 254,530 | ||||||||
Shares redeemed | (381,992,986 | ) | (487,124,842 | ) | ||||||
|
|
|
| |||||||
Change in shares | (37,456,919 | ) | (172,340,583 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
7
AZL Government Money Market Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.01 | — | (a) | — | (a) | — | (a) | — | (a) | ||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | — | (a) | — | (a) | — | (a) | — | (a) | — | (a) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | 0.01 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.01 | ) | — | (a) | — | — | — | ||||||||||||||||||
Net Realized Gains | — | — | (a) | — | (a) | — | (a) | — | (a) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.01 | ) | — | (a) | — | (a) | — | (a) | — | (a) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(b) | 1.01 | % | 0.05 | % | 0.01 | % | 0.01 | % | 0.01 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 453,175 | $ | 490,632 | $ | 663,004 | $ | 687,635 | $ | 700,335 | |||||||||||||||
Net Investment Income/(Loss) | 1.00 | % | 0.04 | % | — | — | — | ||||||||||||||||||
Expenses Before Reductions(c) | 0.87 | % | 0.87 | % | 0.65 | % | 0.65 | % | 0.65 | % | |||||||||||||||
Expenses Net of Reductions | 0.87 | % | 0.87 | % | 0.44 | %(d) | 0.26 | %(d) | 0.20 | %(d) |
(a) | Represents less than $0.005. |
(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) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(d) | The expense ratio for the period reflects the reduction of certain expenses to maintain a certain minimum yield. See Note 3 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
8
AZL Government Money Market Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Government Money Market Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. Investments of the Fund are valued, in accordance with Rule2a-7 of the 1940 Act, at amortized cost, which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security.
Repurchase Agreements
The Fund may invest in repurchase agreements with financial institutions such as member banks of the Federal Reserve System or from registered broker/dealers that the adviser deems creditworthy under guidelines approved by the Board, subject to the seller’s agreement to repurchase such securities at a mutually agreed-upon date and price. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates. The seller under a repurchase agreement is required to maintain the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest). Securities subject to repurchase agreements are held by the Fund’s custodian, another qualifiedsub-custodian, or in the Federal Reserve book-entry system. Master Repurchase Agreements (“MRA”) permit the Fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset receivables under the MRA with collateral posted by the counterparty and create one net payment due to or from the Fund. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, the Fund receives securities as collateral with a market value in excess of the repurchase price to be received by the Fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, the Fund would recognize a liability with respect to such excess collateral to reflect the Fund’s obligation under bankruptcy law to return the excess to the counterparty.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Net realized gains and losses on investments sold 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.
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 Fund of Funds Trust.
9
AZL Government Money Market Fund
Notes to the Financial Statements
December 31, 2018
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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | ||||||||||
Distributions to Shareholders: | ||||||||||
From net investment income | $ | (221,270 | ) | |||||||
From net realized gains | (33,260 | ) | ||||||||
|
| |||||||||
Change in net assets resulting from distributions to shareholders | $ | (254,530 | ) | |||||||
|
|
|
|
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 Advisors, LLC (“BlackRock Advisors”), BlackRock Advisors 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Government Money Market Fund | 0.35 | % | 0.87 | % |
* | Effective December 1, 2018, the Manager voluntarily reduced the management fee to 0.34% on all assets. The Manager reserves the right to increase the management fee to the amount shown in the table at any time. |
The Manager has voluntarily agreed to waive, reimburse, or pay Fund expenses to the extent necessary in order to maintain a minimum daily yield for the Fund of 0.00%. The Distributor may waive its Rule12b-1 fees. The amount waived, reimbursed, or paid by the Manager and/or the Distributor will be repaid to the Manager and/or the Distributor subject to the following limitations:
1. | The repayments will not cause the Fund’s net investment income to fall below 0.00%. |
2. | The repayments must be made no later than three years after the end of the fiscal year in which the waiver, reimbursement, or payment took place. |
3. | Any expense recovery paid by the Fund will not cause its expense ratio to exceed 0.87%. |
The ability of the Manager and/or Distributor to receive such payments could negatively affect the Fund’s future yield. Amounts waived under this agreement during the year ended December 31, 2018 are reflected on the Statement of Operations as “Expenses voluntarily waived/reimbursed by the Manager.”
Any amounts 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.”
10
AZL Government Money Market Fund
Notes to the Financial Statements
December 31, 2018
At December 31, 2018, the contractual reimbursements subject to repayment by the Fund in subsequent years were as follows:
Expires 12/31/2019 | |||||
AZL Government Money Market Fund | $ | 1,440,270 |
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.
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $3,671 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
U.S. Government Agency Mortgages | $ | — | $ | 218,448,982 | $ | — | $ | 218,448,982 | ||||||||||||
U.S. Treasury Obligations | — | 47,567,585 | — | 47,567,585 | ||||||||||||||||
Repurchase Agreements | — | 187,000,000 | — | 187,000,000 | ||||||||||||||||
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Total Investments | $ | — | $ | 453,016,567 | $ | — | $ | 453,016,567 | ||||||||||||
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AZL Government Money Market Fund
Notes to the Financial Statements
December 31, 2018
5. 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 December 31, 2018 is $453,016,567. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | — | ||
Unrealized (depreciation) | — | |||
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Net unrealized appreciation/(depreciation) | $ | 453,016,567 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Government Money Market Fund | $ | 4,583,703 | $ | — | $ | 4,583,703 |
(a) Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes.
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Government Money Market Fund | $ | 254,530 | $ | — | $ | 254,530 |
(a) | Total distributions paid may differ from the 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 | Total Accumulated Earnings/ (Deficit) | |||||||||||||||||||||
AZL Government Money Market Fund | $ | 909 | $ | — | $ | — | $ | — | $ | 909 |
6. 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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 90% of the Fund.
7. 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Government Money Market Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Government Money Market Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $1,410.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
18
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIPand VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
19
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
20
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ||
ANNRPT1218 2/19 |
AZL® International Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 15
Page 15
Statements of Changes in Net Assets
Page 16
Page 17
Notes to the Financial Statements
Page 18
Report of Independent Registered Public Accounting Firm
Page 24
Other Federal Income Tax Information
Page 25
Page 26
Approval of Investment Advisory and Subadvisory Agreements
Page 27
Information about the Board of Trustees and Officers
Page 30
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® International Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® International Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund.
|
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® International Index Fund (Class 2 Shares) (the “Fund”) returned-14.04%. That compared to a-13.36% total return for its benchmark, the MSCI EAFE Index1.
The Fund seeks investment results, before fees, expenses and fair value adjustments to its portfolio at the close of the New York Stock Exchange, that correspond to the performance of the MSCI EAFE Index. The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the Index. The Index is designed to provide a comprehensive measure of international equity markets.*
In the first quarter of 2018, market volatility and concerns over trade protectionism weighed on European equity markets. In particular, the U.K. suffered as rising yields on its sovereign bonds made defensive sectors relatively less attractive to investors, while ongoing political uncertainty weighed on broader investor sentiment. Currency appreciation in Japan buoyed the MSCI EAFE Index’s total return as the yen rallied over 6% against the U.S. dollar, and the Bank of Japan announced a reduction in its long-term bond purchasing efforts. In local terms, however, Japanese equities declined due to U.S. protectionism and fears of a slowdown in global trade.
Uncertainty over U.S. trade protectionism continued to drag on developed equity markets throughout the second quarter, as did concerns about European fragmentation, in part due to the formation of Italy’s populist, coalition government. Momentum for eurozone reform weakened as well, as negotiations over immigration policy in the German coalition government broke down. Increased trade tensions, interest rate differentials and favorable U.S. growth conditions strengthened the U.S. dollar, which weighed onun-hedged developing market equity returns during the quarter.
In the third quarter, steady corporate earnings and economic growth supported domestic markets in the face of rising U.S. protectionism. Japanese equities rallied in the quarter, and the release of the second quarter gross domestic product2 numbers indicated growth had reached an annualized 3%, the fastest growth rate the country has experienced since early 2016. Strong biotech performance in Switzerland also boosted the EAFE Index. However, continuing uncertainty over Brexit and political tensions weighed on investors.
By the fourth quarter, developed markets faced considerable headwinds from tightening global financial conditions, slowing growth and heightened macroeconomic uncertainty. In Western Europe, slowing economic activity, risk-averse investor behavior and political uncertainty all weighed on the region’s equity markets, causing a drag on the broader Index.
In general, international equities underperformed the S&P 500 Index3 for the year. From a sector perspective, financials suffered the most negative return in USD, while materials and consumer discretionary also underperformed. Decreases were seen across all sectors for the year except utilities.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a slightly negative impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | Gross domestic product (GDP) is the measure of the market value of the goods and services produced in a period of time. |
3 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
1
AZL®International Index Fund Review(Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek to match the performance of the Morgan Stanley Capital International Europe, Australasia and Far East Index (“MSCI EAFE® Index”) as closely as possible. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in a statistically selected sampling of equity securities of companies included in the MSCI EAFE Index and in derivative instruments linked to the MSCI EAFE Index, primarily futures contracts. | ||||
Investment Concerns
| ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
| ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
| ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines.
| ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
| ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus.
|
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception | 1 | 3 | 5 | Since | ||||||||||||||
Date | Year | Year | Year | Inception | ||||||||||||||
AZL® International Index Fund (Class 1 Shares) | 10/14/16 | -13.80 | % | — | — | 3.80 | % | |||||||||||
AZL® International Index Fund (Class 2 Shares) | 5/1/09 | -14.04 | % | 2.48 | % | -0.08 | % | 6.11 | % | |||||||||
MSCI EAFE Index (gross of withholding taxes) | 5/1/09 | -13.36 | % | 3.38 | % | 1.00 | % | 7.35 | % | |||||||||
MSCI EAFE Index (net of withholding taxes) | 5/1/09 | -13.79 | % | 2.87 | % | 0.53 | % | 6.86 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL® International Index Fund (Class 1 Shares) | 0.48 | % | ||
AZL® International Index Fund (Class 2 Shares) | 0.73 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.52% for Class 1 Shares and 0.77% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Morgan Stanley Capital International, Europe, Australasia and Far East (MSCI EAFE) Index, which is an unmanaged free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The Index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Index noted as “gross of withholding taxes” reflects the maximum possible reinvestment of dividends with no adjustment for withholding tax deductions or tax credits. The Index noted as “net of withholding taxes” reflects the reinvestment of dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable tonon-resident institutional investors who do not benefit from double taxation treaties. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL International Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL International Index Fund, Class 1 | $ | 1,000.00 | $ | 885.70 | $ | 2.09 | 0.44 | % | ||||||||||||
AZL International Index Fund, Class 2 | $ | 1,000.00 | $ | 884.10 | $ | 3.28 | 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL International Index Fund, Class 1 | $ | 1,000.00 | $ | 1,022.99 | $ | 2.24 | 0.44 | % | ||||||||||||
AZL International Index Fund, Class 2 | $ | 1,000.00 | $ | 1,021.73 | $ | 3.52 | 0.69 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Japan | 24.0 | % | |||
United Kingdom | 15.9 | ||||
France | 10.3 | ||||
Switzerland | 9.1 | ||||
Germany | 8.7 | ||||
Australia | 7.1 | ||||
Netherlands | 4.0 | ||||
Hong Kong | 3.6 | ||||
Spain | 3.1 | ||||
Sweden | 2.5 | ||||
All other countries | 10.5 | ||||
|
| ||||
Total Common Stocks and Preferred Stocks | 98.8 | ||||
Rights | — | ^ | |||
Short-Term Securities Held as Collateral for Securities on Loan | 1.6 | ||||
Money Markets | 0.1 | ||||
|
| ||||
Total Investment Securities | 100.5 | ||||
Net other assets (liabilities) | (0.5 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (98.3%): | ||||||||
Aerospace & Defense (1.2%): | ||||||||
379,843 | BAE Systems plc | $ | 2,216,623 | |||||
321 | Dassault Aviation SA | 444,429 | ||||||
2,648 | Elbit Systems, Ltd. | 304,635 | ||||||
70,443 | European Aeronautic Defence & Space Co. NV | 6,736,316 | ||||||
46,044 | Finmeccanica SpA | 405,231 | ||||||
93,381 | Meggitt plc | 558,539 | ||||||
6,330 | MTU Aero Engines AG | 1,149,570 | ||||||
201,037 | Rolls-Royce Holdings plc | 2,115,296 | ||||||
39,981 | Safran SA | 4,802,667 | ||||||
180,000 | Singapore Technologies Engineering, Ltd. | 459,164 | ||||||
12,844 | Thales SA | 1,493,894 | ||||||
|
| |||||||
20,686,364 | ||||||||
|
| |||||||
Air Freight & Logistics (0.3%): | ||||||||
102,392 | Bollore, Inc. | 409,005 | ||||||
118,044 | Deutsche Post AG | 3,232,655 | ||||||
110,220 | Royal Mail plc | 382,589 | ||||||
11,800 | SG Holdings Co., Ltd. | 309,516 | ||||||
37,800 | Yamato Holdings Co., Ltd. | 1,030,238 | ||||||
|
| |||||||
5,364,003 | ||||||||
|
| |||||||
Airlines (0.1%): | ||||||||
13,400 | All Nippon Airways Co., Ltd. | 483,105 | ||||||
29,257 | Deutsche Lufthansa AG, Registered Shares | 659,721 | ||||||
19,944 | easyJet plc | 279,939 | ||||||
82,030 | International Consolidated Airlines Group SA | 650,906 | ||||||
14,470 | Japan Airlines Co., Ltd. | 512,584 | ||||||
69,400 | Singapore Airlines, Ltd. | 477,942 | ||||||
|
| |||||||
3,064,197 | ||||||||
|
| |||||||
Auto Components (1.0%): | ||||||||
19,900 | Aisin Sieki Co., Ltd. | 686,758 | ||||||
72,600 | Bridgestone Corp. | 2,786,650 | ||||||
20,958 | Compagnie Generale des Establissements Michelin SCA, Class B | 2,071,818 | ||||||
13,392 | Continental AG | 1,851,571 | ||||||
53,600 | Denso Corp. | 2,379,098 | ||||||
8,952 | Faurecia | 335,941 | ||||||
12,000 | Koito Manufacturing Co., Ltd. | 612,235 | ||||||
74,000 | Minth Group, Ltd. | 236,184 | ||||||
19,700 | NGK Spark Plug Co., Ltd. | 388,666 | ||||||
14,129 | Nokian Renkaat OYJ | 435,333 | ||||||
49,051 | Pirelli & C SpA* | 315,396 | ||||||
15,200 | Stanley Electric Co., Ltd. | 423,951 | ||||||
91,800 | Sumitomo Electric Industries, Ltd. | 1,212,035 | ||||||
19,400 | Sumitomo Rubber Industries, Ltd. | 230,914 | ||||||
7,200 | Toyoda Gosei Co., Ltd. | 143,568 | ||||||
17,600 | Toyota Industries Corp. | 809,984 | ||||||
29,175 | Valeo SA | 845,867 | ||||||
14,700 | Yokohama Rubber Co., Ltd. (The) | 274,245 | ||||||
|
| |||||||
16,040,214 | ||||||||
|
| |||||||
Automobiles (3.1%): | ||||||||
39,362 | Bayerische Motoren Werke AG (BMW) | 3,187,379 | ||||||
108,648 | Daimler AG, Registered Shares | 5,711,568 | ||||||
14,952 | Ferrari NV | 1,487,132 | ||||||
131,003 | Fiat Chrysler Automobiles NV* | 1,904,361 | ||||||
74,900 | Fuji Heavy Industries, Ltd. | 1,599,163 | ||||||
197,100 | Honda Motor Co., Ltd. | 5,151,155 | ||||||
62,900 | Isuzu Motors, Ltd. | 878,346 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Automobiles, continued | ||||||||
70,600 | Mazda Motor Corp. | $ | 726,330 | |||||
79,200 | Mitsubishi Motors Corp. | 437,325 | ||||||
282,600 | Nissan Motor Co., Ltd. | 2,278,018 | ||||||
70,270 | PSA Peugeot Citroen SA | 1,493,543 | ||||||
23,400 | Renault SA | 1,456,506 | ||||||
41,200 | Suzuki Motor Corp. | 2,085,026 | ||||||
274,966 | Toyota Motor Corp. | 15,972,424 | ||||||
4,071 | Volkswagen AG | 648,548 | ||||||
33,300 | Yamaha Motor Co., Ltd. | 648,186 | ||||||
|
| |||||||
45,665,010 | ||||||||
|
| |||||||
Banks (11.0%): | ||||||||
50,044 | ABN AMRO Group NV | 1,172,037 | ||||||
107,633 | AIB Group plc^ | 452,391 | ||||||
13,500 | Aozora Bank, Ltd. | 400,380 | ||||||
346,048 | Australia & New Zealand Banking Group, Ltd. | 5,961,542 | ||||||
806,750 | Banco Bilbao Vizcaya Argentaria SA | 4,255,036 | ||||||
696,512 | Banco de Sabadell SA | 792,382 | ||||||
1,951,645 | Banco Santander SA | 8,806,266 | ||||||
131,342 | Bank Hapoalim BM | 833,866 | ||||||
186,368 | Bank LeumiLe-Israel Corp. | 1,129,628 | ||||||
153,800 | Bank of East Asia, Ltd. (The) | 486,821 | ||||||
118,291 | Bank of Ireland Group plc | 656,425 | ||||||
6,800 | Bank of Kyoto, Ltd. (The) | 278,919 | ||||||
51,449 | Bank of Queensland, Ltd. | 350,103 | ||||||
158,620 | Bankia SA | 461,835 | ||||||
80,402 | Bankinter SA | 642,509 | ||||||
2,069,745 | Barclays plc | 3,969,624 | ||||||
60,506 | Bendigo & Adelaide Bank, Ltd. | 460,107 | ||||||
134,330 | BNP Paribas SA | 6,049,156 | ||||||
450,500 | BOC Hong Kong Holdings, Ltd. | 1,664,020 | ||||||
71,600 | Chiba Bank, Ltd. (The) | 397,081 | ||||||
38,803 | Chuo Mitsui Trust Holdings, Inc. | 1,412,580 | ||||||
119,680 | Commerzbank AG* | 792,618 | ||||||
211,396 | Commonwealth Bank of Australia | 10,786,880 | ||||||
134,200 | Concordia Financial Group, Ltd. | 511,773 | ||||||
138,591 | Credit Agricole SA | 1,490,494 | ||||||
433,061 | Criteria Caixacorp SA | 1,558,420 | ||||||
84,139 | Danske Bank A/S | 1,667,453 | ||||||
218,500 | DBS Group Holdings, Ltd. | 3,776,101 | ||||||
114,301 | DnB NOR ASA | 1,834,633 | ||||||
36,152 | Erste Group Bank AG | 1,204,431 | ||||||
17,200 | Fukuoka Financial Group, Inc. | 346,891 | ||||||
93,100 | Hang Seng Bank, Ltd. | 2,079,566 | ||||||
2,391,995 | HSBC Holdings plc | 19,626,590 | ||||||
470,817 | ING Groep NV | 5,044,976 | ||||||
1,788,978 | Intesa Sanpaolo SpA | 3,964,328 | ||||||
45,700 | Japan Post Bank Co., Ltd. | 501,824 | ||||||
30,538 | KBC Group NV | 1,975,750 | ||||||
8,579,213 | Lloyds Banking Group plc | 5,668,067 | ||||||
101,160 | Mebuki Financial Group, Inc. | 267,077 | ||||||
70,527 | Mediobanca SpA | 596,280 | ||||||
1,415,300 | Mitsubishi UFJ Financial Group, Inc. | 6,979,998 | ||||||
15,515 | Mizrahi Tefahot Bank, Ltd. | 262,886 | ||||||
2,889,339 | Mizuho Financial Group, Inc. | 4,503,854 | ||||||
329,040 | National Australia Bank, Ltd. | 5,582,272 | ||||||
361,068 | Nordea Bank AB | 3,046,939 | ||||||
382,899 | Oversea-Chinese Banking Corp., Ltd. | 3,145,818 |
See accompanying notes to the financial statements.
4
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
17,372 | Raiffeisen International Bank-Holding AG | $ | 442,395 | |||||
256,487 | Resona Holdings, Inc. | 1,227,079 | ||||||
586,733 | Royal Bank of Scotland Group plc | 1,613,017 | ||||||
57,800 | Seven Bank, Ltd. | 164,875 | ||||||
20,000 | Shinsei Bank, Ltd. | 236,750 | ||||||
51,800 | Shizuoka Bank, Ltd. (The) | 403,241 | ||||||
191,839 | Skandinaviska Enskilda Banken AB, Class A | 1,868,435 | ||||||
91,080 | Societe Generale | 2,891,300 | ||||||
333,392 | Standard Chartered plc | 2,576,618 | ||||||
159,269 | Sumitomo Mitsui Financial Group, Inc. | 5,252,906 | ||||||
185,910 | Svenska Handelsbanken AB, Class A | 2,060,582 | ||||||
109,635 | Swedbank AB, Class A | 2,445,321 | ||||||
242,448 | Unicredit SpA | 2,749,937 | ||||||
162,773 | United Overseas Bank, Ltd. | 2,918,260 | ||||||
413,260 | Westpac Banking Corp. | 7,287,271 | ||||||
21,000 | Yamaguchi Financial Group, Inc. | 200,750 | ||||||
|
| |||||||
162,187,364 | ||||||||
|
| |||||||
Beverages (2.4%): | ||||||||
91,709 | Anheuser-Busch InBev NV | 6,068,684 | ||||||
44,500 | Asahi Breweries, Ltd. | 1,738,383 | ||||||
12,771 | Carlsberg A/S, Class B | 1,358,959 | ||||||
66,117 | Coca-Cola Amatil, Ltd. | 381,296 | ||||||
14,800 | �� | Coca-Cola Bottlers Japan Holdings, Inc. | 441,878 | |||||
23,898 | Coca-Cola European Partners plc | 1,099,106 | ||||||
24,775 | Coca-Cola HBC AG | 770,775 | ||||||
66,376 | Davide Campari — Milano SpA | 561,715 | ||||||
295,670 | Diageo plc | 10,507,545 | ||||||
13,638 | Heineken Holding NV | 1,147,668 | ||||||
31,315 | Heineken NV | 2,759,644 | ||||||
100,900 | Kirin Holdings Co., Ltd. | 2,122,709 | ||||||
25,394 | Pernod Ricard SA | 4,169,061 | ||||||
2,993 | Remy Cointreau SA^ | 338,364 | ||||||
17,300 | Suntory Beverage & Food, Ltd. | 780,952 | ||||||
86,769 | Treasury Wine Estates, Ltd. | 904,206 | ||||||
|
| |||||||
35,150,945 | ||||||||
|
| |||||||
Biotechnology (1.2%): | ||||||||
3,935 | BeiGene, Ltd., ADR*^ | 551,923 | ||||||
54,463 | CSL, Ltd. | 7,111,147 | ||||||
7,548 | Genmab A/S* | 1,237,188 | ||||||
35,621 | Grifols SA | 930,304 | ||||||
110,576 | Shire plc | 6,425,135 | ||||||
|
| |||||||
16,255,697 | ||||||||
|
| |||||||
Building Products (0.7%): | ||||||||
21,000 | Asahi Glass Co., Ltd. | 651,703 | ||||||
122,018 | Assa Abloy AB, Class B | 2,182,788 | ||||||
59,455 | Compagnie de Saint-Gobain SA | 1,978,710 | ||||||
30,300 | Daikin Industries, Ltd. | 3,188,938 | ||||||
4,509 | Geberit AG, Registered Shares | 1,757,414 | ||||||
18,471 | Kingspan Group plc | 791,015 | ||||||
33,800 | Lixil Group Corp. | 422,049 | ||||||
17,300 | TOTO, Ltd. | 594,763 | ||||||
|
| |||||||
11,567,380 | ||||||||
|
| |||||||
Capital Markets (2.5%): | ||||||||
114,268 | 3i Group plc | 1,121,766 | ||||||
6,908 | Amundi SA | 363,134 | ||||||
22,992 | ASX, Ltd. | 971,422 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
307,202 | Credit Suisse Group AG | $ | 3,386,788 | |||||
190,300 | Daiwa Securities Group, Inc. | 970,453 | ||||||
232,275 | Deutsche Bank AG, Registered Shares^ | 1,853,340 | ||||||
23,482 | Deutsche Boerse AG | 2,823,495 | ||||||
34,899 | Hargreaves Lansdown plc | 822,148 | ||||||
143,393 | Hong Kong Exchanges & Clearing, Ltd. | 4,115,201 | ||||||
81,868 | Investec plc | 456,709 | ||||||
61,400 | Japan Exchange Group, Inc. | 986,205 | ||||||
27,246 | Julius Baer Group, Ltd. | 973,999 | ||||||
37,988 | London Stock Exchange Group plc | 1,960,072 | ||||||
38,375 | Macquarie Group, Ltd. | 2,935,834 | ||||||
114,848 | Natixis | 541,820 | ||||||
424,500 | Nomura Holdings, Inc. | 1,618,749 | ||||||
2,033 | Partners Group Holding AG | 1,236,226 | ||||||
24,390 | SBI Holdings, Inc. | 476,149 | ||||||
15,596 | Schroders plc | 483,611 | ||||||
94,500 | Singapore Exchange, Ltd. | 493,922 | ||||||
66,324 | St. James Place plc | 794,537 | ||||||
466,348 | UBS Group AG | 5,823,774 | ||||||
|
| |||||||
35,209,354 | ||||||||
|
| |||||||
Chemicals (3.4%): | ||||||||
51,457 | Air Liquide SA | 6,369,785 | ||||||
16,500 | Air Water, Inc. | 247,933 | ||||||
30,665 | AkzoNobel NV | 2,464,596 | ||||||
8,525 | Arkema SA | 727,396 | ||||||
153,700 | Asahi Kasei Corp. | 1,568,434 | ||||||
110,066 | BASF SE | 7,615,593 | ||||||
11,468 | Christian Hansen Holding A/S | 1,015,852 | ||||||
24,423 | Clariant AG | 450,816 | ||||||
23,590 | Covestro AG | 1,166,892 | ||||||
15,955 | Croda International plc | 947,579 | ||||||
30,000 | Daicel Chemical Industries, Ltd. | 308,333 | ||||||
1,002 | EMS-Chemie Holding AG | 477,315 | ||||||
19,549 | Evonik Industries AG | 488,195 | ||||||
8,204 | Fuchs Petrolub AG | 338,145 | ||||||
1,124 | Givaudan SA, Registered Shares | 2,608,089 | ||||||
11,300 | Hitachi Chemical Co., Ltd. | 168,790 | ||||||
203,908 | Incitec Pivot, Ltd. | 470,951 | ||||||
75,847 | Israel Chemicals, Ltd. | 431,756 | ||||||
22,625 | Johnson Matthey plc | 807,113 | ||||||
20,800 | JSR Corp. | 310,859 | ||||||
6,000 | Kaneka Corp. | 214,445 | ||||||
21,700 | Kansai Paint Co., Ltd. | 416,526 | ||||||
22,086 | Koninklijke DSM NV | 1,796,811 | ||||||
39,200 | Kuraray Co., Ltd. | 550,025 | ||||||
10,380 | Lanxess AG | 478,034 | ||||||
157,000 | Mitsubishi Chemical Holdings Corp. | 1,181,298 | ||||||
17,500 | Mitsubishi Gas Chemical Co., Inc. | 261,477 | ||||||
22,900 | Mitsui Chemicals, Inc. | 513,865 | ||||||
17,100 | Nippon Paint Holdings Co., Ltd. | 579,901 | ||||||
13,800 | Nissan Chemical Industries, Ltd. | 718,470 | ||||||
19,900 | Nitto Denko Corp. | 993,705 | ||||||
25,938 | Novozymes A/S, Class B | 1,159,623 | ||||||
45,774 | Orica, Ltd. | 555,996 | ||||||
44,000 | Shin-Etsu Chemical Co., Ltd. | 3,390,261 | ||||||
16,500 | Showa Denko K.K. | 484,044 | ||||||
15,600 | Sika AG | 1,983,464 |
See accompanying notes to the financial statements.
5
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
8,720 | Solvay SA | $ | 868,343 | |||||
188,000 | Sumitomo Chemical Co., Ltd. | 919,512 | ||||||
14,995 | Symrise AG | 1,107,963 | ||||||
18,300 | Taiyo Nippon Sanso Corp. | 301,346 | ||||||
20,600 | Teijin, Ltd. | 327,994 | ||||||
167,200 | Toray Industries, Inc. | 1,168,362 | ||||||
34,300 | Tosoh Corp. | 443,870 | ||||||
25,304 | Umicore SA^ | 1,006,280 | ||||||
21,014 | Yara International ASA | 807,146 | ||||||
|
| |||||||
51,213,183 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.5%): | ||||||||
33,762 | Babcock International Group plc | 210,546 | ||||||
193,689 | Brambles, Ltd. | 1,384,352 | ||||||
29,800 | Dai Nippon Printing Co., Ltd. | 620,137 | ||||||
27,464 | Edenred | 1,006,616 | ||||||
189,889 | G4S plc | 475,156 | ||||||
20,973 | ISS A/S | 585,541 | ||||||
13,800 | Park24 Co., Ltd. | 305,081 | ||||||
25,600 | SECOM Co., Ltd. | 2,113,910 | ||||||
37,221 | Securitas AB, Class B | 598,751 | ||||||
2,917 | Societe BIC SA | 297,128 | ||||||
9,500 | Sohgo Security Services Co., Ltd. | 447,328 | ||||||
30,500 | Toppan Printing Co., Ltd. | 446,421 | ||||||
|
| |||||||
8,490,967 | ||||||||
|
| |||||||
Communications Equipment (0.4%): | ||||||||
676,546 | Nokia OYJ | 3,908,487 | ||||||
365,504 | Telefonaktiebolaget LM Ericsson, Class B | 3,223,317 | ||||||
|
| |||||||
7,131,804 | ||||||||
|
| |||||||
Construction & Engineering (0.8%): | ||||||||
29,963 | ACS Actividades de Construccion y Servicios SA | 1,151,720 | ||||||
27,320 | Bouygues SA | 976,785 | ||||||
11,842 | Cimic Group, Ltd. | 361,969 | ||||||
9,614 | Eiffage SA | 804,204 | ||||||
59,237 | Ferrovial SA | 1,194,565 | ||||||
2,435 | Hochtief AG | 328,147 | ||||||
23,600 | JGC Corp. | 329,486 | ||||||
56,000 | Kajima Corp. | 750,773 | ||||||
74,200 | Obayashi Corp. | 666,353 | ||||||
67,700 | Shimizu Corp. | 556,454 | ||||||
40,197 | Skanska AB, Class B | 642,163 | ||||||
26,200 | TAISEI Corp. | 1,114,050 | ||||||
60,851 | Vinci SA | 4,999,921 | ||||||
|
| |||||||
13,876,590 | ||||||||
|
| |||||||
Construction Materials (0.4%): | ||||||||
132,135 | Boral, Ltd. | 459,630 | ||||||
100,294 | CRH plc | 2,643,437 | ||||||
96,309 | Fletcher Building, Ltd.* | 315,234 | ||||||
17,913 | HeidelbergCement AG | 1,095,373 | ||||||
4,174 | Imerys SA | 199,673 | ||||||
53,069 | James Hardie Industries SE | 565,021 | ||||||
59,539 | LafargeHolcim, Ltd., Registered Shares | 2,461,286 | ||||||
14,000 | Taiheiyo Cement Corp. | 430,946 | ||||||
|
| |||||||
8,170,600 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Consumer Finance (0.0%)†: | ||||||||
53,700 | ACOM Co., Ltd. | $ | 176,721 | |||||
13,000 | Aeon Credit Service Co., Ltd. | 233,561 | ||||||
21,100 | Credit Saison Co., Ltd. | 246,087 | ||||||
|
| |||||||
656,369 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
140,990 | Amcor, Ltd.^ | 1,315,493 | ||||||
27,630 | Smurfit Kappa Group plc | 733,651 | ||||||
18,400 | Toyo Seikan Kaisha, Ltd. | 419,791 | ||||||
|
| |||||||
2,468,935 | ||||||||
|
| |||||||
Distributors (0.0%)†: | ||||||||
13,588 | Jardine Cycle & Carriage, Ltd. | 350,856 | ||||||
|
| |||||||
Diversified Consumer Services (0.0%)†: | ||||||||
9,400 | Benesse Holdings, Inc. | 239,054 | ||||||
|
| |||||||
Diversified Financial Services (0.9%): | ||||||||
339,548 | AMP, Ltd. | 585,979 | ||||||
5,200 | Century Tokyo Leasing Corp. | 226,275 | ||||||
69,162 | Challenger, Ltd. | 462,192 | ||||||
5,337 | Eurazeo Se | 376,730 | ||||||
12,905 | EXOR NV | 697,257 | ||||||
10,102 | Groupe Bruxelles Lambert SA | 877,230 | ||||||
18,686 | Industrivarden AB, Class C | 379,285 | ||||||
55,450 | Investor AB, Class B | 2,358,098 | ||||||
28,149 | Kinnevik AB | 681,459 | ||||||
10,702 | L E Lundbergforetagen AB | 316,507 | ||||||
52,300 | Mitsubishi UFJ Lease & Finance Co., Ltd. | 250,636 | ||||||
161,200 | ORIX Corp. | 2,342,497 | ||||||
4,243 | Pargesa Holding SA | 306,636 | ||||||
268,737 | Standard Life Aberdeen plc | 879,182 | ||||||
3,280 | Wendel | 393,373 | ||||||
|
| |||||||
11,133,336 | ||||||||
|
| |||||||
Diversified Telecommunication Services (2.5%): | ||||||||
17,673 | Belgacom SA | 476,922 | ||||||
272,655 | Bezeq Israeli Telecommunication Corp., Ltd. (The) | 266,963 | ||||||
1,026,264 | BT Group plc | 3,106,055 | ||||||
398,974 | Deutsche Telekom AG, Registered Shares | 6,776,307 | ||||||
17,594 | Elisa OYJ | 728,481 | ||||||
238,129 | France Telecom SA | 3,852,967 | ||||||
429,525 | HKT Trust & HKT, Ltd. | 618,467 | ||||||
3,341 | Iliad SA | 466,867 | ||||||
409,316 | Koninklijke (Royal) KPN NV | 1,196,153 | ||||||
82,352 | Nippon Telegraph & Telephone Corp. | 3,353,507 | ||||||
471,000 | PCCW, Ltd. | 270,982 | ||||||
993,900 | Singapore Telecommunications, Ltd. | 2,132,446 | ||||||
3,090 | Swisscom AG, Registered Shares | 1,479,347 | ||||||
232,354 | Telecom Corp. of New Zealand, Ltd. | 645,148 | ||||||
724,011 | Telecom Italia SpA | 346,019 | ||||||
1,407,788 | Telecom Italia SpA* | 779,782 | ||||||
84,244 | Telefonica Deutschland Holding AG | 329,583 | ||||||
559,407 | Telefonica SA | 4,720,890 | ||||||
87,579 | Telenor ASA | 1,691,770 | ||||||
345,906 | Telia Co AB | 1,642,338 | ||||||
489,114 | Telstra Corp., Ltd. | 981,593 | ||||||
45,014 | TPG Telecom, Ltd. | 204,129 | ||||||
14,595 | United Internet AG, Registered Shares | 638,374 | ||||||
|
| |||||||
36,705,090 | ||||||||
|
|
See accompanying notes to the financial statements.
6
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electric Utilities (2.1%): | ||||||||
193,004 | AusNet Services | $ | 211,460 | |||||
74,400 | Chubu Electric Power Co., Inc. | 1,058,115 | ||||||
32,100 | Chugoku Electric Power Co., Inc. (The) | 416,257 | ||||||
78,570 | CK Infrastructure Holdings, Ltd. | 593,110 | ||||||
200,000 | CLP Holdings, Ltd. | 2,254,698 | ||||||
297,895 | EDP – Energias de Portugal SA | 1,039,047 | ||||||
69,262 | Electricite de France | 1,091,182 | ||||||
37,384 | Endesa SA^ | 860,297 | ||||||
975,385 | Enel SpA | 5,626,299 | ||||||
52,390 | Fortum OYJ | 1,148,867 | ||||||
283,500 | HK Electric Investments, Ltd.^ | 285,696 | ||||||
174,000 | Hongkong Electric Holdings, Ltd. | 1,208,086 | ||||||
733,030 | Iberdrola SA | 5,864,495 | ||||||
83,500 | Kansai Electric Power Co., Inc. (The) | 1,253,995 | ||||||
44,400 | Kyushu Electric Power Co., Inc. | 528,021 | ||||||
22,315 | Orsted A/S | 1,494,029 | ||||||
52,696 | Red Electrica Corporacion SA | 1,173,624 | ||||||
123,725 | Scottish & Southern Energy plc | 1,700,864 | ||||||
175,152 | Terna SpA | 994,136 | ||||||
53,700 | Tohoku Electric Power Co., Inc. | 705,931 | ||||||
179,400 | Tokyo Electric Power Co., Inc. (The)* | 1,061,070 | ||||||
8,213 | Verbund AG, Class A | 350,427 | ||||||
|
| |||||||
30,919,706 | ||||||||
|
| |||||||
Electrical Equipment (1.3%): | ||||||||
222,976 | ABB, Ltd. | 4,252,896 | ||||||
13,400 | Fuji Electric Holdings Co., Ltd. | 390,790 | ||||||
32,098 | Legrand SA | 1,806,344 | ||||||
588,117 | Melrose Industries plc | 1,217,654 | ||||||
217,400 | Mitsubishi Electric Corp. | 2,383,662 | ||||||
26,700 | Nidec Corp. | 3,060,366 | ||||||
13,146 | OSRAM Licht AG | 570,673 | ||||||
27,397 | Prysmian SpA | 531,152 | ||||||
65,876 | Schneider Electric SA | 4,482,712 | ||||||
28,762 | Siemens Gamesa Renewable Energy* | 348,448 | ||||||
23,956 | Vestas Wind Systems A/S | 1,819,320 | ||||||
|
| |||||||
20,864,017 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (1.4%): | ||||||||
23,100 | ALPS Electric Co., Ltd. | 446,205 | ||||||
17,500 | Hamamatsu Photonics K.K. | 592,196 | ||||||
31,183 | Hexagon AB, Class B | 1,440,102 | ||||||
3,914 | Hirose Electric Co., Ltd. | 387,416 | ||||||
7,800 | Hitachi High-Technologies Corp. | 243,336 | ||||||
117,620 | Hitachi, Ltd. | 3,126,979 | ||||||
6,865 | Ingenico Group | 388,225 | ||||||
11,640 | Keyence Corp. | 5,867,136 | ||||||
39,100 | Kyocera Corp. | 1,944,674 | ||||||
21,600 | Murata Manufacturing Co., Ltd. | 2,976,618 | ||||||
9,000 | Nippon Electric Glass Co., Ltd. | 218,863 | ||||||
23,100 | Omron Corp. | 832,710 | ||||||
27,200 | Shimadzu Corp. | 532,322 | ||||||
15,300 | TDK Corp. | 1,088,827 | ||||||
33,500 | Venture Corp., Ltd. | 339,583 | ||||||
28,000 | Yaskawa Electric Corp. | 678,165 | ||||||
26,600 | Yokogawa Electric Corp. | 456,324 | ||||||
|
| |||||||
21,559,681 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Energy Equipment & Services (0.0%)†: | ||||||||
79,478 | John Wood Group plc | $ | 508,798 | |||||
57,915 | Tenaris SA | 620,722 | ||||||
38,726 | WorleyParsons, Ltd. | 311,393 | ||||||
|
| |||||||
1,440,913 | ||||||||
|
| |||||||
Entertainment (0.7%): | ||||||||
14,900 | DeNA Co., Ltd. | 247,983 | ||||||
10,400 | Konami Corp. | 458,014 | ||||||
50,000 | Nexon Co., Ltd.* | 638,818 | ||||||
13,800 | Nintendo Co., Ltd. | 3,646,607 | ||||||
12,800 | Toho Co., Ltd. | 462,637 | ||||||
9,595 | UbiSoft Entertainment SA* | 769,654 | ||||||
126,063 | Vivendi Universal SA | 3,062,574 | ||||||
|
| |||||||
9,286,287 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (1.7%): | ||||||||
297,482 | Ascendas Real Estate Investment Trust | 559,486 | ||||||
112,428 | British Land Co. plc | 763,835 | ||||||
277,018 | CapitaLand Commercial Trust | 355,039 | ||||||
288,500 | CapitaMall Trust | 477,458 | ||||||
180 | Daiwahouse Residential Investment Corp. | 402,984 | ||||||
123,857 | Dexus Property Group | 926,095 | ||||||
3,975 | Fonciere des Regions SA | 382,636 | ||||||
5,326 | Gecina SA | 687,448 | ||||||
222,060 | GPT Group | 835,024 | ||||||
97,888 | Hammerson plc | 409,868 | ||||||
4,198 | ICADE | 319,089 | ||||||
110 | Japan Prime Realty Investment Corp. | 417,773 | ||||||
152 | Japan Real Estate Investment Corp. | 853,704 | ||||||
311 | Japan Retail Fund Investment Corp. | 622,801 | ||||||
24,464 | Klepierre | 753,098 | ||||||
90,248 | Land Securities Group plc | 925,000 | ||||||
257,000 | Link REIT (The) | 2,588,312 | ||||||
198,740 | Macquarie Goodman Group | 1,487,248 | ||||||
470,481 | Mirvac Group | 742,117 | ||||||
164 | Nippon Building Fund, Inc. | 1,032,976 | ||||||
208 | Nippon Prologis REIT, Inc. | 439,149 | ||||||
496 | Nomura Real Estate Master Fund, Inc. | 652,828 | ||||||
648,168 | Scentre Group | 1,779,956 | ||||||
127,104 | SERGO plc | 953,257 | ||||||
298,358 | Stockland Trust Group | 740,032 | ||||||
261,300 | Suntec REIT | 340,549 | ||||||
16,730 | Unibail — Rodamco-Westfield | 2,583,908 | ||||||
367 | United Urban Investment Corp. | 569,149 | ||||||
384,976 | Vicinity Centres | 704,737 | ||||||
|
| |||||||
24,305,556 | ||||||||
|
| |||||||
Food & Staples Retailing (1.7%): | ||||||||
74,500 | Aeon Co., Ltd. | 1,466,383 | ||||||
69,391 | Carrefour SA | 1,182,555 | ||||||
6,499 | Casino Guichard-Perrachon SA | 269,755 | ||||||
138,031 | Coles Group, Ltd.* | 1,141,146 | ||||||
6,698 | Colruyt SA | 477,083 | ||||||
41,500 | Dairy Farm International Holdings, Ltd. | 374,804 | ||||||
7,600 | FamilyMart Co., Ltd. | 960,285 | ||||||
8,638 | ICA Gruppen AB^ | 309,223 | ||||||
201,493 | J Sainsbury plc | 679,338 | ||||||
32,776 | Jeronimo Martins SGPS SA | 387,994 | ||||||
150,852 | Koninklijke Ahold Delhaize NV | 3,805,111 |
See accompanying notes to the financial statements.
7
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food & Staples Retailing, continued | ||||||||
6,600 | LAWSON, Inc. | $ | 419,131 | |||||
22,671 | METRO AG^ | 348,532 | ||||||
89,900 | Seven & I Holdings Co., Ltd. | 3,914,997 | ||||||
8,500 | Sundrug Co., Ltd. | 252,871 | ||||||
1,184,388 | Tesco plc | 2,869,499 | ||||||
4,200 | Tsuruha Holdings, Inc. | 360,321 | ||||||
5,700 | Welcia Holdings Co., Ltd. | 258,918 | ||||||
138,031 | Wesfarmers, Ltd. | 3,133,943 | ||||||
272,382 | William Morrison Supermarkets plc | 738,153 | ||||||
158,837 | Woolworths, Ltd. | 3,290,567 | ||||||
|
| |||||||
26,640,609 | ||||||||
|
| |||||||
Food Products (3.3%): | ||||||||
89,706 | A2 Milk Co., Ltd.* | 663,187 | ||||||
56,100 | Ajinomoto Co., Inc. | 995,381 | ||||||
42,480 | Associated British Foods plc | 1,104,647 | ||||||
270 | Barry Callebaut AG, Registered Shares | 420,039 | ||||||
8,800 | Calbee, Inc. | 275,047 | ||||||
12 | Chocoladefabriken Lindt & Spruengli AG, Registered Shares | 894,717 | ||||||
74,379 | Danone SA | 5,241,475 | ||||||
731,782 | Golden Agri-Resources, Ltd. | 131,207 | ||||||
19,301 | Kerry Group plc, Class A | 1,906,408 | ||||||
16,800 | Kikkoman Corp. | 901,702 | ||||||
129 | Lindt & Spruengli AG | 801,674 | ||||||
49,724 | Marine Harvest | 1,047,457 | ||||||
14,852 | Meiji Holdings Co., Ltd. | 1,210,390 | ||||||
368,242 | Nestle SA, Registered Shares | 29,950,576 | ||||||
11,500 | Nippon Meat Packers, Inc. | 432,363 | ||||||
23,345 | Nisshin Seifun Group, Inc. | 482,007 | ||||||
6,600 | Nissin Foods Holdings Co., Ltd. | 414,220 | ||||||
98,786 | Orkla ASA, Class A | 777,331 | ||||||
11,700 | Toyo Suisan Kaisha, Ltd. | 408,362 | ||||||
1,106,388 | WH Group, Ltd. | 843,704 | ||||||
218,900 | Wilmar International, Ltd. | 501,642 | ||||||
14,400 | Yakult Honsha Co., Ltd. | 1,009,758 | ||||||
13,600 | Yamazaki Baking Co., Ltd. | 284,934 | ||||||
|
| |||||||
50,698,228 | ||||||||
|
| |||||||
Gas Utilities (0.6%): | ||||||||
138,653 | APA Group | 829,891 | ||||||
41,856 | Gas Natural SDG SA | 1,061,733 | ||||||
1,116,525 | Hong Kong & China Gas Co., Ltd. | 2,304,459 | ||||||
46,000 | Osaka Gas Co., Ltd. | 840,651 | ||||||
8,300 | Toho Gas Co., Ltd. | 349,792 | ||||||
47,900 | Tokyo Gas Co., Ltd. | 1,211,536 | ||||||
|
| |||||||
6,598,062 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (1.6%): | ||||||||
11,800 | Asahi Intecc Co., Ltd. | 502,334 | ||||||
5,476 | bioMerieux | 360,916 | ||||||
7,060 | Cochlear, Ltd. | 857,698 | ||||||
14,462 | Coloplast A/S, Class B | 1,343,698 | ||||||
158,619 | Convatec Group plc | 280,131 | ||||||
34,814 | Essilor International SA Compagnie Generale d’Optique | 4,395,440 | ||||||
65,199 | Fisher & Paykel Healthcare Corp., Ltd. | 565,162 | ||||||
45,600 | HOYA Corp. | 2,787,558 | ||||||
114,544 | Koninklijke Philips Electronics NV | 4,036,330 | ||||||
34,400 | Olympus Co., Ltd. | 1,052,033 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
4,362 | Sartorius AG | $ | 544,638 | |||||
17,297 | Siemens Healthineers AG* | 724,119 | ||||||
106,478 | Smith & Nephew plc | 1,980,021 | ||||||
6,503 | Sonova Holding AG, Registered Shares | 1,060,755 | ||||||
1,291 | Straumann Holding AG, Registered Shares | 816,902 | ||||||
20,500 | Sysmex Corp. | 989,201 | ||||||
35,800 | Terumo Corp. | 2,011,499 | ||||||
12,129 | William Demant Holding A/S* | 343,902 | ||||||
|
| |||||||
24,652,337 | ||||||||
|
| |||||||
Health Care Providers & Services (0.5%): | ||||||||
21,700 | Alfresa Holdings Corp. | 561,484 | ||||||
26,243 | Fresenius Medical Care AG & Co., KGaA | 1,704,410 | ||||||
50,637 | Fresenius SE & Co. KGaA | 2,447,339 | ||||||
20,100 | Medipal Holdings Corp. | 434,856 | ||||||
12,751 | NMC Health plc | 445,664 | ||||||
17,336 | Ramsay Health Care, Ltd. | 704,724 | ||||||
44,167 | Ryman Healthcare, Ltd. | 317,286 | ||||||
47,400 | Sonic Healthcare, Ltd. | 737,974 | ||||||
8,570 | Suzuken Co., Ltd. | 439,907 | ||||||
|
| |||||||
7,793,644 | ||||||||
|
| |||||||
Health Care Technology (0.0%)†: | ||||||||
49,800 | M3, Inc. | 674,918 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.3%): | ||||||||
22,604 | Accor SA | 958,455 | ||||||
70,472 | Aristocrat Leisure, Ltd. | 1,076,060 | ||||||
20,456 | Carnival plc | 981,057 | ||||||
189,180 | Compass Group plc | 3,971,166 | ||||||
42,677 | Crown, Ltd. | 356,413 | ||||||
6,311 | Domino’s Pizza Enterprises, Ltd. | 180,644 | ||||||
6,425 | Flight Centre, Ltd. | 194,180 | ||||||
288,000 | Galaxy Entertainment Group, Ltd. | 1,807,810 | ||||||
755,757 | Genting Singapore, Ltd. | 541,154 | ||||||
62,988 | GVC Holdings plc | 541,305 | ||||||
22,316 | Intercontinental Hotels Group plc | 1,200,839 | ||||||
7,229 | McDonald’s Holdings Co., Ltd.^ | 308,033 | ||||||
30,267 | Melco Resorts & Entertainment, Ltd., ADR^ | 533,305 | ||||||
82,237 | Merlin Entertainments plc | 332,776 | ||||||
90,673 | MGM China Holdings, Ltd. | 152,636 | ||||||
24,500 | Oriental Land Co., Ltd. | 2,487,847 | ||||||
10,308 | Paddy Power plc | 844,379 | ||||||
294,332 | Sands China, Ltd. | 1,274,692 | ||||||
169,333 | Shangri-La Asia, Ltd. | 249,510 | ||||||
220,987 | SJM Holdings, Ltd. | 203,750 | ||||||
11,286 | Sodexo SA | 1,154,106 | ||||||
226,584 | Tabcorp Holdings, Ltd. | 684,466 | ||||||
50,001 | TUI AG | 717,478 | ||||||
21,731 | Whitbread plc | 1,264,814 | ||||||
191,600 | Wynn Macau, Ltd. | 412,318 | ||||||
|
| |||||||
22,429,193 | ||||||||
|
| |||||||
Household Durables (1.3%): | ||||||||
126,196 | Barratt Developments plc | 744,779 | ||||||
14,288 | Berkeley Group Holdings plc (The) | 633,649 | ||||||
24,800 | Casio Computer Co., Ltd. | 297,127 | ||||||
27,559 | Electrolux AB, Series B, B Shares | 584,222 | ||||||
49,568 | Husqvarna AB, Class B | 368,741 | ||||||
16,200 | Iida Group Holdings Co., Ltd. | 283,086 |
See accompanying notes to the financial statements.
8
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables, continued | ||||||||
36,700 | Nikon Corp. | $ | 543,914 | |||||
268,800 | Panasonic Corp. | 2,412,187 | ||||||
37,977 | Persimmon plc | 930,272 | ||||||
3,700 | Rinnai Corp. | 242,333 | ||||||
2,674 | SEB SA^ | 344,081 | ||||||
47,200 | Sekisui Chemical Co., Ltd. | 698,480 | ||||||
71,500 | Sekisui House, Ltd. | 1,048,463 | ||||||
25,700 | Sharp Corp. | 261,194 | ||||||
152,400 | Sony Corp. | 7,340,116 | ||||||
390,409 | Taylor Wimpey plc | 675,193 | ||||||
160,000 | Techtronic Industries Co., Ltd. | 843,405 | ||||||
|
| |||||||
18,251,242 | ||||||||
|
| |||||||
Household Products (0.8%): | ||||||||
73,784 | Essity AB, Class B | 1,814,172 | ||||||
12,252 | Henkel AG & Co. KGaA | 1,204,747 | ||||||
25,400 | Lion Corp. | 523,991 | ||||||
13,900 | Pigeon Corp. | 600,279 | ||||||
80,399 | Reckitt Benckiser Group plc | 6,138,811 | ||||||
49,700 | Unicharm Corp. | 1,605,881 | ||||||
|
| |||||||
11,887,881 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.0%)†: | ||||||||
16,500 | Electric Power Development Co., Ltd. | 390,868 | ||||||
168,699 | Meridian Energy, Ltd. | 383,871 | ||||||
23,752 | Uniper SE | 614,862 | ||||||
|
| |||||||
1,389,601 | ||||||||
|
| |||||||
Industrial Conglomerates (1.6%): | ||||||||
326,744 | CK Hutchison Holdings, Ltd. | 3,122,660 | ||||||
11,849 | DCC plc | 900,595 | ||||||
27,300 | Jardine Matheson Holdings, Ltd. | 1,900,842 | ||||||
27,600 | Jardine Strategic Holdings, Ltd. | 1,008,356 | ||||||
10,900 | Keihan Electric Railway Co., Ltd. | 443,448 | ||||||
171,300 | Keppel Corp., Ltd. | 744,435 | ||||||
168,834 | NWS Holdings, Ltd. | 346,508 | ||||||
24,400 | Seibu Holdings, Inc. | 423,303 | ||||||
137,200 | SembCorp Industries, Ltd. | 256,278 | ||||||
91,902 | Siemens AG, Registered Shares | 10,248,364 | ||||||
45,447 | Smiths Group plc | 786,737 | ||||||
79,300 | Toshiba Corp. | 2,251,410 | ||||||
|
| |||||||
22,432,936 | ||||||||
|
| |||||||
Insurance (5.4%): | ||||||||
23,585 | Admiral Group plc | 612,996 | ||||||
206,038 | AEGON NV | 957,686 | ||||||
21,897 | Ageas NV | 983,592 | ||||||
1,451,400 | AIA Group, Ltd. | 11,940,353 | ||||||
51,847 | Allianz SE, Registered Shares+ | 10,402,532 | ||||||
143,640 | Assicurazioni Generali SpA | 2,403,265 | ||||||
472,465 | Aviva plc | 2,253,052 | ||||||
233,137 | AXA SA | 5,022,396 | ||||||
5,631 | Baloise Holding AG, Registered Shares | 777,546 | ||||||
20,161 | CNP Assurances SA | 426,396 | ||||||
131,300 | Dai-ichi Life Insurance Co., Ltd. | 2,034,810 | ||||||
165,692 | Direct Line Insurance Group plc | 671,000 | ||||||
22,933 | Gjensidige Forsikring ASA | 357,425 | ||||||
7,419 | Hannover Rueck SE | 999,941 | ||||||
281,299 | Insurance Australia Group, Ltd. | 1,386,537 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Insurance, continued | ||||||||
191,700 | Japan Post Holdings Co., Ltd. | $ | 2,204,360 | |||||
725,337 | Legal & General Group plc | 2,128,016 | ||||||
124,272 | MAPFRE SA | 329,357 | ||||||
334,223 | Medibank Private, Ltd. | 604,843 | ||||||
57,811 | MS&AD Insurance Group Holdings, Inc. | 1,641,208 | ||||||
17,964 | Muenchener Rueckversicherungs-Gesellschaft AG | 3,919,773 | ||||||
40,725 | NKSJ Holdings, Inc. | 1,374,846 | ||||||
36,738 | NN Group NV | 1,459,207 | ||||||
64,066 | Poste Italiane SpA | 514,108 | ||||||
313,578 | Prudential plc | 5,601,862 | ||||||
162,166 | QBE Insurance Group, Ltd. | 1,153,335 | ||||||
122,220 | RSA Insurance Group plc | 797,330 | ||||||
52,736 | Sampo OYJ, Class A | 2,318,019 | ||||||
19,327 | SCOR SA | 870,325 | ||||||
19,400 | Sony Financial Holdings, Inc. | 360,140 | ||||||
155,949 | Suncorp-Metway, Ltd. | 1,386,931 | ||||||
4,021 | Swiss Life Holding AG, Registered Shares | 1,552,650 | ||||||
36,756 | Swiss Re AG | 3,378,589 | ||||||
68,236 | T&D Holdings, Inc. | 787,305 | ||||||
80,300 | Tokio Marine Holdings, Inc. | 3,817,628 | ||||||
15,770 | Tryg A/S | 397,040 | ||||||
18,167 | Zurich Insurance Group AG | 5,430,322 | ||||||
|
| |||||||
83,256,721 | ||||||||
|
| |||||||
Interactive Media & Services (0.1%): | ||||||||
118,034 | Auto Trader Group plc | 681,125 | ||||||
16,000 | Kakaku.com, Inc. | 281,428 | ||||||
8,800 | Line Corp.* | 300,863 | ||||||
6,156 | REA Group, Ltd. | 320,680 | ||||||
354,100 | Yahoo! Japan Corp. | 889,693 | ||||||
|
| |||||||
2,473,789 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.1%): | ||||||||
11,279 | Delivery Hero AG* | 418,825 | ||||||
100,700 | Rakuten, Inc. | 669,671 | ||||||
24,800 | Start Today Co., Ltd.^ | 447,701 | ||||||
13,258 | Zalando SE*^ | 340,670 | ||||||
|
| |||||||
1,876,867 | ||||||||
|
| |||||||
IT Services (0.7%): | ||||||||
52,341 | Amadeus IT Holding SA | 3,643,961 | ||||||
11,527 | Atos Origin SA | 937,754 | ||||||
19,541 | Capgemini SA | 1,928,921 | ||||||
54,245 | Computershare, Ltd. | 656,602 | ||||||
23,300 | Fujitsu, Ltd. | 1,460,895 | ||||||
13,846 | Nomura Research Institute, Ltd. | 509,046 | ||||||
77,000 | NTT Data Corp. | 841,377 | ||||||
7,600 | OBIC Co., Ltd. | 581,714 | ||||||
13,400 | Otsuka Corp. | 366,909 | ||||||
14,203 | Wirecard AG | 2,161,858 | ||||||
5,248 | Wix.com, Ltd.* | 474,104 | ||||||
|
| |||||||
13,563,141 | ||||||||
|
| |||||||
Leisure Products (0.2%): | ||||||||
24,200 | Namco Bandai Holdings, Inc. | 1,079,878 | ||||||
6,300 | Sankyo Co., Ltd. | 238,596 | ||||||
23,800 | Sega Sammy Holdings, Inc. | 335,664 | ||||||
8,500 | Shimano, Inc. | 1,208,561 | ||||||
16,900 | Yamaha Corp. | 717,612 | ||||||
|
| |||||||
3,580,311 | ||||||||
|
|
See accompanying notes to the financial statements.
9
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Life Sciences Tools & Services (0.4%): | ||||||||
1,385 | Eurofins Scientific SE | $ | 514,262 | |||||
9,066 | Lonza Group AG, Registered Shares | 2,357,911 | ||||||
26,582 | Qiagen NV* | 906,277 | ||||||
3,335 | Sartorius Stedim Biotech | 332,721 | ||||||
|
| |||||||
4,111,171 | ||||||||
|
| |||||||
Machinery (2.5%): | ||||||||
33,786 | Alfa Laval AB | 721,671 | ||||||
18,116 | Alstom SA | 729,572 | ||||||
44,900 | AMADA Co., Ltd. | 400,518 | ||||||
9,566 | Andritz AG^ | 439,981 | ||||||
81,749 | Atlas Copco AB, Class A | 1,954,099 | ||||||
45,586 | Atlas Copco AB, Class B | 1,000,024 | ||||||
120,476 | CNH Industrial NV | 1,083,714 | ||||||
11,300 | Daifuku Co., Ltd. | 509,449 | ||||||
81,749 | Epiroc AB, Class A* | 776,791 | ||||||
49,083 | Epiroc AB, Class B* | 439,601 | ||||||
23,000 | FANUC Corp. | 3,458,241 | ||||||
18,423 | GEA Group AG | 475,012 | ||||||
29,600 | Hino Motors, Ltd. | 278,000 | ||||||
12,300 | Hitachi Construction Machinery Co., Ltd. | 284,935 | ||||||
7,000 | Hoshizaki Electric Co., Ltd. | 428,859 | ||||||
18,100 | IHI Corp. | 496,894 | ||||||
23,100 | JTEKT Corp. | 255,668 | ||||||
17,100 | Kawasaki Heavy Industries, Ltd. | 363,684 | ||||||
8,541 | Kion Group AG | 433,435 | ||||||
112,400 | Komatsu, Ltd. | 2,394,639 | ||||||
41,174 | Kone OYJ, Class B | 1,961,152 | ||||||
121,100 | Kubota Corp. | 1,705,421 | ||||||
10,400 | Kurita Water Industries, Ltd. | 249,875 | ||||||
26,100 | Makita Corp. | 924,368 | ||||||
13,068 | Metso Corp. OYJ | 344,627 | ||||||
46,800 | Minebea Co., Ltd. | 672,140 | ||||||
35,000 | Misumi Group, Inc. | 730,545 | ||||||
36,600 | Mitsubishi Heavy Industries, Ltd. | 1,314,847 | ||||||
15,200 | Nabtesco Corp. | 327,087 | ||||||
30,200 | NGK Insulators, Ltd. | 407,166 | ||||||
42,400 | NSK, Ltd. | 363,532 | ||||||
137,436 | Sandvik AB | 1,967,573 | ||||||
4,746 | Schindler Holding AG | 943,283 | ||||||
2,413 | Schindler Holding AG, Registered Shares | 469,460 | ||||||
46,385 | SKF AB, Class B | 706,703 | ||||||
7,000 | SMC Corp. | 2,091,189 | ||||||
13,500 | Sumitomo Heavy Industries, Ltd. | 398,042 | ||||||
15,100 | THK Co., Ltd. | 280,640 | ||||||
190,306 | Volvo AB, Class B | 2,503,649 | ||||||
53,665 | Wartsila Corp. OYJ, Class B | 851,545 | ||||||
27,770 | Weir Group plc (The) | 456,518 | ||||||
321,450 | Yangzijiang Shipbuilding Holdings, Ltd. | 292,323 | ||||||
|
| |||||||
36,886,472 | ||||||||
|
| |||||||
Marine (0.2%): | ||||||||
445 | A.P. Moeller — Maersk A/S, Class A | 525,353 | ||||||
782 | A.P. Moeller — Maersk A/S, Class B | 987,099 | ||||||
6,505 | Kuehne & Nagel International AG, Registered Shares | 838,916 | ||||||
13,700 | Mitsui O.S.K. Lines, Ltd. | 297,706 | ||||||
17,000 | Nippon Yusen Kabushiki Kaisha^ | 263,446 | ||||||
|
| |||||||
2,912,520 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media (0.7%): | ||||||||
6,418 | Axel Springer AG | $ | 362,834 | |||||
12,400 | Cyberagent, Inc.^ | 484,264 | ||||||
25,877 | Dentsu, Inc. | 1,150,513 | ||||||
19,566 | Eutelsat Communications SA | 386,881 | ||||||
30,100 | Hakuhodo DY Holdings, Inc. | 427,175 | ||||||
153,234 | Informa plc | 1,228,550 | ||||||
431,852 | ITV plc | 685,238 | ||||||
8,903 | JCDecaux SA | 249,125 | ||||||
91,786 | Pearson plc | 1,094,058 | ||||||
29,053 | ProSiebenSat.1 Media AG | 516,661 | ||||||
24,874 | Publicis Groupe SA | 1,423,385 | ||||||
4,397 | RTL Group | 235,317 | ||||||
13,208 | Schibsted ASA, Class B | 400,974 | ||||||
44,292 | SES Global, Class A | 848,247 | ||||||
126,768 | Singapore Press Holdings, Ltd. | 217,874 | ||||||
6,267 | Telenet Group Holding NV | 290,892 | ||||||
152,029 | WPP plc | 1,632,586 | ||||||
|
| |||||||
11,634,574 | ||||||||
|
| |||||||
Metals & Mining (2.9%): | ||||||||
293,204 | Alumina, Ltd. | 470,608 | ||||||
125,578 | Anglo American plc^ | 2,775,609 | ||||||
50,760 | Antofagasta plc | 502,980 | ||||||
80,863 | ArcelorMittal | 1,668,228 | ||||||
353,395 | BHP Billiton, Ltd.^ | 8,524,370 | ||||||
253,266 | BHP Group plc | 5,293,994 | ||||||
61,180 | BlueScope Steel, Ltd. | 472,123 | ||||||
33,664 | Boliden AB | 732,581 | ||||||
187,428 | Fortescue Metals Group, Ltd.^ | 549,161 | ||||||
28,344 | Fresnillo plc | 309,739 | ||||||
1,374,288 | Glencore International plc | 5,068,095 | ||||||
23,000 | Hitachi Metals, Ltd. | 238,879 | ||||||
59,300 | JFE Holdings, Inc. | 943,641 | ||||||
36,000 | Kobe Steel, Ltd. | 249,366 | ||||||
7,500 | Maruichi Steel Tube, Ltd. | 236,077 | ||||||
12,800 | Mitsubishi Materials Corp. | 335,624 | ||||||
90,433 | Newcrest Mining, Ltd. | 1,392,938 | ||||||
92,548 | Nippon Steel Corp. | 1,582,770 | ||||||
162,267 | Norsk Hydro ASA | 734,939 | ||||||
141,537 | Rio Tinto plc | 6,747,576 | ||||||
45,215 | Rio Tinto, Ltd. | 2,500,285 | ||||||
599,520 | South32, Ltd. | 1,414,148 | ||||||
28,500 | Sumitomo Metal & Mining Co., Ltd. | 758,117 | ||||||
53,870 | ThyssenKrupp AG | 924,472 | ||||||
14,170 | Voestalpine AG | 423,735 | ||||||
|
| |||||||
44,850,055 | ||||||||
|
| |||||||
Multiline Retail (0.3%): | ||||||||
13,700 | Don Quijote Co., Ltd. | 850,013 | ||||||
80,935 | Harvey Norman Holdings, Ltd.^ | 180,254 | ||||||
37,900 | Isetan Mitsukoshi Holdings, Ltd. | 418,466 | ||||||
27,000 | J. Front Retailing Co., Ltd. | 312,125 | ||||||
186,344 | Marks & Spencer Group plc | 587,225 | ||||||
23,900 | MARUI GROUP Co., Ltd. | 462,239 | ||||||
17,038 | Next plc | 866,938 | ||||||
2,900 | Ryohin Keikaku Co., Ltd. | 705,868 | ||||||
17,500 | Takashimaya Co., Ltd. | 222,406 | ||||||
|
| |||||||
4,605,534 | ||||||||
|
|
See accompanying notes to the financial statements.
10
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Multi-Utilities (1.0%): | ||||||||
79,839 | AGL Energy, Ltd. | $ | 1,155,004 | |||||
681,724 | Centrica plc | 1,172,079 | ||||||
260,692 | E.ON AG | 2,576,984 | ||||||
222,350 | Engie Group | 3,177,424 | ||||||
16,217 | Innogy SE* | 689,739 | ||||||
404,657 | National Grid plc | 3,912,664 | ||||||
61,082 | RWE AG | 1,327,716 | ||||||
47,126 | Suez Environnement Co. | 621,055 | ||||||
65,629 | Veolia Environnement SA | 1,345,996 | ||||||
|
| |||||||
15,978,661 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (5.9%): | ||||||||
13,248 | AKER BP ASA | 335,716 | ||||||
2,401,780 | BP plc | 15,151,531 | ||||||
29,171 | Caltex Australia, Ltd. | 523,395 | ||||||
22,895 | Enagas SA | 618,140 | ||||||
305,017 | ENI SpA | 4,802,796 | ||||||
60,935 | Galp Energia SGPS SA | 964,789 | ||||||
16,100 | Idemitsu Kosan Co., Ltd. | 530,716 | ||||||
125,500 | INPEX Corp. | 1,120,139 | ||||||
399,220 | JX Holdings, Inc. | 2,092,744 | ||||||
9,900 | Koninklijke Vopak NV | 448,413 | ||||||
22,716 | Lundin Petroleum AB | 568,240 | ||||||
15,800 | Neste Oil OYJ | 1,219,760 | ||||||
160,365 | Oil Search, Ltd. | 808,508 | ||||||
17,133 | OMV AG | 749,249 | ||||||
214,003 | Origin Energy, Ltd.* | 974,942 | ||||||
162,471 | Repsol SA | 2,611,426 | ||||||
553,536 | Royal Dutch Shell plc, Class A | 16,244,077 | ||||||
450,532 | Royal Dutch Shell plc, Class B | 13,404,326 | ||||||
217,124 | Santos, Ltd. | 837,810 | ||||||
20,700 | Showa Shell Sekiyu K.K. | 289,920 | ||||||
277,004 | Snam SpA | 1,212,340 | ||||||
141,140 | Statoil ASA | 3,012,034 | ||||||
288,065 | Total SA | 15,215,829 | ||||||
12,993 | Washington H. Soul Pattinson & Co., Ltd. | 226,586 | ||||||
113,953 | Woodside Petroleum, Ltd. | 2,516,286 | ||||||
|
| |||||||
86,479,712 | ||||||||
|
| |||||||
Paper & Forest Products (0.3%): | ||||||||
44,707 | Mondi plc | 924,950 | ||||||
108,000 | OYI Paper Co., Ltd. | 552,853 | ||||||
67,076 | Stora Enso OYJ, Registered Shares | 776,517 | ||||||
64,963 | UPM-Kymmene OYJ | 1,651,614 | ||||||
|
| |||||||
3,905,934 | ||||||||
|
| |||||||
Personal Products (2.3%): | ||||||||
11,769 | Beiersdorf AG | 1,228,077 | ||||||
59,200 | Kao Corp. | 4,365,170 | ||||||
6,000 | Kobayashi Pharmaceutical Co., Ltd. | 410,973 | ||||||
3,600 | KOSE Corp. | 571,017 | ||||||
30,262 | L’Oreal SA | 6,945,756 | ||||||
10,700 | Pola Orbis Holdings, Inc. | 286,686 | ||||||
46,300 | Shiseido Co., Ltd. | 2,877,245 | ||||||
185,348 | Unilever NV | 10,069,507 | ||||||
136,408 | Unilever plc | 7,138,184 | ||||||
|
| |||||||
33,892,615 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Pharmaceuticals (8.0%): | ||||||||
225,100 | Astellas Pharma, Inc. | $ | 2,865,043 | |||||
152,257 | AstraZeneca plc | 11,384,868 | ||||||
111,781 | Bayer AG, Registered Shares | 7,749,967 | ||||||
26,900 | Chugai Pharmaceutical Co., Ltd. | 1,554,154 | ||||||
69,100 | Daiichi Sankyo Co., Ltd. | 2,221,670 | ||||||
17,600 | Dainippon Sumitomo Pharma Co., Ltd. | 566,913 | ||||||
29,900 | Eisai Co., Ltd. | 2,328,461 | ||||||
596,168 | GlaxoSmithKline plc | 11,313,331 | ||||||
7,816 | H. Lundbeck A/S | 342,814 | ||||||
7,300 | Hisamitsu Pharmaceutical Co., Inc. | 398,426 | ||||||
4,528 | Ipsen SA | 583,914 | ||||||
31,100 | Kyowa Hakko Kogyo Co., Ltd. | 584,481 | ||||||
15,624 | Merck KGaA | 1,611,844 | ||||||
31,000 | Mitsubishi Tanabe Pharma Corp. | 445,441 | ||||||
260,547 | Novartis AG, Registered Shares | 22,324,513 | ||||||
219,832 | Novo Nordisk A/S, Class B | 10,107,190 | ||||||
44,600 | Ono Pharmaceutical Co., Ltd. | 902,743 | ||||||
12,002 | Orion OYJ, Class B | 416,873 | ||||||
47,500 | Otsuka Holdings Co., Ltd. | 1,938,654 | ||||||
11,679 | Recordati SpA | 405,329 | ||||||
84,388 | Roche Holding AG | 20,875,474 | ||||||
136,004 | Sanofi-Aventis SA | 11,751,732 | ||||||
44,400 | Santen Pharmaceutical Co., Ltd. | 635,494 | ||||||
32,900 | Shionogi & Co., Ltd. | 1,865,806 | ||||||
4,400 | Taisho Pharmaceutical Holdings Co., Ltd. | 437,511 | ||||||
86,700 | Takeda Pharmacuetical Co., Ltd.^ | 2,942,199 | ||||||
110,461 | Teva Pharmaceutical Industries, Ltd., ADR* | 1,703,309 | ||||||
15,503 | UCB SA | 1,263,751 | ||||||
5,368 | Vifor Pharma AG | 582,869 | ||||||
|
| |||||||
122,104,774 | ||||||||
|
| |||||||
Professional Services (1.2%): | ||||||||
18,158 | Adecco SA, Registered Shares | 850,702 | ||||||
31,529 | Bureau Veritas SA | 640,288 | ||||||
109,162 | Experian plc | 2,652,747 | ||||||
18,808 | Intertek Group plc | 1,144,855 | ||||||
23,500 | Persol Holdings Co., Ltd. | 345,170 | ||||||
13,659 | Randstad Holding NV | 624,630 | ||||||
134,200 | Recruit Holdings Co., Ltd. | 3,213,290 | ||||||
239,196 | Reed Elsevier plc | 4,912,077 | ||||||
39,701 | Seek, Ltd. | 473,002 | ||||||
630 | SGS SA, Registered Shares | 1,419,971 | ||||||
7,034 | Teleperformance | 1,125,825 | ||||||
35,343 | Wolters Kluwer NV | 2,086,836 | ||||||
|
| |||||||
19,489,393 | ||||||||
|
| |||||||
Real Estate Management & Development (2.0%): | ||||||||
10,760 | AEON Mall Co., Ltd. | 172,166 | ||||||
93,252 | Aroundtown SA | 773,824 | ||||||
5,827 | Azrieli Group | 278,528 | ||||||
74,028 | BGP Holdings plc*(a) | 85 | ||||||
315,100 | CapitaLand, Ltd. | 716,824 | ||||||
47,400 | City Developments, Ltd. | 281,364 | ||||||
315,244 | CK Asset Holdings, Ltd. | 2,292,526 | ||||||
8,400 | Daito Trust Construction Co., Ltd. | 1,147,467 | ||||||
68,900 | Daiwa House Industry Co., Ltd. | 2,188,533 | ||||||
42,667 | Deutsche Wohnen AG | 1,955,443 | ||||||
124,000 | Hang Lung Group, Ltd. | 315,055 |
See accompanying notes to the financial statements.
11
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
235,000 | Hang Lung Properties, Ltd. | $ | 447,955 | |||||
152,597 | Henderson Land Development Co., Ltd. | 756,530 | ||||||
142,100 | Hongkong Land Holdings, Ltd. | 895,788 | ||||||
32,500 | Hulic Co., Ltd. | 290,867 | ||||||
73,000 | Hysan Development Co., Ltd. | 346,155 | ||||||
75,775 | Kerry Properties, Ltd. | 257,461 | ||||||
67,086 | Lend Lease Group | 547,129 | ||||||
145,000 | Mitsubishi Estate Co., Ltd. | 2,272,599 | ||||||
108,600 | Mitsui Fudosan Co., Ltd. | 2,406,622 | ||||||
732,623 | New World Development Co., Ltd. | 962,474 | ||||||
16,100 | Nomura Real Estate Holdings, Inc. | 293,788 | ||||||
388,601 | Sino Land Co., Ltd. | 661,378 | ||||||
43,000 | Sumitomo Realty & Development Co., Ltd. | 1,570,734 | ||||||
195,000 | Sun Hung Kai Properties, Ltd. | 2,765,079 | ||||||
57,964 | Swire Pacific, Ltd., Class A | 608,968 | ||||||
131,400 | Swire Properties, Ltd. | 459,194 | ||||||
8,817 | Swiss Prime Site AG | 714,638 | ||||||
59,600 | Tokyu Fudosan Holdings Corp. | 295,900 | ||||||
66,296 | UOL Group, Ltd. | 300,045 | ||||||
59,055 | Vonovia SE | 2,679,900 | ||||||
133,300 | Wharf Holdings, Ltd. (The) | 345,837 | ||||||
150,300 | Wharf Real Estate Investment Co., Ltd. | 893,481 | ||||||
95,897 | Wheelock & Co., Ltd. | 544,670 | ||||||
|
| |||||||
31,439,007 | ||||||||
|
| |||||||
Road & Rail (1.2%): | ||||||||
228,405 | Aurizon Holdings, Ltd. | 688,370 | ||||||
17,200 | Central Japan Railway Co. | 3,655,294 | ||||||
243,600 | ComfortDelGro Corp., Ltd. | 382,643 | ||||||
22,490 | DSV A/S | 1,483,282 | ||||||
36,813 | East Japan Railway Co. | 3,272,519 | ||||||
27,700 | Hankyu Hanshin Holdings, Inc. | 927,803 | ||||||
26,800 | Keihin Electric Express Railway Co., Ltd. | 441,583 | ||||||
12,400 | Keio Corp. | 725,831 | ||||||
15,700 | Keisei Electric Railway Co., Ltd. | 488,820 | ||||||
19,800 | Kintetsu Corp. | 856,946 | ||||||
18,800 | Kyushu Railway Co. | 633,443 | ||||||
174,994 | MTR Corp., Ltd. | 921,043 | ||||||
21,400 | Nagoya Railroad Co., Ltd. | 567,653 | ||||||
9,500 | Nippon Express Co., Ltd. | 527,839 | ||||||
36,900 | Odakyu Electric Railway Co., Ltd. | 808,798 | ||||||
22,000 | Tobu Railway Co., Ltd. | 590,182 | ||||||
59,200 | Tokyu Corp. | 962,264 | ||||||
19,200 | West Japan Railway Co. | 1,356,180 | ||||||
|
| |||||||
19,290,493 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (1.2%): | ||||||||
35,900 | ASM Pacific Technology, Ltd. | 344,032 | ||||||
49,593 | ASML Holding NV | 7,736,789 | ||||||
3,400 | Disco Corp. | 392,466 | ||||||
138,319 | Infineon Technologies AG | 2,751,994 | ||||||
40,183 | NXP Semiconductors NV | 2,944,611 | ||||||
96,600 | Renesas Electronics Corp.* | 443,133 | ||||||
11,300 | ROHM Co., Ltd. | 714,004 | ||||||
83,744 | STMicroelectronics NV | 1,194,914 | ||||||
27,200 | SUMCO Corp. | 306,745 | ||||||
19,100 | Tokyo Electron, Ltd. | 2,191,632 | ||||||
|
| |||||||
19,020,320 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Software (1.5%): | ||||||||
15,196 | Check Point Software Technologies, Ltd.* | $ | 1,559,869 | |||||
15,599 | Dassault Systemes SA | 1,841,474 | ||||||
51,306 | Micro Focus International plc | 896,588 | ||||||
7,396 | NICE Systems, Ltd.* | 801,836 | ||||||
5,100 | Oracle Corp. | 322,725 | ||||||
134,847 | Sage Group plc | 1,032,255 | ||||||
118,133 | SAP AG | 11,765,586 | ||||||
7,385 | Temenos Group AG | 890,344 | ||||||
14,300 | Trend Micro, Inc. | 774,036 | ||||||
|
| |||||||
19,884,713 | ||||||||
|
| |||||||
Specialty Retail (0.7%): | ||||||||
3,400 | ABC-Mart, Inc. | 188,334 | ||||||
4,197 | Dufry AG, Registered Shares | 398,767 | ||||||
7,000 | Fast Retailing Co., Ltd. | 3,581,248 | ||||||
107,470 | Hennes & Mauritz AB, Class B^ | 1,527,294 | ||||||
2,400 | Hikari Tsushin, Inc. | 377,592 | ||||||
132,795 | Industria de Diseno Textil SA | 3,384,890 | ||||||
254,638 | Kingfisher plc | 673,567 | ||||||
9,300 | Nitori Co., Ltd. | 1,155,367 | ||||||
2,400 | Shimamura Co., Ltd. | 184,494 | ||||||
28,900 | USS Co., Ltd. | 482,402 | ||||||
69,100 | Yamada Denki Co., Ltd. | 331,117 | ||||||
|
| |||||||
12,285,072 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.5%): | ||||||||
29,000 | Brother Industries, Ltd. | 425,729 | ||||||
119,900 | Canon, Inc. | 3,304,226 | ||||||
47,300 | Fujifilm Holdings Corp. | 1,825,496 | ||||||
54,700 | Konica Minolta Holdings, Inc. | 491,022 | ||||||
30,200 | NEC Corp. | 904,243 | ||||||
77,200 | Ricoh Co., Ltd. | 755,138 | ||||||
33,400 | Seiko Epson Corp. | 468,713 | ||||||
|
| |||||||
8,174,567 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (2.1%): | ||||||||
22,782 | Adidas AG | 4,760,127 | ||||||
21,600 | ASICS Corp. | 273,817 | ||||||
47,827 | Burberry Group plc | 1,052,086 | ||||||
63,157 | Compagnie Financiere Richemont SA | 4,060,591 | ||||||
3,856 | Hermes International SA | 2,132,257 | ||||||
7,713 | Hugo Boss AG | 475,628 | ||||||
9,046 | Kering | 4,233,082 | ||||||
33,386 | LVMH Moet Hennessy Louis Vuitton SA | 9,808,996 | ||||||
21,940 | Moncler SpA | 733,042 | ||||||
12,873 | Pandora A/S | 523,729 | ||||||
1,017 | Puma SE | 498,072 | ||||||
3,708 | Swatch Group AG (The), Class B | 1,085,199 | ||||||
6,517 | Swatch Group AG (The), Registered Shares | 377,916 | ||||||
74,486 | Yue Yuen Industrial Holdings, Ltd. | 237,707 | ||||||
|
| |||||||
30,252,249 | ||||||||
|
| |||||||
Tobacco (1.1%): | ||||||||
275,216 | British American Tobacco plc | 8,775,070 | ||||||
113,656 | Imperial Tobacco Group plc, Class A | 3,436,429 | ||||||
133,900 | Japan Tobacco, Inc. | 3,177,201 | ||||||
20,813 | Swedish Match AB, Class B | 820,998 | ||||||
|
| |||||||
16,209,698 | ||||||||
|
|
See accompanying notes to the financial statements.
12
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Trading Companies & Distributors (1.4%): | ||||||||
14,712 | AerCap Holdings NV* | $ | 582,595 | |||||
57,594 | Ashtead Group plc | 1,193,073 | ||||||
19,087 | Brenntag AG | 823,667 | ||||||
40,893 | Bunzl plc | 1,230,231 | ||||||
27,670 | Ferguson plc | 1,771,879 | ||||||
168,900 | ITOCHU Corp. | 2,849,047 | ||||||
191,900 | Marubeni Corp. | 1,335,584 | ||||||
162,800 | Mitsubishi Corp. | 4,443,894 | ||||||
200,300 | Mitsui & Co., Ltd. | 3,104,708 | ||||||
15,100 | MonotaRo Co., Ltd. | 368,284 | ||||||
36,905 | Rexel SA | 393,452 | ||||||
138,000 | Sumitomo Corp. | 1,947,034 | ||||||
25,900 | Toyota Tsushu Corp. | 761,844 | ||||||
|
| |||||||
20,805,292 | ||||||||
|
| |||||||
Transportation Infrastructure (0.5%): | ||||||||
8,217 | Aena SA | 1,273,847 | ||||||
3,600 | Aeroports de Paris | 680,587 | ||||||
60,758 | Atlantia SpA | 1,258,007 | ||||||
121,970 | Auckland International Airport, Ltd. | 585,289 | ||||||
4,779 | Fraport AG | 341,547 | ||||||
57,631 | Groupe Eurotunnel SA | 773,305 | ||||||
5,100 | Japan Airport Terminal Co., Ltd. | 176,148 | ||||||
12,000 | Kamigumi Co., Ltd. | 244,892 | ||||||
74,000 | SATS, Ltd. | 253,658 | ||||||
139,052 | Sydney Airport | 658,979 | ||||||
308,960 | Transurban Group | 2,535,935 | ||||||
|
| |||||||
8,782,194 | ||||||||
|
| |||||||
Water Utilities (0.1%): | ||||||||
29,897 | Severn Trent plc | 690,621 | ||||||
80,876 | United Utilities Group plc | 757,222 | ||||||
|
| |||||||
1,447,843 | ||||||||
|
| |||||||
Wireless Telecommunication Services (1.4%): | ||||||||
7,009 | Drillisch AG^ | 356,494 | ||||||
213,000 | KDDI Corp. | 5,076,501 | ||||||
7,641 | Millicom International Cellular SA, SDR | 485,130 | ||||||
158,500 | NTT DoCoMo, Inc. | 3,559,602 | ||||||
99,400 | SoftBank Group Corp. | 6,552,823 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Wireless Telecommunication Services, continued | ||||||||
58,618 | Tele2 AB | $ | 749,424 | |||||
3,227,558 | Vodafone Group plc | 6,270,604 | ||||||
|
| |||||||
23,050,578 | ||||||||
|
| |||||||
Total Common Stocks (Cost $1,364,424,277) | 1,495,696,393 | |||||||
|
| |||||||
Preferred Stocks (0.5%): | ||||||||
Automobiles (0.3%): | ||||||||
6,667 | Bayerische Motoren Werke AG (BMW), 6.47% | 474,425 | ||||||
18,156 | Porsche Automobil Holding SE, 3.41% | 1,074,712 | ||||||
22,454 | Volkswagen AG, 2.85%, 12/31/49 | 3,572,697 | ||||||
|
| |||||||
5,121,834 | ||||||||
|
| |||||||
Household Products (0.2%): | ||||||||
21,689 | Henkel AG & Co. KGaA, 1.88%, 2/21/19 | 2,368,102 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $6,409,154) | 7,489,936 | |||||||
|
| |||||||
Rights (0.0%)†: | ||||||||
Aerospace & Defense (0.0%)†: | ||||||||
9,588,056 | Rolls-Royce Holdings plc, Expires on 1/08/19* | 12,219 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.0%)†: | ||||||||
162,471 | Repsol SA, Expires on 1/10/19*^ | 74,450 | ||||||
|
| |||||||
Total Rights (Cost $88,450) | 86,669 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.1%): | ||||||||
783,135 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(b) | 783,135 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $783,135) | 783,135 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (1.6%) | ||||||||
Miscellaneous Investments (1.6%) | ||||||||
24,472,215 | Short-Term Investments(c) | 24,472,215 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 24,472,215 | ||||||
|
| |||||||
Total Investment Securities (Cost $1,396,177,231) — 100.5%(d) | 1,528,528,348 | |||||||
Net other assets (liabilities) — (0.5)% | (6,915,578 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 1,521,612,770 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
SDR—Swedish Depository Receipt
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $22,263,584. |
+ | Affiliated Securities |
† | Represents less than 0.05%. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.00% of the net assets of the fund. |
(b) | The rate represents the effective yield at December 31, 2018. |
(c) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
13
AZL International Index Fund
Schedule of Portfolio Investments
December 31, 2018
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 December 31, 2018: (Unaudited)
Country | Percentage | |||
Australia | 7.1 | % | ||
Austria | 0.2 | % | ||
Belgium | 0.9 | % | ||
Bermuda | 0.2 | % | ||
China | 0.1 | % | ||
Denmark | 1.7 | % | ||
Finland | 1.2 | % | ||
France | 10.2 | % | ||
Germany | 8.7 | % | ||
Hong Kong | 3.6 | % | ||
Ireland (Republic of) | 0.9 | % | ||
Isle of Man | — | %^ | ||
Israel | 0.5 | % | ||
Italy | 2.1 | % |
Country | Percentage | |||
Japan | 24.0 | % | ||
Luxembourg | 0.3 | % | ||
Netherlands | 4.0 | % | ||
New Zealand | 0.2 | % | ||
Norway | 0.7 | % | ||
Portugal | 0.2 | % | ||
Singapore | 1.3 | % | ||
Spain | 3.0 | % | ||
Sweden | 2.4 | % | ||
Switzerland | 9.0 | % | ||
United Arab Emirates | — | %^ | ||
United Kingdom | 15.9 | % | ||
United States | 1.6 | % | ||
|
| |||
100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
Futures Contracts
Cash of $1,005,085 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
ASX SPI 200 Index March Futures (Australian Dollar) | 3/21/19 | 20 | $ | 1,958,030 | $ | 4,104 | ||||||||||
DJ EURO STOXX 50 March Futures (Euro) | 3/15/19 | 200 | 6,813,990 | (159,502 | ) | |||||||||||
FTSE 100 Index March Futures (British Pounds) | 3/15/19 | 47 | 3,988,543 | (42,440 | ) | |||||||||||
SGX Nikkei 225 Index March Futures (Japanese Yen) | 3/7/19 | 46 | 4,183,822 | (16,919 | ) | |||||||||||
|
| |||||||||||||||
$ | (214,757 | ) | ||||||||||||||
|
|
See accompanying notes to the financial statements.
14
AZL International Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investments innon-affiliates, at cost | $ | 1,389,009,519 | |||
Investments in affiliates, at cost | 7,167,712 | ||||
|
| ||||
Investments innon-affiliates, at value* | $ | 1,518,125,816 | |||
Investments in affiliates, at value | 10,402,532 | ||||
Segregated cash for collateral | 1,005,085 | ||||
Interest and dividends receivable | 1,859,482 | ||||
Foreign currency, at value (cost $7,790,784) | 7,871,637 | ||||
Receivable for capital shares issued | 7,606 | ||||
Receivable for investments sold | 2,313,537 | ||||
Receivable for variation margin on futures contracts | 92,073 | ||||
Reclaims receivable | 5,880,363 | ||||
Prepaid expenses | 17,851 | ||||
|
| ||||
Total Assets | 1,547,575,982 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 304,268 | ||||
Payable for capital shares redeemed | 82,449 | ||||
Payable for collateral received on loaned securities | 24,472,215 | ||||
Manager fees payable | 460,441 | ||||
Administration fees payable | 12,806 | ||||
Distribution fees payable | 307,436 | ||||
Custodian fees payable | 14,640 | ||||
Administrative and compliance services fees payable | 4,843 | ||||
Transfer agent fees payable | 893 | ||||
Trustee fees payable | 1,855 | ||||
Other accrued liabilities | 301,366 | ||||
|
| ||||
Total Liabilities | 25,963,212 | ||||
|
| ||||
Net Assets | $ | 1,521,612,770 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 1,378,510,694 | |||
Total distributable earnings | 143,102,076 | ||||
|
| ||||
Net Assets | $ | 1,521,612,770 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 98,901,677 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 9,951,858 | ||||
Net Asset Value (offering and redemption price per share) | $ | 9.94 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 1,422,711,093 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 99,815,438 | ||||
Net Asset Value (offering and redemption price per share) | $ | 14.25 | |||
|
|
* | Includes securities on loan of $22,263,584. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends from non-affiliates | $ | 60,456,816 | |||
Dividends from affiliates | 517,999 | ||||
Income from securities lending | 687,110 | ||||
Foreign withholding tax | (6,115,766 | ) | |||
|
| ||||
Total Investment Income | 55,546,159 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 6,352,023 | ||||
Administration fees | 523,809 | ||||
Distribution fees — Class 2 | 4,236,033 | ||||
Custodian fees | 241,731 | ||||
Administrative and compliance services fees | 30,834 | ||||
Transfer agent fees | 12,849 | ||||
Trustee fees | 97,100 | ||||
Professional fees | 88,026 | ||||
Shareholder reports | 48,178 | ||||
Other expenses | 743,254 | ||||
|
| ||||
Total expenses | 12,373,837 | ||||
|
| ||||
Net Investment Income/(Loss) | 43,172,322 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 15,325,554 | ||||
Net realized gains/(losses) on affiliated securities | 358,439 | ||||
Net realized gains/(losses) on futures contracts | (1,655,925 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (306,457,129 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated securities | (1,832,365 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (229,585 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (294,491,011 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (251,318,689 | ) | ||
|
|
See accompanying notes to the financial statements.
15
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 43,172,322 | $ | 42,062,104 | ||||||
Net realized gains/(losses) on investments | 14,028,068 | 22,133,434 | ||||||||
Change in unrealized appreciation/depreciation on investments | (308,519,079 | ) | 347,613,875 | |||||||
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|
|
| |||||||
Change in net assets resulting from operations | (251,318,689 | ) | 411,809,413 | |||||||
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|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (6,939,175 | ) | (3,142,199 | ) | ||||||
Class 2 | (66,270,138 | ) | (29,993,552 | ) | ||||||
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|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (73,209,313 | ) | (33,135,751 | ) | ||||||
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|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 126,848 | 364,282 | ||||||||
Proceeds from dividends reinvested | 6,939,175 | 3,142,199 | ||||||||
Value of shares redeemed | (17,191,782 | ) | (20,249,269 | ) | ||||||
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|
|
| |||||||
Total Class 1 Shares | (10,125,759 | ) | (16,742,788 | ) | ||||||
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|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 39,282,271 | 122,065,809 | ||||||||
Proceeds from dividends reinvested | 66,270,138 | 29,993,552 | ||||||||
Value of shares redeemed | (244,059,352 | ) | (247,926,849 | ) | ||||||
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|
|
| |||||||
Total Class 2 Shares | (138,506,943 | ) | (95,867,488 | ) | ||||||
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|
|
| |||||||
Change in net assets resulting from capital transactions | (148,632,702 | ) | (112,610,276 | ) | ||||||
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|
|
| |||||||
Change in net assets | (473,160,704 | ) | 266,063,386 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 1,994,773,474 | 1,728,710,088 | ||||||||
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|
|
| |||||||
End of period | $ | 1,521,612,770 | $ | 1,994,773,474 | ||||||
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| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 10,697 | 34,123 | ||||||||
Dividends reinvested | 643,708 | 267,649 | ||||||||
Shares redeemed | (1,460,097 | ) | (1,769,550 | ) | ||||||
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|
|
| |||||||
Total Class 1 Shares | (805,692 | ) | (1,467,778 | ) | ||||||
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|
| |||||||
Class 2 | ||||||||||
Shares issued | 2,427,714 | 7,560,049 | ||||||||
Dividends reinvested | 4,283,784 | 1,815,590 | ||||||||
Shares redeemed | (14,584,666 | ) | (15,536,341 | ) | ||||||
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|
|
| |||||||
Total Class 2 Shares | (7,873,168 | ) | (6,160,702 | ) | ||||||
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|
| |||||||
Change in shares | (8,678,860 | ) | (7,628,480 | ) | ||||||
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|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
16
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016^ | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.30 | $ | 10.07 | $ | 10.00 | |||||||||||||||||||
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| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.36 | 0.37 | 0.12 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (2.00 | ) | 2.15 | (0.05 | ) | ||||||||||||||||||||
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Total from Investment Activities | (1.64 | ) | 2.52 | 0.07 | |||||||||||||||||||||
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Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.50 | ) | (0.16 | ) | — | ||||||||||||||||||||
Net Realized Gains | (0.22 | ) | (0.13 | ) | — | ||||||||||||||||||||
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Total Dividends | (0.72 | ) | (0.29 | ) | — | ||||||||||||||||||||
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Net Asset Value, End of Period | $ | 9.94 | $ | 12.30 | $ | 10.07 | |||||||||||||||||||
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| ||||||||||||||||||||
Total Return(a) | (13.80 | )% | 25.12 | % | 0.70 | %(b) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 98,902 | $ | 132,265 | $ | 123,158 | |||||||||||||||||||
Net Investment Income/(Loss)(c) | 2.62 | % | 2.48 | % | 1.19 | % | |||||||||||||||||||
Expenses Before Reductions(c)(d) | 0.45 | % | 0.48 | % | 0.40 | % | |||||||||||||||||||
Expenses Net of Reductions(c) | 0.45 | % | 0.48 | % | 0.40 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 2 | % | 8 | % | 55 | %(f) | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 17.30 | $ | 14.10 | $ | 14.42 | $ | 15.28 | $ | 16.57 | |||||||||||||||
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Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.43 | 0.36 | 0.15 | 0.58 | 0.42 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (2.81 | ) | 3.12 | (0.10 | ) | (0.79 | ) | (1.41 | ) | ||||||||||||||||
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| ||||||||||||||||
Total from Investment Activities | (2.38 | ) | 3.48 | 0.05 | (0.21 | ) | (0.99 | ) | |||||||||||||||||
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Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.45 | ) | (0.15 | ) | (0.37 | ) | (0.65 | ) | (0.30 | ) | |||||||||||||||
Net Realized Gains | (0.22 | ) | (0.13 | ) | — | — | — | ||||||||||||||||||
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Total Dividends | (0.67 | ) | (0.28 | ) | (0.37 | ) | (0.65 | ) | (0.30 | ) | |||||||||||||||
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Net Asset Value, End of Period | $ | 14.25 | $ | 17.30 | $ | 14.10 | $ | 14.42 | $ | 15.28 | |||||||||||||||
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Total Return(a) | (14.04 | )% | 24.77 | % | 0.37 | % | (1.39 | )% | (6.18 | )% | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 1,422,711 | $ | 1,862,508 | $ | 1,605,552 | $ | 576,330 | $ | 863,302 | |||||||||||||||
Net Investment Income/(Loss) | 2.36 | % | 2.21 | % | 2.11 | % | 2.16 | % | 2.88 | % | |||||||||||||||
Expenses Before Reductions(d) | 0.70 | % | 0.73 | % | 0.71 | % | 0.75 | % | 0.75 | % | |||||||||||||||
Expenses Net of Reductions | 0.70 | % | 0.73 | % | 0.71 | % | 0.74 | % | 0.75 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 2 | % | 8 | % | 55 | %(f) | 13 | % | 3 | % |
^ | Class 1 activity is for the period October 17, 2016 (commencement of operations) to December 31, 2016. |
(a) | 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. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized for periods less than one year. |
(d) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. Not annualized for periods less than one year. |
(f) | 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 55%. |
See accompanying notes to the financial statements.
17
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL International Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
18
AZL International Index Fund
Notes to the Financial Statements
December 31, 2018
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $68,183 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $23,398,976 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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 $20.3 million for the year ended December 31, 2018. 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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 4,104 | Payable for variation margin on futures contracts | $ | 218,861 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities as Variation margin on futures contracts. |
19
AZL International Index Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) on Derivatives Recognized | Change in Net Unrealized Derivatives Recognized | |||||||
Equity Risk | ||||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/Change in net unrealized appreciation/depreciation on futures contracts | $ | (1,655,925 | ) | $ | (229,585 | ) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (1,715,781 | ) | ||
Class 2 | (16,020,466 | ) | |||
From net realized gains | |||||
Class 1 | (1,426,418 | ) | |||
Class 2 | (13,973,086 | ) | |||
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| ||||
Change in net assets resulting from distributions to shareholders | $ | (33,135,751 | ) | ||
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|
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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL International Index Fund Class 1 | 0.35 | % | 0.52 | % | ||||||
AZL International Index Fund Class 2 | 0.35 | % | 0.77 | % |
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
At December 31, 2018, the following investments are noted as Affiliated Securities in the Fund’s Schedule of Portfolio Investments.
20
AZL International Index Fund
Notes to the Financial Statements
December 31, 2018
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | |||||||||||||||||||||||||||||||||
Allianz SE, Registered Shares | $ | 13,471,678 | $ | — | $ | (1,595,220 | ) | $ | 358,439 | $ | (1,832,365 | ) | $ | 10,402,532 | 51,847 | $ | 517,999 | |||||||||||||||||||||||
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$ | 13,471,678 | $ | — | $ | (1,595,220 | ) | $ | 358,439 | $ | (1,832,365 | ) | $ | 10,402,532 | 51,847 | $ | 517,999 | ||||||||||||||||||||||||
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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 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 value 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 anannual 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 year ended December 31, 2018, $14,714 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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
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AZL International Index Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | ||||||||||||||||||||
Biotechnology | $ | 551,923 | $ | 15,703,774 | $ | — | $ | 16,255,697 | ||||||||||||
Food & Staples Retailing | 1,141,146 | 25,499,463 | — | 26,640,609 | ||||||||||||||||
Hotels, Restaurants & Leisure | 533,305 | 21,895,888 | — | 22,429,193 | ||||||||||||||||
IT Services | 474,104 | 13,089,037 | — | 13,563,141 | ||||||||||||||||
Pharmaceuticals | 1,703,309 | 120,401,465 | — | 122,104,774 | ||||||||||||||||
Real Estate Management & Development | — | 31,438,922 | 85 | 31,439,007 | ||||||||||||||||
Semiconductors & Semiconductor Equipment | 2,944,611 | 16,075,709 | — | 19,020,320 | ||||||||||||||||
Software | 1,559,869 | 18,324,844 | — | 19,884,713 | ||||||||||||||||
Trading Companies & Distributors | 582,595 | 20,222,697 | — | 20,805,292 | ||||||||||||||||
All Other Common Stocks+ | — | 1,203,553,647 | — | 1,203,553,647 | ||||||||||||||||
Preferred Stocks | ||||||||||||||||||||
Automobiles | — | 5,121,834 | — | 5,121,834 | ||||||||||||||||
Household Products | — | 2,368,102 | — | 2,368,102 | ||||||||||||||||
Rights | — | 86,669 | — | 86,669 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 24,472,215 | — | 24,472,215 | ||||||||||||||||
Unaffiliated Investment Company | 783,135 | — | — | 783,135 | ||||||||||||||||
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Total Investment Securities | 10,273,997 | 1,518,254,266 | 85 | 1,528,528,348 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | (214,757 | ) | — | — | (214,757 | ) | ||||||||||||||
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Total Investments | $ | 10,059,240 | $ | 1,518,254,266 | $ | 85 | $ | 1,528,313,591 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL International Index Fund | $ | 41,277,410 | $ | 224,794,924 |
6. Investment Risks
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 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.
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.
22
AZL International Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 is $1,435,506,536. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 189,339,259 | ||
Unrealized (depreciation) | (96,317,447 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 93,021,812 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL International Index Fund | $ | 53,411,357 | $ | 19,797,956 | $ | 73,209,313 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL International Index Fund | $ | 17,736,247 | $ | 15,399,504 | $ | 33,135,751 |
(a) | Total distributions paid may differ from the 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/ | Total Earnings/ | |||||||||||||||||||||
AZL International Index Fund | $ | 39,883,105 | $ | 10,099,174 | $ | — | $ | 93,119,797 | $ | 143,102,076 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and mark-to-market of PFIC investments. |
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 35% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL International Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL International Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $4,072,004.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $19,797,956.
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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 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-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 calling800-SEC-0330.
26
Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
27
Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
28
The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
29
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
30
Officers
Name, Address, and Age | Positions FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
31
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® MetWest Total Return Bond Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 14
Page 14
Statements of Changes in Net Assets
Page 15
Page 16
Notes to the Financial Statements
Page 17
Report of Independent Registered Public Accounting Firm
Page 25
Page 26
Approval of Investment Advisory and Subadvisory Agreements
Page 27
Information about the Board of Trustees and Officers
Page 30
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® MetWest Total Return Bond Fund (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® MetWest Total Return Bond Fund and Metropolitan West Asset Management, LLC serves as Subadviser to the Fund.
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What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® MetWest Total Return Bond Fund (the “Fund”) returned-0.21%. That compared to a 0.01% total return for its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index1 (“Index”).
Rising interest rates weighed on fixed income markets in the first part of 2018, as the U.S. Federal Reserve Board continued to normalize interest rates and remove liquidity from the markets. Investment-grade credit faced challenges as performance weakened on growing concerns about leverage, poor underwriting, deteriorating liquidity conditions, and the broader macroeconomic outlook. However, fixed income markets recovered at the end of the year amid asell-off in equities that drove aflight-to-safety rally in interest rates.
The Fund’s duration profile contributed to its relative performance during the year. As rates rose in 2018, the Fund’s duration was extended through dollar cost averaging from 0.3 years short of the Index at the beginning of the year to 0.2 years long byyear-end, due to better yield compensation. The Fund benefited from rising rates over the first half of the year and from its long position when rates fell during the fourth quarter.*
A defensive positioning in corporate credit also contributed to the Fund’s returns relative to the Index. The sector suffered significant spread widening in the latter part of the year, lagging the broader fixed income market as investment-grade spreads expanded by 60 basis points (0.60%).
The Fund’s allocation to securitized products benefited performance during the year. In particular, the Fund’s overweight position in federally guaranteed student loans helped relative results as spreads remained consistently narrow throughout the year. An overweight position in non-agency mortgage-backed securities also boosted relative performance, due to improving fundamentals that supported the sector’s positive performance.*
Compared to the Index, the Fund’s positioning continued to favor regulated sectors such as senior issues of U.S. banks and utilities. However, the Fund’s overweight position in banks detracted from relative performance as bank spreads widened along with the broader corporate credit markets, weighed down by subordinated issues. Meanwhile, bonds more senior in the capital structure performed relatively better.*
The Fund was able to take advantage of spread widening late in the year, adding selectively in industries such as autos and manufacturing, which led to overweight positions in these areas compared to the Index. Despite the attractive levels at which the Fund made these additions, they resulted in a drag on relative performance as spreads continued to widen late in the fourth quarter.*
The Fund held derivatives in the form of futures and currency swaps during the period under review. Neither of these holdings materially impacted performance.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
1
AZL® MetWest Total Return Bond Fund (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to maximize long-term total return. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in investment-grade fixed income securities or unrated securities that are determined by the Subadvisor to be of similar quality. | ||||
Investment Concerns | ||||
Bonds offer a relatively stable level of income, although bond prices will fluctuate, providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. | ||||
Emerging market investing may be subject to additional economic, political, liquidity, and currency risks not associated with more developed countries. | ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. | ||||
Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities. | ||||
High-yield bonds have a higher risk of default or other adverse credit events, but have the potential to pay higher earnings over investment-grade bonds. The higher risk of default, or the inability of the creditor to repay its debt, is the primary reason for the higher interest rates on high-yield bonds. | ||||
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Since | ||||||||||||
1 | 3 | Inception | ||||||||||
Year | Year | (11/17/14) | ||||||||||
AZL®MetWest Total Return Bond Fund | -0.21 | % | 1.73 | % | 1.38 | % | ||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 0.01 | % | 2.06 | % | 1.82 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®MetWest Total Return Bond Fund | 0.91 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.50% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.91% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Bloomberg Barclays U.S. Aggregate Bond Index, which is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL MetWest Total Return Bond Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL MetWest Total Return Bond 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL MetWest Total Return Bond Fund | $ | 1,000.00 | $ | 1,013.80 | $ | 4.31 | 0.85 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL MetWest Total Return Bond Fund | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 | 0.85 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
U.S. Government Agency Mortgages | 31.1 | % | |||
Corporate Bonds | 27.1 | ||||
U.S. Treasury Obligations | 19.8 | ||||
Collateralized Mortgage Obligations | 10.8 | ||||
Asset Backed Securities | 6.2 | ||||
Yankee Dollars | 4.1 | ||||
Municipal Bonds | 1.6 | ||||
Foreign Bonds | 1.1 | ||||
Money Markets | 1.0 | ||||
Commercial Paper | 0.2 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 0.1 | ||||
|
| ||||
Total Investment Securities | 103.1 | ||||
Net other assets (liabilities) | (3.1 | ) | |||
|
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Net Assets | 100.0 | % | |||
|
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3
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Asset Backed Securities (6.2%): | ||||||||
$ | 224,120 | Goal Capital Funding Trust, Class A3, Series2005-2, 2.85%(US0003M+17bps), 5/28/30, Callable 8/25/20 @ 100 | $ | 223,795 | ||||
632,699 | Navient Student Loan Trust, Class A, Series2014-2, 3.15%(US0001M+64bps), 3/25/83, Callable 10/25/33 @ 100 | 629,131 | ||||||
620,902 | Navient Student Loan Trust, Class A, Series2014-3, 3.13%(US0001M+62bps), 3/25/83, Callable 11/25/32 @ 100 | 613,934 | ||||||
408,260 | Navient Student Loan Trust, Class A, Series2014-4, 3.13%(US0001M+62bps), 3/25/83, Callable 2/25/33 @ 100 | 402,862 | ||||||
775,872 | Navient Student Loan Trust, Class A, Series2016-1A, 3.21%(US0001M+70bps), 2/25/70, Callable 7/25/33 @ 100(a) | 773,880 | ||||||
965,000 | Navient Student Loan Trust, Class A3, Series2016-2, 4.01%(US0001M+150bps), 6/25/65, Callable 10/25/30 @ 100(a) | 997,164 | ||||||
950,000 | Navient Student Loan Trust, Class A3,Series 2017-3A, 3.56%(US0001M+105bps), 7/26/66, Callable 1/25/34 @ 100(a) | 959,617 | ||||||
1,102,805 | Nelnet Student Loan Trust, Class A2,Series 2015-2A, 3.11%(US0001M+60bps), 9/25/47, Callable 6/25/32 @ 100(a) | 1,092,917 | ||||||
2,615,000 | SLC Student Loan Trust, Class 2A3, Series2006-1, 2.95%(US0003M+16bps), 3/15/55, Callable 6/15/30 @ 100 | 2,479,367 | ||||||
1,175,063 | SLC Student Loan Trust, Class 2A3, Series2008-1, 4.39%(US0003M+160bps), 12/15/32, Callable 9/15/27 @ 100 | 1,203,297 | ||||||
695,332 | SLM Student Loan Trust, Class 2A3, Series2003-7, 3.36%(US0003M+57bps), 9/15/39, Callable 3/15/29 @ 100 | 665,264 | ||||||
940,000 | SLM Student Loan Trust, Class A6A, Series2004-3A, 3.04%(US0003M+55bps), 10/25/64, Callable 1/25/29 @ 100(a) | 943,162 | ||||||
469,060 | SLM Student Loan Trust, Class A4, Series2007-6, 2.87%(US0003M+38bps), 10/25/24, Callable 1/25/34 @ 100 | 469,151 | ||||||
795,774 | SLM Student Loan Trust, Class A4, Series2007-7, 2.82%(US0003M+33bps), 1/25/22, Callable 7/25/22 @ 100 | 781,374 | ||||||
1,220,000 | SLM Student Loan Trust, Class 2A3, Series2008-5, 4.34%(US0003M+185bps), 7/25/73, Callable 10/25/24 @ 100 | 1,247,178 | ||||||
1,208,166 | SLM Student Loan Trust, Class A4, Series2008-6, 3.59%(US0003M+110bps), 7/25/23, Callable 7/25/23 @ 100 | 1,217,092 | ||||||
809,487 | SLM Student Loan Trust, Class A, Series2008-9, 3.99%(US0003M+150bps), 4/25/23, Callable 10/25/24 @ 100 | 813,713 | ||||||
240,000 | SLM Student Loan Trust, Class 2A3, Series2008-9, 4.74%(US0003M+225bps), 10/25/83, Callable 10/25/24 @ 100 | 249,506 | ||||||
1,380,224 | SLM Student Loan Trust, Class A, Series2009-3, 3.26%(US0001M+75bps), 1/25/45, Callable 2/25/34 @ 100(a) | 1,372,151 |
Principal Amount | Fair Value | |||||||
Asset Backed Securities, continued | ||||||||
$ | 790,566 | SLM Student Loan Trust, Class A3, Series2012-1, 3.46%(US0001M+95bps), 9/25/28, Callable 5/25/26 @ 100 | $ | 791,824 | ||||
1,970,000 | Wachovia Student Loan Trust, Class 2A3,Series 2006-1, 2.66%(US0003M+17bps), 4/25/40, Callable 1/25/26 @ 100(a) | 1,937,272 | ||||||
|
| |||||||
Total Asset Backed Securities (Cost $19,592,635) | 19,863,651 | |||||||
|
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Collateralized Mortgage Obligations (10.8%): | ||||||||
850,000 | AIMCO CLO, Class AR, Series2015-AA, 3.29%(US0003M+85bps), 1/15/28, Callable 1/15/19 @ 100(a) | 836,188 | ||||||
1,655,306 | Alternative Loan Trust, Class 4A1, Series2005-56, 2.63%(US0001M+31bps), 11/25/35, Callable 5/25/19 @ 100 | 1,602,873 | ||||||
1,212,300 | America Home Mortgage Investment Trust, Class 6A, Series2005-1, 4.89%(US0006M+200bps), 6/25/45, Callable 1/25/19 @ 100 | 1,235,388 | ||||||
379,861 | Ameriquest Mortgage Securities, Inc., Class M2, Series2005-R5, 3.20%(US0001M+46bps), 7/25/35, Callable 1/25/19 @ 100 | 380,154 | ||||||
69,336 | Ameriquest Mortgage Securities, Inc., Class M2, Series2005-R5, 3.23%(US0001M+72bps), 4/25/35, Callable 1/25/19 @ 100 | 69,347 | ||||||
515,000 | Bank of America Merrill Lynch Large Loan, Inc., Class A, Series 2018-PARK, 4.09%, 8/10/38(a)(b) | 536,687 | ||||||
499,763 | Bank of America Mortgage Securities, Inc., Class 2A3, Series2005-F, 4.24%, 7/25/35, Callable 1/25/19 @ 100(b) | 468,639 | ||||||
340,000 | Barclays Commercial Mortgages Securities, Class A2, Series 2013-TYSNC, 3.76%, 9/5/32(a) | 342,591 | ||||||
360,000 | CGRBS Commercial Mortgage Trust, Class A, Series 2013-VN05, 3.37%, 3/13/35(a) | 363,933 | ||||||
1,139,264 | Citigroup Mortgage Loan Trust, Inc., Class 1A1A, Series2007-AR5, 4.25%, 4/25/37, Callable 6/25/30 @ 100(b) | 1,128,395 | ||||||
500,000 | Cityline Commercial Mortgage Trust, Class A, Series 2016-CLNE, 2.78%, 11/10/31(a)(b) | 489,852 | ||||||
390,000 | Commercial Mortgage Trust, Class A,Series 2014-277P, 3.61%, 8/10/49(a)(b) | 395,374 | ||||||
360,000 | Commercial Mortgage Trust, Class A1,Series 2013-300P, 4.35%, 8/10/30(a) | 378,078 | ||||||
365,000 | Commercial Mortgage Trust, Class A,Series 2016-787S, 3.55%, 2/10/36(a)(b) | 362,712 | ||||||
341,522 | Core Industrial Trust, Class A, Series 2015-CALW, 3.04%, 2/10/34(a) | 340,411 | ||||||
342,411 | Core Industrial Trust, Class A, Series 2015-TEXW, 3.08%, 2/10/34(a) | 340,971 | ||||||
1,051,486 | Credit Suisse Mortgage Capital Certificates, Class A2E, Series2007-CB2, 4.10%, 2/25/37, Callable 12/25/22 @ 100(b) | 804,492 | ||||||
1,820,000 | FannieMae-Aces, Class A2, Series2018-M1, 2.99%, 12/25/27(b) | 1,780,099 | ||||||
860,000 | Federal Home Loan Mortgage Corporation, Class A3, Series K151, 3.51%, 4/25/30 | 854,251 | ||||||
602,050 | First Franklin Mortgage Loan Trust, Class M1,Series 2005-FF8, 3.24%(US0001M+49bps), 9/25/35, Callable 1/25/19 @ 100 | 603,077 |
See accompanying notes to the financial statements.
4
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Collateralized Mortgage Obligations, continued | ||||||||
$ | 888,542 | First Horizon Alternative Mortgage Securities Trust, Class 2A1, Series 2005-AA12, 4.08%, 2/25/36, Callable 1/25/19 @ 100(b) | $ | 703,741 | ||||
454,717 | First Horizon Alternative Mortgage Securities Trust, Class 2A1, Series2005-AR3, 4.26%, 8/25/35, Callable 1/25/19 @ 100(b) | 372,970 | ||||||
1,102,309 | First Horizon Alternative Mortgage Securities Trust, Class 1A1, Series2006-AA1, 4.12%, 3/25/36, Callable 1/25/19 @ 100(b) | 1,006,943 | ||||||
956,952 | First Horizon Alternative Mortgage Securities Trust, Class 2A1, Series2006-AA1, 4.11%, 4/25/36, Callable 1/25/19 @ 100(b) | 887,032 | ||||||
956,557 | GMAC Mortgage Corp. Loan Trust, Class 1A1,Series 2006-AR1, 3.83%, 4/19/36, Callable 2/19/19 @ 100(b) | 844,949 | ||||||
724,223 | GMAC Mortgage Corp. Loan Trust, Class 3A1,Series 2005-AR5, 4.23%, 9/19/35, Callable 1/19/19 @ 100(b) | 681,422 | ||||||
850,000 | GoldenTree Loan Opportunities IX, Ltd., Class AR2, Series2014-9A, 3.62%(US0003M+111bps), 10/29/29, Callable 10/29/20 @ 100(a) | 843,362 | ||||||
280,000 | GRACE Mortgage Trust, Class A, Series 2014-GRCE, 3.37%, 6/10/28(a) | 280,760 | ||||||
147,500 | GS Mortgage Securities Trust, Class A, Series 2012-ALOH, 3.55%, 4/10/34(a) | 148,664 | ||||||
1,727,357 | HarborView Mortgage Loan Trust, Class 1A1A, Series2006-10, 2.67%(US0001M+20bps), 11/19/36, Callable 9/19/26 @ 100 | 1,532,331 | ||||||
365,000 | Liberty Street Trust, Class A, Series 2016-225L, 3.60%, 2/10/36(a) | �� | 364,120 | |||||
691,081 | Magnetite IX, Ltd., Class A1R, Series2014-9A, 3.49%(US0003M+100bps), 7/25/26, Callable 1/25/19 @ 100(a) | 689,112 | ||||||
1,000,000 | Magnetite XI, Ltd., Class A1R, Series2014-11A, 3.56%(US0003M+112bps), 1/18/27, Callable 1/18/19 @ 100(a) | 995,951 | ||||||
931,759 | Merrill Lynch First Franklin Mortgage Loan Trust, Class 2A2, Series2007-4, 2.63%(US0001M+12bps), 7/25/37, Callable 9/25/25 @ 100 | 638,898 | ||||||
345,000 | Morgan Stanley Capital I Trust, Class A,Series 2014-MP, 3.47%, 8/11/33(a) | 349,090 | ||||||
832,530 | Morgan Stanley Remic Trust, Class 3A,Series 2014-R8, 2.63%(12MTA+75bps), 6/26/47(a) | 806,952 | ||||||
603,489 | MortgageIT Trust, Class 2A3, Series2005-2, 4.00%(US0001M+165bps), 5/25/35, Callable 1/25/19 @ 100 | 597,101 | ||||||
676,162 | Nomura Asset Acceptance Corp., Class 3A1,Series 2005-AR3, 5.69%, 7/25/35, Callable 1/25/19 @ 100(b) | 682,310 | ||||||
1,147,984 | Nomura Resecuritization Trust, Class 2A3,Series 2014-7R, 2.52%(US0001M+20bps), 12/26/35(a) | 1,137,412 | ||||||
210,000 | Octagon Investment Partners 25, Class AR,Series 2015-1A, 3.27%(US0003M+80bps), 10/20/26, Callable 1/20/19 @ 100(a) | 207,327 | ||||||
385,000 | RBSCF Trust, Class A, Series2013-GSP, 3.83%, 1/13/32(a)(b) | 394,907 |
Principal Amount | Fair Value | |||||||
Collateralized Mortgage Obligations, continued | ||||||||
$ | 1,496,904 | Residential Accredit Loans, Inc., Class A2, Series 2006-QA10, 2.69%(US0001M+18bps), 12/25/36, Callable 4/25/20 @ 100 | $ | 1,417,806 | ||||
1,704,251 | Structured Asset Mortgage Investments II Trust, Class 3A1, Series2006-AR1, 2.74%(US0001M+23bps), 2/25/36, Callable 6/25/19 @ 100 | 1,502,340 | ||||||
858,483 | WaMu Mortgage Pass-Through Certificates, Class 2A1A, Series2005-AR6, 2.97%(US0001M+23bps), 4/25/45, Callable 1/25/19 @ 100 | 858,491 | ||||||
979,147 | WaMu Mortgage Pass-Through Certificates, Class 2A1A, Series2005-AR8, 3.09%(US0001M+29bps), 7/25/45, Callable 1/25/19 @ 100 | 967,440 | ||||||
859,595 | WaMu Mortgage Pass-Through Certificates, Class A2, Series2005-AR3, 3.67%, 3/25/35, Callable 11/25/19 @ 100(b) | 866,509 | ||||||
389,591 | WaMU Mortgage Pass-Through Certificates, Class A1A, Series 2004-AR10, 2.95%(US0001M+44bps), 7/25/44, Callable 1/25/19 @ 100 | 386,843 | ||||||
606,271 | Wells Fargo Mortgage Backed Securities Trust, Class 2A1, Series2006-AR2, 4.61%, 3/25/36, Callable 1/25/19 @ 100(b) | 615,226 | ||||||
670,565 | Wells Fargo Mortgage Backed Securities Trust, Class 1A1, Series 2006-AR12, 4.71%, 9/25/36, Callable 1/25/19 @ 100(b) | 673,197 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations (Cost $34,301,584) | 34,766,718 | |||||||
|
| |||||||
Corporate Bonds (27.1%): | ||||||||
Aerospace & Defense (0.4%): | ||||||||
530,000 | L3 Technologies, Inc., 4.40%, 6/15/28, Callable 3/15/28 @ 100 | 529,882 | ||||||
550,000 | Northrop Grumman Corp., 3.25%, 1/15/28, Callable 10/15/27 @ 100 | 513,151 | ||||||
175,000 | United Technologies Corp., 3.35%, 8/16/21 | 174,526 | ||||||
|
| |||||||
1,217,559 | ||||||||
|
| |||||||
Airlines (0.7%): | ||||||||
1,235,952 | Continental Airlines2009-2, Series A, 7.25%, 5/10/21^ | 1,269,200 | ||||||
153,226 | U.S. Airways2001-1G PTT, Class G, Series 2001, 7.08%, 9/20/22 | 160,121 | ||||||
722,129 | U.S. Airways2010-1A PTT, Series A, 6.25%, 10/22/24 | 762,785 | ||||||
|
| |||||||
2,192,106 | ||||||||
|
| |||||||
Banks (6.6%): | ||||||||
670,000 | Bank of America Corp., Series G, 2.37%(US0003M+66bps), 7/21/21, Callable 7/21/20 @ 100 | 658,010 | ||||||
910,000 | Bank of America Corp., 2.74%(US0003M+37bps), 1/23/22, Callable 1/23/21 @ 100 | 896,191 | ||||||
165,000 | Bank of America Corp., 3.00%(US0003M+79bps), 12/20/23, Callable 12/20/22 @ 100 | 160,381 | ||||||
735,000 | Bank of America Corp., 3.09%(US0003M+109bps), 10/1/25, Callable 10/1/24 @ 100 | 696,920 |
See accompanying notes to the financial statements.
5
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Banks, continued | ||||||||
$ | 350,000 | Bank of America Corp., 3.70%(US0003M+151bps), 4/24/28, Callable 4/24/27 @ 100 | $ | 335,744 | ||||
685,000 | Bank of America Corp., Series G, 3.59%(US0003M+137bps), 7/21/28, Callable 7/21/27 @ 100 | 649,599 | ||||||
1,395,000 | Bank of America Corp., 4.27%(US0003M+131bps), 7/23/29, Callable 7/23/28 @ 100 | 1,388,453 | ||||||
950,000 | Citibank NA, Series B, 3.05%, 5/1/20, Callable 4/1/20 @ 100 | 948,794 | ||||||
545,000 | Citibank NA, Series B, 3.40%, 7/23/21, Callable 6/23/21 @ 100 | 545,693 | ||||||
500,000 | Citigroup, Inc., 2.55%, 4/8/19 | 499,283 | ||||||
500,000 | Citigroup, Inc., 2.50%, 7/29/19 | 498,292 | ||||||
700,000 | Citigroup, Inc., 3.89%(US0003M+156bps), 1/10/28, Callable 1/10/27 @ 100 | 675,436 | ||||||
815,000 | JPMorgan Chase & Co., 4.02%(US0003M+100bps), 12/5/24, Callable 12/5/23 @ 100 | 821,485 | ||||||
960,000 | JPMorgan Chase & Co., 3.22%(US0003M+116bps), 3/1/25, Callable 3/1/24 @ 100 | 927,343 | ||||||
750,000 | JPMorgan Chase & Co., 3.54%(US0003M+138bps), 5/1/28, Callable 5/1/27 @ 100 | 715,040 | ||||||
1,450,000 | JPMorgan Chase Bank NA, 2.87%(US0003M+25bps), 2/13/20, Callable 2/13/19 @ 100 | 1,448,080 | ||||||
1,820,000 | JPMorgan Chase Bank NA, 2.60%(US0003M+28bps), 2/1/21, Callable 2/1/20 @ 100 | 1,805,545 | ||||||
1,000,000 | JPMorgan Chase Bank NA, Series B, 3.09%(US0003M+35bps), 4/26/21, Callable 4/26/20 @ 100 | 995,958 | ||||||
750,000 | PNC Bank NA, 2.40%, 10/18/19, Callable 9/18/19 @ 100 | 745,570 | ||||||
165,000 | Wells Fargo & Co., 2.63%, 7/22/22, MTN | 159,103 | ||||||
265,000 | Wells Fargo & Co., 3.55%, 9/29/25, MTN | 256,752 | ||||||
2,110,000 | Wells Fargo & Co., 3.00%, 4/22/26 | 1,966,179 | ||||||
3,000,000 | Wells Fargo Bank NA, 2.40%, 1/15/20 | 2,974,480 | ||||||
530,000 | Wells Fargo Bank NA, Class B, 3.33%(US0003M+49bps), 7/23/21, Callable 7/23/20 @ 100 | 529,483 | ||||||
|
| |||||||
21,297,814 | ||||||||
|
| |||||||
Beverages (0.5%): | ||||||||
763,000 | Anheuser-Busch Cos. LLC, 4.90%, 2/1/46, Callable 8/1/45 @ 100(a) | 707,595 | ||||||
900,000 | Constellation Brands, Inc., 2.00%, 11/7/19 | 888,916 | ||||||
|
| |||||||
1,596,511 | ||||||||
|
| |||||||
Biotechnology (0.8%): | ||||||||
300,000 | AbbVie, Inc., 4.70%, 5/14/45, Callable 11/14/44 @ 100 | 272,824 | ||||||
150,000 | AbbVie, Inc., 4.88%, 11/14/48, Callable 5/14/48 @ 100 | 139,949 | ||||||
300,000 | Amgen, Inc., 4.40%, 5/1/45, Callable 11/1/44 @ 100 | 280,556 | ||||||
500,000 | Amgen, Inc., 4.56%, 6/15/48, Callable 12/15/47 @ 100 | 478,831 | ||||||
120,000 | Baxalta, Inc., 2.88%, 6/23/20, Callable 5/23/20 @ 100 | 118,928 | ||||||
660,000 | Celgene Corp., 5.00%, 8/15/45, Callable 2/15/45 @ 100 | 610,291 |
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Biotechnology, continued | ||||||||
$ | 350,000 | Gilead Sciences, Inc., 4.60%, 9/1/35, Callable 3/1/35 @ 100 | $ | 353,375 | ||||
249,000 | Gilead Sciences, Inc., 4.75%, 3/1/46, Callable 9/1/45 @ 100 | 247,031 | ||||||
|
| |||||||
2,501,785 | ||||||||
|
| |||||||
Capital Markets (1.7%): | ||||||||
165,000 | Bank of New York Mellon Corp., 3.25%, 9/11/24, Callable 8/11/24 @ 100, MTN | 162,864 | ||||||
335,000 | Goldman Sachs Bank USA, Series B, 3.20%, 6/5/20 | 334,394 | ||||||
900,000 | Goldman Sachs Group, Inc. (The), 2.55%, 10/23/19 | 894,315 | ||||||
400,000 | Goldman Sachs Group, Inc. (The), 3.85%, 7/8/24, Callable 4/8/24 @ 100 | 391,027 | ||||||
550,000 | Goldman Sachs Group, Inc. (The), 3.27%(US0003M+120bps), 9/29/25, Callable 9/29/24 @ 100 | 515,555 | ||||||
780,000 | Morgan Stanley, Series G, 7.30%, 5/13/19 | 791,839 | ||||||
1,200,000 | Morgan Stanley, 3.41%(US0003M+80bps), 2/14/20, Callable 2/14/19 @ 100 | 1,200,030 | ||||||
500,000 | Morgan Stanley, 5.50%, 7/24/20 | 515,438 | ||||||
400,000 | Morgan Stanley, 3.40%(US0003M+93bps), 7/22/22, Callable 7/22/21 @ 100 | 394,386 | ||||||
165,000 | State Street Corp., 3.78%(US0003M+77bps), 12/3/24, Callable 12/3/23 @ 100 | 165,393 | ||||||
|
| |||||||
5,365,241 | ||||||||
|
| |||||||
Chemicals (0.1%): | ||||||||
180,000 | Axalta Coating Systems, 4.88%, 8/15/24, Callable 8/15/19 @ 103.66(a) | 170,100 | ||||||
170,000 | Valvoline, Inc., 4.38%, 8/15/25, Callable 8/15/20 @ 103.28^ | 156,400 | ||||||
|
| |||||||
326,500 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.1%): | ||||||||
200,000 | Clean Harbors, Inc., 5.13%, 6/1/21, Callable 2/7/19 @ 100 | 199,500 | ||||||
100,000 | Matthews International Corp., 5.25%, 12/1/25, Callable 12/1/20 @ 103.94(a) | 93,000 | ||||||
110,000 | Mutlti-Color Corp., 4.88%, 11/1/25, Callable 11/1/20 @ 102.44(a) | 94,600 | ||||||
|
| |||||||
387,100 | ||||||||
|
| |||||||
Consumer Finance (0.6%): | ||||||||
200,000 | Ford Motor Credit Co. LLC, 8.13%, 1/15/20 | 207,636 | ||||||
310,000 | Ford Motor Credit Co. LLC, 2.43%, 6/12/20 | 301,855 | ||||||
150,000 | Ford Motor Credit Co. LLC, 3.31%(US0003M+88bps), 10/12/21 | 143,949 | ||||||
455,000 | Ford Motor Credit Co. LLC, 3.34%, 3/28/22, Callable 2/28/22 @ 100 | 429,480 | ||||||
600,000 | General Motors Financial Co., Inc., 3.10%, 1/15/19 | 599,975 | ||||||
265,000 | General Motors FINL Co., 2.40%, 5/9/19 | 264,004 | ||||||
|
| |||||||
1,946,899 | ||||||||
|
| |||||||
Containers & Packaging (0.3%): | ||||||||
200,000 | Ball Corp., 4.00%, 11/15/23 | 194,500 | ||||||
70,000 | Berry Global, Inc., 4.50%, 2/15/26, Callable 2/15/21 @ 102.25(a) | 64,050 | ||||||
339,188 | Beverage Packaging Holdings Luxemberg, 5.75%, 10/15/20, Callable 2/7/19 @ 100 | 338,339 |
See accompanying notes to the financial statements.
6
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Containers & Packaging, continued | ||||||||
$ | 87,000 | Crown Americas LLC, 4.25%, 9/30/26, Callable 3/31/26 @ 100 | $ | 78,083 | ||||
325,000 | Westrock Co., 4.90%, 3/15/29, Callable 12/15/28 @ 100(a) | 334,045 | ||||||
|
| |||||||
1,009,017 | ||||||||
|
| |||||||
Diversified Financial Services (1.0%): | ||||||||
600,000 | Amcor Finance USA, Inc., 3.63%, 4/28/26, Callable 1/28/26 @ 100(a) | 568,179 | ||||||
400,000 | Berkshire Hathaway Finance Corp., 4.30%, 5/15/43 | 406,248 | ||||||
35,000 | Level 3 Financing, Inc., 5.38%, 1/15/24, Callable 2/11/19 @ 102.69 | 33,338 | ||||||
180,000 | Level 3 Financing, Inc., 5.25%, 3/15/26, Callable 3/15/21 @ 102.63 | 164,700 | ||||||
605,000 | Protective Life Global, 2.70%, 11/25/20(a) | 597,837 | ||||||
1,500,000 | WEA Finance LLC, 2.70%, 9/17/19, Callable 8/17/19 @ 100(a) | 1,493,358 | ||||||
|
| |||||||
3,263,660 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.1%): | ||||||||
375,000 | AT&T, Inc., 3.80%, 3/15/22 | 376,635 | ||||||
700,000 | AT&T, Inc., 4.30%, 2/15/30, Callable 11/15/29 @ 100 | 661,490 | ||||||
840,000 | AT&T, Inc., 4.80%, 6/15/44, Callable 12/15/43 @ 100 | 752,904 | ||||||
500,000 | AT&T, Inc., 5.15%, 11/15/46, Callable 5/15/46 @ 100 | 464,642 | ||||||
175,000 | Qwest Corp., 7.25%, 9/15/25 | 180,177 | ||||||
550,000 | Verizon Communications, Inc., 4.50%, 8/10/33 | 542,897 | ||||||
700,000 | Verizon Communications, Inc., 3.85%, 11/1/42, Callable 5/1/42 @ 100 | 603,454 | ||||||
96,000 | Zayo Group LLC /Zayo Capital, Inc., 5.75%, 1/15/27, Callable 1/15/22 @ 102.88(a) | 85,680 | ||||||
|
| |||||||
3,667,879 | ||||||||
|
| |||||||
Electric Utilities (2.2%): | ||||||||
280,000 | American Transmission Systems, Inc., 5.00%, 9/1/44, Callable 3/1/44 @ 100(a) | 299,070 | ||||||
500,000 | Appalachian Power Co., Series H, 5.95%, 5/15/33 | 564,118 | ||||||
400,000 | Cleco Power LLC, 6.00%, 12/1/40 | 451,519 | ||||||
1,000,000 | Duke Energy Progress, Inc., 4.15%, 12/1/44, Callable 6/1/44 @ 100 | 970,813 | ||||||
936,000 | Duquesne Light Holdings, Inc., 6.40%, 9/15/20(a) | 976,140 | ||||||
500,000 | Entergy Texas, 7.13%, 2/1/19 | 501,381 | ||||||
750,000 | Jersey Central Power & Light Co., 6.40%, 5/15/36 | 873,702 | ||||||
300,000 | Midamerican Energy Co., 4.25%, 5/1/46, Callable 11/1/45 @ 100 | 304,674 | ||||||
1,250,000 | NextEra Energy Capital Holdings, Inc., 3.26%(US0003M+55bps), 8/28/21, Callable 8/28/19 @ 100 | 1,234,162 | ||||||
100,000 | NextEra Energy Operating Partners LP, 4.50%, 9/15/27, Callable 6/15/27 @ 100(a) | 89,000 | ||||||
700,000 | Public Service Oklahoma, 4.40%, 2/1/21 | 712,065 | ||||||
|
| |||||||
6,976,644 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.0%)†: | ||||||||
90,000 | Itron, Inc., 5.00%, 1/15/26, Callable 1/15/21 @ 102.5(a) | 82,350 | ||||||
|
|
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Equity Real Estate Investment Trusts (2.1%): | ||||||||
$ | 500,000 | Alexandria Real Estate Equities, Inc., 3.45%, 4/30/25, Callable 2/28/25 @ 100 | $ | 481,274 | ||||
590,000 | American Campus Communities Operating Partnership LP, 3.63%, 11/15/27, Callable 8/15/27 @ 100 | 554,578 | ||||||
295,000 | American Tower Corp., 3.00%, 6/15/23 | 283,827 | ||||||
400,000 | Crown Castle International Corp., 3.20%, 9/1/24, Callable 7/1/24 @ 100 | 379,482 | ||||||
160,000 | GLP Capital LP, 5.25%, 6/1/25, Callable 3/1/25 @ 100 | 158,867 | ||||||
440,000 | GLP Capital, LP, 5.38%, 4/15/26 | 435,164 | ||||||
105,000 | GLP Capital, LP, 5.75%, 6/1/28, Callable 3/3/28 @ 100 | 106,050 | ||||||
290,000 | GLP Capital, LP, 5.30%, 1/15/29, Callable 10/15/28 @ 100 | 283,629 | ||||||
575,000 | HCP, Inc., 4.00%, 12/1/22, Callable 10/1/22 @ 100 | 574,163 | ||||||
875,000 | HCP, Inc., 4.25%, 11/15/23, Callable 8/15/23 @ 100 | 876,336 | ||||||
400,000 | HCP, Inc., 3.88%, 8/15/24, Callable 5/17/24 @ 100 | 393,664 | ||||||
100,000 | MGM Growth/MGM Finance, 5.63%, 5/1/24, Callable 2/1/24 @ 100 | 99,000 | ||||||
112,000 | SBA Communications Corp., 4.88%, 9/1/24, Callable 9/1/19 @ 103.66 | 105,280 | ||||||
500,000 | VEREIT Operating Partnership LP, 3.00%, 2/6/19 | 499,699 | ||||||
1,440,000 | Welltower, Inc., 3.75%, 3/15/23, Callable 12/15/22 @ 100 | 1,437,390 | ||||||
|
| |||||||
6,668,403 | ||||||||
|
| |||||||
Food & Staples Retailing (0.6%): | ||||||||
250,000 | Rite Aid Corp., 6.13%, 4/1/23, Callable 2/7/19 @ 104.59(a) | 197,500 | ||||||
790,000 | Walgreens Boots Alliance, Inc., 3.80%, 11/18/24, Callable 8/18/24 @ 100 | 777,986 | ||||||
300,000 | Walgreens Boots Alliance, Inc., 4.80%, 11/18/44, Callable 5/18/44 @ 100 | 273,142 | ||||||
770,000 | Wal-Mart Stores, Inc., 3.55%, 6/26/25, Callable 4/26/25 @ 100 | 778,492 | ||||||
|
| |||||||
2,027,120 | ||||||||
|
| |||||||
Food Products (0.7%): | ||||||||
117,000 | Chobani LLC/Finance Corp., 7.50%, 4/15/25, Callable 4/15/20 @ 105.63^(a) | 92,138 | ||||||
525,000 | General Mills, Inc., 4.20%, 4/17/28, Callable 1/17/28 @ 100 | 514,455 | ||||||
795,000 | Kraft Heinz Foods Co., 3.95%, 7/15/25, Callable 4/15/25 @ 100 | 769,365 | ||||||
650,000 | Kraft Heinz Foods Co., 4.63%, 1/30/29, Callable 10/30/28 @ 100 | 642,667 | ||||||
126,000 | Pilgrim’s Pride Corp., 5.88%, 9/30/27, Callable 9/30/22 @ 102.94(a) | 114,345 | ||||||
209,000 | Post Holdings, Inc., 5.75%, 3/1/27, Callable 3/1/22 @ 102.88(a) | 195,938 | ||||||
|
| |||||||
2,328,908 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.4%): | ||||||||
360,000 | Becton Dickinson And Co., 2.40%, 6/5/20 | 354,382 | ||||||
500,000 | Becton Dickinson And Co., 3.68%(US0003M+88bps), 12/29/20, Callable 3/1/19 @ 100 | 494,974 |
See accompanying notes to the financial statements.
7
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
$ | 190,000 | Hill-Rom Holdings, Inc., 5.75%, 9/1/23, Callable 2/7/19 @ 104.31(a) | $ | 190,000 | ||||
115,000 | Hologic, Inc., 4.63%, 2/1/28, Callable 2/1/23 @ 102.31(a) | 103,500 | ||||||
92,000 | Teleflex, Inc., 4.63%, 11/15/27, Callable 11/15/22 @ 102.31 | 85,330 | ||||||
|
| |||||||
1,228,186 | ||||||||
|
| |||||||
Health Care Providers & Services (1.5%): | ||||||||
200,000 | Aetna, Inc., 3.50%, 11/15/24, Callable 8/15/24 @ 100 | 193,371 | ||||||
372,000 | Centene Corp., 5.63%, 2/15/21, Callable 2/7/19 @ 102.81 | 372,930 | ||||||
97,000 | Centene Corp., 5.38%, 6/1/26, Callable 6/1/21 @ 104.03(a) | 94,333 | ||||||
500,000 | Cigna Corp., 3.05%, 10/15/27, Callable 7/15/27 @ 100 | 457,367 | ||||||
50,000 | Community Health Systems, Inc., 8.63%, 1/15/24, Callable 1/15/21 @ 104.31(a) | 49,375 | ||||||
715,000 | CVS Health Corp., 5.05%, 3/25/48, Callable 9/25/47 @ 100 | 695,416 | ||||||
1,300,000 | Halfmoon Parent, Inc., 4.13%, 11/15/25, Callable 9/15/25 @ 100(a) | 1,298,168 | ||||||
456,000 | HCA, Inc., 6.50%, 2/15/20 | 467,400 | ||||||
192,000 | HCA, Inc., 5.25%, 4/15/25 | 191,040 | ||||||
170,000 | Molina Healthcare, Inc., 5.38%, 11/15/22, Callable 8/15/22 @ 100 | 164,050 | ||||||
35,000 | Molina Healthcare, Inc., 4.88%, 6/15/25, Callable 6/15/20 @ 102.44(a) | 31,938 | ||||||
26,000 | Tenet Healthcare Corp., 4.50%, 4/1/21 | 25,285 | ||||||
156,000 | Tenet Healthcare Corp., 4.63%, 7/15/24, Callable 7/15/20 @ 102.31 | 145,080 | ||||||
97,000 | WellCare Health Plans, 5.25%, 4/1/25, Callable 4/1/20 @ 103.94 | 93,363 | ||||||
500,000 | WellPoint, Inc., 3.50%, 8/15/24, Callable 5/15/24 @ 100 | 490,436 | ||||||
|
| |||||||
4,769,552 | ||||||||
|
| |||||||
Health Care Technology (0.0%)†: | ||||||||
99,000 | Change Health/ Finance, Inc., 5.75%, 3/1/25, Callable 3/1/20 @ 102.88(a) | 92,318 | ||||||
|
| |||||||
Household Products (0.1%): | ||||||||
23,000 | Central Garden & Pet Co., 6.13%, 11/15/23, Callable 2/7/19 @ 104.59 | 22,943 | ||||||
207,000 | Central Garden & Pet Co., 5.13%, 2/1/28, Callable 1/1/23 @ 102.56 | 185,265 | ||||||
100,000 | Spectrum Brands, Inc., 5.75%, 7/15/25, Callable 7/15/20 @ 102.88 | 94,970 | ||||||
|
| |||||||
303,178 | ||||||||
|
| |||||||
Industrial Conglomerates (0.6%): | ||||||||
485,000 | General Electric Capital corp., 5.55%, 1/5/26, MTN | 474,384 | ||||||
735,000 | General Electric Capital Corp., 5.50%, 1/8/20, MTN | 743,658 | ||||||
300,000 | General Electric Capital Corp., 4.63%, 1/7/21, MTN | 300,775 | ||||||
150,000 | General Electric Capital Corp., 4.65%, 10/17/21 | 150,450 | ||||||
273,000 | General Electric Capital Corp., 5.88%, 1/14/38, MTN | 261,013 | ||||||
|
| |||||||
1,930,280 | ||||||||
|
|
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Insurance (0.5%): | ||||||||
$ | 900,000 | Farmers Exchange Capital III, 5.45%(US0003M+345bps), 10/15/54, Callable 10/15/34 @ 100(a) | $ | 870,929 | ||||
670,000 | Farmers Insurance Exchange, 4.75%(US0003M+323bps), 11/1/57, Callable 11/1/37 @ 100(a) | 592,255 | ||||||
|
| |||||||
1,463,184 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.1%): | ||||||||
200,000 | IMS Health, Inc., 5.00%, 10/15/26, Callable 10/15/21 @ 102.5(a) | 191,000 | ||||||
|
| |||||||
Media (0.7%): | ||||||||
103,000 | CCO Holdings LLC, 5.13%, 5/1/27, Callable 5/1/22 @ 102.56(a) | 95,934 | ||||||
200,000 | Charter Communications Operating LLC, 3.75%, 2/15/28, Callable 11/15/27 @ 100 | 180,923 | ||||||
500,000 | Charter Communications Operating LLC, 6.48%, 10/23/45, Callable 4/23/45 @ 100 | 513,969 | ||||||
860,000 | Comcast Corp., 4.70%, 10/15/48, Callable 4/15/48 @ 100 | 869,358 | ||||||
200,000 | CSC Holdings LLC, 5.50%, 5/15/26, Callable 5/15/21 @ 102.75(a) | 188,500 | ||||||
175,000 | CSC Holdings, Inc., 8.63%, 2/15/19 | 175,438 | ||||||
200,000 | Dish DBS Corp., 5.88%, 7/15/22 | 184,000 | ||||||
|
| |||||||
2,208,122 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.3%): | ||||||||
200,000 | Anadarko Petroleum Corp., 4.50%, 7/15/44, Callable 1/15/44 @ 100 | 169,480 | ||||||
100,000 | Antero Resources Corp., 5.13%, 12/1/22, Callable 2/7/19 @ 102.56 | 94,000 | ||||||
50,000 | CrownRock LP/CrownRock Finance, Inc., 5.63%, 10/15/25, Callable 10/15/20 @ 104.22(a) | 45,000 | ||||||
14,000 | Diamondback Energy, Inc., 4.75%, 11/1/24, Callable 11/1/19 @ 103.56(a) | 13,510 | ||||||
85,000 | Diamondback Energy, Inc., 4.75%, 11/1/24, Callable 11/1/19 @ 103.56 | 82,025 | ||||||
35,000 | Endeavor Energy Resources LP, 5.75%, 1/30/28, Callable 1/30/23 @ 102.88(a) | 35,707 | ||||||
500,000 | Energy Transfer Equity LP, 5.88%, 1/15/24, Callable 10/15/23 @ 100 | 508,750 | ||||||
210,000 | Energy Transfer Equity LP, 5.50%, 6/1/27, Callable 3/1/27 @ 100 | 204,750 | ||||||
700,000 | Energy Transfer Partners LP, 5.95%, 10/1/43, Callable 4/1/43 @ 100 | 665,554 | ||||||
400,000 | Kinder Morgan Energy Partners LP, 5.80%, 3/15/35 | 408,929 | ||||||
60,000 | Matador Resources Co., 5.88%, 9/15/26, Callable 9/15/21 @ 104.41 | 55,200 | ||||||
70,000 | Parsley Energy LLC/Finan, 5.38%, 1/15/25, Callable 1/15/20 @ 104.03(a) | 64,400 | ||||||
100,000 | Parsley Energy LLC/Parsley Finance Corp., 5.63%, 10/15/27, Callable 10/15/22 @ 102.81(a) | 90,875 | ||||||
250,000 | Plains All American Pipeline LP, 3.85%, 10/15/23, Callable 7/15/23 @ 100 | 244,600 | ||||||
300,000 | Plains All American Pipeline LP, 4.65%, 10/15/25, Callable 7/15/25 @ 100 | 295,033 |
See accompanying notes to the financial statements.
8
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
$ | 80,000 | Range Resources Corp., 5.00%, 3/15/23, Callable 12/15/22 @ 100 | $ | 70,400 | ||||
110,000 | Range Resources Corp., 4.88%, 5/15/25, Callable 2/15/25 @ 100 | 90,200 | ||||||
200,000 | Rockies Express Pipeline LLC, 5.63%, 4/15/20(a) | 200,000 | ||||||
493,000 | Sabine Pass Liquefaction LLC, 5.75%, 5/15/24, Callable 2/15/24 @ 100 | 514,375 | ||||||
350,000 | Williams Partners LP, 6.30%, 4/15/40 | 372,324 | ||||||
50,000 | WPX Energy, Inc., 5.75%, 6/1/26, Callable 6/1/21 @ 104.31^ | 45,250 | ||||||
|
| |||||||
4,270,362 | ||||||||
|
| |||||||
Personal Products (0.0%)†: | ||||||||
126,000 | First Quality Finance Co., 5.00%, 7/1/25, Callable 7/1/20 @ 103.75(a) | 112,770 | ||||||
|
| |||||||
Pharmaceuticals (0.5%): | ||||||||
705,000 | Bayer US Finance II LLC, 4.38%, 12/15/28, Callable 9/15/28 @ 100(a) | 673,101 | ||||||
500,000 | Bayer US Finance LLC, 2.38%, 10/8/19(a) | 496,003 | ||||||
375,000 | Teva Pharmaceutical Finance IV LLC, 2.25%, 3/18/20^ | 364,928 | ||||||
|
| |||||||
1,534,032 | ||||||||
|
| |||||||
Road & Rail (0.1%): | ||||||||
350,000 | Union Pacific Corp., 3.95%, 9/10/28, Callable 6/10/28 @ 100 | 349,523 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.2%): | ||||||||
730,000 | Broadcom CRP / Cayman Finance, 2.38%, 1/15/20 | 720,883 | ||||||
|
| |||||||
Specialty Retail (0.1%): | ||||||||
180,000 | Home Depot, Inc., 3.90%, 12/6/28, Callable 9/6/28 @ 100 | 184,366 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.5%): | ||||||||
920,000 | Apple, Inc., 4.65%, 2/23/46, Callable 8/23/45 @ 100 | 973,856 | ||||||
700,000 | Dell International LLC, 3.48%, 6/1/19(a) | 697,931 | ||||||
|
| |||||||
1,671,787 | ||||||||
|
| |||||||
Tobacco (0.2%): | ||||||||
735,000 | BAT Capital Corp., 2.76%, 8/15/22, Callable 7/15/22 @ 100 | 694,222 | ||||||
|
| |||||||
Trading Companies & Distributors (0.4%): | ||||||||
545,000 | Air Lease Corp., 4.75%, 3/1/20 | 552,509 | ||||||
655,000 | Air Lease Corp., 3.50%, 1/15/22 | 644,581 | ||||||
|
| |||||||
1,197,090 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.4%): | ||||||||
59,000 | Sprint Communications, Inc., 6.88%, 11/15/28 | 55,755 | ||||||
22,000 | Sprint Corp., 7.13%, 6/15/24 | 21,787 | ||||||
179,000 | Sprint Corp., 7.63%, 3/1/26, Callable 11/1/25 @ 100 | 176,763 | ||||||
378,813 | Sprint Spectrum Co. LLC, 3.36%, 3/20/23(a) | 374,077 | ||||||
715,000 | Sprint Spectrum Co. LLC, 4.74%, 3/20/25(a) | 701,594 | ||||||
|
| |||||||
1,329,976 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $89,448,179) | 87,106,327 | |||||||
|
|
Principal Amount | Fair Value | |||||||
Foreign Bonds (1.1%): | ||||||||
Sovereign Bond (1.1%): | ||||||||
$ | 195,000,000 | Japan Treasury Discount Bill, Series 786, 1/9/19+ | $ | 1,779,390 | ||||
190,000,000 | Japan Treasury Discount Bill, Series 793, 2/12/19+ | 1,734,038 | ||||||
|
| |||||||
Total Foreign Bonds (Cost $3,392,125) | 3,513,428 | |||||||
|
| |||||||
Yankee Dollars (4.1%): | ||||||||
Banks (0.9%): | ||||||||
700,000 | Cooperatieve Rabobank UA, 3.13%, 4/26/21 | 697,438 | ||||||
525,000 | Lloyds Bank plc, 3.30%, 5/7/21 | 523,408 | ||||||
365,000 | Lloyds Banking Group plc, 2.91%(US0003M+81bps), 11/7/23, Callable 11/7/22 @ 100 | 345,631 | ||||||
635,000 | Santander UK Group Holdings plc, 2.88%, 10/16/20 | 623,921 | ||||||
500,000 | Santander UK Group Holdings plc, 2.88%, 8/5/21 | 482,327 | ||||||
625,000 | Santander UK plc, 3.40%, 6/1/21 | 621,950 | ||||||
|
| |||||||
3,294,675 | ||||||||
|
| |||||||
Beverages (0.1%): | ||||||||
165,000 | Bacardi, Ltd., 4.70%, 5/15/28, Callable 2/15/28 @ 100(a) | 158,563 | ||||||
175,000 | Bacardi, Ltd., 5.30%, 5/15/48, Callable 11/15/47 @ 100(a) | 157,984 | ||||||
|
| |||||||
316,547 | ||||||||
|
| |||||||
Biotechnology (0.2%): | ||||||||
600,000 | Shire Acq INV Ireland DA, 1.90%, 9/23/19 | 591,591 | ||||||
|
| |||||||
Diversified Financial Services (0.8%): | ||||||||
625,000 | GE Capital International Funding, 2.34%, 11/15/20 | 603,160 | ||||||
1,441,000 | GE Capital International Funding, 4.42%, 11/15/35 | 1,206,933 | ||||||
15,000 | Intelsat Jackson Holdings SA, 5.50%, 8/1/23, Callable 2/7/19 @ 102.75 | 13,050 | ||||||
124,000 | Intelsat Jackson Holdings SA, 8.50%, 10/15/24, Callable 10/15/20 @ 106.38(a) | 120,280 | ||||||
190,000 | Intelsat Jackson Holdings SA, 9.75%, 7/15/25, Callable 7/15/21 @ 104.88(a) | 190,532 | ||||||
200,000 | NXP BV/NXP Funding LLC, 4.13%, 6/1/21(a) | 197,500 | ||||||
29,000 | OI European Group BV, 4.00%, 3/15/23, Callable 12/15/22 @ 100(a) | 27,115 | ||||||
400,000 | Virgin Media Secured Finance plc, 5.25%, 1/15/26, Callable 1/15/20 @ 102.63(a) | 366,500 | ||||||
|
| |||||||
2,725,070 | ||||||||
|
| |||||||
Energy Equipment & Services (0.1%): | ||||||||
129,000 | Transocean Guardian, Ltd., 5.88%, 1/15/24, Callable 7/15/21 @ 102.94(a) | 123,518 | ||||||
114,000 | Transocean Pontus, Ltd., 6.13%, 8/1/25, Callable 8/1/21 @ 104.59(a) | 110,010 | ||||||
55,200 | Transocean Proteus, Ltd., 6.25%, 12/1/24, Callable 12/1/20 @ 103.13(a) | 52,854 | ||||||
|
| |||||||
286,382 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
475,000 | Alimentation Couche-Tard, Inc., 3.55%, 7/26/27, Callable 4/26/27 @ 100(a) | 443,495 | ||||||
|
| |||||||
Food Products (0.2%): | ||||||||
700,000 | Mondelez International Hldings Ne, 2.00%, 10/28/21, Callable 9/28/21 @ 100(a) | 670,694 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.1%): | ||||||||
255,000 | 1011778 BC ULC New Red Finance, Inc., 4.25%, 5/15/24, Callable 5/15/20 @ 102.13(a) | 234,600 | ||||||
|
|
See accompanying notes to the financial statements.
9
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Industrial Conglomerates (0.1%): | ||||||||
$ | 465,000 | Siemens Financieringsmat, 1.70%, 9/15/21(a) | $ | 445,894 | ||||
|
| |||||||
Media (0.0%)†: | ||||||||
67,000 | Clear Channel International BV, 8.75%, 12/15/20, Callable 2/7/19 @ 102.19(a) | 67,503 | ||||||
|
| |||||||
Metals & Mining (0.1%): | ||||||||
200,000 | Indonesia Asahan Aluminium Persero PT, 6.53%, 11/15/28(a) | 209,776 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.5%): | ||||||||
200,000 | Petrobras Global Finance BV, 5.75%, 2/1/29 | 185,000 | ||||||
365,000 | Petroleos Mexicanos, 6.50%, 3/13/27 | 343,100 | ||||||
165,000 | Petroleos Mexicanos, 5.35%, 2/12/28 | 143,963 | ||||||
500,000 | Petroleos Mexicanos, 6.50%, 1/23/29 | 466,250 | ||||||
350,000 | Shell International Finance BV, 4.38%, 5/11/45 | 358,888 | ||||||
|
| |||||||
1,497,201 | ||||||||
|
| |||||||
Pharmaceuticals (0.2%): | ||||||||
428,000 | Actavis Funding SCS, 4.55%, 3/15/35, Callable 9/15/34 @ 100 | 406,000 | ||||||
100,000 | Valeant Pharmaceuticals International, Inc., 7.00%, 3/15/24, Callable 3/15/20 @ 103.5(a) | 101,000 | ||||||
130,000 | Valeant Pharmaceuticals International, Inc., 5.50%, 11/1/25, Callable 11/1/20 @ 102.75(a) | 121,225 | ||||||
111,000 | VRX Escrow Corp., 5.88%, 5/15/23, Callable 2/7/19 @ 102.94(a) | 102,675 | ||||||
|
| |||||||
730,900 | ||||||||
|
| |||||||
Professional Services (0.2%): | ||||||||
121,000 | IHS Markit, Ltd., 5.00%, 11/1/22, Callable 8/1/22 @ 100(a) | 122,210 | ||||||
104,000 | IHS Markit, Ltd., 4.00%, 3/1/26, Callable 12/1/25 @ 100(a) | 96,720 | ||||||
295,000 | IHS Markit, Ltd., 4.75%, 8/1/28, Callable 5/1/28 @ 100 | 288,861 | ||||||
|
| |||||||
507,791 | ||||||||
|
| |||||||
Sovereign Bond (0.2%): | ||||||||
200,000 | Oman Government International Bond, 5.63%, 1/17/28(a) | 176,075 | ||||||
200,000 | Russian Federation, 4.75%, 5/27/26 | 198,002 | ||||||
|
| |||||||
374,077 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.2%): | ||||||||
530,000 | Aercap Ireland Capital, Ltd., 4.50%, 5/15/21 | 531,530 | ||||||
|
| |||||||
Wireless Telecommunication Services (0.1%): | ||||||||
350,000 | Vodafone Group plc, 4.38%, 5/30/28 | 339,524 | ||||||
|
| |||||||
Total Yankee Dollars (Cost $13,779,933) | 13,267,250 | |||||||
|
| |||||||
Municipal Bonds (1.6%): | ||||||||
California (0.8%): | ||||||||
800,000 | California State, Build America Bonds, GO, 7.95%, 3/1/36, Continuously Callable @100 | 844,608 | ||||||
700,000 | Los Angeles Unified School District, Build America Bonds, GO, 5.76%, 7/1/29 | 810,075 | ||||||
615,000 | The Regents of the University of California, Build America Bonds, General Revenue Bonds, 6.27%, 5/15/31,Pre-refunded 5/15/19 @ 100 | 623,057 | ||||||
|
| |||||||
2,277,740 | ||||||||
|
|
Principal Amount | Fair Value | |||||||
Municipal Bonds, continued | ||||||||
New York (0.8%): | ||||||||
$ | 750,000 | New York City Municipal Finance Authority Water & Sewer System, Build America Bonds, Revenue, 5.95%, 6/15/42 | $ | 973,088 | ||||
775,000 | New York City Transitional Finance Authority Future Tax Secured Revenue, 3.28%, 8/1/29, Continuously Callable @100 | 749,138 | ||||||
1,125,000 | New York NY, Build America Bonds, GO, 5.05%, 10/1/24 | 1,225,766 | ||||||
|
| |||||||
2,947,992 | ||||||||
|
| |||||||
Total Municipal Bonds (Cost $5,297,869) | 5,225,732 | |||||||
|
| |||||||
U.S. Government Agency Mortgages (31.1%): | ||||||||
Federal Home Loan Mortgage Corporation (16.2%) | ||||||||
2,000,000 | 3.50%, 1/15/31, TBA | 2,025,273 | ||||||
555,986 | 3.00%, 3/1/31, Pool #G18592 | 554,124 | ||||||
665,000 | Class A3, Series K158, 3.90%, 10/25/33 | 680,515 | ||||||
1,798,817 | 3.50%, 4/1/44, Pool #G07848 | 1,812,154 | ||||||
2,552,115 | 3.50%, 4/1/45, Pool #G60023 | 2,570,261 | ||||||
2,341,919 | 4.00%, 12/1/45, Pool #G60344 | 2,404,686 | ||||||
2,333,072 | 3.50%, 6/1/46, Pool #G08711 | 2,333,290 | ||||||
2,465,462 | 3.00%, 6/1/46, Pool #G08710 | 2,405,856 | ||||||
1,565,271 | 3.50%, 8/1/46, Pool #G08716 | 1,565,256 | ||||||
1,217,908 | 3.00%, 8/1/46, Pool #G08715 | 1,188,463 | ||||||
326,468 | 3.00%, 9/1/46, Pool #G08721 | 318,575 | ||||||
622,128 | 3.50%, 9/1/46, Pool #G08722 | 623,661 | ||||||
1,624,053 | 3.00%, 10/1/46, Pool #G08726 | 1,584,789 | ||||||
1,757,381 | 3.00%, 11/1/46, Pool #G08732 | 1,714,348 | ||||||
2,022,192 | 3.00%, 1/1/47, Pool #G08741 | 1,971,541 | ||||||
1,471,948 | 3.50%, 4/1/47, Pool #G67703 | 1,476,945 | ||||||
845,915 | Class PA, Series 4846, 4.00%, 6/15/47 | 881,350 | ||||||
612,095 | 3.00%, 12/1/47, Pool #G08791 | 596,721 | ||||||
1,206,394 | 3.50%, 12/1/47, Pool #G08792 | 1,206,180 | ||||||
2,010,688 | 3.50%, 12/1/47, Pool #G67706 | 2,016,269 | ||||||
3,267,735 | 3.50%, 1/1/48, Pool #G67707 | 3,282,888 | ||||||
3,375,000 | 4.50%, 1/15/48, TBA | 3,493,436 | ||||||
2,066,340 | 4.00%, 3/1/48, Pool #G67711 | 2,120,024 | ||||||
3,761,591 | 3.50%, 3/1/48, Pool #G67708 | 3,767,956 | ||||||
1,124,082 | 3.50%, 3/1/48, Pool #G67710 | 1,124,934 | ||||||
434,713 | Class CA, Series 4818, 3.00%, 4/15/48 | 424,450 | ||||||
741,678 | 4.00%, 6/1/48, Pool #G67713 | 759,852 | ||||||
1,944,367 | 3.50%, 6/1/48, Pool #G08816 | 1,943,895 | ||||||
468,412 | 5.00%, 7/1/48, Pool #G08833 | 490,628 | ||||||
1,401,740 | 4.50%, 10/1/48, Pool #G08843 | 1,451,569 | ||||||
1,505,717 | 3.50%, 2/1/49, Pool #G08800 | 1,505,260 | ||||||
1,222,910 | Class HZ, Series 4639, 2.75%, 4/15/53 | 1,154,283 | ||||||
|
| |||||||
51,449,432 | ||||||||
|
| |||||||
Federal National Mortgage Association (9.6%) | ||||||||
1,245,000 | 3.06%, 5/1/22, Pool #471258 | 1,255,866 | ||||||
745,424 | 2.51%, 8/1/26, Pool #AN2270 | 720,231 | ||||||
1,131,059 | 2.97%, 5/1/27, Pool #AL6829 | 1,119,749 | ||||||
1,050,000 | 3.85%, 7/1/30, Pool #AN9776 | 1,080,522 | ||||||
850,000 | 3.82%, 11/1/30, Pool # BL0242 | 872,279 | ||||||
693,853 | 3.53%, 12/1/30, Pool #AN0475 | 700,945 | ||||||
725,000 | 3.17%, 5/1/31, Pool #AN6553 | 699,940 | ||||||
987,190 | 3.50%, 1/1/32, Pool #AB4262 | 1,005,541 | ||||||
180,000 | 3.00%, 1/25/32, TBA | 179,554 |
See accompanying notes to the financial statements.
10
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Principal Amount | Fair Value | |||||||
U.S. Government Agency Mortgages, continued | ||||||||
Federal National Mortgage Association, continued | ||||||||
$ | 622,154 | 3.00%, 10/1/33, Pool #MA1676 | $ | 618,930 | ||||
863,584 | 3.21%, 11/1/37, Pool # AN7345 | 814,698 | ||||||
1,304,606 | 3.50%, 4/1/43, Pool #MA1404 | 1,312,322 | ||||||
826,663 | 4.50%, 2/1/46, Pool #AL9106 | 860,726 | ||||||
592,972 | Class QA, Series2018-57, 3.50%, 5/25/46 | 601,154 | ||||||
1,618,553 | Class PA, Series2018-55, 3.50%, 1/25/47 | 1,641,968 | ||||||
991,616 | 4.00%, 6/1/47, Pool #MA3027 | 1,011,202 | ||||||
998,663 | 4.00%, 6/1/47, Pool #AS9830 | 1,018,337 | ||||||
872,699 | 4.00%, 7/1/47, Pool #AS9972 | 889,846 | ||||||
1,014,540 | 4.00%, 8/1/47, Pool #MA3088 | 1,034,500 | ||||||
1,895,835 | 3.50%, 1/1/48, Pool #CA0996 | 1,899,777 | ||||||
1,006,343 | 4.00%, 1/1/48, Pool #MA3239 | 1,026,693 | ||||||
80,587 | 4.00%, 4/1/48, Pool # MA3333 | 82,444 | ||||||
3,457,159 | 3.50%, 4/1/48, Pool #MA3332 | 3,457,443 | ||||||
2,104,180 | 4.50%, 5/1/48, Pool #CA1710 | 2,179,793 | ||||||
192,675 | 4.50%, 5/1/48, Pool #CA1711 | 199,657 | ||||||
1,376,219 | 4.50%, 7/1/48, Pool #MA3444 | 1,425,251 | ||||||
1,442,267 | 4.50%, 8/1/48, Pool #CA2208 | 1,494,098 | ||||||
1,710,000 | 4.00%, 1/25/49, TBA | 1,743,131 | ||||||
145,000 | 3.50%, 1/25/49, TBA | 144,975 | ||||||
|
| |||||||
31,091,572 | ||||||||
|
| |||||||
Government National Mortgage Association (5.3%) | ||||||||
960,217 | 3.50%, 3/20/46, Pool #MA3521 | 967,897 | ||||||
1,000,931 | 3.50%, 4/20/46, Pool #MA3597 | 1,008,782 | ||||||
194,683 | 3.50%, 5/20/46, Pool #MA3663 | 196,150 | ||||||
409,031 | 3.50%, 9/20/46, Pool #MA3937 | 411,861 | ||||||
2,163,620 | 3.00%, 12/20/46, Pool #MA4126 | 2,132,479 | ||||||
1,701,693 | 3.50%, 1/20/47, Pool #MA4196 | 1,712,995 | ||||||
289,280 | 5.00%, 3/20/47, Pool #MA4324 | 305,065 | ||||||
386,722 | 3.50%, 6/20/47, Pool #MA4510 | 389,291 | ||||||
781,921 | 5.00%, 6/20/47, Pool #MA4513 | 816,246 | ||||||
582,889 | 5.00%, 9/20/47, Pool #MA4722 | 607,176 | ||||||
1,797,752 | 3.00%, 11/20/47, Pool #MA4836 | 1,770,868 | ||||||
459,791 | 3.50%, 11/20/47, Pool #MA4837 | 462,844 | ||||||
812,823 | 4.00%, 11/20/47, Pool #MA4838 | 832,825 | ||||||
3,735,000 | 4.50%, 1/20/48, TBA | 3,864,776 | ||||||
697,181 | Class NW, Series2018-124, 3.50%, 9/20/48 | 706,006 | ||||||
870,000 | 4.00%, 1/20/49, TBA | 890,798 | ||||||
|
| |||||||
17,076,059 | ||||||||
|
| |||||||
Total U.S. Government Agency Mortgages (Cost $101,102,333) | 99,617,063 | |||||||
|
|
Shares or Principal | Fair Value | |||||||
U.S. Treasury Obligations (19.8%): | ||||||||
U.S. Treasury Bills (0.1%) | ||||||||
$ | 405,000 | 2.33%, 3/28/19(c) | $ | 402,732 | ||||
|
| |||||||
U.S. Treasury Bonds (5.4%) | ||||||||
945,000 | 3.00%, 8/15/48 | 940,533 | ||||||
15,390,000 | 3.38%, 11/15/48 | 16,457,681 | ||||||
|
| |||||||
17,398,214 | ||||||||
|
| |||||||
U.S. Treasury Inflation Index Bonds (1.4%) | ||||||||
2,488,253 | 0.75%, 7/15/28 | 2,435,596 | ||||||
2,107,279 | 1.00%, 2/15/48 | 1,997,066 | ||||||
|
| |||||||
4,432,662 | ||||||||
|
| |||||||
U.S. Treasury Inflation Index Notes (0.5%) | ||||||||
857,293 | 0.13%, 7/15/24 | 822,128 | ||||||
741,092 | 0.38%, 7/15/25 | 714,480 | ||||||
|
| |||||||
1,536,608 | ||||||||
|
| |||||||
U.S. Treasury Notes (12.4%) | ||||||||
450,000 | 2.75%, 9/30/20 | 451,688 | ||||||
1,070,000 | 2.88%, 9/30/23 | 1,087,388 | ||||||
28,310,000 | 2.88%, 10/31/23 | 28,781,096 | ||||||
1,505,000 | 2.63%, 12/31/23 | 1,512,878 | ||||||
7,790,000 | 3.13%, 11/15/28 | 8,080,299 | ||||||
|
| |||||||
39,913,349 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $62,052,459) | 63,683,565 | |||||||
|
| |||||||
Commercial Paper (0.2%): | ||||||||
685,000 | Ford Motor Credit Co. LLC, 3.37%(a) | 679,021 | ||||||
|
| |||||||
Total Commercial Paper (Cost $679,532) | 679,021 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.0%): | ||||||||
3,285,322 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%d(d) | 3,285,322 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $3,285,322) | 3,285,322 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (0.1%) | ||||||||
Miscellaneous Investments (0.1%) | ||||||||
394,232 | Short-Term Investments(e) | 394,232 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 394,232 | ||||||
|
| |||||||
Total Investment Securities (Cost $333,326,203) — 103.1%(f) | 331,402,309 | |||||||
Net other assets (liabilities) — (3.1)% | (10,058,156 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 321,344,153 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
12MTA—12 Month Treasury Average
GO—General Obligation
MTN—Medium Term Note
REMIC—Real Estate Mortgage Investment Conduit
TBA—To Be Announced Security
US0001M—1 Month US Dollar LIBOR
US0003M—3 Month US Dollar LIBOR
US0006M—6 Month US Dollar LIBOR
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $414,032. |
+ | The principal amount is disclosed in local currency and the fair value is disclosed in U.S. Dollars. |
† | Represents less than 0.05%. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
See accompanying notes to the financial statements.
11
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
(b) | The rate for certain asset-backed and mortgage-backed securities may vary based on factors relating to the pool of assets underlying the security. The rate presented is the rate in effect at December 31, 2018. |
(c) | All or a portion of this security has been pledged as collateral for open derivative positions. |
(d) | The rate represents the effective yield at December 31, 2018. |
(e) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $61,361 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Short Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Euro-Bobl March Futures (Euro) | 3/7/19 | 56 | $ | (8,501,587 | ) | $ | (23,247 | ) | ||||||||
|
| |||||||||||||||
$ | (23,247 | ) | ||||||||||||||
|
|
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
U.S. Treasury2-Year Note April Futures (U.S. Dollar) | 3/29/19 | 165 | $ | 35,031,579 | $ | 232,484 | ||||||||||
U.S. Treasury5-Year Note April Futures (U.S. Dollar) | 3/29/19 | 325 | 37,273,438 | 581,172 | ||||||||||||
|
| |||||||||||||||
$ | 813,656 | |||||||||||||||
|
| |||||||||||||||
Total Net Futures Contracts | $ | 790,409 | ||||||||||||||
|
|
Forward Currency Contracts
At December 31, 2018, the Fund’s open forward currency contracts were as follows:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Net Unrealized Appreciation/ (Depreciation) | ||||||||
U.S. Dollar | 1,732,694 | Japanese Yen | 195,000,000 | Goldman Sachs | 1/9/19 | $(48,005) | ||||||
U.S. Dollar | 1,689,925 | Japanese Yen | 190,000,000 | Goldman Sachs | 2/12/19 | (49,817) | ||||||
| ||||||||||||
$(97,822) | ||||||||||||
|
Swap Agreements
At December 31, 2018, the Fund’s open centrally cleared interest rate swap agreements were as follows:
Paid by the Fund | Received by the Fund | |||||||||||||||||||||||||||||||||
Rate | Frequency | Rate | Frequency | Expiration Date | Notional Amount | Upfront Premiums Paid/ (Received) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||
3-Month U.S. Dollar LIBOR | Semi-annually | 3.07% | Semi-annually | 11/21/21 | 17,660,000 | USD | $ | — | $ | 178,404 | $ | 178,404 | ||||||||||||||||||||||
3.08% | Semi-annually | 3-Month U.S. Dollar LIBOR | Semi-annually | 11/21/24 | 7,260,000 | USD | — | (167,681 | ) | (167,681 | ) | |||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||
$ | 10,723 | $ | 10,723 | |||||||||||||||||||||||||||||||
|
|
|
|
See accompanying notes to the financial statements.
12
AZL MetWest Total Return Bond Fund
Schedule of Portfolio Investments
December 31, 2018
Balances Reported in the Statement of Assets and Liabilities for Forward Currency Contracts and Swap Agreements
Swap Premiums Paid | Swap Premiums Received | Appreciation | Unrealized Depreciation | |||||||||||||
Centrally cleared swap agreements(a) | $ | — | $ | — | $ | 178,404 | $ | (167,681 | ) | |||||||
Forward Currency Contracts | — | — | — | (97,822 | ) |
(a) | Includes cumulative unrealized appreciation (depreciation) on these swap agreements as reported in the Schedule of Portfolio Investments. Only current day’s variation margin for centrally cleared swap agreements is reported within the Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts. |
See accompanying notes to the financial statements.
13
AZL MetWest Total Return Bond Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 333,326,203 | |||
|
| ||||
Investment securities, at value(a) | $ | 331,402,309 | |||
Cash | 24,864 | ||||
Segregated cash for collateral | 61,361 | ||||
Interest and dividends receivable | 1,854,785 | ||||
Receivable for investments sold | 1,484,062 | ||||
Receivable for variation margin on centrally cleared swap agreements | 10,451 | ||||
Receivable for variation margin on futures contracts | 104,545 | ||||
Prepaid expenses | 3,927 | ||||
|
| ||||
Total Assets | 334,946,304 | ||||
|
| ||||
Liabilities: | |||||
Unrealized depreciation on forward currency contracts | 97,822 | ||||
Payable for investments purchased | 12,860,515 | ||||
Payable for capital shares redeemed | 15,139 | ||||
Payable for collateral received on loaned securities | 394,232 | ||||
Payable for variation margin on centrally cleared swap agreements | 15,051 | ||||
Manager fees payable | 137,888 | ||||
Administration fees payable | 5,460 | ||||
Distribution fees payable | 68,944 | ||||
Custodian fees payable | 661 | ||||
Administrative and compliance services fees payable | 665 | ||||
Transfer agent fees payable | 261 | ||||
Trustee fees payable | 255 | ||||
Other accrued liabilities | 5,258 | ||||
|
| ||||
Total Liabilities | 13,602,151 | ||||
|
| ||||
Net Assets | $ | 321,344,153 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 321,591,752 | |||
Total distributable earnings/(losses) | (247,599 | ) | |||
|
| ||||
Net Assets | $ | 321,344,153 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 32,241,004 | ||||
Net Asset Value (offering and redemption price per share) | $ | 9.97 | |||
|
|
(a) | Includes securities on loan of $414,032. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Interest | $ | 10,612,419 | |||
Dividends | 146,760 | ||||
Income from securities lending | 3,735 | ||||
|
| ||||
Total Investment Income | 10,762,914 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,081,125 | ||||
Administration fees | 133,148 | ||||
Distribution fees | 867,131 | ||||
Custodian fees | 13,023 | ||||
Administrative and compliance services fees | 5,311 | ||||
Transfer agent fees | 5,097 | ||||
Trustee fees | 16,588 | ||||
Professional fees | 15,737 | ||||
Shareholder reports | 4,597 | ||||
Other expenses | 6,421 | ||||
|
| ||||
Total expenses before reductions | 3,148,178 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (187,219 | ) | |||
|
| ||||
Net expenses | 2,960,959 | ||||
|
| ||||
Net Investment Income/(Loss) | 7,801,955 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | (4,803,194 | ) | |||
Net realized gains/(losses) on forward currency contracts | (386,324 | ) | |||
Net realized gains/(losses) on futures contracts | (871,549 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (3,972,513 | ) | |||
Change in net unrealized appreciation/depreciation on forward currency contracts | (188,987 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | 829,841 | ||||
Change in net unrealized appreciation/depreciation on swap agreements | 10,723 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (9,382,003 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (1,580,048 | ) | ||
|
|
See accompanying notes to the financial statements.
14
AZL MetWest Total Return Bond Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 7,801,955 | $ | 5,930,220 | ||||||
Net realized gains/(losses) on investments | (6,061,067 | ) | 317,716 | |||||||
Change in unrealized appreciation/depreciation on investments | (3,320,936 | ) | 5,030,449 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (1,580,048 | ) | 11,278,385 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (6,944,494 | ) | (6,559,679 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (6,944,494 | ) | (6,559,679 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 12,184,164 | 11,196,842 | ||||||||
Proceeds from dividends reinvested | 6,944,494 | 6,559,679 | ||||||||
Value of shares redeemed | (55,834,436 | ) | (15,153,280 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (36,705,778 | ) | 2,603,241 | |||||||
|
|
|
| |||||||
Change in net assets | (45,230,320 | ) | 7,321,947 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 366,574,473 | 359,252,526 | ||||||||
|
|
|
| |||||||
End of period | $ | 321,344,153 | $ | 366,574,473 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 1,225,472 | 1,095,692 | ||||||||
Dividends reinvested | 713,720 | 642,476 | ||||||||
Shares redeemed | (5,639,247 | ) | (1,479,972 | ) | ||||||
|
|
|
| |||||||
Change in shares | (3,700,055 | ) | 258,196 | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
15
AZL MetWest Total Return Bond Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | November 17, 2014 to December 31, 2014(a) | ||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.20 | $ | 10.07 | $ | 10.01 | $ | 10.07 | $ | 10.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.26 | 0.17 | 0.16 | 0.11 | 0.01 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.29 | ) | 0.15 | 0.07 | (0.13 | ) | 0.06 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.03 | ) | 0.32 | 0.23 | (0.02 | ) | 0.07 | ||||||||||||||||||
|
|
|
|
| �� |
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.20 | ) | (0.16 | ) | (0.11 | ) | (0.01 | ) | — | ||||||||||||||||
Net Realized Gains | — | (0.03 | ) | (0.06 | ) | (0.03 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.20 | ) | (0.19 | ) | (0.17 | ) | (0.04 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 9.97 | $ | 10.20 | $ | 10.07 | $ | 10.01 | $ | 10.07 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(b) | (0.21 | )% | 3.14 | % | 2.30 | % | (0.20 | )% | 0.70 | %(c) | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 321,344 | $ | 366,574 | $ | 359,253 | $ | 392,669 | $ | 415,586 | |||||||||||||||
Net Investment Income/(Loss)(d) | 2.25 | % | 1.63 | % | 1.45 | % | 1.02 | % | 0.56 | % | |||||||||||||||
Expenses Before Reductions(d)(e) | 0.91 | % | 0.91 | % | 0.91 | % | 0.89 | % | 0.91 | % | |||||||||||||||
Expenses Net of Reductions(d) | 0.85 | % | 0.86 | % | 0.86 | % | 0.84 | % | 0.86 | % | |||||||||||||||
Portfolio Turnover Rate | 184 | % | 198 | % | 185 | % | 256 | % | 27 | %(c) |
(a) | For the period November 17, 2014 (commencement of share class) to December 31, 2014. |
(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.
16
AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL MetWest Total Return Bond Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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
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.
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 Fund of Funds Trust.
17
AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $368 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $393,361 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
TBA Purchase and Sale Commitments
The Fund may enter intoto-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 “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 December 31, 2018, no collateral had been posted by the Fund to counterparties for TBAs.
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 year ended December 31, 2018, the Fund participated in following cross-trade transactions:
Purchases | Sales | Realized Gain/(Loss) | |||||||||||||
AZL MetWest Total Return Bond Fund | $ | 394,746 | $ | — | $ | — |
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.
Forward Currency Contracts
During the year ended December 31, 2018, the Fund entered into forward currency contracts in connections with planned purchases or sales of securities or to hedge the U.S. dollar value of securities denominated in a particular currency. 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
18
AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
opened and the value at the time it was closed. For the year ended December 31, 2018, the monthly average notional amount for short contracts was $5.5 million. Realized gains and losses are reported as “Net realized gains/(losses) on forward currency contracts” on the Statement of Operations.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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. For the year ended December 31, 2018, the monthly average notional amount for long contracts was $58.9 million and the monthly average notional amount for short contracts was $8.6 million. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the 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 theover-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 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, 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 December 31, 2018, 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 $4.2 million for the year ended December 31, 2018.
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 December 31, 2018:
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 | ||||||||
Interest Rate Risk | ||||||||||||
Futures Contracts | Receivable for variation margin on futures contracts* | $ | 813,656 | Payable for variation margin on futures contracts* | $ | 23,247 | ||||||
Interest Rate Swap Agreements | Unrealized appreciation on swap agreements* | 178,404 | Unrealized depreciation on swap agreements* | 167,681 | ||||||||
Foreign Exchange Rate Risk | ||||||||||||
Forward Currency Contracts | Unrealized appreciation on forward currency contracts | — | Unrealized depreciation on forward currency contracts | 97,822 |
* | Includes cumulative appreciation/depreciation of futures contracts and cumulative unrealized gain (loss) on these swap agreements as reported in the Schedule of Portfolio Investments. Only current day’s variation margin for both futures contracts and these centrally cleared swap agreements are reported within the Statement of Assets and Liabilities. |
19
AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 | |||||||
Interest Rate Risk | ||||||||||
Futures Contracts | Net realized gains/(losses) on futures contracts/ Change in net unrealized appreciation/depreciation on futures contracts | $ | (871,549 | ) | $ | 829,841 | ||||
Interest Rate Swap Agreements | Net realized gains/(losses) on swap agreements/Change in net unrealized appreciation/depreciation on swap agreements | — | 10,723 | |||||||
Foreign Exchange Risk | ||||||||||
Forward Currency Contracts | Net realized gains/(losses) on forward currency contracts/Change in net unrealized appreciation/depreciation on forward currency contracts | (386,324 | ) | (188,987 | ) |
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 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 December 31, 2018. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to master netting arrangements in the Statement of Assets and Liabilities. This table also summarizes the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of December 31, 2018.
As of December 31, 2018, the Fund’s derivative assets and liabilities by type were as follows:
Assets | Liabilities | |||||||||
Derivative Financial Instruments: | ||||||||||
Futures contracts | $ | 104,545 | $ | — | ||||||
Forward currency contracts | — | 97,822 | ||||||||
Swap agreements | 10,451 | 15,051 | ||||||||
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| |||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | 114,996 | 112,873 | ||||||||
Derivatives not subject to a master netting agreement or similar agreement (“MNA”) | (114,996 | ) | (15,051 | ) | ||||||
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Total assets and liabilities subject to a MNA | $ | — | $ | 97,822 | ||||||
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The following table presents the Fund’s derivative liabilities by counterparty net of amounts available for offset under MNA and net of the related collateral received by the Fund as of December 31, 2018:
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 | ||||||||||||||||||||
Goldman Sachs | $ | 97,822 | $ | — | $ | — | $ | — | $ | 97,822 | |||||||||||||||
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| ||||||||||||||||
Total | $ | 97,822 | $ | — | $ | — | $ | — | $ | 97,822 | |||||||||||||||
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* | 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 Statement of Assets and Liabilities. |
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As
20
AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (5,581,130 | ) | ||
From net realized gains | (978,549 | ) | |||
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| ||||
Change in net assets resulting from distributions to shareholders | $ | (6,559,679 | ) | ||
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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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL MetWest Total Return Bond Fund | 0.60 | % | 0.91 | % |
* | Effective December 1, 2018, the Manager voluntarily reduced the management fee to 0.50% on all assets. Prior to December 1, 2018, the Manager voluntarily reduced the management fee to 0.55% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 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 year ended December 31, 2018, $22,213 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee
21
AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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. 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, 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.
For the year ended December 31, 2018, 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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Total | ||||||||||||
Asset Backed Securities | $ | — | $ | 19,863,651 | $ | 19,863,651 | |||||||||
Collateralized Mortgage Obligations | — | 34,766,718 | 34,766,718 | ||||||||||||
Corporate Bonds+ | — | 87,106,327 | 87,106,327 | ||||||||||||
Foreign Bonds | — | 3,513,428 | 3,513,428 | ||||||||||||
Yankee Dollars+ | — | 13,267,250 | 13,267,250 | ||||||||||||
Municipal Bonds | — | 5,225,732 | 5,225,732 | ||||||||||||
U.S. Government Agency Mortgages | — | 99,617,063 | 99,617,063 | ||||||||||||
U.S. Treasury Obligations | — | 63,683,565 | 63,683,565 | ||||||||||||
Commercial Paper | — | 679,021 | 679,021 | ||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 394,232 | 394,232 | ||||||||||||
Unaffiliated Investment Company | 3,285,322 | — | 3,285,322 | ||||||||||||
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Total Investment Securities | 3,285,322 | 328,116,987 | 331,402,309 | ||||||||||||
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Other Financial Instruments:* | |||||||||||||||
Futures Contracts | 790,409 | — | 790,409 | ||||||||||||
Forward Currency Contracts | — | (97,822 | ) | (97,822 | ) | ||||||||||
Centrally Cleared Interest Rate Swaps | — | 10,723 | 10,723 | ||||||||||||
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Total Investments | $ | 4,075,731 | $ | 328,029,888 | $ | 332,105,619 | |||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts, 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 and centrally cleared interest rate swaps, which are presented at variation margin. |
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AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MetWest Total Return Bond Fund | $ | 600,429,629 | $ | 624,410,318 |
For the year ended December 31, 2018, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL MetWest Total Return Bond Fund | $ | 533,970,820 | $ | 563,222,896 |
6. Investment Risks
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 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.
Mortgage-Related and Other Asset-Backed Risk: The Fund may invest in a variety of mortgage-related and other asset-backed securities, which are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to call risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless. An unexpectedly high or low rate of prepayments on a pool’s underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk ofnon-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. A Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
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.
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 December 31, 2018 is $333,335,628. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 3,760,609 | ||
Unrealized (depreciation) | (5,683,205 | ) | ||
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| |||
Net unrealized appreciation/(depreciation) | $ | (1,922,596 | ) | |
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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.
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AZL MetWest Total Return Bond Fund
Notes to the Financial Statements
December 31, 2018
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL MetWest Total Return Bond Fund | $ | 5,379,537 | $ | 709,098 | $ | 6,088,635 |
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MetWest Total Return Bond Fund | $ | 6,944,494 | $ | — | $ | 6,944,494 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MetWest Total Return Bond Fund | $ | 6,146,557 | $ | 413,122 | $ | 6,559,679 |
(a) | Total distributions paid may differ from the 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 MetWest Total Return Bond Fund | $ | 7,861,454 | $ | — | $ | (6,088,635 | ) | $ | (1,922,595 | ) | $ | (149,776 | ) |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had an individual shareholder account which are 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL MetWest Total Return Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL MetWest Total Return Bond Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
27
Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
29
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
30
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/ Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
31
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Mid Cap Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 11
Page 11
Statements of Changes in Net Assets
Page 12
Page 13
Notes to the Financial Statements
Page 14
Report of Independent Registered Public Accounting Firm
Page 20
Other Federal Income Tax Information
Page 21
Page 22
Approval of Investment Advisory and Subadvisory Agreements
Page 23
Information about the Board of Trustees and Officers
Page 26
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® Mid Cap Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Mid Cap Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund. | ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Mid Cap Index Fund (Class 2 Shares) (the “Fund”) returned-11.35%. That compared to a-11.08% total return for its benchmark, the S&P MidCap 400 Index1.
The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the S&P MidCap 400 Index (“Index”). The Index is designed to provide a comprehensive measure ofmid-cap stock performance.*
Markets opened the year posting strong gains fueled bytax-reform optimism and ongoing global growth that carried over from 2017. As the first quarter progressed, however, investors grew more concerned that the economy might be overheating. The realized volatility of the S&P 500 Index2 rose to annualized level of 19% during the first quarter, which was up from an average of 6.6% in 2017. Rising yields and trade protectionism fears further weighed on equities. And yet, the underlying U.S. economy remained healthy, with low unemployment, high consumer confidence and accelerating economic indicators. These factors supported the Federal Reserve Board’s (the Fed) decision to increase interest rates in March, which helped drive yields higher.
The second quarter saw renewed gains in U.S. equity markets, in spite of ongoing threats of U.S. tariffs. Unemployment fell to its lowest level since 1975 and earnings growth inspired confidence in investors. The Fed raised interest rates again in June.
U.S.large-cap equities reachedall-time highs in the third quarter. Signs of strong economic growth and positive earnings results helped grow investors’ appetite for risk. Volatility fell in spite of the U.S. announcing tariffs on $505 billion of Chinese goods. The unemployment rate fell as well, dropping to 3.7% in September—the lowest rate since 1969. Meanwhile, consumer confidence reached its highest level since 2000. The strength of the economy led the Fed to once again raise interest rates, which, combined with positive growth and high levels of U.S. government debt issuance, pushed the yield on10-year U.S. Treasuries up to 3.06%.
Concerns over Fed policy, growing trade protectionism and a potential slowdown in growth contributed to investor anxiety throughout the fourth quarter. Hawkish comments from Fed Chairman Powell about U.S. interest rates drove a temporarysell-off in U.S. Treasuries, and helped spur a return to volatility.
From a sector perspective, the largest negative returns in the Index came from the energy, materials and consumer discretionary sectors. Increases were seen in the utilities and healthcare sectors.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a slight negative impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
1
AZL®Mid Cap Index Fund Review(Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek to match the performance of the Standard & Poor’s MidCap 400 Index (“S&P 400”) as closely as possible. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of its net assets in a statistically selected sampling of equity securities of companies included in the S&P 400 and in derivative instruments linked to the S&P 400, primarily futures contracts. | ||||
Investment Concerns | ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility. | ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. | ||||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception Date | 1 Year | 3 Year | 5 Year | Since Inception | ||||||||||||||
AZL®Mid Cap Index Fund (Class 1 Shares) | 10/14/16 | -11.01 | % | — | — | 5.51 | % | |||||||||||
AZL®Mid Cap Index Fund (Class 2 Shares) | 5/1/09 | -11.35 | % | 7.07 | % | 5.47 | % | 12.91 | % | |||||||||
S&P MidCap 400 Index | 5/1/09 | -11.08 | % | 7.66 | % | 6.03 | % | 13.67 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®Mid Cap Index Fund (Class 1 Shares) | 0.31 | % | ||
AZL®Mid Cap Index Fund (Class 2 Shares) | 0.56 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.46% for Class 1 Shares and 0.71% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Standard & Poor’s MidCap 400 Index (“S&P 400”), which is the most widely used index formid-sized companies. The S&P 400 covers 7% of the U.S. equities market, and is part of a series of S&P U.S. indexes that can be used as building blocks for portfolio composition. The index is unmanaged and does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL Mid Cap Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Mid Cap Index Fund, Class 1 | $ | 1,000.00 | $ | 857.90 | $ | 1.45 | 0.31 | % | ||||||||||||
AZL Mid Cap Index Fund, Class 2 | $ | 1,000.00 | $ | 855.90 | $ | 2.62 | 0.56 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Mid Cap Index Fund, Class 1 | $ | 1,000.00 | $ | 1,023.64 | $ | 1.58 | 0.31 | % | ||||||||||||
AZL Mid Cap Index Fund, Class 2 | $ | 1,000.00 | $ | 1,022.38 | $ | 2.85 | 0.56 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Financials | 16.3 | % | |||
Industrials | 14.9 | ||||
Information Technology | 14.9 | ||||
Consumer Discretionary | 11.6 | ||||
Health Care | 9.9 | ||||
Real Estate | 9.4 | ||||
Materials | 6.6 | ||||
Utilities | 5.5 | ||||
Energy | 3.6 | ||||
Consumer Staples | 2.9 | ||||
Telecommunication Services | 2.5 | ||||
Private Placements | 1.1 | ||||
|
| ||||
Total Common Stocks and Private Placements | 99.2 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 20.0 | ||||
Money Markets | 0.7 | ||||
|
| ||||
Total Investment Securities | 119.9 | ||||
Net other assets (liabilities) | (19.9 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (98.1%): | ||||||||
Aerospace & Defense (1.0%): | ||||||||
30,914 | Curtiss-Wright Corp. | $ | 3,156,938 | |||||
18,724 | Esterline Technologies Corp.* | 2,274,030 | ||||||
25,432 | Teledyne Technologies, Inc.* | 5,266,204 | ||||||
|
| |||||||
10,697,172 | ||||||||
|
| |||||||
Airlines (0.3%): | ||||||||
214,828 | JetBlue Airways Corp.* | 3,450,138 | ||||||
|
| |||||||
Auto Components (0.8%): | ||||||||
61,037 | Adient plc | 919,217 | ||||||
101,601 | Dana Holding Corp. | 1,384,822 | ||||||
62,516 | Delphi Technologies plc | 895,229 | ||||||
184,656 | Gentex Corp. | 3,731,897 | ||||||
20,393 | Visteon Corp.*^ | 1,229,290 | ||||||
|
| |||||||
8,160,455 | ||||||||
|
| |||||||
Automobiles (0.2%): | ||||||||
35,187 | Thor Industries, Inc.^ | 1,829,724 | ||||||
|
| |||||||
Banks (7.2%): | ||||||||
116,863 | Associated Banc-Corp. | 2,312,719 | ||||||
63,910 | BancorpSouth Bank^ | 1,670,607 | ||||||
29,439 | Bank of Hawaii Corp.^ | 1,981,833 | ||||||
84,970 | Bank OZK^ | 1,939,865 | ||||||
54,259 | Cathay General Bancorp | 1,819,304 | ||||||
50,311 | Chemical Financial Corp. | 1,841,886 | ||||||
70,032 | Commerce Bancshares, Inc.^ | 3,947,704 | ||||||
45,052 | Cullen/Frost Bankers, Inc.^ | 3,961,873 | ||||||
102,045 | East West Bancorp, Inc. | 4,442,019 | ||||||
228,452 | F.N.B. Corp.^ | 2,247,968 | ||||||
228,445 | First Horizon National Corp.^ | 3,006,336 | ||||||
123,673 | Fulton Financial Corp. | 1,914,458 | ||||||
60,142 | Hancock Holding Co. | 2,083,920 | ||||||
112,102 | Home Bancshares, Inc.^ | 1,831,747 | ||||||
38,683 | International Bancshares Corp. | 1,330,695 | ||||||
59,219 | MB Financial, Inc. | 2,346,849 | ||||||
86,055 | PacWest Bancorp | 2,863,910 | ||||||
51,456 | Pinnacle Financial Partners, Inc.^ | 2,372,122 | ||||||
46,635 | Prosperity Bancshares, Inc.^ | 2,905,361 | ||||||
37,645 | Signature Bank | 3,870,282 | ||||||
158,656 | Sterling Bancorp^ | 2,619,411 | ||||||
116,656 | Synovus Financial Corp. | 3,731,825 | ||||||
117,871 | TCF Financial Corp. | 2,297,306 | ||||||
35,257 | Texas Capital Bancshares, Inc.* | 1,801,280 | ||||||
47,316 | Trustmark Corp.^ | 1,345,194 | ||||||
31,692 | UMB Financial Corp.^ | 1,932,261 | ||||||
155,094 | Umpqua Holdings Corp.^ | 2,465,995 | ||||||
72,976 | United Bankshares, Inc.^ | 2,270,283 | ||||||
232,990 | Valley National Bancorp^ | 2,068,951 | ||||||
64,962 | Webster Financial Corp. | 3,201,977 | ||||||
39,726 | Wintrust Financial Corp. | 2,641,382 | ||||||
|
| |||||||
77,067,323 | ||||||||
|
| |||||||
Beverages (0.1%): | ||||||||
6,070 | Boston Beer Co., Inc. (The), Class A* | 1,461,899 | ||||||
|
| |||||||
Biotechnology (0.9%): | ||||||||
210,648 | Exelixis, Inc.* | 4,143,446 | ||||||
14,992 | Ligand Pharmaceuticals, Inc., Class B* | 2,034,414 | ||||||
30,675 | United Therapeutics Corp.* | 3,340,508 | ||||||
|
| |||||||
9,518,368 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Building Products (0.7%): | ||||||||
25,544 | Lennox International, Inc.^ | $ | 5,590,560 | |||||
86,868 | Resideo Technologies, Inc.* | 1,785,137 | ||||||
|
| |||||||
7,375,697 | ||||||||
|
| |||||||
Capital Markets (2.9%): | ||||||||
82,106 | Eaton Vance Corp. | 2,888,489 | ||||||
28,515 | Evercore Partners, Inc., Class A | 2,040,533 | ||||||
26,801 | FactSet Research Systems, Inc.^ | 5,363,684 | ||||||
67,285 | Federated Investors, Inc., Class B^ | 1,786,417 | ||||||
52,873 | Interactive Brokers Group, Inc., Class A | 2,889,509 | ||||||
117,616 | Janus Henderson Group plc^ | 2,437,004 | ||||||
60,329 | Legg Mason, Inc. | 1,538,993 | ||||||
26,500 | MarketAxess Holdings, Inc.^ | 5,599,716 | ||||||
92,121 | SEI Investments Co. | 4,255,990 | ||||||
50,770 | Stifel Financial Corp. | 2,102,893 | ||||||
|
| |||||||
30,903,228 | ||||||||
|
| |||||||
Chemicals (2.6%): | ||||||||
43,971 | Ashland Global Holdings, Inc. | 3,120,182 | ||||||
42,315 | Cabot Corp. | 1,817,006 | ||||||
120,646 | Chemours Co. (The) | 3,404,630 | ||||||
24,884 | Minerals Technologies, Inc. | 1,277,545 | ||||||
6,279 | NewMarket Corp.^ | 2,587,513 | ||||||
117,670 | Olin Corp. | 2,366,344 | ||||||
56,287 | PolyOne Corp. | 1,609,808 | ||||||
93,557 | RPM International, Inc. | 5,499,281 | ||||||
27,665 | ScottsMiracle-Gro Co. (The)^ | 1,700,291 | ||||||
29,691 | Sensient Technologies Corp.^ | 1,658,242 | ||||||
132,583 | Valvoline, Inc. | 2,565,481 | ||||||
|
| |||||||
27,606,323 | ||||||||
|
| |||||||
Commercial Services & Supplies (1.4%): | ||||||||
35,663 | Brink’s Co. (The)^ | 2,305,613 | ||||||
35,995 | Clean Harbors, Inc.* | 1,776,353 | ||||||
32,618 | Deluxe Corp. | 1,253,836 | ||||||
51,809 | Healthcare Services Group, Inc.^ | 2,081,686 | ||||||
42,007 | Herman Miller, Inc. | 1,270,712 | ||||||
30,658 | HNI Corp. | 1,086,213 | ||||||
24,585 | MSA Safety, Inc. | 2,317,628 | ||||||
131,843 | Pitney Bowes, Inc.^ | 779,192 | ||||||
60,121 | Stericycle, Inc.*^ | 2,205,839 | ||||||
|
| |||||||
15,077,072 | ||||||||
|
| |||||||
Communications Equipment (1.4%): | ||||||||
115,225 | ARRIS International plc* | 3,522,428 | ||||||
100,234 | Ciena Corp.* | 3,398,935 | ||||||
23,866 | InterDigital, Inc. | 1,585,418 | ||||||
51,796 | Lumentum Holdings, Inc.* | 2,175,950 | ||||||
49,297 | NetScout Systems, Inc.*^ | 1,164,888 | ||||||
23,130 | Plantronics, Inc. | 765,603 | ||||||
39,544 | ViaSat, Inc.*^ | 2,331,119 | ||||||
|
| |||||||
14,944,341 | ||||||||
|
| |||||||
Construction & Engineering (1.2%): | ||||||||
110,270 | Aecom Technology Corp.* | 2,922,155 | ||||||
21,962 | Dycom Industries, Inc.*^ | 1,186,826 | ||||||
40,592 | EMCOR Group, Inc. | 2,422,936 | ||||||
33,078 | Granite Construction, Inc.^ | 1,332,382 | ||||||
99,025 | KBR, Inc. | 1,503,200 |
See accompanying notes to the financial statements.
4
AZL Mid Cap Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Construction & Engineering, continued | ||||||||
44,898 | MasTec, Inc.*^ | $ | 1,821,063 | |||||
15,570 | Valmont Industries, Inc. | 1,727,492 | ||||||
|
| |||||||
12,916,054 | ||||||||
|
| |||||||
Construction Materials (0.2%): | ||||||||
33,075 | Eagle Materials, Inc., Class A | 2,018,567 | ||||||
|
| |||||||
Consumer Finance (0.4%): | ||||||||
161,895 | Navient Corp. | 1,426,295 | ||||||
306,922 | SLM Corp.* | 2,550,522 | ||||||
|
| |||||||
3,976,817 | ||||||||
|
| |||||||
Containers & Packaging (1.4%): | ||||||||
44,274 | AptarGroup, Inc. | 4,164,855 | ||||||
64,049 | Bemis Co., Inc. | 2,939,849 | ||||||
18,263 | Greif, Inc., Class A | 677,740 | ||||||
111,935 | Owens-Illinois, Inc.*^ | 1,929,759 | ||||||
54,427 | Silgan Holdings, Inc. | 1,285,566 | ||||||
70,224 | Sonoco Products Co.^ | 3,731,001 | ||||||
|
| |||||||
14,728,770 | ||||||||
|
| |||||||
Distributors (0.4%): | ||||||||
28,380 | Pool Corp.^ | 4,218,687 | ||||||
|
| |||||||
Diversified Consumer Services (1.0%): | ||||||||
41,437 | Adtalem Global Education, Inc.* | 1,960,799 | ||||||
3,057 | Graham Holdings Co., Class B | 1,958,253 | ||||||
127,626 | Service Corp. International^ | 5,138,222 | ||||||
24,548 | Sotheby’s* | 975,538 | ||||||
27,161 | Weight Watchers International, Inc.*^ | 1,047,057 | ||||||
|
| |||||||
11,079,869 | ||||||||
|
| |||||||
Electric Utilities (1.6%): | ||||||||
36,121 | ALLETE, Inc. | 2,753,143 | ||||||
76,814 | Hawaiian Electric Industries, Inc. | 2,812,929 | ||||||
35,538 | IDA Corp., Inc. | 3,307,166 | ||||||
140,659 | OGE Energy Corp. | 5,512,426 | ||||||
56,100 | PNM Resources, Inc. | 2,305,149 | ||||||
|
| |||||||
16,690,813 | ||||||||
|
| |||||||
Electrical Equipment (1.3%): | ||||||||
28,243 | Acuity Brands, Inc.^ | 3,246,533 | ||||||
29,625 | EnerSys | 2,299,196 | ||||||
38,500 | Hubbell, Inc. | 3,824,590 | ||||||
114,679 | nVent Electric plc | 2,575,690 | ||||||
30,544 | Regal-Beloit Corp. | 2,139,607 | ||||||
|
| |||||||
14,085,616 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (3.9%): | ||||||||
61,426 | Arrow Electronics, Inc.* | 4,235,323 | ||||||
78,434 | Avnet, Inc. | 2,831,467 | ||||||
28,650 | Belden, Inc.^ | 1,196,711 | ||||||
121,323 | Cognex Corp.^ | 4,691,560 | ||||||
17,080 | Coherent, Inc.* | 1,805,527 | ||||||
101,293 | Jabil, Inc. | 2,511,053 | ||||||
17,720 | Littlelfuse, Inc.^ | 3,038,626 | ||||||
79,399 | National Instruments Corp. | 3,603,127 | ||||||
29,305 | SYNNEX Corp. | 2,369,016 | ||||||
26,304 | Tech Data Corp.* | 2,151,930 | ||||||
177,128 | Trimble Navigation, Ltd.* | 5,829,282 | ||||||
93,086 | Vishay Intertechnology, Inc.^ | 1,676,479 | ||||||
37,946 | Zebra Technologies Corp., Class A* | 6,042,142 | ||||||
|
| |||||||
41,982,243 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Energy Equipment & Services (1.1%): | ||||||||
54,385 | Apergy Corp.* | $ | 1,472,746 | |||||
31,145 | Core Laboratories NV^ | 1,858,111 | ||||||
45,567 | Diamond Offshore Drilling, Inc.* | 430,152 | ||||||
25,232 | Dril-Quip, Inc.*^ | 757,717 | ||||||
307,628 | Ensco plc, Class A, ADR^ | 1,095,156 | ||||||
127,296 | McDermott International, Inc.*^ | 832,516 | ||||||
69,391 | Oceaneering International, Inc.* | 839,631 | ||||||
153,252 | Patterson-UTI Energy, Inc. | 1,586,159 | ||||||
89,306 | Rowan Cos. plc, Class A* | 749,277 | ||||||
355,682 | Transocean, Ltd.* | 2,468,433 | ||||||
|
| |||||||
12,089,898 | ||||||||
|
| |||||||
Entertainment (0.9%): | ||||||||
74,798 | Cinemark Holdings, Inc.^ | 2,677,768 | ||||||
97,441 | Live Nation, Inc.*^ | 4,798,970 | ||||||
30,485 | World Wrestling Entertainment, Inc., Class A^ | 2,277,839 | ||||||
|
| |||||||
9,754,577 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (8.9%): | ||||||||
47,651 | Alexander & Baldwin, Inc.* | 875,825 | ||||||
96,369 | American Campus Communities, Inc. | 3,988,713 | ||||||
65,644 | Camden Property Trust | 5,779,953 | ||||||
83,462 | Corecivic, Inc. | 1,488,127 | ||||||
25,800 | Coresite Realty Corp. | 2,250,534 | ||||||
76,726 | Corporate Office Properties Trust | 1,613,548 | ||||||
295,448 | Cousins Properties, Inc. | 2,334,039 | ||||||
74,567 | Cyrusone, Inc. | 3,943,103 | ||||||
113,463 | Douglas Emmett, Inc. | 3,872,492 | ||||||
52,260 | EPR Properties | 3,346,208 | ||||||
88,676 | First Industrial Realty Trust, Inc. | 2,559,189 | ||||||
85,600 | Geo Group, Inc. (The) | 1,686,320 | ||||||
88,320 | Healthcare Realty Trust, Inc. | 2,511,821 | ||||||
72,717 | Highwoods Properties, Inc. | 2,813,421 | ||||||
115,693 | Hospitality Properties Trust | 2,762,749 | ||||||
76,740 | JBG SMITH Properties | 2,671,319 | ||||||
71,012 | Kilroy Realty Corp. | 4,465,235 | ||||||
60,012 | Lamar Advertising Co., Class A | 4,151,630 | ||||||
103,953 | Liberty Property Trust | 4,353,552 | ||||||
32,780 | Life Storage, Inc. | 3,048,212 | ||||||
63,748 | Mack-Cali Realty Corp.^ | 1,248,823 | ||||||
256,924 | Medical Properties Trust, Inc. | 4,131,338 | ||||||
112,217 | National Retail Properties, Inc. | 5,443,647 | ||||||
141,537 | Omega Healthcare Investors, Inc. | 4,975,026 | ||||||
90,262 | Pebblebrook Hotel Trust^ | 2,555,317 | ||||||
47,657 | Potlatch Corp. | 1,507,867 | ||||||
91,068 | Rayonier, Inc. | 2,521,673 | ||||||
125,493 | Sabra Health Care REIT, Inc. | 2,068,125 | ||||||
167,119 | Senior Housing Properties Trust | 1,958,635 | ||||||
66,359 | Tanger Factory Outlet Centers, Inc.^ | 1,341,779 | ||||||
42,921 | Taubman Centers, Inc. | 1,952,476 | ||||||
126,089 | Uniti Group, Inc.^ | 1,963,206 | ||||||
80,148 | Urban Edge Properties | 1,332,060 | ||||||
83,806 | Weingarten Realty Investors | 2,079,227 | ||||||
|
| |||||||
95,595,189 | ||||||||
|
| |||||||
Food & Staples Retailing (0.5%): | ||||||||
25,816 | Casey’s General Stores, Inc. | 3,308,062 | ||||||
90,000 | Sprouts Farmers Market, Inc.* | 2,115,900 | ||||||
|
| |||||||
5,423,962 | ||||||||
|
|
See accompanying notes to the financial statements.
5
AZL Mid Cap Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products (1.7%): | ||||||||
128,960 | Flowers Foods, Inc.^ | $ | 2,381,891 | |||||
62,838 | Hain Celestial Group, Inc.*^ | 996,611 | ||||||
49,925 | Ingredion, Inc. | 4,563,145 | ||||||
13,772 | Lancaster Colony Corp. | 2,435,716 | ||||||
47,002 | Post Holdings, Inc.* | 4,189,288 | ||||||
14,149 | Sanderson Farms, Inc.^ | 1,404,854 | ||||||
13,249 | Tootsie Roll Industries, Inc.^ | 442,517 | ||||||
39,613 | TreeHouse Foods, Inc.*^ | 2,008,775 | ||||||
|
| |||||||
18,422,797 | ||||||||
|
| |||||||
Gas Utilities (2.4%): | ||||||||
82,310 | Atmos Energy Corp. | 7,631,783 | ||||||
60,452 | National Fuel Gas Co. | 3,093,933 | ||||||
62,152 | New Jersey Resources Corp. | 2,838,482 | ||||||
36,989 | ONE Gas, Inc. | 2,944,324 | ||||||
37,343 | Southwest Gas Corp. | 2,856,740 | ||||||
122,493 | UGI Corp. | 6,535,002 | ||||||
|
| |||||||
25,900,264 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (4.7%): | ||||||||
33,220 | Avanos Medical, Inc.*^ | 1,487,924 | ||||||
25,506 | Cantel Medical Corp. | 1,898,922 | ||||||
53,620 | Globus Medical, Inc., Class A* | 2,320,674 | ||||||
36,334 | Haemonetics Corp.* | 3,635,217 | ||||||
47,406 | Hill-Rom Holdings, Inc. | 4,197,801 | ||||||
11,703 | ICU Medical, Inc.* | 2,687,360 | ||||||
12,431 | Inogen, Inc.* | 1,543,557 | ||||||
49,730 | Integra LifeSciences Holdings Corp.* | 2,242,823 | ||||||
34,339 | LivaNova plc* | 3,140,988 | ||||||
34,376 | Masimo Corp.* | 3,690,951 | ||||||
36,106 | NuVasive, Inc.* | 1,789,413 | ||||||
59,432 | STERIS plc | 6,350,309 | ||||||
32,411 | Teleflex, Inc. | 8,377,595 | ||||||
52,217 | West Pharmaceutical Services, Inc. | 5,118,833 | ||||||
|
| |||||||
48,482,367 | ||||||||
|
| |||||||
Health Care Providers & Services (1.9%): | ||||||||
62,048 | Acadia Healthcare Co., Inc.*^ | 1,595,254 | ||||||
11,309 | Chemed Corp. | 3,203,614 | ||||||
69,639 | Encompass Health Corp. | 4,296,726 | ||||||
38,074 | HealthEquity, Inc.*^ | 2,271,114 | ||||||
62,991 | MEDNAX, Inc.* | 2,078,703 | ||||||
43,976 | Molina Healthcare, Inc.* | 5,110,890 | ||||||
58,004 | Patterson Cos., Inc.^ | 1,140,359 | ||||||
58,300 | Tenet Healthcare Corp.*^ | 999,262 | ||||||
|
| |||||||
20,695,922 | ||||||||
|
| |||||||
Health Care Technology (0.4%): | ||||||||
122,733 | Allscripts Healthcare Solutions, Inc.*^ | 1,183,146 | ||||||
43,127 | Medidata Solutions, Inc.*^ | 2,907,622 | ||||||
|
| |||||||
4,090,768 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (3.9%): | ||||||||
56,821 | Boyd Gaming Corp. | 1,180,740 | ||||||
27,222 | Brinker International, Inc.^ | 1,197,224 | ||||||
29,637 | Cheesecake Factory, Inc. (The)^ | 1,289,506 | ||||||
8,389 | Churchill Downs, Inc. | 2,046,413 | ||||||
16,943 | Cracker Barrel Old Country Store, Inc.^ | 2,708,508 | ||||||
29,319 | Domino’s Pizza, Inc. | 7,270,818 | ||||||
58,196 | Dunkin’ Brands Group, Inc.^ | 3,731,528 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
45,663 | Eldorado Resorts, Inc.*^ | $ | 1,653,457 | |||||
17,237 | International Speedway Corp., Class A | 756,015 | ||||||
18,142 | Jack in the Box, Inc. | 1,408,363 | ||||||
28,800 | Marriott Vacations Worldwide Corp. | 2,030,688 | ||||||
15,780 | Papa John’s International, Inc. | 628,202 | ||||||
76,289 | Penn National Gaming, Inc.*^ | 1,436,522 | ||||||
38,558 | Scientific Games Corp., Class A*^ | 689,417 | ||||||
50,607 | Six Flags Entertainment Corp.^ | 2,815,267 | ||||||
46,904 | Texas Roadhouse, Inc.^ | 2,800,169 | ||||||
131,600 | Wendy’s Co. (The)^ | 2,054,276 | ||||||
69,915 | Wyndham Hotels & Resorts, Inc. | 3,172,044 | ||||||
68,688 | Wyndham Worldwide Corp. | 2,461,778 | ||||||
|
| |||||||
41,330,935 | ||||||||
|
| |||||||
Household Durables (1.5%): | ||||||||
18,601 | Helen of Troy, Ltd.* | 2,440,079 | ||||||
60,768 | KB Home | 1,160,669 | ||||||
2,396 | NVR, Inc.* | 5,839,027 | ||||||
32,143 | Tempur Sealy International, Inc.*^ | 1,330,720 | ||||||
95,632 | Toll Brothers, Inc. | 3,149,162 | ||||||
100,250 | TRI Pointe Homes, Inc.*^ | 1,095,733 | ||||||
34,243 | Tupperware Brands Corp. | 1,081,052 | ||||||
|
| |||||||
16,096,442 | ||||||||
|
| |||||||
Household Products (0.2%): | ||||||||
42,043 | Energizer Holdings, Inc. | 1,898,241 | ||||||
|
| |||||||
Industrial Conglomerates (0.4%): | ||||||||
41,989 | Carlisle Cos., Inc. | 4,220,734 | ||||||
|
| |||||||
Insurance (5.1%): | ||||||||
10,452 | Alleghany Corp. | 6,514,942 | ||||||
49,470 | American Financial Group, Inc. | 4,478,519 | ||||||
42,003 | Aspen Insurance Holdings, Ltd. | 1,763,706 | ||||||
165,309 | Brown & Brown, Inc. | 4,555,916 | ||||||
115,674 | CNO Financial Group, Inc. | 1,721,229 | ||||||
78,485 | First American Financial Corp. | 3,503,570 | ||||||
353,034 | Genworth Financial, Inc., Class A* | 1,645,138 | ||||||
29,899 | Hanover Insurance Group, Inc. (The) | 3,491,306 | ||||||
42,163 | Kemper Corp. | 2,798,780 | ||||||
19,058 | Mercury General Corp.^ | 985,489 | ||||||
200,618 | Old Republic International Corp. | 4,126,712 | ||||||
29,857 | Primerica, Inc. | 2,917,327 | ||||||
44,219 | Reinsurance Group of America, Inc. | 6,200,831 | ||||||
28,402 | RenaissanceRe Holdings, Ltd. | 3,797,348 | ||||||
67,956 | W.R. Berkley Corp. | 5,022,628 | ||||||
|
| |||||||
53,523,441 | ||||||||
|
| |||||||
Interactive Media & Services (0.3%): | ||||||||
44,496 | Cars.com, Inc.*^ | 956,664 | ||||||
54,083 | Yelp, Inc.* | 1,892,364 | ||||||
|
| |||||||
2,849,028 | ||||||||
|
| |||||||
IT Services (2.8%): | ||||||||
17,507 | CACI International, Inc., Class A* | 2,521,533 | ||||||
56,896 | CoreLogic, Inc.* | 1,901,464 | ||||||
105,776 | Leidos Holdings, Inc. | 5,576,511 | ||||||
47,973 | LiveRamp Holdings, Inc.* | 1,853,197 | ||||||
45,153 | Maximus, Inc. | 2,939,009 | ||||||
99,703 | Perspecta, Inc. | 1,716,886 | ||||||
194,039 | Sabre Corp. | 4,199,004 |
See accompanying notes to the financial statements.
6
AZL Mid Cap Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services, continued | ||||||||
29,929 | Science Applications International Corp. | $ | 1,906,477 | |||||
83,364 | Teradata Corp.*^ | 3,197,843 | ||||||
30,289 | WEX, Inc.* | 4,242,277 | ||||||
|
| |||||||
30,054,201 | ||||||||
|
| |||||||
Leisure Products (0.6%): | ||||||||
60,958 | Brunswick Corp. | 2,831,499 | ||||||
40,963 | Polaris Industries, Inc.^ | 3,141,043 | ||||||
|
| |||||||
5,972,542 | ||||||||
|
| |||||||
Life Sciences Tools & Services (1.5%): | ||||||||
14,193 | Bio-Rad Laboratories, Inc., Class A* | 3,295,898 | ||||||
26,554 | Bio-Techne Corp. | 3,842,895 | ||||||
33,926 | Charles River Laboratories International, Inc.* | 3,839,745 | ||||||
41,233 | PRA Health Sciences, Inc.* | 3,791,787 | ||||||
42,677 | Syneos Health, Inc.*^ | 1,679,340 | ||||||
|
| |||||||
16,449,665 | ||||||||
|
| |||||||
Machinery (5.0%): | ||||||||
46,352 | AGCO Corp. | 2,580,416 | ||||||
35,732 | Crane Co. | 2,579,136 | ||||||
90,150 | Donaldson Co., Inc.^ | 3,911,609 | ||||||
117,490 | Graco, Inc. | 4,916,956 | ||||||
54,108 | IDEX Corp. | 6,831,675 | ||||||
61,789 | ITT, Inc. | 2,982,555 | ||||||
57,913 | Kennametal, Inc.^ | 1,927,345 | ||||||
45,422 | Lincoln Electric Holdings, Inc. | 3,581,525 | ||||||
36,786 | Nordson Corp. | 4,390,408 | ||||||
50,657 | OshKosh Corp. | 3,105,781 | ||||||
45,587 | Terex Corp.^ | 1,256,834 | ||||||
48,779 | Timken Co. | 1,820,432 | ||||||
74,170 | Toro Co. | 4,144,620 | ||||||
103,149 | Trinity Industries, Inc.^ | 2,123,838 | ||||||
60,636 | Wabtec Corp.^ | 4,259,679 | ||||||
39,203 | Woodward, Inc. | 2,912,391 | ||||||
|
| |||||||
53,325,200 | ||||||||
|
| |||||||
Marine (0.2%): | ||||||||
37,858 | Kirby Corp.*^ | 2,550,115 | ||||||
|
| |||||||
Media (1.1%): | ||||||||
31,943 | AMC Networks, Inc., Class A*^ | 1,753,032 | ||||||
3,488 | Cable One, Inc. | 2,860,508 | ||||||
31,980 | John Wiley & Sons, Inc., Class A | 1,502,101 | ||||||
27,972 | Meredith Corp.^ | 1,452,866 | ||||||
99,189 | New York Times Co. (The), Class A^ | 2,210,923 | ||||||
151,704 | Tegna, Inc. | 1,649,022 | ||||||
|
| |||||||
11,428,452 | ||||||||
|
| |||||||
Metals & Mining (2.0%): | ||||||||
88,414 | Allegheny Technologies, Inc.*^ | 1,924,773 | ||||||
33,245 | Carpenter Technology Corp. | 1,183,854 | ||||||
82,957 | Commercial Metals Co. | 1,328,971 | ||||||
23,732 | Compass Minerals International, Inc.^ | 989,387 | ||||||
49,626 | Reliance Steel & Aluminum Co. | 3,531,882 | ||||||
46,144 | Royal Gold, Inc. | 3,952,234 | ||||||
161,787 | Steel Dynamics, Inc. | 4,860,082 | ||||||
124,489 | United States Steel Corp.^ | 2,270,679 | ||||||
28,396 | Worthington Industries, Inc. | 989,317 | ||||||
|
| |||||||
21,031,179 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Multiline Retail (0.4%): | ||||||||
28,356 | Big Lots, Inc.^ | $ | 820,056 | |||||
13,033 | Dillard’s, Inc., Class A^ | 786,020 | ||||||
36,345 | Ollie’s Bargain Outlet Holdings, Inc.*^ | 2,417,306 | ||||||
|
| |||||||
4,023,382 | ||||||||
|
| |||||||
Multi-Utilities (1.1%): | ||||||||
38,045 | Black Hills Corp.^ | 2,388,465 | ||||||
137,949 | MDU Resources Group, Inc. | 3,288,704 | ||||||
35,368 | NorthWestern Corp. | 2,102,274 | ||||||
58,543 | Vectren Corp. | 4,213,925 | ||||||
|
| |||||||
11,993,368 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.5%): | ||||||||
159,958 | Callon Petroleum Co.*^ | 1,038,127 | ||||||
641,805 | Chesapeake Energy Corp.* | 1,347,791 | ||||||
143,507 | CNX Resources Corp.* | 1,638,850 | ||||||
179,351 | EQT Corp. | 3,387,941 | ||||||
143,042 | Equitrans Midstream Corp.* | 2,863,701 | ||||||
72,913 | Matador Resources Co.*^ | 1,132,339 | ||||||
114,573 | Murphy Oil Corp.^ | 2,679,862 | ||||||
187,666 | Oasis Petroleum, Inc.*^ | 1,037,793 | ||||||
84,241 | PBF Energy, Inc., Class A | 2,752,153 | ||||||
167,440 | QEP Resources, Inc.* | 942,687 | ||||||
145,534 | Range Resources Corp.^ | 1,392,760 | ||||||
72,396 | SM Energy Co. | 1,120,690 | ||||||
412,112 | Southwestern Energy Co.*^ | 1,405,302 | ||||||
47,758 | World Fuel Services Corp. | 1,022,499 | ||||||
277,514 | WPX Energy, Inc.* | 3,149,784 | ||||||
|
| |||||||
26,912,279 | ||||||||
|
| |||||||
Paper & Forest Products (0.4%): | ||||||||
44,158 | Domtar Corp. | 1,551,271 | ||||||
99,459 | Louisiana-Pacific Corp. | 2,209,979 | ||||||
|
| |||||||
3,761,250 | ||||||||
|
| |||||||
Personal Products (0.4%): | ||||||||
37,943 | Edgewell Personal Care Co.*^ | 1,417,171 | ||||||
39,131 | Nu Skin Enterprises, Inc., Class A | 2,399,904 | ||||||
|
| |||||||
3,817,075 | ||||||||
|
| |||||||
Pharmaceuticals (0.5%): | ||||||||
102,427 | Catalent, Inc.* | 3,193,674 | ||||||
58,584 | Mallinckrodt plc* | 925,627 | ||||||
36,364 | Prestige Brands Holdings, Inc.*^ | 1,122,920 | ||||||
|
| |||||||
5,242,221 | ||||||||
|
| |||||||
Professional Services (1.0%): | ||||||||
36,985 | ASGN, Inc.* | 2,015,683 | ||||||
26,185 | Dun & Bradstreet Corp. | 3,737,646 | ||||||
26,807 | Insperity, Inc. | 2,502,702 | ||||||
43,613 | ManpowerGroup, Inc. | 2,826,122 | ||||||
|
| |||||||
11,082,153 | ||||||||
|
| |||||||
Real Estate Management & Development (0.5%): | ||||||||
32,141 | Jones Lang LaSalle, Inc. | 4,069,051 | ||||||
83,246 | Realogy Holdings Corp.^ | 1,222,051 | ||||||
|
| |||||||
5,291,102 | ||||||||
|
| |||||||
Road & Rail (1.6%): | ||||||||
45,829 | Avis Budget Group, Inc.* | 1,030,236 | ||||||
41,159 | Genesee & Wyoming, Inc., Class A*^ | 3,046,589 | ||||||
88,548 | Knight-Swift Transportation Holdings, Inc.^ | 2,219,898 |
See accompanying notes to the financial statements.
7
AZL Mid Cap Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Road & Rail, continued | ||||||||
28,884 | Landstar System, Inc. | $ | 2,763,332 | |||||
46,108 | Old Dominion Freight Line, Inc. | 5,693,877 | ||||||
37,450 | Ryder System, Inc. | 1,803,218 | ||||||
31,219 | Werner Enterprises, Inc.^ | 922,209 | ||||||
|
| |||||||
17,479,359 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.0%): | ||||||||
42,170 | Cirrus Logic, Inc.*^ | 1,399,201 | ||||||
72,308 | Cree, Inc.*^ | 3,092,975 | ||||||
255,271 | Cypress Semiconductor Corp. | 3,247,047 | ||||||
53,039 | First Solar, Inc.*^ | 2,251,771 | ||||||
91,007 | Integrated Device Technology, Inc.* | 4,407,469 | ||||||
38,056 | MKS Instruments, Inc. | 2,458,798 | ||||||
27,514 | Monolithic Power Systems, Inc.^ | 3,198,503 | ||||||
30,425 | Silicon Laboratories, Inc.* | 2,397,794 | ||||||
24,420 | Synaptics, Inc.*^ | 908,668 | ||||||
126,309 | Teradyne, Inc.^ | 3,963,576 | ||||||
29,881 | Universal Display Corp.^ | 2,795,965 | ||||||
76,651 | Versum Materials, Inc. | 2,124,766 | ||||||
|
| |||||||
32,246,533 | ||||||||
|
| |||||||
Software (3.7%): | ||||||||
81,368 | ACI Worldwide, Inc.* | 2,251,453 | ||||||
34,159 | Blackbaud, Inc.^ | 2,148,601 | ||||||
90,984 | CDK Global, Inc. | 4,356,314 | ||||||
27,394 | CommVault Systems, Inc.* | 1,618,711 | ||||||
20,421 | Fair Isaac Corp.* | 3,818,727 | ||||||
32,882 | j2 Global, Inc.^ | 2,281,353 | ||||||
36,048 | LogMeIn, Inc. | 2,940,435 | ||||||
46,223 | Manhattan Associates, Inc.*^ | 1,958,469 | ||||||
75,313 | PTC, Inc.* | 6,243,447 | ||||||
116,948 | SurveyMonkey, 0.00%*(a)(b) | 1,401,352 | ||||||
27,375 | Tyler Technologies, Inc.* | 5,086,823 | ||||||
22,026 | Ultimate Software Group, Inc. (The)* | 5,393,507 | ||||||
|
| |||||||
39,499,192 | ||||||||
|
| |||||||
Specialty Retail (2.1%): | ||||||||
48,624 | Aaron’s, Inc. | 2,044,639 | ||||||
118,352 | American Eagle Outfitters, Inc. | 2,287,744 | ||||||
40,426 | AutoNation, Inc.*^ | 1,443,208 | ||||||
97,266 | Bed Bath & Beyond, Inc.^ | 1,101,051 | ||||||
51,992 | Dick’s Sporting Goods, Inc.^ | 1,622,150 | ||||||
39,282 | Five Below, Inc.* | 4,019,335 | ||||||
63,381 | Michaels Cos., Inc. (The)*^ | 858,179 | ||||||
21,033 | Murphy U.S.A., Inc.* | 1,611,969 | ||||||
84,447 | Sally Beauty Holdings, Inc.*^ | 1,439,821 | ||||||
36,488 | Signet Jewelers, Ltd.^ | 1,159,224 | ||||||
53,151 | Urban Outfitters, Inc.* | 1,764,613 | ||||||
56,622 | Williams-Sonoma, Inc.^ | 2,856,581 | ||||||
|
| |||||||
22,208,514 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.2%): | ||||||||
83,194 | NCR Corp.*^ | 1,920,118 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.7%): | ||||||||
32,328 | Carter’s, Inc.^ | 2,638,611 | ||||||
20,542 | Deckers Outdoor Corp.* | 2,628,349 | ||||||
94,365 | Skechers U.S.A., Inc., Class A* | 2,160,015 | ||||||
|
| |||||||
7,426,975 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Thrifts & Mortgage Finance (0.6%): | ||||||||
5,225 | LendingTree, Inc.* | $ | 1,147,253 | |||||
344,721 | New York Community Bancorp, Inc.^ | 3,243,825 | ||||||
57,484 | Washington Federal, Inc. | 1,535,398 | ||||||
|
| |||||||
5,926,476 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.8%): | ||||||||
26,583 | GATX Corp.^ | 1,882,342 | ||||||
31,994 | MSC Industrial Direct Co., Inc., Class A | 2,460,978 | ||||||
76,000 | NOW, Inc.*^ | 884,640 | ||||||
22,645 | Watsco, Inc.^ | 3,150,826 | ||||||
|
| |||||||
8,378,786 | ||||||||
|
| |||||||
Water Utilities (0.4%): | ||||||||
125,206 | Aqua America, Inc.^ | 4,280,793 | ||||||
|
| |||||||
Wireless Telecommunication Services (0.2%): | ||||||||
65,544 | Telephone & Data Systems, Inc. | 2,132,802 | ||||||
|
| |||||||
Total Common Stocks (Cost $1,009,593,957) | 1,044,597,473 | |||||||
|
| |||||||
Private Placements (1.1%): | ||||||||
Internet & Direct Marketing Retail (0.9%): | ||||||||
76,914 | Airbnb, Inc., Series D, 0.00%(a)(b) | 9,405,044 | ||||||
|
| |||||||
Software (0.2%): | ||||||||
229,712 | Palantir Technologies, Inc., Series G, 0.00%*(a)(b) | 1,242,742 | ||||||
67,672 | Palantir Technologies, Inc., Series H, 0.00%(a)(b) | 366,106 | ||||||
67,672 | Palantir Technologies, Inc., Series H1, 0.00%(a)(b) | 366,106 | ||||||
|
| |||||||
1,974,954 | ||||||||
|
| |||||||
Total Private Placements (Cost $4,209,378) | 11,379,998 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.7%): | ||||||||
7,969,664 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(c) | 7,969,664 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $7,969,664) | 7,969,664 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (20.0%)(d) | ||||||||
Floating Rate Notes (12.9%) | ||||||||
2,700,000 | Apple Inc., 2.56%, 5/6/19 | 2,703,156 | ||||||
2,789,000 | Australia & New Zealand Banking Group, 2.65%, 8/23/19 | 2,789,000 | ||||||
2,500,000 | Bank of America NA, 2.66%, 1/14/19 | 2,500,000 | ||||||
2,400,000 | Bank of Montreal, 2.67%, 1/24/19 | 2,400,000 | ||||||
2,800,000 | Bank of Montreal, 2.90%, 12/23/19 | 2,800,000 | ||||||
2,400,000 | Bank of Nova Scotia, 2.85%, 2/28/19 | 2,400,259 | ||||||
2,596,000 | Bank of Nova Scotia, 2.80%, 5/24/19 | 2,596,000 | ||||||
3,080,000 | Bedford Row Funding, 2.82%, 5/23/19 | 3,080,000 | ||||||
2,668,000 | Bedford Row Funding, 2.72%, 8/15/19 | 2,668,000 | ||||||
3,900,000 | Berkshire Hathaway Finance, 2.44%, 1/11/19 | 3,900,290 | ||||||
3,564,000 | BNP Paribas, 2.70%, 5/8/19 | 3,564,000 |
See accompanying notes to the financial statements.
8
AZL Mid Cap Index Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
3,435,000 | BNP Paribas, 2.79%, 5/21/19 | $ | 3,435,000 | |||||
3,152,000 | Canadian Imperial Bank of Commerce, 2.58%, 7/5/19 | 3,154,453 | ||||||
2,565,000 | Collateralized Commercial Paper Program Co. LLC, 2.78%, 2/26/19 | 2,565,000 | ||||||
3,797,000 | Commonwealth Bank Australia, 2.68%, 5/3/19 | 3,797,035 | ||||||
2,525,000 | Cooperatieve Rabobank UA, 2.67%, 2/11/19 | 2,525,000 | ||||||
2,500,000 | Cooperatieve Rabobank UA, 2.61%, 9/13/19 | 2,500,000 | ||||||
3,664,000 | Credit Agricole CIB, 2.55%, 2/11/19 | 3,664,000 | ||||||
3,155,000 | Credit Agricole CIB, 2.92%, 6/3/19 | 3,159,318 | ||||||
4,537,000 | Credit Industriel et Commercial, 2.74%, 5/20/19 | 4,537,000 | ||||||
3,100,000 | Credit Industriel et Commercial, 2.66%, 6/4/19 | 3,100,000 | ||||||
3,500,000 | DNB Bank ASA, 2.58%, 9/11/19 | 3,500,000 | ||||||
3,256,000 | HSBC Bank USA NA, 2.70%, 2/4/19 | 3,256,000 | ||||||
3,200,000 | Mitsubishi UFJ Trust and Banking Corp., 2.63%, 1/11/19 | 3,200,000 | ||||||
1,941,000 | Mitsubishi UFJ Trust and Banking Corp., 2.73%, 1/22/19 | 1,941,000 | ||||||
3,344,000 | Mizuho Bank, Ltd., 2.55%, 2/1/19 | 3,344,000 | ||||||
2,557,000 | Mizuho Bank, Ltd., 2.82%, 5/28/19 | 2,557,000 | ||||||
3,485,000 | National Australia Bank, 2.75%, 5/21/19 | 3,485,000 | ||||||
3,300,000 | National Australia Bank, 2.55%, 8/2/19 | 3,300,000 | ||||||
2,900,000 | National Bank of Canada, 2.60%, 1/7/19 | 2,900,000 | ||||||
3,000,000 | National Bank of Canada, 2.65%, 5/7/19 | 3,000,000 | ||||||
3,400,000 | Natixis SA, 2.52%, 2/1/19 | 3,400,000 | ||||||
3,677,000 | Nordea Bank Abp, 2.50%, 4/1/19 | 3,676,990 | ||||||
3,396,000 | Nordea Bank Abp, 2.72%, 5/21/19 | 3,396,000 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
2,261,000 | Oversea-Chinese Banking Corp., Ltd., 2.61%, 4/16/19 | $ | 2,261,000 | |||||
3,320,000 | Royal Bank of Canada, 2.62%, 4/18/19 | 3,320,000 | ||||||
2,900,000 | Skandinaviska Enskilda Banken AB, 2.81%, 6/6/19 | 2,900,000 | ||||||
3,300,000 | Societe Generale SA, 2.63%, 1/7/19 | 3,300,000 | ||||||
3,636,000 | Societe Generale SA, 2.58%, 2/11/19 | 3,636,000 | ||||||
3,157,000 | Sumitomo Mitsui Banking Corp., 2.65%, 5/2/19 | 3,157,000 | ||||||
3,000,000 | Sumitomo Mitsui Trust Bank, Ltd., 2.67%, 5/7/19 | 3,000,000 | ||||||
2,900,000 | Sumitomo Mitsui Trust Bank, Ltd., 2.81%, 5/28/19 | 2,900,000 | ||||||
3,300,000 | Swedbank AB, 2.69%, 1/30/19 | 3,299,973 | ||||||
2,700,000 | Wells Fargo Bank NA, 2.75%, 5/3/19 | 2,700,000 | ||||||
2,603,000 | Westpac Banking Corp., 2.70%, 8/16/19 | 2,603,000 | ||||||
|
| |||||||
137,870,474 | ||||||||
|
| |||||||
Repurchase Agreements (2.2%) | ||||||||
23,222,362 | BNP Paribas SA, 3.00%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $23,226,232, Collateralized by U.S. Government Agency Obligations, 2.00% - 7.00%, 2/1/20 - 11/1/48, fair value of $23,686,809 | 23,222,362 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
51,710,296 | Short-Term Investments(e) | 51,710,296 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 212,803,132 | ||||||
|
| |||||||
Total Investment Securities (Cost $1,234,576,131) — 119.9%(f) | 1,276,750,267 | |||||||
Net other assets (liabilities) — (19.9)% | (211,822,427 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 1,064,927,840 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $209,380,027. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 1.20% of the net assets of the fund. |
(b) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 1.20% of the net assets of the fund. |
(c) | The rate represents the effective yield at December 31, 2018. |
(d) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
9
AZL Mid Cap Index Fund
Schedule of Portfolio Investments
December 31, 2018
Futures Contracts
Cash of $423,000 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P MidCap 400E-Mini March Futures (U.S Dollar) | 3/15/19 | 51 | $ | 8,477,220 | $ | (80,255 | ) | |||||||||
|
| |||||||||||||||
$ | (80,255 | ) | ||||||||||||||
|
|
Continued
10
AZL Mid Cap Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 1,234,576,131 | |||
|
| ||||
Investment securities, at value(a) | $ | 1,276,750,267 | |||
Segregated cash for collateral | 423,000 | ||||
Interest and dividends receivable | 1,304,042 | ||||
Receivable for capital shares issued | 543,315 | ||||
Receivable for investments sold | 312,259 | ||||
Receivable for variation margin on futures contracts | 90,305 | ||||
Reclaims receivable | 8,092 | ||||
Prepaid expenses | 13,162 | ||||
|
| ||||
Total Assets | 1,279,444,442 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 15,818 | ||||
Payable for investments purchased | 1,106,973 | ||||
Payable for capital shares redeemed | 6,747 | ||||
Payable for collateral received on loaned securities | 212,803,132 | ||||
Manager fees payable | 235,404 | ||||
Administration fees payable | 7,405 | ||||
Distribution fees payable | 225,514 | ||||
Custodian fees payable | 3,107 | ||||
Administrative and compliance services fees payable | 4,133 | ||||
Transfer agent fees payable | 1,042 | ||||
Trustee fees payable | 1,583 | ||||
Other accrued liabilities | 105,744 | ||||
|
| ||||
Total Liabilities | 214,516,602 | ||||
|
| ||||
Net Assets | $ | 1,064,927,840 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 930,888,430 | |||
Total distributable earnings | 134,039,410 | ||||
|
| ||||
Net Assets | $ | 1,064,927,840 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 44,788,155 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 5,491,534 | ||||
Net Asset Value (offering and redemption price per share) | $ | 8.16 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 1,020,139,685 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 53,676,097 | ||||
Net Asset Value (offering and redemption price per share)(b) | $ | 19.00 | |||
|
|
(a) | Includes securities on loan of $209,380,027. |
(b) | Difference in net asset value calculation and the net asset value stated is caused by rounding differences. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 19,528,222 | |||
Interest | 7,943 | ||||
Income from securities lending | 950,700 | ||||
Foreign withholding tax | (10,050 | ) | |||
|
| ||||
Total Investment Income | 20,476,815 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 3,120,034 | ||||
Administration fees | 298,626 | ||||
Distribution fees — Class 2 | 2,985,123 | ||||
Custodian fees | 35,005 | ||||
Administrative and compliance services fees | 19,973 | ||||
Transfer agent fees | 11,489 | ||||
Trustee fees | 63,747 | ||||
Professional fees | 58,341 | ||||
Shareholder reports | 32,916 | ||||
Other expenses | 275,755 | ||||
|
| ||||
Total expenses | 6,901,009 | ||||
|
| ||||
Net Investment Income/(Loss) | 13,575,806 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 87,212,562 | ||||
Net realized gains/(losses) on futures contracts | (2,232,330 | ) | |||
Change in net unrealized appreciation/depreciation on securities | (233,764,956 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (34,552 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (148,819,276 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (135,243,470 | ) | ||
|
|
See accompanying notes to the financial statements.
11
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 13,575,806 | $ | 12,543,746 | ||||||
Net realized gains/(losses) on investments | 84,980,232 | 99,059,290 | ||||||||
Change in unrealized appreciation/depreciation on investments | (233,799,508 | ) | 69,166,076 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (135,243,470 | ) | 180,769,112 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (9,683,057 | ) | (5,952,314 | ) | ||||||
Class 2 | (101,907,745 | ) | (61,899,190 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (111,590,802 | ) | (67,851,504 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 21,928 | 141,112 | ||||||||
Proceeds from dividends reinvested | 9,683,057 | 5,952,314 | ||||||||
Value of shares redeemed | (5,556,511 | ) | (6,813,790 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | 4,148,474 | (720,364 | ) | |||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 107,730,060 | 74,869,811 | ||||||||
Proceeds from dividends reinvested | 101,907,744 | 61,899,190 | ||||||||
Value of shares redeemed | (166,722,565 | ) | (261,118,646 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | 42,915,239 | (124,349,645 | ) | |||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | 47,063,713 | (125,070,009 | ) | |||||||
|
|
|
| |||||||
Change in net assets | (199,770,559 | ) | (12,152,401 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 1,264,698,399 | 1,276,850,800 | ||||||||
|
|
|
| |||||||
End of period | $ | 1,064,927,840 | $ | 1,264,698,399 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 2,559 | 12,884 | ||||||||
Dividends reinvested | 1,040,071 | 568,511 | ||||||||
Shares redeemed | (507,788 | ) | (605,288 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | 534,842 | (23,893 | ) | |||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 4,469,475 | 3,334,698 | ||||||||
Dividends reinvested | 4,694,046 | 2,835,510 | ||||||||
Shares redeemed | (7,047,273 | ) | (11,596,024 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | 2,116,248 | (5,425,816 | ) | |||||||
|
|
|
| |||||||
Change in shares | 2,651,090 | (5,449,709 | ) | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
12
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016* | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.25 | $ | 10.90 | $ | 10.00 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.15 | 0.25 | 0.12 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.13 | ) | 1.41 | 0.78 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total from Investment Activities | (0.98 | ) | 1.66 | 0.90 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.28 | ) | (0.12 | ) | — | ||||||||||||||||||||
Net Realized Gains | (1.83 | ) | (1.19 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Dividends | (2.11 | ) | (1.31 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Net Asset Value, End of Period | $ | 8.16 | $ | 11.25 | $ | 10.90 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Return(a) | (11.01 | )% | 16.08 | % | 9.00 | %(b) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 44,788 | $ | 55,764 | $ | 54,300 | |||||||||||||||||||
Net Investment Income/(Loss)(c) | 1.32 | % | 1.27 | % | 1.26 | % | |||||||||||||||||||
Expenses Before Reductions(c)(d) | 0.31 | % | 0.31 | % | 0.31 | % | |||||||||||||||||||
Expenses Net of Reductions(c) | 0.31 | % | 0.31 | % | 0.31 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 18 | % | 21 | % | 86 | %(f) | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.45 | $ | 21.45 | $ | 21.10 | $ | 23.49 | $ | 22.43 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.25 | 0.24 | 0.13 | 0.30 | 0.19 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (2.65 | ) | 3.06 | 3.67 | (0.91 | ) | 1.85 | ||||||||||||||||||
|
|
|
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| ||||||||||||||||
Total from Investment Activities | (2.40 | ) | 3.30 | 3.80 | (0.61 | ) | 2.04 | ||||||||||||||||||
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Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.22 | ) | (0.11 | ) | (0.24 | ) | (0.27 | ) | (0.16 | ) | |||||||||||||||
Net Realized Gains | (1.83 | ) | (1.19 | ) | (3.21 | ) | (1.51 | ) | (0.82 | ) | |||||||||||||||
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Total Dividends | (2.05 | ) | (1.30 | ) | (3.45 | ) | (1.78 | ) | (0.98 | ) | |||||||||||||||
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Net Asset Value, End of Period | $ | 19.00 | $ | 23.45 | $ | 21.45 | $ | 21.10 | $ | 23.49 | |||||||||||||||
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| ||||||||||||||||
Total Return(a) | (11.35 | )% | 15.80 | % | 19.52 | % | (2.67 | )% | 9.21 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 1,020,140 | $ | 1,208,935 | $ | 1,222,550 | $ | 406,092 | $ | 554,440 | |||||||||||||||
Net Investment Income/(Loss) | 1.08 | % | 1.02 | % | 1.14 | % | 0.95 | % | 0.88 | % | |||||||||||||||
Expenses Before Reductions(d) | 0.56 | % | 0.56 | % | 0.57 | % | 0.57 | % | 0.57 | % | |||||||||||||||
Expenses Net of Reductions | 0.56 | % | 0.56 | % | 0.57 | % | 0.57 | % | 0.57 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 18 | % | 21 | % | 86 | %(f) | 26 | % | 13 | % |
* | Class 1 activity is for the period October 17, 2016 (commencement of operations) to December 31, 2016. |
(a) | 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. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized for periods less than one year. |
(d) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. Not annualized for periods less than one year. |
(f) | 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 86%. |
See accompanying notes to the financial statements.
13
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Mid Cap Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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.
14
AZL Mid Cap Index Fund
Notes to the Financial Statements
December 31, 2018
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $93,533 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $212,677,193 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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 $18.2 million for the year ended December 31, 2018. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
15
AZL Mid Cap Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | — | Payable for variation margin on futures contracts | $ | 80,255 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the 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 year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | (2,232,330 | ) | $ | (34,552 | ) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (548,121 | ) | ||
Class 2 | (5,176,959 | ) | |||
From net realized gains | |||||
Class 1 | (5,404,193 | ) | |||
Class 2 | (56,722,231 | ) | |||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (67,851,504 | ) | ||
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|
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 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 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.
16
AZL Mid Cap Index Fund
Notes to the Financial Statements
December 31, 2018
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL Mid Cap Index Fund Class 1 | 0.25 | % | 0.46 | % | ||||||
AZL Mid Cap Index Fund Class 2 | 0.25 | % | 0.71 | % |
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
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 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 value 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 anannual 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 year ended December 31, 2018, $9,921 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
17
AZL Mid Cap Index Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 1,043,196,121 | $ | — | $ | — | $ | 1,043,196,121 | ||||||||||||
Private Placements | — | — | 12,781,350 | 12,781,350 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 212,803,132 | — | 212,803,132 | ||||||||||||||||
Unaffiliated Investment Company | 7,969,664 | — | — | 7,969,664 | ||||||||||||||||
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| |||||||||||||
Total Investment Securities | 1,051,165,785 | 212,803,132 | 12,781,350 | 1,276,750,267 | ||||||||||||||||
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| |||||||||||||
Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | (80,255 | ) | — | — | (80,255 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Investments | $ | 1,051,085,530 | $ | 212,803,132 | $ | 12,781,350 | $ | 1,276,670,012 | ||||||||||||
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|
|
|
|
|
|
+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Mid Cap Index Fund | $ | 220,906,983 | $ | 254,690,473 |
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 December 31, 2018 are identified below.
Security | Acquisition Date(a) | Acquisition Cost | Shares or Principal Amount | Fair Value | Percentage of Net Assets | ||||||||||||||||||||
Airbnb, Inc., Series D, 0.00% | 4/16/14 | $ | 3,131,402 | 76,914 | $ | 9,405,044 | 0.89 | % | |||||||||||||||||
Palantir Technologies, Inc., Series H1, 0.00% | 10/25/13 | 237,529 | 67,672 | 366,106 | 0.03 | % | |||||||||||||||||||
Palantir Technologies, Inc., Series H, 0.00% | 10/25/13 | 237,529 | 67,672 | 366,106 | 0.03 | % | |||||||||||||||||||
Palantir Technologies, Inc., Series G, 0.00% | 7/19/12 | 702,919 | 229,712 | 1,242,742 | 0.12 | % | |||||||||||||||||||
SurveyMonkey, 0.00% | 11/25/14 | 1,923,795 | 116,948 | 1,401,352 | 0.13 | % |
(a) | Acquisition date represents the initial purchase date of the security. |
7. Investment Risks
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 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.
18
AZL Mid Cap Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 is $1,237,716,354. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 156,728,446 | ||
Unrealized (depreciation) | (117,694,533 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 39,033,913 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Mid Cap Index Fund | $ | 34,030,891 | $ | 77,559,911 | $ | 111,590,802 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Mid Cap Index Fund | $ | 5,725,080 | $ | 62,126,424 | $ | 67,851,504 |
(a) | Total distributions paid may differ from the 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 Mid Cap Index Fund | $ | 20,272,532 | $ | 74,732,791 | $ | — | $ | 39,034,087 | $ | 134,039,410 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 45% of the Fund.
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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Mid Cap Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Mid Cap Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 30.26% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $21,732,845.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $77,559,911.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
27
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ||
ANNRPT1218 2/19 |
AZL® Moderate Index Strategy Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 5
Page 5
Statements of Changes in Net Assets
Page 6
Page 7
Notes to the Financial Statements
Page 8
Report of Independent Registered Public Accounting Firm
Page 13
Other Federal Income Tax Information
Page 14
Page 15
Approval of Investment Advisory Agreement
Page 16
Information about the Board of Trustees and Officers
Page 18
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® Moderate Index Strategy Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Moderate Index Strategy Fund.
|
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Moderate Index Strategy Fund (the “Fund”) returned-5.17%. That compared to a-4.38%, 0.01% and-2.26% total return for its benchmarks, the S&P 500 Index1, Bloomberg Barclays U.S. Aggregate Bond Index1 and the Moderate Composite Index1, respectively.
The Fund is a fund of funds that pursues broad diversification across four underlying equity portfolios and one fixed income portfolio. The four equity portfolios pursue passive strategies that aim to achieve, before fees, returns similar to the S&P 500 Index (S&P 500), the S&P MidCap 400 Index2, the S&P SmallCap 600 Index3 and the MSCI EAFE4 Index. The fixed-incomesub-portfolio is an enhanced bond index strategy that seeks to achieve a return that exceeds that of the Bloomberg Barclays U.S. Aggregate Bond Index. Generally, the Fund allocates 50% to 70% of its assets to the underlying equity portfolios and between 30% and 50% to the underlying fixed income portfolio.*
Despite volatility in the first quarter, U.S. equities experienced healthy gains in the first three quarters because of strong economic data and positive earnings growth. However, volatility increased during the fourth quarter. U.S.large-cap equities fell, as measured by the S&P 500, due to investors’ concerns over continued Federal Reserve Board (the Fed) interest rate hikes, political and economic uncertainty and contentious global trade negotiations.Mid- andsmall-cap stocks also underperformed during the12-month period. Growth stocks sharply outperformed value stocks in the first three quarters, but this trend reversed in the fourth quarter.
International developed markets, as measured by the MSCI EAFE Index (net), underperformed U.S. domestic markets, returning-13.79% for the year. Thoughnon-U.S. developed markets underperformed during the first three quarters, they outperformed U.S. equities during the volatile fourth quarter.
The U.S. bond market ended the year flat, with a return of just 0.01% for the Bloomberg Barclays U.S. Aggregate Bond Index. The Fed raised interest rates four times during the period—once per quarter. Treasury yields rose during the first three quarters, however, the yield curve flattened dramatically in the fourth quarter, leaving the intermediate portion of the curve inverted. Investment-grade corporate spreads widened sharply as investors became more risk averse.
The Fund underperformed its blended benchmark for the12-month period. This underperformance was due largely to a strategic allocation to international equities, as these underperformed U.S. equities for most of the year. A strategic allocation to U.S.mid- andsmall-cap equities during the period detracted from performance as well, as these underperformed U.S.large-cap equities. An overweight allocation to corporate bonds detracted from relative results, causing the Fund’s fixed income allocation to modestly lag its fixed-income benchmark for the period.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmarks please refer to page 2 of this report. |
2 | The Standard & Poor’s MidCap 400 Index (S&P 400) is the most widely used index formid-sized companies. The S&P 400 covers 7% of the U.S. equities market, and is part of a series of S&P U.S. indexes that can be used as building blocks for portfolio composition. |
3 | The Standard & Poor’s SmallCap 600 Index covers approximately 3% of the domestic equities market. Measuring thesmall-cap segment of the market that is typically renowned for poor trading liquidity and financial instability, the index is designed to be an efficient portfolio of companies that meet specific inclusion criteria to ensure that they are investable and financially viable. |
4 | MSCI EAFE Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The MSCI EM Index a free float-adjusted market capitalization index that is designed to measure equity performance of emerging markets. |
The indexes defined above are unmanaged. Investors cannot invest directly in an index.
1
AZL® Moderate Index Strategy Fund Review (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek long-term capital appreciation. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing primarily in a combination of five underlying index funds (the”Index Strategy Underlying Funds”), allocating 50%–70% of its assets in the underlying equity index funds and 30%–50% of its assets in the underlying bond index fund. | ||||
Investment Concerns
| ||||
The Fund invests in underlying funds, so its investment performance is directly related to the performance of those underlying funds. Before investing, investors should assess the risks associated with and types of investments made by each of the underlying funds in which the Fund invests.
| ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
| ||||
Stocks are more volatile and carry more risk and return potential than other forms of investments.
| ||||
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
| ||||
The performance of the Fund is expected to be lower than that of the Indexes because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines.
| ||||
Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates.
| ||||
Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities.
| ||||
Investing in a single industry or sector, or concentrating investments in a limited number of industries or sectors, tends to increase the risk that economic, political, or regulatory developments affecting certain industries or sectors will have a large impact on the value of the portfolio.
| ||||
Bonds offer a relatively stable level of income, although bond prices will fluctuate, providing the potential for principal gain or loss.
| ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmarks and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 | 3 | 5 | 10 | |||||||||||||
Year | Year | Year | Year | |||||||||||||
AZL®Moderate Index Strategy Fund | -5.17 | % | 5.38 | % | 4.37 | % | 8.78 | % | ||||||||
S&P 500 Index | -4.38 | % | 9.26 | % | 8.49 | % | 13.12 | % | ||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 0.01 | % | 2.06 | % | 2.52 | % | 3.48 | % | ||||||||
Moderate Composite Index | -2.26 | % | 6.52 | % | 6.22 | % | 9.48 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®Moderate Index Strategy Fund | 1.03 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.05% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense and acquired fund fees and expenses), to 0.20% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
Acquired fund fees and expenses are incurred indirectly by the Fund through the valuation of the Fund’s investments in the Permitted Underlying Funds. Accordingly, acquired fund fees and expenses affect the Fund’s total returns. Because these fees and expenses are not included in the Fund’s financial highlights, the Fund’s total annual fund operating expenses, as shown in the prospectus, do not correlate to the ratios of expenses to average net assets shown in the Financial Highlights. Without acquired fund fees and expenses the Fund’s gross expense ratio would be 0.43%.
The Fund’s performance is measured against the Standard and Poor’s 500 Index (“S&P 500”), the Bloomberg Barclays U.S. Aggregate Bond Index and the Moderate Composite Index (“Composite”). The S&P 500 is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. The Bloomberg Barclays U.S. Aggregate Bond Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Composite is a blended index comprised of (60%) of the S&P 500 and (40%) of the Bloomberg Barclays U.S. Aggregate Bond Index. These indexes are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Moderate Index Strategy Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Moderate Index Strategy Fund | $ | 1,000.00 | $ | 944.70 | $ | 0.39 | 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Moderate Index Strategy Fund | $ | 1,000.00 | $ | 1,024.80 | $ | 0.41 | 0.08 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Domestic Equity Funds | 43.5 | % | |||
Fixed Income Funds | 41.5 | ||||
International Equity Funds | 15.0 | ||||
|
| ||||
Total Investment Securities | 100.0 | ||||
Net other assets (liabilities) | — | ^ | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL Moderate Index Strategy Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Affiliated Investment Companies (100.0%): | ||||||||
Domestic Equity Funds (43.5%): | ||||||||
2,663,731 | AZL Mid Cap Index Fund, Class 2 | $ | 50,637,521 | |||||
2,005,094 | AZL Small Cap Stock Index Fund, Class 2 | 24,401,994 | ||||||
12,436,015 | AZL S&P 500 Index Fund, Class 2 | 181,690,174 | ||||||
|
| |||||||
256,729,689 | ||||||||
|
| |||||||
Fixed Income Funds (41.5%): | ||||||||
23,123,698 | AZL Enhanced Bond Index Fund | 244,879,958 | ||||||
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| |||||||
244,879,958 | ||||||||
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| |||||||
International Equity Funds (15.0%): | ||||||||
6,217,414 | AZL International Index Fund, Class 2 | 88,598,148 | ||||||
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| |||||||
88,598,148 | ||||||||
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| |||||||
Total Affiliated Investment Companies (Cost $585,342,097) | 590,207,795 | |||||||
|
| |||||||
Total Investment Securities (Cost $585,342,097) — 100.0%(a) | 590,207,795 | |||||||
Net other assets (liabilities) — 0.0% | (115,317 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 590,092,478 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
† | 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.
4
AZL Moderate Index Strategy Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investments in affiliates, at cost | $ | 585,342,097 | |||
|
| ||||
Investments in affiliates, at value | $ | 590,207,795 | |||
Foreign currency, at value (cost $23,293) | 22,910 | ||||
Receivable for capital shares issued | 3,402 | ||||
Receivable for affiliated investments sold | 64,039 | ||||
Reclaims receivable | 139,950 | ||||
Prepaid expenses | 7,770 | ||||
|
| ||||
Total Assets | 590,445,866 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 63,826 | ||||
Interest and dividends payable | 162 | ||||
Payable for capital shares redeemed | 238,770 | ||||
Manager fees payable | 25,599 | ||||
Administration fees payable | 3,871 | ||||
Custodian fees payable | 948 | ||||
Administrative and compliance services fees payable | 1,724 | ||||
Transfer agent fees payable | 394 | ||||
Trustee fees payable | 660 | ||||
Other accrued liabilities | 17,434 | ||||
|
| ||||
Total Liabilities | 353,388 | ||||
|
| ||||
Net Assets | $ | 590,092,478 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 544,993,313 | |||
Total distributable earnings | 45,099,165 | ||||
|
| ||||
Net Assets | $ | 590,092,478 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 49,241,333 | ||||
Net Asset Value (offering and redemption price per share) | $ | 11.98 | |||
|
|
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends from affiliates | $ | 12,492,797 | |||
Dividends from non-affiliates | 233 | ||||
|
| ||||
Total Investment Income | 12,493,030 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,744,376 | ||||
Administration fees | 51,054 | ||||
Custodian fees | 9,493 | ||||
Administrative and compliance services fees | 10,411 | ||||
Transfer agent fees | 5,466 | ||||
Trustee fees | 32,813 | ||||
Professional fees | 30,047 | ||||
Shareholder reports | 16,753 | ||||
Other expenses | 13,414 | ||||
|
| ||||
Total expenses before reductions | 2,913,827 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (2,401,320 | ) | |||
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| ||||
Net expenses | 512,507 | ||||
|
| ||||
Net Investment Income/(Loss) | 11,980,523 | ||||
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| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 46,000 | ||||
Net realized gains/(losses) on affiliated underlying securities | 13,219,471 | ||||
Net realized gains distributions from affiliated underlying funds | 15,059,894 | ||||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (4,344 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated underlying funds | (72,398,781 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (44,077,760 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (32,097,237 | ) | ||
|
|
See accompanying notes to the financial statements.
5
AZL Moderate Index Strategy Fund
Statements of Changes in Net Assets
For the December 31, 2018 | For the December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 11,980,523 | $ | 5,606,970 | ||||||
Net realized gains/(losses) on investments | 28,325,365 | 27,056,194 | ||||||||
Change in unrealized appreciation/depreciation on investments | (72,403,125 | ) | 58,697,181 | |||||||
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| |||||||
Change in net assets resulting from operations | (32,097,237 | ) | 91,360,345 | |||||||
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| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (32,709,295 | ) | (180,181,133 | ) | ||||||
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| |||||||
Change in net assets resulting from distributions to shareholders | (32,709,295 | ) | (180,181,133 | ) | ||||||
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| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 4,831,098 | 26,825,246 | ||||||||
Proceeds from dividends reinvested | 32,709,295 | 180,181,133 | ||||||||
Value of shares redeemed | (123,600,657 | ) | (98,159,965 | ) | ||||||
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| |||||||
Change in net assets resulting from capital transactions | (86,060,264 | ) | 108,846,414 | |||||||
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| |||||||
Change in net assets | (150,866,796 | ) | 20,025,626 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 740,959,274 | 720,933,648 | ||||||||
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| |||||||
End of period | $ | 590,092,478 | $ | 740,959,274 | ||||||
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| |||||||
Share Transactions: | ||||||||||
Shares issued | 361,486 | 1,705,435 | ||||||||
Dividends reinvested | 2,589,810 | 14,076,651 | ||||||||
Shares redeemed | (9,401,786 | ) | (6,481,019 | ) | ||||||
|
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| |||||||
Change in shares | (6,450,490 | ) | 9,301,067 | |||||||
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(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
6
AZL Moderate Index Strategy Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.30 | $ | 15.54 | $ | 15.03 | $ | 16.50 | $ | 15.73 | |||||||||||||||
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| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.26 | 0.12 | 0.32 | 0.19 | 0.23 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.92 | ) | 1.78 | 1.00 | (0.61 | ) | 1.10 | ||||||||||||||||||
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| ||||||||||||||||
Total from Investment Activities | (0.66 | ) | 1.90 | 1.32 | (0.42 | ) | 1.33 | ||||||||||||||||||
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| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.13 | ) | (0.35 | ) | (0.30 | ) | (0.36 | ) | (0.13 | ) | |||||||||||||||
Net Realized Gains | (0.53 | ) | (3.79 | ) | (0.51 | ) | (0.69 | ) | (0.43 | ) | |||||||||||||||
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| ||||||||||||||||
Total Dividends | (0.66 | ) | (4.14 | ) | (0.81 | ) | (1.05 | ) | (0.56 | ) | |||||||||||||||
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| ||||||||||||||||
Net Asset Value, End of Period | $ | 11.98 | $ | 13.30 | $ | 15.54 | $ | 15.03 | $ | 16.50 | |||||||||||||||
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| ||||||||||||||||
Total Return(a) | (5.17 | )% | 13.30 | % | 8.91 | % | (2.47 | )% | 8.50 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000's) | $ | 590,092 | $ | 740,959 | $ | 720,934 | $ | 1,282,506 | $ | 1,317,095 | |||||||||||||||
Net Investment Income/(Loss) | 1.75 | % | 0.77 | % | 1.25 | % | 1.22 | % | 1.57 | % | |||||||||||||||
Expenses Before Reductions*(b) | 0.42 | % | 0.43 | % | 0.96 | % | 1.05 | % | 1.05 | % | |||||||||||||||
Expenses Net of Reductions* | 0.07 | % | 0.08 | % | 0.83 | % | 0.96 | % | 0.96 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly* | 0.07 | % | 0.08 | % | 0.83 | % | 0.96 | % | 0.96 | %(c) | |||||||||||||||
Portfolio Turnover Rate | 4 | % | 7 | %(d) | 190 | % | 117 | % | 119 | % |
* | The expense ratios exclude the impact of fees/expenses paid by each underlying fund. |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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 is used to pay certain Fund expenses. The Fund ceased participation in the program in June 2014. |
(d) | The Fund's purchase and sales of securities and, accordingly, portfolio turnover ratio decreased during 2017 as a result of a change in the Fund's investment strategy which became effective October 14, 2016. |
See accompanying notes to the financial statements.
7
AZL Moderate Index Strategy Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Moderate Index Strategy Fund (the “Fund”), and 21 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 and variable life insurance policies 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 the 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.
Foreign Currency Translation
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.
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 Fund of Funds 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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
8
AZL Moderate Index Strategy Fund
Notes to the Financial Statements
December 31, 2018
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (15,250,038 | ) | ||
From net realized gains | (164,931,095 | ) | |||
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Change in net assets resulting from distributions to shareholders | $ | (180,181,133 | ) | ||
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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”), BlackRock 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Moderate Index Strategy Fund | 0.40% | 0.20% |
* | The Manager voluntarily reduced the management fee to 0.05% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
The Manager or an affiliate of the Manager serves as the investment adviser of certain underlying funds in which the Fund invests. At December 31, 2018, 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 year ended December 31, 2018 is as follows:
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain(Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | Net Realized gains distributions from affiliated underlying funds | |||||||||||||||||||||||||||||||||||||
AZL Enhanced Bond Index Fund | $ | 294,359,436 | $ | 7,784,688 | $ | (49,036,951 | ) | $ | (1,754,496 | ) | $ | (6,472,719 | ) | $ | 244,879,958 | 23,123,698 | 5,845,940 | $ | — | ||||||||||||||||||||||||||
AZL International Index Fund, Class 2 | 112,242,570 | 5,007,995 | (10,336,731 | ) | 1,948,156 | (20,263,842 | ) | 88,598,148 | 6,217,414 | 2,693,614 | 1,314,631 | ||||||||||||||||||||||||||||||||||
AZL Mid Cap Index Fund, Class 2 | 67,236,926 | 4,998,585 | (10,472,421 | ) | 2,057,950 | (13,183,519 | ) | 50,637,521 | 2,663,731 | 540,132 | 4,458,453 |
9
AZL Moderate Index Strategy Fund
Notes to the Financial Statements
December 31, 2018
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain(Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | Net Realized gains distributions from affiliated underlying funds | |||||||||||||||||||||||||||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | $ | 33,932,605 | $ | 2,900,214 | $ | (7,656,056 | ) | $ | 1,797,678 | $ | (6,572,447 | ) | $ | 24,401,994 | 2,005,094 | $ | 253,430 | $ | 2,646,784 | ||||||||||||||||||||||||||
AZL S&P 500 Index Fund, Class 2 | 233,580,884 | 10,083,064 | (45,237,703 | ) | 9,170,183 | (25,906,254 | ) | 181,690,174 | 12,436,015 | 3,159,681 | 6,640,026 | ||||||||||||||||||||||||||||||||||
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$ | 741,352,421 | $ | 30,774,546 | $ | (122,739,862 | ) | $ | 13,219,471 | $ | (72,398,781 | ) | $ | 590,207,795 | 46,445,952 | $ | 12,492,797 | $ | 15,059,894 | |||||||||||||||||||||||||||
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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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $5,528 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-end investment companies.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Affiliated Investment Companies | $ | 590,207,795 | $ | — | $ | — | $ | 590,207,795 | ||||||||||||
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Total Investments | $ | 590,207,795 | $ | — | $ | — | $ | 590,207,795 | ||||||||||||
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10
AZL Moderate Index Strategy Fund
Notes to the Financial Statements
December 31, 2018
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Moderate Index Strategy Fund | $ | 30,774,546 | $ | 122,739,862 |
6. Investment Risks
Fund of Funds 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 December 31, 2018 is $585,693,837. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 14,052,926 | ||
Unrealized (depreciation) | (9,538,968 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 4,513,958 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Moderate Index Strategy Fund | $ | 14,303,056 | $ | 18,406,239 | $ | 32,709,295 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Moderate Index Strategy Fund | $ | 30,788,638 | $ | 149,392,495 | $ | 180,181,133 |
(a) | Total distributions paid may differ from the 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 Moderate Index Strategy Fund | $ | 14,322,022 | $ | 26,262,467 | $ | — | $ | 4,514,676 | $ | 45,099,165 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 90% of the Fund.
11
AZL Moderate Index Strategy Fund
Notes to the Financial Statements
December 31, 2018
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.
12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Moderate Index Strategy Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Moderate Index Strategy Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the transfer agent. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
13
Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 16.49% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $7,729,043.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $18,406,239.
14
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 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-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 calling800-SEC-0330.
15
Approval of Investment Advisory Agreement (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of the Fund, which is a series of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Fund by Allianz Investment Management LLC (the “Manager”). The Manager manages the Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of the Fund. For management services, the Fund pays the Manager an investment advisory fee based upon the Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of the Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Fund is offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Fund is offered only through Allianz Life and Allianz of New York variable products.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager. The Board’s decision to approve this contract reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of the contract, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s management philosophy, personnel, processes and investment performance, including its compliance history and the adequacy of its compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Manager. This includes fees received for services provided to the Fund by employees of the Manager or of affiliates of the Manager and research services received by the Manager from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) payments made by the underlying funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement for the Fund.
The Board considered and weighed these circumstances in light of its experience in governing the Trust, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Fund and the Manager. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of the Management Agreement is informed by reports covering such matters as: the Manager’s investment philosophy, personnel and processes, and the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark). In connection with comparing the performance of the Fund versus its benchmark, the Board receives reports on the extent to which the Fund’s performance may be attributed to various applicable factors, such as asset class allocation decisions and volatility management strategies, the performance of the underlying funds, rebalancing decisions, and the impact of cash positions and Fund fees and expenses. The Board also receives reports on the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the nature and extent of the advisory and other services provided to the Fund by the Manager and its affiliates; compliance and audit reports concerning the Fund and the companies that service them; and relevant developments in the mutual fund industry and how the Fund and/or the Manager are responding to them.
The Board also receives financial information about the Manager, including reports on the compensation and benefits the Manager derives from its relationships with the Fund. These reports cover not only the fees under the Management Agreement, but also fees, if any, received for providing other services to the Fund. The reports also discuss any indirect or “fall out” benefits the Manager or its affiliates may derive from its relationship with the Fund.
The Management Agreement was most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of the Management Agreement was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Management Agreement was approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreement with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreement, in respect of the Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Management Agreement on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to the Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of the investment adviser and the approval of the advisory fee. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager. The Trustees noted that the Manager, subject to the control of the Board, administers the Fund’s business and other affairs. The Trustees noted that the Manager also provides the Trust and the Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Fund) and executive and other personnel as are necessary for the operation of the Trust and the Fund. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
16
The Board considered the scope and quality of services provided by the Manager and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager is responsible for maintaining and monitoring its own compliance program, and this compliance program has been continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and the Fund. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to the Fund under the Management Agreement.
(2) The investment performance of the Fund and the Manager. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, Trustees received extensive information on the performance results of the Fund. However, the Board also considered the fact that prior to October 14, 2016, the Fund was subadvised by Invesco Advisers, Inc., and managed pursuant to a different strategy. Accordingly, the investment performance of the Fund during the period prior to October 14, 2016, was not deemed relevant to the Board’s assessment of the continuance of the Management Agreement in the fall of 2018. Such performance information included performance information on absolute total return, performance versus the appropriate benchmark(s), the contribution to performance of the Manager’s asset class allocation decisions and volatility management strategies, the performance of the underlying funds, and the impact on performance of rebalancing decisions, cash and Fund fees. This included Lipper performance information on the Fund for the previous quarter andyear-to-date. In connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, the Fund ranked in the in the top 40%.
At the Board meeting held October 23, 2018, the Trustees determined that the investment performance of the Fund was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and its affiliates from the relationship with the Fund.The Board considered that the Manager receives an advisory fee from the Fund. The Manager reported that the advisory fee paid by the Fund put it in the 8th percentile of its customized peer group. (A lower percentile reflects lower fund fees and is better for fund shareholders.) Trustees were provided with information on the total expense ratios of the Fund and other funds in the customized peer groups, and the Manager reported upon the challenges in making peer group comparisons for the Fund.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Fund before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to the Fund.
Based upon the information provided, the Board concluded that the Fund’s advisory fees and expense ratios are not unreasonable, and determined that there was no evidence that the Manager’s level of profitability from its relationship with the Fund was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Fund grows, and whether fee levels reflect these economies of scale.The Board noted that the advisory fee schedule for the Fund does not contain breakpoints that reduce the fee rate on assets above specified levels. The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with funds that have substantial assets. The Board found there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the Fund. The Board also noted that the total assets in the Fund, as of June 30, 2018, were approximately $741 million.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Fund grows larger. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Fund’s advisory fee rate schedules was acceptable under the Fund’s circumstances.
17
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
18
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
19
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Morgan Stanley Global Real Estate Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 7
Page 7
Statements of Changes in Net Assets
Page 8
Page 9
Notes to the Financial Statements
Page 10
Report of Independent Registered Public Accounting Firm
Page 16
Other Federal Income Tax Information
Page 17
Page 18
Approval of Investment Advisory and Subadvisory Agreements
Page 19
Information about the Board of Trustees and Officers
Page 22
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® Morgan Stanley Global Real Estate Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL®Morgan Stanley Global Real Estate Fund and Morgan Stanley Investment Management Inc. serves as Subadviser to the Fund. | ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Morgan Stanley Global Real Estate Fund (Class 2 Shares) (the “Fund”) returned-8.07%. That compared to a-4.74% total return for its benchmark, the FTSE EPRA/NAREIT Developed Real Estate Index1.
Global real estate equities were down during the12-month period as investors grew concerned about a potential economic slowdown. The sharpest declines came in the fourth quarter amid thesell-off in the broader equity markets, which was driven by a variety of macro-level concerns such as U.S.-Sino trade tension, the potential effects of continued Federal Reserve rate hikes, and uncertainty over Brexit.
Property stocks in Europe declined the most, driven by weakness in the real estate sector and uncertainty over Brexit. Property stocks in the United States also fell as investor sentiment turned negative toward high-quality retail space, central business district (CBD) offices and hotels. Property stocks in Asia performed better than other regions, but still posted losses. In Hong Kong, trade concerns, interest rates and economic weakness continued to weigh on investor sentiment. Across regions, investors showed a preference for defensive-oriented market segments, such as U.S. net lease and healthcare real estate investment trusts (REITs), German residential stocks, Japanese REITs and Australian REITs.
The Fund’s European portfolio detracted from relative performance during the period. Although the portfolio benefited from stock selection and an underweight position in U.K. retail securities, as well as an overweight position in Spain, these gains were more than offset by the Fund’s overweight position in Continental retail, an overweighting and adverse stock selection in U.K. Majors, and an underweight position in the German residential sector.*
The Fund’s North American portfolio also weighed on relative performance. Primary detractors included stock selection and an overweight position in the U.S. primary CBD office sector; adverse stock selection and an underweight position in U.S. healthcare; and an underweight position in U.S. net lease assets. The negative impact of these positions more than offset the benefits from stock selection in the U.S. diversified sector.*
The Asian portfolio boosted the Fund’s relative performance, helped by stock selection in Hong Kong and an underweight position in Singapore. These gains helped the portfolio overcome the negative impact of an overweight position in Hong Kong and an underweight position in Japan.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
1
AZL® Morgan Stanley Global Real Estate Fund Review (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek to provide income and capital appreciation. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 80% of the Fund’s assets, plus any borrowings for investment purposes, in equity securities of companies in the real estate industry, including real estate investments trusts (REITs), real estate operating companies (REOCs), and foreign real estate companies. | ||||
Investment Concerns
| ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
Emerging market investing may be subject to additional economic, political, liquidity, and currency risks not associated with more developed countries. | ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. | ||||
Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.
| ||||
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility. | ||||
The performance of investments in real estate depends on the overall strength of the real estate market, the management of real estate investments trusts (REITs), real estate operating companies (REOCs), and foreign real estate companies, and property management, all of which can be affected by a variety of factors, including national and regional economic conditions. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. | ||||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception | 1 | 3 | 5 | 10 | Since | |||||||||||||||||
Date | Year | Year | Year | Year | Inception | |||||||||||||||||
AZL®Morgan Stanley Global Real Estate Fund (Class 1 Shares) | 10/14/16 | -7.91 | % | — | — | — | 0.81 | % | ||||||||||||||
AZL®Morgan Stanley Global Real Estate Fund (Class 2 Shares) | 5/1/06 | -8.07 | % | 1.33 | % | 3.15 | % | 9.08 | % | 2.89 | % | |||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index (gross of withholding taxes) | 5/1/06 | -4.74 | % | 3.67 | % | 5.26 | % | 10.53 | % | 4.11 | % | |||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index (net of withholding taxes) | 5/1/06 | -5.63 | % | 2.72 | % | 4.34 | % | 9.65 | % | 3.34 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®Morgan Stanley Global Real Estate Fund (Class 1 Shares) | 1.03 | % | ||
AZL®Morgan Stanley Global Real Estate Fund (Class 2 Shares) | 1.28 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.85% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 1.10% for Class 1 Shares and 1.35% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Financial Times London Stock Exchange (“FTSE”) European Public Real Estate Association (“EPRA”)/NAREIT Developed Real Estate Index series, which is designed to represent general trends in eligible real estate stocks worldwide. Relevant real estate activities are defined as the ownership, disposal and development of income-producing real estate. The Indexes do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Index noted as “gross of withholding taxes” reflects the maximum possible reinvestment of dividends with no adjustment for withholding tax deductions or tax credits. The Index noted as “net of withholding taxes” reflects the reinvestment of dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable tonon-resident institutional investors who do not benefit from double taxation treaties. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Morgan Stanley Global Real Estate Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Morgan Stanley Global Real Estate 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Morgan Stanley Global Real Estate Fund, Class 1 | $ | 1,000.00 | $ | 919.00 | $ | 4.64 | 0.96 | % | ||||||||||||
AZL Morgan Stanley Global Real Estate Fund, Class 2 | $ | 1,000.00 | $ | 919.30 | $ | 5.85 | 1.21 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Morgan Stanley Global Real Estate Fund, Class 1 | $ | 1,000.00 | $ | 1,020.37 | $ | 4.89 | 0.96 | % | ||||||||||||
AZL Morgan Stanley Global Real Estate Fund, Class 2 | $ | 1,000.00 | $ | 1,019.11 | $ | 6.16 | 1.21 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
United States | 53.2 | % | |||
Hong Kong | 10.1 | ||||
Japan | 9.8 | ||||
France | 5.4 | ||||
United Kingdom | 5.4 | ||||
Australia | 3.9 | ||||
Germany | 2.5 | ||||
Canada | 1.8 | ||||
Bermuda | 1.8 | ||||
Spain | 0.9 | ||||
All other countries | 4.3 | ||||
|
| ||||
Total Common Stocks | 99.1 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 2.1 | ||||
Money Markets | 0.2 | ||||
|
| ||||
Total Investment Securities | 101.4 | ||||
Net other assets (liabilities) | (1.4 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
AZL Morgan Stanley Global Real Estate Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (99.1%): | ||||||||
Diversified Real Estate Activities (8.0%): | ||||||||
4,800 | City Developments, Ltd. | $ | 28,493 | |||||
50,883 | Henderson Land Development Co., Ltd. | 252,263 | ||||||
116,311 | Mitsubishi Estate Co., Ltd. | 1,822,953 | ||||||
75,298 | Mitsui Fudosan Co., Ltd. | 1,668,635 | ||||||
477,801 | New World Development Co., Ltd. | 627,705 | ||||||
5,000 | Nomura Real Estate Holdings, Inc. | 91,238 | ||||||
25,331 | Sumitomo Realty & Development Co., Ltd. | 925,309 | ||||||
164,471 | Sun Hung Kai Properties, Ltd. | 2,332,183 | ||||||
2,800 | Tokyo Tatemono Co., Ltd. | 28,859 | ||||||
36,215 | UOL Group, Ltd. | 163,903 | ||||||
135,399 | Wharf Holdings, Ltd. (The) | 351,282 | ||||||
|
| |||||||
8,292,823 | ||||||||
|
| |||||||
Diversified REITs (6.8%): | ||||||||
55 | Activia Properties, Inc. | 222,879 | ||||||
14,060 | Empire State Realty Trust, Inc., Class A | 200,074 | ||||||
2,721 | Fonciere des Regions SA | 261,925 | ||||||
6,169 | Gecina SA | 796,258 | ||||||
115,858 | GPT Group | 435,667 | ||||||
9,969 | H&R Real Estate Investment Trust | 150,813 | ||||||
45 | Hulic REIT, Inc. | 69,861 | ||||||
4,165 | ICADE | 316,580 | ||||||
18 | Kenedix Office Investment Corp. | 114,885 | ||||||
140,451 | Land Securities Group plc | 1,439,559 | ||||||
23,240 | Lexington Realty Trust | 190,800 | ||||||
59,330 | Merlin Properties Socimi SA | 732,951 | ||||||
203,388 | Mirvac Group | 320,816 | ||||||
400 | Nomura Real Estate Master Fund, Inc. | 526,475 | ||||||
138 | Premier Investment Corp. | 156,999 | ||||||
162,388 | Stockland Trust Group | 402,779 | ||||||
44,464 | Suntec REIT | 57,949 | ||||||
307 | United Urban Investment Corp. | 476,100 | ||||||
|
| |||||||
6,873,370 | ||||||||
|
| |||||||
Health Care Facilities (0.1%): | ||||||||
13,912 | Extendicare, Inc. | 64,719 | ||||||
|
| |||||||
Health Care REITs (3.3%): | ||||||||
12,298 | HCP, Inc. | 343,483 | ||||||
48,138 | Healthcare Realty Trust, Inc. | 1,369,045 | ||||||
17,454 | Healthcare Trust of America, Inc., Class A | 441,761 | ||||||
11,630 | Ventas, Inc. | 681,402 | ||||||
9,005 | Welltower, Inc. | 625,037 | ||||||
|
| |||||||
3,460,728 | ||||||||
|
| |||||||
Hotel & Resort REITs (5.4%): | ||||||||
26,683 | Chesapeake Lodging Trust^ | 649,731 | ||||||
50,516 | DiamondRock Hospitality, Co. | 458,685 | ||||||
147,862 | Host Hotels & Resorts, Inc. | 2,464,860 | ||||||
270 | Invincible Investment Corp. | 111,467 | ||||||
276 | Japan Hotel REIT Investment Corp. | 197,449 | ||||||
81,918 | RLJ Lodging Trust | 1,343,455 | ||||||
28,100 | Sunstone Hotel Investors, Inc. | 365,581 | ||||||
|
| |||||||
5,591,228 | ||||||||
|
| |||||||
Industrial REITs (4.9%): | ||||||||
64,198 | Ascendas Real Estate Investment Trust | 120,739 | ||||||
11,310 | Duke Realty Corp. | 292,929 | ||||||
365 | GLPJ-REIT | 372,889 | ||||||
86,223 | Macquarie Goodman Group | 645,240 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Industrial REITs, continued | ||||||||
72,100 | Mapletree Logistics Trust | $ | 66,590 | |||||
52 | Nippon Prologis REIT, Inc. | 109,787 | ||||||
54,963 | ProLogis, Inc. | 3,227,427 | ||||||
28,284 | SERGO plc | 212,125 | ||||||
|
| |||||||
5,047,726 | ||||||||
|
| |||||||
Office REITs (19.9%): | ||||||||
5,411 | Alexandria Real Estate Equities, Inc. | 623,564 | ||||||
18,404 | Alstria OfficeREIT-AG | 257,215 | ||||||
30,272 | Boston Properties, Inc. | 3,407,114 | ||||||
25,426 | Brandywine Realty Trust | 327,233 | ||||||
179,144 | CapitaLand Commercial Trust | 229,600 | ||||||
437,000 | Champion REIT | 298,990 | ||||||
38,760 | Columbia Property Trust, Inc. | 750,006 | ||||||
13,582 | Corporate Office Properties Trust | 285,629 | ||||||
30,408 | Cousins Properties, Inc. | 240,223 | ||||||
20,724 | Derwent Valley Holdings plc | 752,058 | ||||||
78,219 | Dexus Property Group | 584,854 | ||||||
79,592 | Great Portland Estates plc | 666,883 | ||||||
229,810 | Green REIT plc | 354,835 | ||||||
�� | 133,668 | Hibernia REIT plc | 191,161 | |||||
23,737 | Hudson Pacific Properties, Inc. | 689,797 | ||||||
25,712 | Inmobiliaria Colonial SA | 238,958 | ||||||
125 | Japan Real Estate Investment Corp. | 702,060 | ||||||
11,832 | JBG SMITH Properties | 411,872 | ||||||
5,584 | Kilroy Realty Corp. | 351,122 | ||||||
45,218 | Mack-Cali Realty Corp. | 885,821 | ||||||
90 | Mori Trust Sogo REIT, Inc. | 130,932 | ||||||
160 | Nippon Building Fund, Inc. | 1,007,781 | ||||||
1,215 | NSI NV | 47,462 | ||||||
42 | ORIX JREIT, Inc. | 69,861 | ||||||
96,881 | Paramount Group, Inc. | 1,216,825 | ||||||
45,312 | SL Green Realty Corp. | 3,583,274 | ||||||
13,603 | Tier REIT, Inc. | 280,630 | ||||||
32,709 | Vornado Realty Trust | 2,028,939 | ||||||
8,948 | Workspace Group plc | 90,256 | ||||||
|
| |||||||
20,704,955 | ||||||||
|
| |||||||
Real Estate Development (2.8%): | ||||||||
83,925 | China Overseas Land & Investment, Ltd. | 288,867 | ||||||
18,000 | China Resources Land, Ltd. | 68,730 | ||||||
116,040 | CK Asset Holdings, Ltd. | 843,869 | ||||||
297,000 | Country Garden Holdings Co., Ltd. | 357,788 | ||||||
115,200 | Guangzhou R&F Properties Co., Ltd., Class H | 172,556 | ||||||
44,500 | Longfor Properties Co., Ltd. | 133,229 | ||||||
241,073 | Sino Land Co., Ltd. | 410,293 | ||||||
48,377 | St. Modwen Properties plc | 243,742 | ||||||
94,038 | Urban & Civic plc | 313,245 | ||||||
|
| |||||||
2,832,319 | ||||||||
|
| |||||||
Real Estate Operating Companies (9.6%): | ||||||||
4,025 | ADO Properties SA | 210,420 | ||||||
39,583 | Atrium European Real Estate, Ltd. | 146,330 | ||||||
7,891 | Atrium Ljungberg AB, Class B | 135,567 | ||||||
2,485,087 | BGP Holdings plc*(a)(b) | 2,847 | ||||||
4,075 | Carmila SA | 75,292 | ||||||
8,742 | Castellum AB | 161,007 | ||||||
24,921 | Citycon OYJ^ | 46,075 |
See accompanying notes to the financial statements.
4
AZL Morgan Stanley Global Real Estate Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Operating Companies, continued | ||||||||
13,870 | Deutsche Wohnen AG | $ | 635,667 | |||||
27,745 | Entra ASA | 368,741 | ||||||
47,432 | First Capital Realty, Inc. | 655,013 | ||||||
59,475 | Grainger Trust plc | 158,989 | ||||||
292,952 | Hongkong Land Holdings, Ltd. | 1,846,747 | ||||||
20,835 | Hufvudstaden AB | 322,597 | ||||||
34,856 | Hulic Co., Ltd. | 311,953 | ||||||
142,669 | Hysan Development Co., Ltd. | 676,515 | ||||||
20,202 | Kojamo Oyj* | 187,627 | ||||||
18,682 | Kungsleden AB | 132,766 | ||||||
1,821 | LEG Immobilien AG | 190,114 | ||||||
89,127 | LXB Retail Properties plc | 12,858 | ||||||
33,959 | Norwegian Property ASA | 41,631 | ||||||
3,318 | PSP Swiss Property AG | 326,819 | ||||||
317,329 | Swire Properties, Ltd. | 1,108,947 | ||||||
28,121 | Vonovia SE | 1,276,123 | ||||||
135,710 | Wharf Real Estate Investment Co., Ltd. | 806,748 | ||||||
|
| |||||||
9,837,393 | ||||||||
|
| |||||||
Real Estate Services (0.0%)†: | ||||||||
101,500 | APAC Realty, Ltd. | 33,170 | ||||||
|
| |||||||
Residential REITs (10.9%): | ||||||||
120 | Advance Residence Investment | 331,619 | ||||||
12,570 | American Campus Communities, Inc. | 520,272 | ||||||
51,941 | American Homes 4 Rent, Class A | 1,031,029 | ||||||
9,810 | Apartment Investment & Management Co., Class A | 430,463 | ||||||
16,940 | AvalonBay Communities, Inc. | 2,948,407 | ||||||
3,938 | Boardwalk REIT | 109,081 | ||||||
12,645 | Camden Property Trust | 1,113,392 | ||||||
28,392 | Equity Residential Property Trust | 1,874,156 | ||||||
3,477 | Essex Property Trust, Inc. | 852,595 | ||||||
40,892 | Invitation Homes, Inc.^ | 821,111 | ||||||
7,301 | Mid-America Apartment Communities, Inc. | 698,706 | ||||||
11,952 | UDR, Inc. | 473,538 | ||||||
|
| |||||||
11,204,369 | ||||||||
|
| |||||||
Retail REITs (22.9%): | ||||||||
196,271 | British Land Co. plc | 1,333,464 | ||||||
96,141 | Brixmor Property Group, Inc. | 1,412,311 | ||||||
113,552 | CapitaMall Trust | 187,925 | ||||||
14,701 | Crombie REIT | 134,840 | ||||||
14,737 | Eurocommercial Properties NV | 455,444 | ||||||
22 | Frontier Real Estate Investment Corp. | 87,355 | ||||||
46,123 | Hammerson plc | 193,122 |
Shares or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Retail REITs, continued | ||||||||
265 | Japan Retail Fund Investment Corp. | $ | 530,683 | |||||
15,609 | Kimco Realty Corp.^ | 228,672 | ||||||
64,651 | Klepierre | 1,990,212 | ||||||
58,020 | Liberty International plc^ | 83,839 | ||||||
220,884 | Link REIT (The) | 2,224,578 | ||||||
48,348 | Macerich Co. (The) | 2,092,501 | ||||||
23,441 | Mercialys SA | 320,887 | ||||||
31,339 | Regency Centers Corp. | 1,838,973 | ||||||
36,639 | RioCan REIT | 638,834 | ||||||
384,205 | Scentre Group | 1,055,078 | ||||||
7,989 | Shaftesbury plc | 84,475 | ||||||
36,969 | Simon Property Group, Inc. | 6,210,423 | ||||||
4,415 | Smart Real Estate Investment Trust | 99,718 | ||||||
11,771 | Unibail-Rodamco-Westfield | 1,818,003 | ||||||
321,543 | Vicinity Centres | 588,616 | ||||||
|
| |||||||
23,609,953 | ||||||||
|
| |||||||
Specialized REITs (4.5%): | ||||||||
30,668 | CubeSmart | 879,865 | ||||||
7,841 | Digital Realty Trust, Inc. | 835,459 | ||||||
5,880 | Extra Space Storage, Inc.^ | 532,022 | ||||||
14,717 | Gaming & Leisure Properties, Inc. | 475,506 | ||||||
2,410 | Life Storage, Inc. | 224,106 | ||||||
6,366 | Public Storage, Inc. | 1,288,542 | ||||||
11,719 | QTS Realty Trust, Inc., Class A^ | 434,189 | ||||||
|
| |||||||
4,669,689 | ||||||||
|
| |||||||
Total Common Stocks (Cost $102,207,641) | 102,222,442 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.2%): | ||||||||
253,063 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(c) | 253,063 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $253,063) | 253,063 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (2.1%) | ||||||||
Miscellaneous Investments (2.1%) | ||||||||
2,130,465 | Short-Term Investments(d) | 2,130,465 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 2,130,465 | ||||||
|
| |||||||
Total Investment Securities (Cost $104,683,475) — 101.4%(e) | 104,605,970 | |||||||
Net other assets (liabilities) — (1.4)% | (1,402,095 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 103,203,875 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $2,074,708. |
† | Represents less than 0.05%. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.00% of the net assets of the fund. |
(b) | Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 0.00% of the net assets of the Fund. |
(c) | The rate represents the effective yield at December 31, 2018. |
(d) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
5
AZL Morgan Stanley Global Real Estate Fund
Schedule of Portfolio Investments
December 31, 2018
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 December 31, 2018: (Unaudited)
Country | Percentage | |||
Australia | 3.9 | % | ||
Bermuda | 1.8 | % | ||
Canada | 1.8 | % | ||
China | 0.5 | % | ||
Finland | 0.2 | % | ||
France | 5.3 | % | ||
Germany | 2.5 | % | ||
Hong Kong | 10.1 | % | ||
Ireland | 0.5 | % | ||
Japan | 9.6 | % | ||
Jersey | 0.1 | % | ||
Netherlands | 0.5 | % | ||
Norway | 0.4 | % | ||
Singapore | 0.8 | % | ||
Spain | 0.9 | % | ||
Sweden | 0.7 | % | ||
Switzerland | 0.3 | % | ||
United Kingdom | 5.3 | % | ||
United States | 54.8 | % | ||
|
| |||
100.0 | % | |||
|
|
See accompanying notes to the financial statements.
6
AZL Morgan Stanley Global Real Estate Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 104,683,475 | |||
|
| ||||
Investment securities, at value(a) | $ | 104,605,970 | |||
Interest and dividends receivable | 438,849 | ||||
Receivable for investments sold | 357,371 | ||||
Reclaims receivable | 132,690 | ||||
Prepaid expenses | 1,451 | ||||
|
| ||||
Total Assets | 105,536,331 | ||||
|
| ||||
Liabilities: | |||||
Foreign currency, at value (cost $3,822) | 3,458 | ||||
Payable for investments purchased | 84,242 | ||||
Payable for capital shares redeemed | 6,356 | ||||
Payable for collateral received on loaned securities | 2,130,465 | ||||
Manager fees payable | 79,014 | ||||
Administration fees payable | 2,080 | ||||
Distribution fees payable | 18,701 | ||||
Custodian fees payable | 2,872 | ||||
Administrative and compliance services fees payable | 190 | ||||
Transfer agent fees payable | 437 | ||||
Trustee fees payable | 73 | ||||
Other accrued liabilities | 4,568 | ||||
|
| ||||
Total Liabilities | 2,332,456 | ||||
|
| ||||
Net Assets | $ | 103,203,875 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 104,668,447 | |||
Total distributable earnings/(losses) | (1,464,572 | ) | |||
|
| ||||
Net Assets | $ | 103,203,875 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 20,483,786 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 2,556,015 | ||||
Net Asset Value (offering and redemption price per share) | $ | 8.01 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 82,720,089 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 9,578,855 | ||||
Net Asset Value (offering and redemption price per share) | $ | 8.64 | |||
|
|
(a) | Includes securities on loan of $2,074,708. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 4,646,723 | |||
Income from securities lending | 31,522 | ||||
Foreign withholding tax | (235,735 | ) | |||
|
| ||||
Total Investment Income | 4,442,510 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 1,103,139 | ||||
Administration fees | 48,866 | ||||
Distribution fees — Class 2 | 248,025 | ||||
Custodian fees | 56,077 | ||||
Administrative and compliance services fees | 1,819 | ||||
Transfer agent fees | 9,350 | ||||
Trustee fees | 5,807 | ||||
Professional fees | 5,226 | ||||
Shareholder reports | 10,540 | ||||
Other expenses | 4,278 | ||||
|
| ||||
Total expenses before reductions | 1,493,127 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (61,287 | ) | |||
|
| ||||
Net expenses | 1,431,840 | ||||
|
| ||||
Net Investment Income/(Loss) | 3,010,670 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 936,538 | ||||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (13,639,310 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (12,702,772 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (9,692,102 | ) | ||
|
|
See accompanying notes to the financial statements.
7
AZL Morgan Stanley Global Real Estate Fund
Statements of Changes in Net Assets
For the December 31, 2018 | For the December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 3,010,670 | $ | 3,052,930 | ||||||
Net realized gains/(losses) on investments | 936,538 | 9,568,019 | ||||||||
Change in unrealized appreciation/depreciation on investments | (13,639,310 | ) | 207,580 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (9,692,102 | ) | 12,828,529 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (2,324,054 | ) | (3,091,166 | ) | ||||||
Class 2 | (8,873,299 | ) | (12,369,090 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (11,197,353 | ) | (15,460,256 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 34,084 | 14,573 | ||||||||
Proceeds from dividends reinvested | 2,324,054 | 3,091,166 | ||||||||
Value of shares redeemed | (3,513,877 | ) | (4,020,059 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (1,155,739 | ) | (914,320 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 416,028 | 800,139 | ||||||||
Proceeds from dividends reinvested | 8,873,299 | 12,369,090 | ||||||||
Value of shares redeemed | (19,760,081 | ) | (16,544,139 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (10,470,754 | ) | (3,374,910 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (11,626,493 | ) | (4,289,230 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (32,515,948 | ) | (6,920,957 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 135,719,823 | 142,640,780 | ||||||||
|
|
|
| |||||||
End of period | $ | 103,203,875 | $ | 135,719,823 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 3,531 | 1,434 | ||||||||
Dividends reinvested | 277,997 | 332,741 | ||||||||
Shares redeemed | (379,772 | ) | (397,099 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (98,244 | ) | (62,924 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 42,675 | 73,913 | ||||||||
Dividends reinvested | 983,736 | 1,245,629 | ||||||||
Shares redeemed | (2,031,552 | ) | (1,538,982 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (1,005,141 | ) | (219,440 | ) | ||||||
|
|
|
| |||||||
Change in shares | (1,103,385 | ) | (282,364 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
8
AZL Morgan Stanley Global Real Estate Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016* | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.72 | $ | 10.05 | $ | 10.00 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.29 | 0.28 | — | ^+ | |||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.02 | ) | 0.67 | 0.05 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total from Investment Activities | (0.73 | ) | 0.95 | 0.05 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.42 | ) | (0.43 | ) | — | ||||||||||||||||||||
Net Realized Gains | (0.56 | ) | (0.85 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Dividends | (0.98 | ) | (1.28 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Net Asset Value, End of Period | $ | 8.01 | $ | 9.72 | $ | 10.05 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Return(c) | (7.91 | )% | 10.00 | % | 0.50 | %(a) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000's) | $ | 20,484 | $ | 25,794 | $ | 27,302 | |||||||||||||||||||
Net Investment Income/(Loss)(b) | 2.67 | % | 2.38 | % | 0.13 | % | |||||||||||||||||||
Expenses Before Reductions(b)(d) | 1.02 | % | 1.03 | % | 1.04 | % | |||||||||||||||||||
Expenses Net of Reductions(b) | 0.97 | % | 0.98 | % | 1.03 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 34 | % | 33 | % | 52 | % | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.39 | $ | 10.68 | $ | 10.51 | $ | 11.11 | $ | 9.86 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.29 | 0.27 | 0.20 | 0.22 | 0.18 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.09 | ) | 0.71 | 0.13 | (0.39 | ) | 1.17 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.80 | ) | 0.98 | 0.33 | (0.17 | ) | 1.35 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.39 | ) | (0.42 | ) | (0.16 | ) | (0.43 | ) | (0.10 | ) | |||||||||||||||
Net Realized Gains | (0.56 | ) | (0.85 | ) | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.95 | ) | (1.27 | ) | (0.16 | ) | (0.43 | ) | (0.10 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 8.64 | $ | 10.39 | $ | 10.68 | $ | 10.51 | $ | 11.11 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(c) | (8.07 | )% | 9.72 | % | 3.14 | % | (1.34 | )% | 13.77 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000's) | $ | 82,720 | $ | 109,926 | $ | 115,339 | $ | 159,821 | $ | 187,892 | |||||||||||||||
Net Investment Income/(Loss) | 2.41 | % | 2.17 | % | 1.84 | % | 1.70 | % | 1.67 | % | |||||||||||||||
Expenses Before Reductions(d) | 1.27 | % | 1.28 | % | 1.29 | % | 1.29 | % | 1.29 | % | |||||||||||||||
Expenses Net of Reductions | 1.22 | % | 1.23 | % | 1.29 | % | 1.29 | % | 1.28 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 34 | % | 33 | % | 52 | % | 25 | % | 32 | % |
* | Class 1 activity is for the period October 17, 2016 (commencement of operations) to December 31, 2016. |
^ | Average shares method used in calculations. |
+ | Represents less than $0.005. |
(a) | Not annualized for periods less than one year. |
(b) | Annualized for periods less than one year. |
(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) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
See accompanying notes to the financial statements.
9
AZL Morgan Stanley Global Real Estate Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Morgan Stanley Global Real Estate Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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.
10
AZL Morgan Stanley Global Real Estate Fund
Notes to the Financial Statements
December 31, 2018
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $3,388 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $2,124,110 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, the Fund did not engage in any Rule17a-7 transactions under the Rule.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
11
AZL Morgan Stanley Global Real Estate Fund
Notes to the Financial Statements
December 31, 2018
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (1,035,506) | |||
Class 2 | (4,103,304) | ||||
From net realized gains | |||||
Class 1 | (2,055,660) | ||||
Class 2 | (8,265,786) | ||||
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Change in net assets resulting from distributions to shareholders | $ | (15,460,256) | |||
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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 Morgan Stanley Investment Management Inc. (“MSIM”), MSIM 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Morgan Stanley Global Real Estate Fund Class 1 | 0.90 | % | 1.10 | % | ||||||
AZL Morgan Stanley Global Real Estate Fund Class 2 | 0.90 | % | 1.35 | % |
* | The Manager voluntarily reduced the management fee to 0.85% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 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.
12
AZL Morgan Stanley Global Real Estate Fund
Notes to the Financial Statements
December 31, 2018
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 year ended December 31, 2018, $987 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Diversified Real Estate Activities | $ | — | $ | 8,292,823 | $ | — | $ | 8,292,823 | ||||||||||||
Diversified REITs | 541,687 | 6,331,683 | — | 6,873,370 | ||||||||||||||||
Hotel & Resort REITs | 5,282,312 | 308,916 | — | 5,591,228 | ||||||||||||||||
Industrial REITs | 3,520,356 | 1,527,370 | — | 5,047,726 | ||||||||||||||||
Office REITs | 15,082,049 | 5,622,906 | — | 20,704,955 | ||||||||||||||||
Real Estate Development | — | 2,832,319 | — | 2,832,319 | ||||||||||||||||
Real Estate Operating Companies | 655,013 | 9,179,533 | 2,847 | 9,837,393 | ||||||||||||||||
Real Estate Services | — | 33,170 | — | 33,170 | ||||||||||||||||
Residential REITs | 10,872,750 | 331,619 | — | 11,204,369 | ||||||||||||||||
Retail REITs | 12,656,272 | 10,953,681 | — | 23,609,953 | ||||||||||||||||
Other Common Stocks+ | 8,195,136 | — | 8,195,136 | |||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 2,130,465 | — | 2,130,465 | ||||||||||||||||
Unaffiliated Investment Company | 253,063 | — | — | 253,063 | ||||||||||||||||
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Total Investments | $ | 57,058,638 | $ | 47,544,485 | $ | 2,847 | $ | 104,605,970 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Morgan Stanley Global Real Estate Fund | $ | 41,875,724 | $ | 60,258,506 |
13
AZL Morgan Stanley Global Real Estate Fund
Notes to the Financial Statements
December 31, 2018
6. Investment Risks
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.
Real Estate Investments Risk: The performance of REITs depends on the strength of real estate markets, REIT management and property management which can be affected by many factors, including national and regional economic conditions.
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 December 31, 2018 is $108,185,760. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 4,460,708 | ||
Unrealized (depreciation) | (8,040,498 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | (3,579,790 | ) | |
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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.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL Morgan Stanley Global Real Estate Fund | $ | 64,528 | $ | 870,910 | $ | 935,438 |
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Morgan Stanley Global Real Estate Fund | $ | 4,691,715 | $ | 6,505,638 | $ | 11,197,353 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Morgan Stanley Global Real Estate Fund | $ | 5,138,810 | $ | 10,321,446 | $ | 15,460,256 |
(a) | Total distributions paid may differ from the 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 Morgan Stanley Global Real Estate Fund | $ | 3,052,401 | $ | — | $ | (935,436 | ) | $ | (3,581,537 | ) | $ | (1,464,572 | ) |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and mark-to-market of passive foreign investment companies. |
14
AZL Morgan Stanley Global Real Estate Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 95% 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.
15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Morgan Stanley Global Real Estate Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Morgan Stanley Global Real Estate Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
16
Other Federal Income Tax Information (Unaudited)
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $6,505,639.
17
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 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-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 calling800-SEC-0330.
18
Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) 50 South Sixth Street | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Suite 200 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
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The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® MSCI Emerging Markets Equity Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 15
Page 15
Statements of Changes in Net Assets
Page 16
Page 17
Notes to the Financial Statements
Page 18
Report of Independent Registered Public Accounting Firm
Page 25
Other Federal Income Tax Information
Page 26
Page 27
Approval of Investment Advisory and Subadvisory Agreements
Page 28
Information about the Board of Trustees and Officers
Page 31
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® MSCI Emerging Markets Equity Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL®MSCI Emerging Markets Equity Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund. | ||||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® MSCI Emerging Markets Equity Index Fund (Class 2 Shares) (the “Fund”) returned-15.46%. That compared to a-14.25% total return for its benchmark, the MSCI Emerging Markets Index1.
The Fund seeks investment results, before fees, expenses and fair value adjustments to its portfolio at the close of the New York Stock Exchange, that correspond to the performance of the MSCI Emerging Markets Index (“Index”). The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the Index. The Index is designed to provide a comprehensive measure of emerging markets equities.*
Despite a strong start to the year, emerging markets equities posted sizeable losses for 2018 amid geopolitical tensions and uncertainty, including U.S. trade protectionism against China and slowing global growth. Rising U.S. interest rates and a strong dollar placed additional pressure on emerging market economies with poor finances.
The first quarter of 2018 saw high levels of synchronized global growth, which was a catalyst for emerging markets exporters. However, trade tensions between the U.S. and China escalated in March, negatively impacting markets. Despite these concerns, Chinese equities managed to end the quarter with a modest gain.
In the second quarter, emerging markets equities experienced their worst quarter since the end of 2016. Trade war risks, rising U.S. protectionism and a rebound in the U.S. dollar weighed on all regions. China represented 30% of the Index’s holdings and contributed the most to the Index’s decline as investors became increasingly risk-averse amid the intensifying trade rhetoric. Turkish equities also underperformed as the country’s high debt and large current account deficit left it exposed to the negative impacts of rising U.S. interest rates and a strengthening dollar. Latin America, led lower by Brazil, was the worst-performing region during the quarter despite a highearnings-per-share growth rate.
The performance of emerging markets equities diverged even further from their developed market peers during the third quarter. Tightening global financial conditions, deteriorating relations between the U.S. and China and a general global economic slowdown pressured emerging
markets assets. Chinese and Turkish stocks continued to weigh on the Index, while South African stocks underperformed due to the nation’s deficits and weakening macro-economic conditions. By comparison, Latin America stocks helped offset broader emerging markets weakness, as Mexico gained following its general election and North American Free Trade Agreement renegotiations, and Brazil outperformed ahead of its October elections. In the Middle East, Qatar also rallied along with crude oil prices.
In the final quarter of the period, slowing growth, tighter financial conditions and rising geopolitical uncertainties created difficulties for emerging economies and weighed on investor sentiment. Emerging markets suffered another drawdown, but they managed to outperform U.S. and other developed markets by more than five percentage points for the quarter.
From a country perspective, the top performers were Brazil, and Indonesia, while Mexico and Taiwan lagged other markets.
From a sector perspective, the largest negative returns in the Index came from consumer discretionary, communications services and healthcare. All sectors of the Index declined, with the exception of the energy sector, which posted a modest gain for the year.
The Fund underperformed its benchmark primarily due to the impacts of Fair Value Pricing and due to expenses incurred by the Fund.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a negative impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
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AZL® MSCI Emerging Markets Equity Index Fund Review (Unaudited)
Fund Objective
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The Fund’s investment objective is to seek to match the performance of the MSCI Emerging Markets Index as closely as possible. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 90% of its assets in the securities of the MSCI Emerging Markets Index (the “Underlying Index”) and in depositary receipts representing securities in its Underlying Index.
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Investment Concerns
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Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
Emerging market investing may be subject to additional economic, political, liquidity, and currency risks not associated with more developed countries.
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International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
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The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines.
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Investing in a single industry or sector, or concentrating investments in a limited number of industries or sectors, tends to increase the risk that economic, political, or regulatory developments affecting certain industries or sectors will have a large impact on the value of the portfolio.
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Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
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For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. | ||||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception | 1 | 3 | 5 | 10 | ||||||||||||||||
Date | Year | Year | Year | Year | ||||||||||||||||
AZL®MSCI Emerging Markets Equity Index Fund (Class 1 Shares) | 5/6/07 | -15.31 | % | 8.54 | % | 1.19 | % | 7.36 | % | |||||||||||
AZL®MSCI Emerging Markets Equity Index Fund (Class 2 Shares) | 5/1/06 | -15.46 | % | 8.27 | % | 0.94 | % | 7.09 | % | |||||||||||
MSCI Emerging Markets Index (gross of withholding taxes) | 5/1/06 | -14.25 | % | 9.65 | % | 2.03 | % | 8.39 | % | |||||||||||
MSCI Emerging Markets Index (net of withholding taxes) | 5/1/06 | -14.58 | % | 9.25 | % | 1.65 | % | 8.02 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®MSCI Emerging Markets Equity Index Fund (Class 1 Shares) | 1.11 | % | ||
AZL®MSCI Emerging Markets Equity Index Fund (Class 2 Shares) | 1.36 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.45% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.85% for Class 1 Shares and 1.10% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Morgan Stanley Capital International (“MSCI”) Emerging Markets Index, an unmanaged free float-adjusted market capitalization index that is designed to measure equity performance of emerging markets. The Indexes do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Index noted as “gross of withholding taxes” reflects the maximum possible reinvestment of dividends with no adjustment for withholding tax deductions or tax credits. The Index noted as “net of withholding taxes” reflects the reinvestment of dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable tonon-resident institutional investors who do not benefit from double taxation treaties. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL MSCI Emerging Markets Equity Index Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL MSCI Emerging Markets Equity Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL MSCI Emerging Markets Equity Index Fund, Class 1 | $ | 1,000.00 | $ | 912.40 | $ | 2.89 | 0.60 | % | ||||||||||||
AZL MSCI Emerging Markets Equity Index Fund, Class 2 | $ | 1,000.00 | $ | 911.90 | $ | 4.10 | 0.85 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL MSCI Emerging Markets Equity Index Fund, Class 1 | $ | 1,000.00 | $ | 1,022.18 | $ | 3.06 | 0.60 | % | ||||||||||||
AZL MSCI Emerging Markets Equity Index Fund, Class 2 | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 | 0.85 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Financials | 24.6 | % | |||
Information Technology | 14.5 | ||||
Telecommunication Services | 13.8 | ||||
Consumer Discretionary | 10.4 | ||||
Energy | 7.9 | ||||
Materials | 7.6 | ||||
Consumer Staples | 6.8 | ||||
Industrials | 5.1 | ||||
Real Estate | 3.1 | ||||
Health Care | 3.0 | ||||
Utilities | 2.6 | ||||
|
| ||||
Total Common Stocks and Preferred Stocks | 99.4 | ||||
Rights | — | ^ | |||
Short-Term Securities Held as Collateral for Securities on Loan | 0.6 | ||||
Money Markets | 0.1 | ||||
|
| ||||
Total Investment Securities | 100.1 | ||||
Net other assets (liabilities) | (0.1 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (97.0%): | ||||||||
Aerospace & Defense (0.1%): | ||||||||
23,219 | Aselsan Elektronik Sanayi Ve Ticaret AS | $ | 105,674 | |||||
139,000 | AviChina Industry & Technology Co., Ltd., Class H | 87,597 | ||||||
45,601 | Embraer SA | 255,110 | ||||||
4,568 | Korea Aerospace Industries, Ltd.* | 130,091 | ||||||
|
| |||||||
578,472 | ||||||||
|
| |||||||
Air Freight & Logistics (0.0%)†: | ||||||||
1,279 | Hyundai Glovis Co., Ltd. | 147,377 | ||||||
183,000 | Sinotrans, Ltd. | 78,749 | ||||||
|
| |||||||
226,126 | ||||||||
|
| |||||||
Airlines (0.2%): | ||||||||
126,000 | Air China, Ltd. | 108,631 | ||||||
89,500 | AirAsia Berhad | 64,175 | ||||||
188,000 | China Airlines, Ltd. | 67,399 | ||||||
39,299 | China Eastern Airlines Corp., Ltd. | 27,350 | ||||||
126,000 | China Southern Airlines Co., Ltd., Class H | 77,012 | ||||||
151,410 | Eva Airways Corp. | 77,960 | ||||||
5,453 | InterGlobe Aviation, Ltd. | 91,166 | ||||||
3,195 | Korean Air Lines Co., Ltd. | 94,485 | ||||||
21,063 | Latam Airlines Group SA | 210,591 | ||||||
28,736 | Turk Hava Yollari Anonim Ortakligi* | 87,514 | ||||||
|
| |||||||
906,283 | ||||||||
|
| |||||||
Auto Components (0.6%): | ||||||||
15,044 | Bharat Forge, Ltd. | 109,846 | ||||||
518 | Bosch, Ltd. | 145,632 | ||||||
131,000 | Cheng Shin Rubber Industry Co., Ltd. | 173,049 | ||||||
182,000 | China First Capital Group, Ltd.* | 103,171 | ||||||
37,200 | Fuyao Glass Industry Group Co., Ltd., Class H | 118,065 | ||||||
5,055 | Hankook Tire Co., Ltd. | 181,743 | ||||||
13,072 | Hanon Systems | 126,242 | ||||||
4,361 | Hyundai Mobis Co., Ltd. | 740,966 | ||||||
66,627 | Motherson Sumi Systems, Ltd. | 159,220 | ||||||
45,000 | Nexteer Automotive Group, Ltd. | 63,553 | ||||||
|
| |||||||
1,921,487 | ||||||||
|
| |||||||
Automobiles (2.0%): | ||||||||
1,315,200 | Astra International Tbk PT | 757,362 | ||||||
91,500 | BAIC Motor Corp., Ltd., Class H | 48,402 | ||||||
5,699 | Bajaj Auto, Ltd. | 221,658 | ||||||
218,000 | Brilliance China Automotive Holdings, Ltd. | 160,764 | ||||||
41,500 | BYD Co., Ltd., Class H | 261,589 | ||||||
188,000 | Dongfeng Motor Corp., Class H | 169,407 | ||||||
903 | Eicher Motors, Ltd. | 298,413 | ||||||
5,291 | Ford Otomotiv Sanayi AS | 49,799 | ||||||
336,000 | Geely Automobile Holdings, Ltd. | 594,762 | ||||||
203,000 | Great Wall Motor Co., Ltd., Class H | 114,957 | ||||||
179,200 | Guangzhou Automobile Group Co., Ltd. | 177,088 | ||||||
3,578 | Hero MotoCorp, Ltd. | 158,872 | ||||||
8,573 | Hyundai Motor Co. | 909,297 | ||||||
1,672 | Hyundai Motor Co., Ltd. | 105,056 | ||||||
17,981 | Kia Motors Corp. | 542,223 | ||||||
48,046 | Mahindra & Mahindra, Ltd. | 552,103 | ||||||
6,474 | Maruti Suzuki India, Ltd. | 690,489 | ||||||
7,500 | SAIC Motor Corp., Ltd. | 29,238 | ||||||
94,030 | Tata Motors, Ltd.* | 232,178 | ||||||
|
| |||||||
6,073,657 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks (15.7%): | ||||||||
46,058 | Absa Group, Ltd. | $ | 515,446 | |||||
126,709 | Abu Dhabi Commercial Bank | 281,471 | ||||||
119,900 | Agricultural Bank of China, Ltd. | 62,837 | ||||||
1,920,000 | Agricultural Bank of China, Ltd., Class A | 836,587 | ||||||
149,364 | Akbank T.A.S. | 193,466 | ||||||
6,260 | Alior Bank SA* | 88,867 | ||||||
71,600 | Alliance Bank Malaysia BHD | 69,698 | ||||||
86,256 | Alpha Bank SA* | 108,219 | ||||||
89,500 | AMMB Holdings Berhad | 93,913 | ||||||
117,279 | Axis Bank, Ltd.* | 1,043,463 | ||||||
67,954 | Banco Bradesco SA | 593,565 | ||||||
1,647,450 | Banco de Chile | 235,567 | ||||||
2,822 | Banco de Credito e Inversiones | 183,447 | ||||||
55,789 | Banco do Brasil SA | 669,272 | ||||||
25,431 | Banco Santander Brasil SA | 280,212 | ||||||
4,100,296 | Banco Santander Chile | 305,593 | ||||||
113,116 | Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand, Class B | 140,245 | ||||||
13,323 | Bancolombia SA | 124,813 | ||||||
28,297 | Bancolombia SA | 273,813 | ||||||
16,800 | Bangkok Bank Public Co., Ltd. | 104,883 | ||||||
2,261 | Bank Handlowy w Warszawie SA | 41,804 | ||||||
41,982 | Bank Millennium SA* | 99,787 | ||||||
35,300 | Bank of Beijing Co., Ltd., Class A | 28,920 | ||||||
5,256,000 | Bank of China, Ltd. | 2,258,410 | ||||||
57,900 | Bank of China, Ltd., Class A | 30,431 | ||||||
36,200 | Bank of Communications Co., Ltd., Class A | 30,607 | ||||||
568,000 | Bank of Communications Co., Ltd., Class H | 441,919 | ||||||
17,900 | Bank of Shanghai Co., Ltd., Class A | 29,255 | ||||||
59,366 | Bank of the Philippine Islands | 106,017 | ||||||
10,434 | Bank Pekao SA | 303,833 | ||||||
121,514 | BDO Unibank, Inc. | 302,946 | ||||||
15,577 | BNK Financial Group, Inc. | 102,282 | ||||||
2,765 | Capitec Bank Holdings, Ltd. | 214,384 | ||||||
400,344 | Chang Hwa Commercial Bank | 222,993 | ||||||
655,000 | China Citic Bank Co., Ltd. | 396,718 | ||||||
6,300,000 | China Construction Bank | 5,165,601 | ||||||
32,600 | China Construction Bank Corp. | 30,361 | ||||||
881,000 | China Development Financial Holding Corp. | 277,035 | ||||||
68,200 | China Everbright Bank Co., Ltd. | 36,845 | ||||||
136,000 | China Everbright Bank Co., Ltd., Class H | 58,960 | ||||||
21,444 | China Merchants Bank Co., Ltd. | 79,086 | ||||||
259,500 | China Merchants Bank Co., Ltd. | 943,869 | ||||||
385,800 | China Minsheng Banking Corp., Ltd. | 265,927 | ||||||
70,300 | China Minsheng Banking Corp., Ltd., Class A | 58,816 | ||||||
1,113,000 | Chinatrust Financial Holding Co., Ltd. | 727,032 | ||||||
174,000 | Chongqing Rural Commercial Bank Co., Ltd. | 92,877 | ||||||
321,400 | CIMB Group Holdings Berhad | 444,406 | ||||||
12,087 | Commercial Bank of Qatar Qsc (The) | 130,691 | ||||||
71,877 | Commercial International Bank Egypt SAE | 298,133 | ||||||
4,451 | Credicorp, Ltd. | 986,653 | ||||||
12,002 | DGB Financial Group, Inc. | 89,282 | ||||||
114,022 | Dubai Islamic Bank | 155,199 | ||||||
674,283 | E.Sun Financial Holding Co., Ltd. | 439,062 | ||||||
660,136 | First Financial Holdings Co., Ltd. | 428,392 | ||||||
261,844 | Grupo Aval Acciones y Valores | 80,611 | ||||||
169,850 | Grupo Financiero Banorte SAB de C.V. | 829,289 |
See accompanying notes to the financial statements.
4
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
136,092 | Grupo Financiero Inbursa SAB de C.V., Class O^ | $ | 196,507 | |||||
42,000 | Habib Bank, Ltd. | 36,485 | ||||||
19,311 | Hana Financial Holdings Group, Inc. | 626,712 | ||||||
40,600 | Hong Leong Bank Berhad | 200,326 | ||||||
15,800 | Hong Leong Financial Group Berhad | 71,038 | ||||||
490,910 | Hua Nan Financial Holdings Co., Ltd. | 278,590 | ||||||
26,900 | Huaxia Bank Co., Ltd., Class A | 28,937 | ||||||
155,274 | ICICI Bank, Ltd. | 802,450 | ||||||
4,611,000 | Industrial & Commercial Bank of China, Class H | 3,272,602 | ||||||
46,800 | Industrial & Commercial Bank of China, Ltd., Class A | 36,169 | ||||||
37,700 | Industrial Bank Co., Ltd. | 82,297 | ||||||
15,412 | Industrial Bank of Korea (IBK) | 194,070 | ||||||
10,639,682 | Itau Corpbanca | 99,394 | ||||||
294,161 | Itausa – Investimentos Itau S.A. | 916,952 | ||||||
79,600 | Kasikornbank Public Co., Ltd. | 452,971 | ||||||
38,800 | Kasikornbank Public Co., Ltd. | 220,795 | ||||||
25,612 | KB Financial Group, Inc. | 1,069,191 | ||||||
4,645 | Komercni Banka AS | 175,258 | ||||||
238,400 | Krung Thai Bank | 140,499 | ||||||
220,301 | Malayan Banking Berhad | 505,903 | ||||||
23,698 | Masraf Al Rayan | 271,303 | ||||||
1,057 | mBank SA | 120,071 | ||||||
34,700 | MCB Bank, Ltd. | 48,425 | ||||||
686,000 | Mega Financial Holdings Co., Ltd. | 576,907 | ||||||
55,091 | Metropolitan Bank & Trust | 84,804 | ||||||
32,671 | Moneta Money Bank AS | 105,494 | ||||||
155,419 | National Bank of Abu Dhabi | 596,755 | ||||||
25,622 | Nedcor, Ltd. | 488,744 | ||||||
14,946 | OTP Bank Nyrt | 603,309 | ||||||
20,400 | Ping An Bank Co., Ltd., Class A | 28,002 | ||||||
219,000 | Postal Savings Bank of China Co., Ltd., Class H | 115,034 | ||||||
59,180 | Powszechna Kasa Oszczednosci Bank Polski SA | 624,077 | ||||||
654,800 | PT Bank Central Asia Tbk | 1,184,132 | ||||||
172,300 | PT Bank Danamon Indonesia Tbk | 91,091 | ||||||
1,202,500 | PT Bank Mandiri Tbk | 616,679 | ||||||
525,300 | PT Bank Negara Indonesia Tbk | 321,452 | ||||||
3,642,300 | PT Bank Rakyat Indonesia Tbk | 930,060 | ||||||
193,700 | Public Bank Berhad | 1,159,391 | ||||||
7,928 | Qatar Islamic Bank | 331,150 | ||||||
30,344 | Qatar National Bank | 1,624,119 | ||||||
56,400 | RHB Capital Berhad | 72,132 | ||||||
2,138 | Santander Bank Polska SA | 205,914 | ||||||
167,593 | Sberbank of Russia, ADR | 1,836,820 | ||||||
7,820 | Security Bank Corp. | 23,106 | ||||||
29,200 | Shanghai Pudong Development Bank Co., Ltd. | 41,812 | ||||||
28,109 | Shinhan Financial Group Co., Ltd. | 997,574 | ||||||
119,900 | Siam Commercial Bank Public Co., Ltd. | 492,376 | ||||||
676,800 | SinoPac Financial Holdings Co., Ltd. | 225,404 | ||||||
82,642 | Standard Bank Group, Ltd. | 1,029,523 | ||||||
113,223 | State Bank of India* | 478,470 | ||||||
708,401 | Taishin Financial Holding Co., Ltd. | 299,486 | ||||||
319,441 | Taiwan Business Bank | 107,006 | ||||||
575,754 | Taiwan Cooperative Financial Holding Co., Ltd. | 329,527 | ||||||
507,300 | TMB Bank PCL | 34,239 | ||||||
156,832 | Turkiye Garanti Bankasi AS | 232,831 | ||||||
43,823 | Turkiye Halk Bankasi AS | 58,142 | ||||||
104,602 | Turkiye Is Bankasi AS, Class C | 89,803 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
69,455 | VTB Bank OJSC, GDR | $ | 76,856 | |||||
29,773 | Woori Bank | 416,262 | ||||||
115,813 | Yes Bank, Ltd. | 302,297 | ||||||
|
| |||||||
49,111,535 | ||||||||
|
| |||||||
Beverages (1.3%): | ||||||||
307,756 | Ambev SA Com Npv | 1,221,399 | ||||||
14,344 | Anadolu Efes Biracilik ve Malt Sanayii AS | 55,924 | ||||||
28,489 | Arca Continental SAB de C.V. | 159,353 | ||||||
104,000 | China Resources Enterprises, Ltd. | 360,396 | ||||||
36,517 | Coca-Cola Femsa | 221,766 | ||||||
10,230 | Compania Cervecerias Unidas SA | 131,506 | ||||||
18,016 | Embotelladora Andina SA | 67,399 | ||||||
128,772 | Fomento Economico Mexicano S.A.B. de C.V. | 1,107,498 | ||||||
1,900 | Jiangsu Yanghe Brewery Joint-Stock Co., Ltd., Class A | 26,185 | ||||||
1,072 | Kweichow Moutai Co., Ltd. | 92,034 | ||||||
22,000 | Tsingtao Brewery Co., Ltd., Class H | 88,949 | ||||||
18,855 | United Spirits, Ltd.* | 171,484 | ||||||
7,300 | Wuliangye Yibin Co., Ltd. | 54,045 | ||||||
|
| |||||||
3,757,938 | ||||||||
|
| |||||||
Biotechnology (0.7%): | ||||||||
92,000 | 3SBio, Inc. | 116,594 | ||||||
5,491 | Celltrion, Inc.* | 1,091,462 | ||||||
290 | Medy-Tox, Inc. | 149,936 | ||||||
4,022 | Sillajen, Inc.* | 266,647 | ||||||
11,000 | Taimed Biologics, Inc.* | 58,662 | ||||||
962 | Viromed Co., Ltd.* | 220,196 | ||||||
|
| |||||||
1,903,497 | ||||||||
|
| |||||||
Building Products (0.0%)†: | ||||||||
427 | KCC Corp. | 118,055 | ||||||
|
| |||||||
Capital Markets (1.2%): | ||||||||
134,327 | B3SA- Brasil Bolsa Balcao | 929,298 | ||||||
685,000 | China Cinda Asset Management Co., Ltd., Class H | 166,554 | ||||||
56,000 | China Ding Yi Feng Holdings, Ltd.* | 149,912 | ||||||
64,000 | China Everbright, Ltd. | 112,707 | ||||||
217,500 | China Galaxy Securities Co. | 97,561 | ||||||
726,000 | China Huarong Asset Management Co., Ltd., Class H | 131,621 | ||||||
74,800 | China International Capital Corp., Ltd. | 139,318 | ||||||
144,500 | Citic Securities Co., Ltd., Class A | 249,946 | ||||||
12,800 | Citic Securities Co., Ltd., Class A | 29,710 | ||||||
27,277 | Daewoo Securities Co., Ltd. | 159,186 | ||||||
102,400 | GF Securities Co., Ltd. | 139,105 | ||||||
15,400 | GF Securities Co., Ltd., Class A | 28,539 | ||||||
7,400 | Guotai Junan Securities Co., Ltd. | 16,577 | ||||||
232,400 | Haitong Securities Co., Ltd. | 220,649 | ||||||
6,400 | Huatai Securities Co., Ltd., Class A | 15,172 | ||||||
98,000 | Huatai Securities Co., Ltd., Class H | 155,624 | ||||||
15,336 | Investec, Ltd. | 84,430 | ||||||
2,818 | Korea Investment Holdings Co., Ltd. | 149,600 | ||||||
9,973 | NH Investment & Securities Co., Ltd. | 116,273 | ||||||
1,631 | Noah Holdings Limited, ADR* | 70,655 | ||||||
10,223 | Reinet Investments SCA | 155,530 | ||||||
4,574 | Samsung Securities Co., Ltd. | 128,848 | ||||||
88,300 | Shenwan Hongyuan Group Co., Ltd. | 52,530 | ||||||
96,161 | The Moscow Exchange | 112,103 | ||||||
686,000 | Yuanta Financial Holding Co., Ltd. | 343,439 | ||||||
|
| |||||||
3,954,887 | ||||||||
|
|
See accompanying notes to the financial statements.
5
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals (2.4%): | ||||||||
19,208 | Asian Paints, Ltd. | $ | 378,524 | |||||
235,000 | Formosa Chemicals & Fibre Corp. | 796,221 | ||||||
289,000 | Formosa Plastics Corp. | 941,962 | ||||||
6,038 | Hanwha Chemical Corp. | 108,724 | ||||||
123,400 | Indorama Ventures PCL | 205,273 | ||||||
1,295 | Kumho Petrochemical Co., Ltd. | 101,130 | ||||||
2,994 | LG Chem, Ltd. | 927,363 | ||||||
540 | LG Chem, Ltd. | 94,400 | ||||||
1,158 | Lotte Chemical Corp. | 286,809 | ||||||
71,849 | Mexichem SAB de C.V. | 182,513 | ||||||
344,000 | Nan Ya Plastics Corp. | 844,693 | ||||||
1,183 | OCI Co., Ltd. | 112,837 | ||||||
51,390 | Petkim Petrokimya Holding AS | 48,950 | ||||||
163,900 | Petronas Chemicals Group Berhad | 368,316 | ||||||
9,523 | Phosagro OAO, GDR | 121,263 | ||||||
7,974 | Pidilite Industries, Ltd. | 126,311 | ||||||
160,600 | PTT Global Chemical Public Co., Ltd. | 350,941 | ||||||
36,347 | Sasol, Ltd. | 1,076,978 | ||||||
240,000 | Sinopec Shanghai Petrochemical Co., Ltd., Class H | 104,423 | ||||||
8,191 | Sociedad Quimica y Minera de Chile SA | 322,479 | ||||||
23,000 | UPL, Ltd. | 249,446 | ||||||
|
| |||||||
7,749,556 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.1%): | ||||||||
230,222 | China Everbright International, Ltd. | 204,891 | ||||||
58,000 | Country Garden Services Holdings Co., Ltd.* | 91,288 | ||||||
929 | S1 Corp. | 83,663 | ||||||
|
| |||||||
379,842 | ||||||||
|
| |||||||
Communications Equipment (0.0%)†: | ||||||||
35,000 | BYD Electronic International Co., Ltd. | 43,454 | ||||||
53,200 | ZTE Corp., Class H | 99,219 | ||||||
|
| |||||||
142,673 | ||||||||
|
| |||||||
Construction & Engineering (0.8%): | ||||||||
316,000 | China Communications Construction Co., Ltd. | 296,856 | ||||||
19,498 | China Railway Construction Corp., Ltd., Class A | 31,150 | ||||||
116,500 | China Railway Construction Corp., Ltd., Class H | 161,819 | ||||||
248,000 | China Railway Group, Ltd. | 226,491 | ||||||
37,100 | China State Construction Engineering Corp., Ltd. | 31,026 | ||||||
124,000 | China State Construction International Holdings, Ltd. | 98,085 | ||||||
1,453 | Daelim Industrial Co., Ltd. | 133,176 | ||||||
8,837 | Daewoo Engineering & Construct* | 42,531 | ||||||
159,200 | Gamuda Berhad | 89,951 | ||||||
3,522 | GS Engineering & Construction Corp. | 137,408 | ||||||
1,359 | HDC Hyundai Development Co.-Engineering & Construction* | 58,458 | ||||||
4,835 | Hyundai Engineering & Construction Co., Ltd. | 235,312 | ||||||
226,800 | IJM Corporation Berhad | 88,760 | ||||||
30,454 | Larsen & Toubro, Ltd. | 626,080 | ||||||
71,700 | Metallurgical Corp. of China, Ltd. | 32,463 | ||||||
10,614 | Samsung Engineering Co., Ltd.* | 166,428 | ||||||
98,500 | Sinopec Engineering Group Co., Ltd. | 80,432 | ||||||
|
| |||||||
2,536,426 | ||||||||
|
| |||||||
Construction Materials (1.2%): | ||||||||
41,230 | Ambuja Cements, Ltd. | 132,824 | ||||||
5,500 | Anhui Conch Cement Co., Ltd., Class A | 23,579 | ||||||
84,000 | Anhui Conch Cement Co., Ltd., Class H | 403,091 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Construction Materials, continued | ||||||||
137,000 | Asia Cement Corp. | $ | 150,120 | |||||
31,885 | Cementos Argos SA | 68,388 | ||||||
995,933 | Cemex SAB de C.V.* | 481,548 | ||||||
270,000 | China National Buildings Material Co., Ltd. | 182,918 | ||||||
172,000 | China Resources Cement Holdings, Ltd. | 152,900 | ||||||
23,351 | Grasim Industries, Ltd. | 275,728 | ||||||
20,102 | Grupo Argos SA | 104,692 | ||||||
969 | POSCO Chemtech Co., Ltd. | 54,988 | ||||||
126,300 | PT Indocement Tunggal Prakarsa Tbk | 162,064 | ||||||
203,800 | PT Semen Indonesia (Persero) Tbk | 162,984 | ||||||
588 | Shree Cement, Ltd. | 145,194 | ||||||
8,700 | Siam Cement PCL | 116,396 | ||||||
311,700 | Taiwan Cement Corp. | 358,402 | ||||||
16,000 | The Siam Cement Public Co., Ltd. | 214,063 | ||||||
3,113 | Titan Cement Co. SA | 69,149 | ||||||
6,471 | Ultra Tech Cement, Ltd. | 369,262 | ||||||
|
| |||||||
3,628,290 | ||||||||
|
| |||||||
Consumer Finance (0.2%): | ||||||||
11,721 | Bajaj Finance, Ltd. | 441,953 | ||||||
19,290 | Mahindra & Mahindra Financial Services | 130,969 | ||||||
50,000 | Muangthai Capital PCL, Class R | 75,131 | ||||||
2,510 | Samsung Card Co., Ltd. | 77,732 | ||||||
10,453 | Shriram Transport Finance | 185,082 | ||||||
|
| |||||||
910,867 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
48,975 | Klabin SA | 200,687 | ||||||
|
| |||||||
Diversified Consumer Services (0.5%): | ||||||||
85,731 | Kroton Educacional SA | 196,226 | ||||||
9,228 | New Oriental Education & Technology Group, Inc., ADR* | 505,787 | ||||||
23,058 | TAL Education Group, ADR* | 615,187 | ||||||
|
| |||||||
1,317,200 | ||||||||
|
| |||||||
Diversified Financial Services (1.2%): | ||||||||
17,880 | Ayala Corp. | 306,020 | ||||||
72,420 | Chailease Holding Co., Ltd. | 226,561 | ||||||
135,000 | Far East Horizon, Ltd. | 136,142 | ||||||
220,845 | FirstRand, Ltd. | 1,008,753 | ||||||
410,000 | Fubon Financial Holdings Co., Ltd. | 625,093 | ||||||
9,452 | Grupo de Inversiones Surameric | 90,529 | ||||||
12,163 | Grupo de Inversiones Suramericana SA | 120,394 | ||||||
7,257 | GT Capital Holdings, Inc. | 134,550 | ||||||
50,558 | Haci Omer Sabanci Holding AS | 71,822 | ||||||
1,147,800 | Metro Pacific Investments Corp. | 101,275 | ||||||
10,154 | PSG Group, Ltd. | 173,197 | ||||||
51,118 | REC, Ltd. | 89,195 | ||||||
33,450 | Remgro, Ltd. | 453,854 | ||||||
44,396 | RMB Holdings, Ltd. | 243,034 | ||||||
|
| |||||||
3,780,419 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.5%): | ||||||||
23,942 | Bharti Infratel, Ltd. | 88,877 | ||||||
132,000 | China Communications Services Corp., Ltd. | 109,535 | ||||||
914,000 | China Telecom Corp., Ltd., Class H | 465,118 | ||||||
2,400,000 | China Tower Corp., Ltd., Class H* | 452,387 | ||||||
394,000 | China Unicom Hong Kong, Ltd. | 418,506 | ||||||
229,000 | Chunghwa Telecom Co., Ltd. | 841,061 |
See accompanying notes to the financial statements.
6
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Telecommunication Services, continued | ||||||||
126,784 | Emirates Telecommunications Group Co. PJSC | $ | 586,241 | |||||
20,148 | Hellenic Telecommunications Organization SA (OTE) | 219,719 | ||||||
6,985 | LG Uplus Corp. | 110,325 | ||||||
6,681 | Ooredoo Qsc | 137,633 | ||||||
45,417 | Orange Polska SA* | 58,124 | ||||||
3,307,800 | PT Telekomunikasi Indonesia Tbk | 863,772 | ||||||
173,600 | PT Tower Bersama Infrastructure Tbk | 43,493 | ||||||
30,725 | Telefonica Brasil | 366,531 | ||||||
78,100 | Telekom Malaysia Berhad | 50,338 | ||||||
18,236 | Telkom SA SOC, Ltd. | 80,167 | ||||||
681,200 | True Corp. PCL | 108,655 | ||||||
|
| |||||||
5,000,482 | ||||||||
|
| |||||||
Electric Utilities (1.1%): | ||||||||
15,700 | Centrais Eletricas Brasileiras S.A* | 114,125 | ||||||
14,284 | Centrais Eletricas Brasileiras S.A* | 89,310 | ||||||
11,133 | CEZ | 265,769 | ||||||
51,451 | Companhia Energetica de Minas Gerais, ADR | 184,014 | ||||||
2,011,135 | ENEL Americas SA | 355,250 | ||||||
2,081,892 | ENEL Chile SA | 201,030 | ||||||
11,911 | Equatorial Energia SA | 229,165 | ||||||
2,025,679 | Inter Rao Ues PJSC | 113,104 | ||||||
18,720 | Interconexion Electrica SA ESP | 80,649 | ||||||
16,290 | Korea Electric Power Corp., Ltd. | 483,080 | ||||||
60,825 | PGE SA* | 163,331 | ||||||
107,549 | Power Grid Corp. of India, Ltd. | 306,099 | ||||||
76,751 | Tata Power Co., Ltd. | 84,187 | ||||||
203,800 | Tenega Nasional Berhad | 668,913 | ||||||
|
| |||||||
3,338,026 | ||||||||
|
| |||||||
Electrical Equipment (0.2%): | ||||||||
33,350 | Elswedy Cables Holding Co. | 33,484 | ||||||
447,500 | Fullshare Holdings, Ltd. | 102,562 | ||||||
17,292 | Havells India, Ltd. | 171,365 | ||||||
286,000 | Shanghai Electric Group Co., Ltd., Class H | 91,051 | ||||||
13,900 | Xinjiang Goldwind Science & Technology Co., Ltd. | 20,207 | ||||||
33,600 | Zhuzhou CRRC Times Electric Co., Ltd., Class H | 186,545 | ||||||
|
| |||||||
605,214 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (2.2%): | ||||||||
50,000 | AAC Technologies Holdings, Inc. | 287,433 | ||||||
561,000 | AU Optronics Corp. | 222,722 | ||||||
35,300 | Delta Electronics Thai PCL | 75,400 | ||||||
133,000 | Delta Electronics, Inc. | 556,849 | ||||||
59,000 | Foxconn Technology Co., Ltd. | 116,333 | ||||||
16,200 | Hangzhou HikvisionDigital-A | 61,208 | ||||||
848,000 | Hon Hai Precision Industry Co., Ltd. | 1,957,349 | ||||||
621,000 | Innolux Corp. | 196,775 | ||||||
44,000 | Kingboard Holdings, Ltd. | 116,296 | ||||||
55,500 | Kingboard Laminates Holdings, Ltd. | 45,887 | ||||||
6,000 | Largan Precision Co., Ltd. | 628,871 | ||||||
15,960 | LG Display Co., Ltd. | 256,998 | ||||||
1,006 | LG Innotek Co., Ltd. | 77,374 | ||||||
3,819 | Samsung Electro-Mechanics Co., Ltd., Series L | 357,016 | ||||||
3,573 | Samsung SDI Co., Ltd. | 696,681 | ||||||
48,600 | Sunny Optical Technology Group Co., Ltd. | 426,430 | ||||||
100,000 | Synnex Technology International Corp. | 117,428 | ||||||
18,000 | Walsin Technology Corp. | 90,678 | ||||||
118,960 | WPG Holdings, Ltd. | 142,482 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
17,377 | Yageo Corp. | $ | 177,461 | |||||
26,000 | Zhen Ding Technology Holding, Ltd. | 67,974 | ||||||
|
| |||||||
6,675,645 | ||||||||
|
| |||||||
Energy Equipment & Services (0.1%): | ||||||||
94,000 | China Oilfield Services, Ltd. | 80,334 | ||||||
222,100 | Dialog Group Berhad | 166,811 | ||||||
|
| |||||||
247,145 | ||||||||
|
| |||||||
Entertainment (0.6%): | ||||||||
860,000 | Alibaba Pictures Group, Ltd.*^ | 144,153 | ||||||
4,048 | CD Projekt SA* | 157,305 | ||||||
1,186 | Ncsoft Corp. | 496,946 | ||||||
5,029 | NetEase, Inc., ADR | 1,183,676 | ||||||
1,721 | Netmarble Corp. | 171,530 | ||||||
281 | Pearl Abyss Corp.* | 52,462 | ||||||
|
| |||||||
2,206,072 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (0.4%): | ||||||||
232,182 | Fibra UNO Amdinistracion SA | 258,206 | ||||||
65,874 | Fortress REIT, Ltd., Class A | 83,709 | ||||||
66,232 | Fortress REIT, Ltd., Class B | 66,794 | ||||||
187,245 | Growthpoint Properties, Ltd. | 302,896 | ||||||
16,836 | Hyprop Investments, Ltd. | 95,494 | ||||||
385,942 | Redefine Properties, Ltd. | 260,169 | ||||||
20,451 | Resilient REIT, Ltd. | 81,123 | ||||||
|
| |||||||
1,148,391 | ||||||||
|
| |||||||
Food & Staples Retailing (1.9%): | ||||||||
27,300 | Atacadao Distribuicao Comercio e Industria, Ltd. | 127,437 | ||||||
8,552 | Avenue Supermarts, Ltd.* | 196,851 | ||||||
69,700 | Berli Jucker PCL | 108,482 | ||||||
536 | BGF Retail Co., Ltd. | 98,005 | ||||||
21,501 | Bid Corp., Ltd. | 395,994 | ||||||
14,429 | BIM Birlesik Magazalar AS | 237,685 | ||||||
102,597 | Cencosud SA | 185,860 | ||||||
17,421 | Clicks Group, Ltd. | 231,656 | ||||||
331,500 | CP All PCL | 697,441 | ||||||
1,463 | E-Mart Co., Ltd. | 238,629 | ||||||
1,911 | GS Retail Co., Ltd. | 69,351 | ||||||
24,369 | Magnit OJSC, Registered Shares, GDR | 310,227 | ||||||
25,356 | Pickn Pay Stores, Ltd. | 119,745 | ||||||
39,000 | President Chain Store Corp. | 394,049 | ||||||
13,924 | Raia Drogasil SA | 205,341 | ||||||
30,077 | Shoprite Holdings, Ltd. | 396,367 | ||||||
154,500 | Sun Art Retail Group, Ltd. | 157,734 | ||||||
12,481 | The Spar Group, Ltd. | 180,500 | ||||||
354,902 | Wal-Mart de Mexico SAB de C.V. | 902,798 | ||||||
8,189 | X5 Retail Group NV, GDR | 202,930 | ||||||
|
| |||||||
5,457,082 | ||||||||
|
| |||||||
Food Products (1.7%): | ||||||||
35,997 | BRF-Brasil Foods SA* | 203,704 | ||||||
3,342 | Britannia Industries, Ltd. | 148,879 | ||||||
182,700 | Charoen Pokphand Foods Public Co., Ltd. | 138,176 | ||||||
280,000 | China Huishan Dairy Holdings Co., Ltd.*^(a) | 715 | ||||||
191,000 | China Mengniu Dairy Co., Ltd. | 590,445 | ||||||
577 | CJ CheilJedang Corp. | 170,554 | ||||||
150,000 | Dali Foods Group Co., Ltd. | 110,624 | ||||||
3,700 | Foshan Haitian Flavouring & Food Co., Ltd. | 37,034 |
See accompanying notes to the financial statements.
7
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products, continued | ||||||||
15,800 | Genting Plantations Berhad | $ | 37,631 | |||||
13,566 | Gruma, SAB de C.V., Class B | 153,192 | ||||||
114,023 | Grupo Bimbo SAB de C.V., Series A | 227,491 | ||||||
7,800 | Inner Mongolia Yili Indsutrial Group Co., Ltd. | 26,124 | ||||||
128,600 | IOI Corp. Berhad | 138,654 | ||||||
54,024 | JBS SA | 161,572 | ||||||
25,700 | Kuala Lumpur Kepong Berhad | 153,678 | ||||||
7,200 | M Dias Branco SA | 79,519 | ||||||
1,568 | Nestle India, Ltd. | 249,359 | ||||||
4,000 | Nestle Malaysia Bhd | 142,625 | ||||||
1,487 | Orion Corp./ Republic of Korea | 159,660 | ||||||
84 | Ottogi Corp. | 54,495 | ||||||
37,280 | PPB Group Berhad | 158,586 | ||||||
499,300 | PT Charoen Pokphand Indonesia Tbk | 251,407 | ||||||
161,400 | PT Indofood CBP Sukses Makmur Tbk | 117,442 | ||||||
331,900 | PT Indofood Sukses Makmur Tbk | 172,270 | ||||||
172,400 | Sime Darby Plantation Bhd | 197,558 | ||||||
17,000 | Standard Foods Corp. | 27,393 | ||||||
128,100 | Thai Union Frozen Products PCL | 63,825 | ||||||
11,067 | Tiger Brands, Ltd.^ | 211,158 | ||||||
146,000 | Tingyi (Caymen Is) Holding Corp. | 193,403 | ||||||
67,000 | Uni-President China Holdings, Ltd. | 57,862 | ||||||
329,000 | Uni-President Enterprises Corp. | 744,616 | ||||||
56,950 | Universal Robina Corp. | 137,548 | ||||||
367,000 | Want Want China Holdings, Ltd. | 255,323 | ||||||
23,000 | Yihai International Holding, Ltd. | 56,000 | ||||||
|
| |||||||
5,628,522 | ||||||||
|
| |||||||
Gas Utilities (0.6%): | ||||||||
36,500 | Beijing Enterprises Holdings, Ltd. | 192,364 | ||||||
118,800 | China Gas Holdings, Ltd. | 420,384 | ||||||
54,000 | China Resources Gas Group, Ltd. | 212,561 | ||||||
52,100 | ENN Energy Holdings, Ltd. | 459,388 | ||||||
53,716 | GAIL India, Ltd. | 276,793 | ||||||
32,977 | Infraestructura Energetica Nova, SAB de C.V. | 122,557 | ||||||
1,962 | Korea Gas Corp.* | 84,923 | ||||||
47,800 | Petronas Gas Berhad | 221,855 | ||||||
755,000 | PT Perusahaan Gas Negara Tbk | 111,298 | ||||||
|
| |||||||
2,102,123 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.1%): | ||||||||
90,700 | Hartalega Holdings Berhad | 135,074 | ||||||
132,000 | Shandong Weigao Group Medical Polymer Co., Ltd., Class H | 106,091 | ||||||
96,200 | Top Glove Corp. Berhad | 130,714 | ||||||
|
| |||||||
371,879 | ||||||||
|
| |||||||
Health Care Providers & Services (0.5%): | ||||||||
236,200 | Bangkok Dusit Medical Services Public Co., Ltd. | 180,563 | ||||||
19,800 | Bumrungrad Hospital PCL | 113,929 | ||||||
3,061 | Celltrion Healthcare Co., Ltd.* | 205,850 | ||||||
167,600 | IHH Healthcare Berhad | 217,549 | ||||||
86,850 | Life Healthcare Group Holdings Pte, Ltd. | 158,745 | ||||||
84,664 | Netcare, Ltd. | 155,074 | ||||||
43,100 | Shanghai Pharmaceuticals Holding Co., Ltd. | 87,268 | ||||||
20,700 | Shanghai Pharmaceuticals Holding Co., Ltd. | 51,221 | ||||||
82,400 | Sinopharm Group Co., Series H | 345,048 | ||||||
|
| |||||||
1,515,247 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Technology (0.1%): | ||||||||
244,000 | Alibaba Health Information Technology, Ltd.* | $ | 195,895 | |||||
|
| |||||||
Hotels, Restaurants & Leisure (0.7%): | ||||||||
3,500 | China International Travel Service Corp., Ltd., Class A | 30,660 | ||||||
152,800 | Genting Berhard | 225,826 | ||||||
215,100 | Genting Malaysia Berhad | 157,390 | ||||||
9,099 | Huazhu Group, Ltd., ADR | 260,505 | ||||||
30,290 | Jollibee Foods Corp. | 168,079 | ||||||
8,118 | Kangwon Land, Inc. | 232,720 | ||||||
170,500 | Minor International PCL | 178,348 | ||||||
15,544 | OPAP SA | 135,004 | ||||||
24,234 | Yum China Holdings, Inc. | 812,566 | ||||||
|
| |||||||
2,201,098 | ||||||||
|
| |||||||
Household Durables (0.4%): | ||||||||
16,369 | Arcelik AS | 48,675 | ||||||
3,126 | Coway Co., Ltd. | 207,413 | ||||||
5,299 | Gree Electric Appliances, Inc. of Zhuhai, Class A* | 27,677 | ||||||
83,000 | Haier Electronics Group Co., Ltd. | 202,425 | ||||||
6,714 | LG Electronics, Inc. | 377,556 | ||||||
11,000 | Midea Group Co.,Ltd.-A | 59,400 | ||||||
10,000 | Nien Made Enterprise Co., Ltd. | 76,092 | ||||||
104,000 | Tatung Co., Ltd.* | 86,951 | ||||||
|
| |||||||
1,086,189 | ||||||||
|
| |||||||
Household Products (0.5%): | ||||||||
42,236 | Hindustan Unilever, Ltd. | 1,099,048 | ||||||
107,952 | Kimberl- Clark de Mexico SAB de C.V.^ | 171,973 | ||||||
104,500 | PT Unilever Indonesia Tbk | 330,664 | ||||||
|
| |||||||
1,601,685 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.5%): | ||||||||
107,100 | Aboitiz Power Corp. | 71,487 | ||||||
858,000 | Cgn Power Co., Ltd., Class H | 202,980 | ||||||
227,000 | China Longyuan Power Group Corp. | 153,296 | ||||||
41,500 | China National Nuclear Power Co., Ltd. | 31,839 | ||||||
142,000 | China Resources Power Holdings Co. | 272,050 | ||||||
23,400 | China Yangtze Power Co., Ltd. | 54,247 | ||||||
546,185 | Colbun SA | 109,749 | ||||||
8,800 | Electricity Genera PCL | 67,084 | ||||||
14,125 | Engie Brasil Energia SA | 120,354 | ||||||
28,900 | Glow Energy PCL | 78,801 | ||||||
30,000 | Gulf Energy Development PCL, Class R | 75,023 | ||||||
294,000 | Huaneng Power International, Inc., Class H | 185,913 | ||||||
396,000 | Huaneng Renewables Corp., Ltd. | 105,617 | ||||||
135,038 | NTPC, Ltd. | 288,630 | ||||||
|
| |||||||
1,817,070 | ||||||||
|
| |||||||
Industrial Conglomerates (1.7%): | ||||||||
141,120 | Aboitiz Equity Ventures, Inc. | 148,154 | ||||||
175,934 | Alfa SAB de C.V., Class A | 209,443 | ||||||
254,400 | Alliance Global Group, Inc. | 57,669 | ||||||
22,728 | Bidvest Group, Ltd. | 328,002 | ||||||
407,000 | Citic, Ltd. | 634,930 | ||||||
713 | CJ Corp. | 77,495 | ||||||
275,700 | DMCI Holdings, Inc. | 67,126 | ||||||
215,000 | Far Eastern New Century Corp. | 193,452 | ||||||
192,500 | Fosun International, Ltd. | 281,635 | ||||||
34,601 | Grupo Carso SAB de C.V. | 123,961 |
See accompanying notes to the financial statements.
8
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Industrial Conglomerates, continued | ||||||||
3,352 | Hanwha Corp. | $ | 93,880 | |||||
41,000 | Hap Seng Consolidated Berhad | 97,657 | ||||||
12,285 | Industries Qatar Q.S.C. | 450,410 | ||||||
184,960 | JG Summit Holdings, Inc. | 195,903 | ||||||
45,810 | KOC Holdings AS | 122,581 | ||||||
6,434 | LG Corp. | 403,379 | ||||||
2,365 | Lotte Corp.* | 111,597 | ||||||
4,781 | Samsung C&T Corp. | 453,442 | ||||||
32,000 | Shanghai Industrial Holdings, Ltd. | 64,502 | ||||||
169,500 | Sime Darby Berhad | 98,631 | ||||||
2,148 | SK C&C Co., Ltd. | 500,005 | ||||||
16,840 | SM Investments Corp. | 293,804 | ||||||
54,505 | Turkiye Sise ve Cam Fabrikalari AS | 58,251 | ||||||
|
| |||||||
5,065,909 | ||||||||
|
| |||||||
Insurance (3.7%): | ||||||||
2,665 | Bajaj Finserv, Ltd. | 246,461 | ||||||
42,185 | BB Seguridade Participacoes SA | 300,334 | ||||||
534,000 | Cathay Financial Holding Co., Ltd. | 812,736 | ||||||
157,134 | China Life Insurance Co., Ltd. | 141,822 | ||||||
492,000 | China Life Insurance Co., Ltd. | 1,040,464 | ||||||
6,000 | China Pacific Insurance Group Co., Ltd., Class A | 24,958 | ||||||
173,200 | China Pacific Insurance Group Co., Ltd., Class H | 557,051 | ||||||
112,000 | China Taiping Insurance Holdings Co., Ltd. | 304,314 | ||||||
3,216 | DB Insurance Co., Ltd. | 202,889 | ||||||
21,517 | Discovery, Ltd. | 237,963 | ||||||
23,816 | Hanwha Life Insurance Co., Ltd. | 89,912 | ||||||
4,525 | Hyundai Marine & Fire Insurance Co., Ltd. | 166,459 | ||||||
2,277 | IRB Brasil Resseguros SA | 49,038 | ||||||
7,924 | Liberty Holding, Ltd. | 60,595 | ||||||
50,823 | MMI Holdings, Ltd.* | 60,514 | ||||||
52,100 | New China Life Insurance Co., Ltd. | 204,972 | ||||||
4,500 | New China Life Insurance Co., Ltd., Class A | 27,818 | ||||||
336,066 | Old Mutual, Ltd. | 522,975 | ||||||
543,000 | People’s Insurance Co. Group of China, Ltd. (The) | 216,673 | ||||||
448,000 | Picc Property & Casuality Co., Ltd., Class H | 456,132 | ||||||
10,700 | Ping An Insurance Group Co. of China, Ltd. | 87,865 | ||||||
340,000 | Ping An Insurance Group Co. of China, Ltd. | 2,985,590 | ||||||
5,556 | Porto Seguro SA | 74,767 | ||||||
43,035 | Powszechny Zaklad Ubezpieczen SA | 506,239 | ||||||
12,775 | Qatar Insurance Co. | 125,789 | ||||||
50,425 | Rand Merchant Investment Holdings, Ltd. | 127,391 | ||||||
1,991 | Samsung Fire & Marine Insurance Co., Ltd. | 480,106 | ||||||
4,772 | Samsung Life Insurance Co., Ltd. | 348,671 | ||||||
115,708 | Sanlam, Ltd. | 643,303 | ||||||
726,898 | Shin Kong Financial Holdings Co., Ltd. | 210,691 | ||||||
14,112 | Sul America SA | 104,148 | ||||||
|
| |||||||
11,418,640 | ||||||||
|
| |||||||
Interactive Media & Services (6.5%): | ||||||||
6,339 | 58.com, Inc., ADR* | 343,637 | ||||||
4,038 | Autohome, Inc., ADR | 315,893 | ||||||
18,214 | Baidu, Inc., ADR* | 2,888,739 | ||||||
3,373 | Daum Kakao Corp. | 309,939 | ||||||
9,897 | Momo, Inc., ADR* | 235,054 | ||||||
9,172 | NHN Corp. | 999,450 | ||||||
4,498 | SINA Corp.* | 241,273 | ||||||
372,700 | Tencent Holdings, Ltd. | 14,774,408 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Interactive Media & Services, continued | ||||||||
3,767 | Weibo Corp., ADR*^ | $ | 220,106 | |||||
3,336 | YY, Inc., ADR* | 199,693 | ||||||
|
| |||||||
20,528,192 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (4.4%): | ||||||||
84,825 | Alibaba Group Holding, Ltd., ADR* | 11,626,963 | ||||||
8,004 | B2W Cia Digital* | 86,788 | ||||||
2,123 | Baozun, Inc., ADR*^ | 62,013 | ||||||
744 | CJ ENM Co., Ltd. | 134,374 | ||||||
26,875 | Ctrip.com International, ADR* | 727,238 | ||||||
47,683 | JD.com, Inc., ADR* | 998,005 | ||||||
31,768 | Vipshop Holdings, Ltd., ADR* | 173,453 | ||||||
|
| |||||||
13,808,834 | ||||||||
|
| |||||||
IT Services (1.9%): | ||||||||
76,993 | Cielo SA | 176,623 | ||||||
3,466 | Gds Holdings, Ltd., ADR*^ | 80,030 | ||||||
35,271 | HCL Technologies, Ltd. | 486,355 | ||||||
225,492 | Infosys, Ltd. | 2,130,428 | ||||||
2,357 | Samsung SDS Co., Ltd. | 429,767 | ||||||
59,685 | Tata Consultancy Services, Ltd. | 1,619,547 | ||||||
31,893 | Tech Mahindra, Ltd. | 330,115 | ||||||
68,000 | Travelsky Technology, Ltd., Series H | 173,088 | ||||||
69,308 | Wipro, Ltd. | 327,744 | ||||||
|
| |||||||
5,753,697 | ||||||||
|
| |||||||
Leisure Products (0.0%)†: | ||||||||
18,000 | Giant Manufacturing Co., Ltd. | 84,131 | ||||||
2,186 | HLB, Inc.* | 155,289 | ||||||
|
| |||||||
239,420 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.2%): | ||||||||
1,802 | Divi’s Laboratories, Ltd. | 38,197 | ||||||
44,000 | Genscript Biotech Corp.* | 58,345 | ||||||
1,127 | Samsung Biologics Co., Ltd.* | 392,226 | ||||||
33,500 | Wuxi Biologics Cayman, Inc.* | 211,963 | ||||||
|
| |||||||
700,731 | ||||||||
�� |
| |||||||
Machinery (0.7%): | ||||||||
8,000 | AirTac International Group | 77,133 | ||||||
78,790 | Ashok Leyland, Ltd. | 115,340 | ||||||
114,000 | China Conch Venture Holdings, Ltd. | 337,791 | ||||||
51,399 | CRRC Corp., Ltd., Class A | 67,936 | ||||||
241,000 | CRRC Corp., Ltd., Class H | 234,158 | ||||||
1,338 | Daewoo Shipbuilding & Marine Engineering Co., Ltd.* | 41,133 | ||||||
3,406 | Doosan Bobcat, Inc. | 95,907 | ||||||
44,000 | Haitian International Holdings, Ltd. | 84,269 | ||||||
13,090 | Hiwin Technologies Corp. | 92,595 | ||||||
2,586 | Hyundai Heavy Industries Co.* | 296,182 | ||||||
669 | Hyundai Heavy Industries Holdings Co., Ltd.* | 207,099 | ||||||
29,830 | Samsung Heavy Industries Co., Ltd., Class R* | 197,075 | ||||||
35,500 | Sinotruk Hong Kong, Ltd.^ | 53,705 | ||||||
56,939 | WEG SA | 257,712 | ||||||
132,000 | Weichai Power Co., Ltd., Class H | 149,695 | ||||||
|
| |||||||
2,307,730 | ||||||||
|
| |||||||
Marine (0.0%)†: | ||||||||
203,000 | Cosco Shipping Holdings Co., Ltd.* | 76,003 | ||||||
150,815 | Evergreen Marine Corp. (Taiwan), Ltd. | 58,478 | ||||||
70,400 | MISC Berhad | 114,269 | ||||||
|
| |||||||
248,750 | ||||||||
|
|
See accompanying notes to the financial statements.
9
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media (2.1%): | ||||||||
4,891 | Cheil Worldwide, Inc. | $ | 98,627 | |||||
14,200 | China Literature, Ltd.*^ | 65,246 | ||||||
20,222 | Cyfrowy Polsat SA* | 121,812 | ||||||
166,932 | Grupo Televisa SAB | 419,798 | ||||||
28,699 | Naspers, Ltd. | 5,715,153 | ||||||
404,000 | PT Surya Citra Media Tbk | 52,543 | ||||||
30,612 | ZEE Entertainment Enterprises, Ltd. | 208,326 | ||||||
|
| |||||||
6,681,505 | ||||||||
|
| |||||||
Metals & Mining (3.2%): | ||||||||
172,767 | Alrosa PAO | 245,221 | ||||||
288,000 | Aluminum Corp. of China, Ltd.* | 92,084 | ||||||
58,000 | Angang Steel Co., Ltd. | 39,671 | ||||||
3,733 | Anglo American Platinum, Ltd. | 139,700 | ||||||
28,236 | AngloGold Ashanti, Ltd. | 357,019 | ||||||
25,400 | Baoshan Iron & Steel Co., Ltd., Class A | 24,029 | ||||||
121,000 | China Hongqiao Group, Ltd. | 68,486 | ||||||
210,000 | China Molybdenum Co., Ltd., Class H | 76,309 | ||||||
46,000 | China Oriental Group Co., Ltd. | 27,125 | ||||||
826,000 | China Steel Corp. | 651,898 | ||||||
13,010 | Cia de Minas Buenaventura SA, ADR | 211,022 | ||||||
43,200 | Companhia Siderurgica Nacional SA (CSN) | 98,544 | ||||||
81,505 | Eregli Demir ve Celik Fabrikalari T.A.S. | 110,610 | ||||||
52,662 | Gold Fields | 182,777 | ||||||
237,053 | Grupo Mexico SAB de C.V., Series B | 489,482 | ||||||
79,430 | Hindalco Industries, Ltd. | 256,396 | ||||||
5,176 | Hyundai Steel Co. | 209,195 | ||||||
9,186 | Industrias Penoles SAB de C.V. | 112,208 | ||||||
3,269 | Jastrzebska Spolka Weglowa SA* | 58,706 | ||||||
86,000 | Jiangxi Copper Co., Ltd. | 100,862 | ||||||
56,780 | JSW Steel, Ltd. | 249,483 | ||||||
8,941 | KGHM Polska Miedz SA* | 212,852 | ||||||
530 | Korea Zinc Co. | 205,110 | ||||||
4,432 | Kumba Iron Ore, Ltd.^ | 87,417 | ||||||
153,767 | Magnitogorsk Iron & Steel Works PJSC | 94,786 | ||||||
4,238 | MMC Norilsk Nickel PJSC | 795,313 | ||||||
132,000 | MMG, Ltd.* | 56,160 | ||||||
77,152 | Novolipetsk Steel PJSC | 174,799 | ||||||
1,838 | Polyus PJSC | 142,821 | ||||||
5,146 | POSCO | 1,126,548 | ||||||
90,100 | Press Metal Aluminium Holdings Bhd | 105,441 | ||||||
11,606 | Severstal | 157,500 | ||||||
5,944 | Southern Copper Corp. | 182,897 | ||||||
24,827 | Tata Steel, Ltd. | 184,598 | ||||||
209,332 | Vale SA | 2,754,866 | ||||||
86,950 | Vedanta, Ltd. | 250,824 | ||||||
486,000 | Zijin Mining Group Co., Ltd. | 183,700 | ||||||
|
| |||||||
10,516,459 | ||||||||
|
| |||||||
Multiline Retail (0.5%): | ||||||||
12,985 | El Puerto de Liverpool SAb de C.V. | 83,391 | ||||||
805 | Hyundai Department Store Co., Ltd. | 65,084 | ||||||
48,621 | Lojas Renner SA | 531,967 | ||||||
691 | Lotte Shopping Co., Ltd. | 130,363 | ||||||
5,168 | Magazine Luiza SA | 241,470 | ||||||
34,100 | Robinson Department Store Public Co., Ltd. | 66,420 | ||||||
40,029 | S.A.C.I. Falabella | 293,752 | ||||||
566 | Shinsegae Department Store Co. | 129,266 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Multiline Retail, continued | ||||||||
67,002 | Woolworths Holdings, Ltd. | $ | 255,665 | |||||
|
| |||||||
1,797,378 | ||||||||
|
| |||||||
Multi-Utilities (0.1%): | ||||||||
3,491 | Qatar Electricity & Water Co. | 177,179 | ||||||
236,964 | YTL Corporation Berhad | 57,849 | ||||||
|
| |||||||
235,028 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (7.8%): | ||||||||
133,700 | Banpu Public Co., Ltd. | 60,704 | ||||||
51,587 | Bharat Pertoleum Corp., Ltd. | 267,503 | ||||||
30,900 | China Petroleum & Chemical Corp., Class A | 22,836 | ||||||
1,692,000 | China Petroleum & Chemical Corp., Class H | 1,208,973 | ||||||
221,500 | China Shenhua Energy Co., Ltd. | 482,479 | ||||||
1,169,000 | CNOOC, Ltd. | 1,791,100 | ||||||
46,054 | Coal India, Ltd. | 158,821 | ||||||
12,036 | Cosan sa industria e Comercio | 103,921 | ||||||
299,839 | Ecopetrol SA | 244,399 | ||||||
24,802 | Empresas Copec SA | 297,810 | ||||||
79,400 | Energy Absolute Public Co., Ltd. | 103,877 | ||||||
16,959 | Exxaro Resources, Ltd. | 162,861 | ||||||
83,000 | Formosa Petrochemical Corp. | 292,042 | ||||||
719,809 | Gazprom PJSC | 1,590,224 | ||||||
6,397 | Grupa Lotos SA | 151,287 | ||||||
3,320 | GS Holdings | 153,356 | ||||||
41,744 | Hindustan Petroleum Corp., Ltd. | 151,600 | ||||||
97,757 | Indian Oil Corp., Ltd. | 191,648 | ||||||
89,300 | Inner Mongolia Yitai Coal Co., Ltd. | 105,504 | ||||||
755,300 | IRPC PCL | 133,640 | ||||||
206,000 | Kunlun Energy Co., Ltd. | 216,950 | ||||||
32,749 | LUKOIL PJSC | 2,355,267 | ||||||
24,055 | MOL Hungarian Oil And Gas PLC | 264,256 | ||||||
6,174 | NovaTek OAO, Registered Shares, GDR | 1,054,303 | ||||||
46,100 | Oil & Gas Development Co., Ltd. | 42,529 | ||||||
92,726 | Oil & Natural Gas Corp., Ltd. | 198,891 | ||||||
1,432,000 | PetroChina Co., Ltd., Class H | 885,401 | ||||||
256,866 | Petroleo Brasileiro SA* | 1,503,296 | ||||||
192,950 | Petroleo Brasileiro SA | 1,264,658 | ||||||
15,500 | Petronas Dagangan Berhad | 99,322 | ||||||
41,614 | Petronet LNG, Ltd. | 133,442 | ||||||
19,132 | Polski Koncern Naftowy Orlen SA | 553,654 | ||||||
125,473 | Polskie Gornictwo Naftowe i Gazownictwo SA | 232,010 | ||||||
996,300 | PT Adaro Energy Tbk | 84,180 | ||||||
115,300 | PT United Tractors Tbk | 219,495 | ||||||
95,800 | PTT Exploration & Production PCL | 333,222 | ||||||
670,000 | PTT PCL | 944,952 | ||||||
185,264 | Reliance Industries, Ltd. | 2,983,073 | ||||||
76,360 | Rosneft Oil Co., Registered Shares, GDR | 471,286 | ||||||
4,174 | SK Energy Co., Ltd. | 669,434 | ||||||
3,071 | S-Oil Corp. | 267,977 | ||||||
477,980 | Surgutneftegas PJSC | 184,364 | ||||||
430,482 | Surgutneftegas Prefernce | 241,104 | ||||||
103,626 | Tatneft PJSC | 1,100,523 | ||||||
81,200 | Thai Oil Public Co., Ltd. | 165,004 | ||||||
7,686 | Tupras-Turkiye Petrol Rafine | 169,778 | ||||||
24,592 | Ultrapar Participacoes SA | 337,598 | ||||||
130,000 | Yanzhou Coal Mining Co. | 104,226 | ||||||
|
| |||||||
24,754,780 | ||||||||
|
|
See accompanying notes to the financial statements.
10
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Paper & Forest Products (0.6%): | ||||||||
71,055 | Empresas CMPC SA | $ | 226,018 | |||||
16,957 | Fibria Celulose SA | 295,794 | ||||||
190,700 | Indah Kiat Pulp & Paper Corp Tbk PT | 153,165 | ||||||
82,000 | Lee & Man Paper Manufacturing, Ltd. | 69,009 | ||||||
7,179 | Mondi, Ltd. | 154,419 | ||||||
134,000 | Nine Dragons Paper Holdings, Ltd. | 122,932 | ||||||
70,200 | Pabrik Kertas Tjiwi Kimia Tbk PT | 54,311 | ||||||
34,838 | Sappi, Ltd. | 198,223 | ||||||
30,065 | Suzano Papel e Celulose SA | 295,429 | ||||||
|
| |||||||
1,569,300 | ||||||||
|
| |||||||
Personal Products (0.7%): | ||||||||
2,177 | Amorepacific Corp. | 406,481 | ||||||
635 | Amorepacific Corp. | 58,119 | ||||||
1,878 | Amorepacific Group | 121,869 | ||||||
33,415 | Dabur India, Ltd. | 205,630 | ||||||
24,314 | Godrej Consumer Products, Ltd. | 281,585 | ||||||
50,500 | Hengan International Group Co., Ltd. | 366,290 | ||||||
602 | LG Household & Health Care, Ltd. | 594,428 | ||||||
148 | LG Household & Health Care, Ltd. | 86,870 | ||||||
27,460 | Marico, Ltd. | 146,643 | ||||||
12,230 | Natura Cosmeticos SA | 142,015 | ||||||
|
| |||||||
2,409,930 | ||||||||
|
| |||||||
Pharmaceuticals (1.4%): | ||||||||
26,347 | Aspen Pharmacare Holdings, Ltd. | 247,802 | ||||||
17,848 | Aurobindo Pharma, Ltd. | 187,122 | ||||||
14,212 | Cadila Healthcare, Ltd. | 70,787 | ||||||
794 | Celltrion Pharm, Inc.* | 45,030 | ||||||
113,000 | China Medical System Holdings, Ltd. | 105,331 | ||||||
320,000 | China Pharmaceutical Enterprise & Investment Corp. | 457,459 | ||||||
129,500 | China Resources Pharmaceutical | 169,335 | ||||||
172,000 | China Traditional Chinese Medicine Co., Ltd. | 99,439 | ||||||
23,195 | Cipla, Ltd. | 172,441 | ||||||
7,753 | Dr Reddy’s Laboratories, Ltd. | 291,695 | ||||||
9,570 | Glenmark Pharmaceuticals, Ltd. | 94,834 | ||||||
453 | Hanmi Pharm Co., Ltd.* | 188,072 | ||||||
917 | Hanmi Science Co., Ltd.* | 64,819 | ||||||
2,844 | Hutchison China MediTech, Ltd., ADR*^ | 65,668 | ||||||
23,529 | Hypera SA | 183,360 | ||||||
3,900 | Jiangsu Hengrui Medicine Co. Limited | 30,133 | ||||||
10,100 | Kangmei Pharmaceutical Co., Ltd., Class A | 13,532 | ||||||
13,889 | Lupin, Ltd. | 167,758 | ||||||
100,500 | Luye Pharma Group, Ltd. | 69,268 | ||||||
4,924 | Piramal Enterprises, Ltd. | 167,456 | ||||||
1,473,500 | PT Kalbe Farma Tbk | 155,781 | ||||||
8,905 | Richter Gedeon Nyrt | 172,628 | ||||||
31,000 | Shanghai Fosun Pharmaceutical Group Co., Ltd. | 90,205 | ||||||
262,000 | Sihuan Pharmaceutical Holdings Group, Ltd. | 45,918 | ||||||
474,500 | Sino Biopharmaceutical, Ltd. | 308,959 | ||||||
116,000 | SSY Group, Ltd. | 86,244 | ||||||
51,215 | Sun Pharmaceutical Industries, Ltd. | 315,272 | ||||||
641 | Yuhan Corp.* | 117,159 | ||||||
|
| |||||||
4,183,507 | ||||||||
|
| |||||||
Professional Services (0.0%)†: | ||||||||
1,887 | 51job, Inc., ADR* | 117,824 | ||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development (2.7%): | ||||||||
106,000 | Agile Property Holdings, Ltd. | $ | 123,336 | |||||
360,186 | Aldar Properties PJSC | 156,958 | ||||||
526,300 | Ayala Land, Inc. | 407,324 | ||||||
10,148 | Barwa Real Estate Co. | 111,251 | ||||||
57,377 | BR Malls Participacoes SA | 193,512 | ||||||
570,800 | Bumi Serpong Damai Tbk PT* | 49,978 | ||||||
87,800 | Central Pattana PCL | 201,273 | ||||||
170,000 | China Evergrande Group^ | 505,153 | ||||||
12,400 | China Merchants Shekou Industrial Zone Holdings Co., Ltd., Class A | 31,307 | ||||||
256,000 | China Overseas Land & Investment, Ltd. | 881,143 | ||||||
180,000 | China Resources Land, Ltd. | 687,295 | ||||||
18,300 | China Vanke Co., Ltd., Class A | 63,839 | ||||||
71,800 | China Vanke Co., Ltd., Class H | 241,732 | ||||||
222,000 | CIFI Holdings Group Co., Ltd. | 116,837 | ||||||
520,000 | Country Garden Holdings Co., Ltd. | 626,432 | ||||||
120,230 | DAMAC Properties Dubai Co. PJSC | 49,460 | ||||||
206,650 | Emaar Malls PJSC | 100,532 | ||||||
250,985 | Emaar Properties PJSC | 282,368 | ||||||
64,021 | Ezdan Holding Group* | 228,148 | ||||||
366,000 | Franshion Properties China, Ltd. | 163,338 | ||||||
152,000 | Future Land Development Holdings, Ltd. | 102,973 | ||||||
45,000 | Greentown China Holdings, Ltd. | 33,475 | ||||||
64,800 | Guangzhou R&F Properties Co., Ltd., Class H | 97,063 | ||||||
61,000 | Highwealth Construction Corp. | 89,395 | ||||||
109,100 | IOI Properties Group Bhd | 40,699 | ||||||
74,000 | Jiayuan International Group, Ltd. | 136,710 | ||||||
116,000 | Kaisa Group Holdings, Ltd. | 36,699 | ||||||
69,500 | KWG Group Holdings, Ltd. | 60,865 | ||||||
76,000 | Logan Property Holdings Co., Ltd. | 94,574 | ||||||
101,000 | Longfor Properties Co., Ltd. | 302,384 | ||||||
770,000 | Megaworld Corp. | 69,553 | ||||||
20,178 | Multiplan Empreendimentos Imobiliarios SA | 126,578 | ||||||
25,830 | NEPI Rockcastle PLC | 202,830 | ||||||
18,100 | Poly Real Estate Group Co., Ltd., Class A | 31,052 | ||||||
1,266,300 | PT Pakuwon Jati Tbk | 54,608 | ||||||
41,040 | Ruentex Development Co., Ltd. | 59,824 | ||||||
91,100 | Shanghai Lujiazue | 116,107 | ||||||
75,500 | Shimao Property Holdings, Ltd. | 199,727 | ||||||
169,500 | Sime Darby Property Bhd | 40,849 | ||||||
218,500 | Sino-Ocean Land Holdings, Ltd. | 95,499 | ||||||
707,100 | SM Prime Holdings, Inc. | 481,377 | ||||||
118,500 | Soho China, Ltd.* | 42,307 | ||||||
165,000 | Sunac China Holdings, Ltd. | 530,655 | ||||||
562,000 | Yuexiu Property Co., Ltd. | 102,871 | ||||||
89,000 | Yuzhou Properties Co., Ltd. | 36,499 | ||||||
|
| |||||||
8,406,389 | ||||||||
|
| |||||||
Road & Rail (0.3%): | ||||||||
538,500 | BTS Group Holdings PCL | 157,863 | ||||||
637 | CJ Logistics Corp.* | 95,205 | ||||||
11,389 | Container Corp. of India, Ltd. | 112,235 | ||||||
22,699 | Daqin Railway Co., Ltd., Class A | 27,268 | ||||||
34,325 | Localiza Rent a Car SA | 263,507 | ||||||
74,235 | Rumo SA* | 325,651 | ||||||
|
| |||||||
981,729 | ||||||||
|
|
See accompanying notes to the financial statements.
11
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment (5.4%): | ||||||||
219,465 | ASE Technology Holding Co., Ltd. | $ | 411,549 | |||||
15,000 | Globalwafers Co., Ltd. | 134,086 | ||||||
18,000 | Hua Hong Semiconductor, Ltd. | 32,838 | ||||||
97,000 | MediaTek, Inc. | 715,371 | ||||||
72,000 | Nanya Technology Corp. | 127,195 | ||||||
33,000 | Novatek Microelectronics Corp. | 151,411 | ||||||
10,000 | Phison Electronics Corp. | 73,325 | ||||||
43,000 | Powertech Technology, Inc. | 91,541 | ||||||
32,000 | Realtek Semiconductor Corp. | 147,279 | ||||||
222,800 | Semiconductor Manufacturing International Corp.* | 193,097 | ||||||
38,190 | SK Hynix, Inc. | 2,064,498 | ||||||
1,609,000 | Taiwan Semiconductor Manufacturing Co., Ltd. | 11,680,557 | ||||||
821,000 | United Microelectronics Corp. | 298,100 | ||||||
62,000 | Vanguard International Semiconductor Corp. | 118,057 | ||||||
24,000 | Win Semiconductors Corp. | 90,863 | ||||||
201,000 | Winbond Electronics Corp. | 87,193 | ||||||
248,000 | Xinyi Solar Holdings, Ltd. | 86,663 | ||||||
|
| |||||||
16,503,623 | ||||||||
|
| |||||||
Software (0.1%): | ||||||||
160,000 | Kingdee International Software Group Co., Ltd. | 139,496 | ||||||
47,000 | Kingsoft Corp., Ltd. | 67,915 | ||||||
|
| |||||||
207,411 | ||||||||
|
| |||||||
Specialty Retail (0.4%): | ||||||||
2,316 | FF Group*(a) | 27 | ||||||
651,000 | GOME Retail Holdings, Ltd.* | 53,775 | ||||||
271,400 | Home Product Center Public Co., Ltd. | 126,208 | ||||||
17,000 | Hotai Motor Co., Ltd. | 140,055 | ||||||
1,936 | Hotel Shilla Co., Ltd. | 131,918 | ||||||
8,559 | Jumbo SA | 124,713 | ||||||
17,118 | Mr.Price Group, Ltd.^ | 292,666 | ||||||
24,035 | Petrobras Distribuidora SA | 159,394 | ||||||
17,100 | Suning.com Co., Ltd., Class A | 24,615 | ||||||
14,576 | The Foschini Group, Ltd. | 167,473 | ||||||
29,812 | Truworths International, Ltd. | 183,101 | ||||||
47,500 | Zhongsheng Group Holdings, Ltd. | 94,421 | ||||||
|
| |||||||
1,498,366 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (4.4%): | ||||||||
203,000 | Acer, Inc. | 127,080 | ||||||
23,199 | Advantech Co., Ltd. | 157,869 | ||||||
43,000 | Asustek Computer, Inc. | 282,299 | ||||||
57,900 | BOE Technology Group Co., Ltd., Class A | 22,160 | ||||||
44,000 | Catcher Technology Co., Ltd. | 317,229 | ||||||
36,360 | Chicony Electronics Co., Ltd. | 73,708 | ||||||
262,000 | Compal Electronics, Inc. | 147,969 | ||||||
22,699 | Focus Media Information Technology Co., Ltd., Class A | 17,441 | ||||||
176,000 | Inventec Corp. | 125,289 | ||||||
17,400 | Legend Holdings Corp., Class H | 45,358 | ||||||
470,000 | Lenovo Group, Ltd. | 315,142 | ||||||
138,000 | Lite-On Technology Corp. | 181,302 | ||||||
89,500 | Meitu, Inc.* | 24,821 | ||||||
42,000 | Micro-Star International Co., Ltd. | 103,360 | ||||||
132,000 | Pegatron Corp. | 218,335 | ||||||
180,000 | Quanta Computer, Inc. | 307,471 | ||||||
314,652 | Samsung Electronics Co., Ltd. | 10,888,146 | ||||||
162,863 | Wistron Corp. | 100,349 | ||||||
|
| |||||||
13,455,328 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Textiles, Apparel & Luxury Goods (0.7%): | ||||||||
75,000 | Anta Sports Products, Ltd. | $ | 356,662 | |||||
1,856 | CCC SA | 96,407 | ||||||
11,220 | Eclat Textile Co., Ltd. | 126,404 | ||||||
24,000 | Feng Tay Enterprise Co., Ltd. | 136,308 | ||||||
2,419 | Fila Korea, Ltd. | 116,497 | ||||||
49,000 | Formosta Taffeta Co., Ltd. | 54,910 | ||||||
936,000 | HengTen Networks Group, Ltd.* | 28,237 | ||||||
81 | LPP SA | 169,930 | ||||||
323 | Page Industries, Ltd. | 116,932 | ||||||
157,000 | Pou Chen Corp. | 165,696 | ||||||
23,400 | Ruentex Industries, Ltd. | 59,565 | ||||||
52,000 | Shenzhou International Group | 585,100 | ||||||
18,949 | Titan Co., Ltd. | 252,263 | ||||||
|
| |||||||
2,264,911 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (1.1%): | ||||||||
105,058 | Housing Development Finance Corp., Ltd. | 2,963,158 | ||||||
18,921 | Indiabulls Housing Finance, Ltd. | 230,313 | ||||||
16,895 | LIC Housing Finance, Ltd. | 118,275 | ||||||
|
| |||||||
3,311,746 | ||||||||
|
| |||||||
Tobacco (0.6%): | ||||||||
9,900 | British American Tobacco Malaysia Berhad | 86,234 | ||||||
533,100 | Hanjaya Mandala Sampoerna Tbk PT | 137,547 | ||||||
214,632 | ITC, Ltd. | 866,266 | ||||||
8,016 | KT&G Corp. | 729,306 | ||||||
28,200 | PT Gudang Garam Tbk | 164,013 | ||||||
|
| |||||||
1,983,366 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.0%)†: | ||||||||
15,700 | BOC Aviation, Ltd. | 115,517 | ||||||
3,849 | Daewoo International Corp. | 62,510 | ||||||
|
| |||||||
178,027 | ||||||||
|
| |||||||
Transportation Infrastructure (1.0%): | ||||||||
35,628 | Adani Ports & Special Economic Zone, Ltd. | 197,467 | ||||||
281,000 | Airports of Thailand Public Co., Ltd. | 555,283 | ||||||
488,600 | Bangkok Expressway & Metro | 145,723 | ||||||
106,000 | Beijing Capital International Airport Co., Ltd. | 112,737 | ||||||
109,228 | China Merchants Holdings International Co., Ltd. | 197,182 | ||||||
76,204 | Companhia de Concessoes Rodoviarias | 220,237 | ||||||
112,000 | Cosco Pacific, Ltd. | 109,707 | ||||||
11,337 | DP World, Ltd. | 193,841 | ||||||
14,561 | Grupo Aeroportuario de Sur | 219,678 | ||||||
22,901 | Grupo Aeroporturaio del Pacifico SAB de C.V. | 186,655 | ||||||
35,200 | International Container Terminal Services, Inc. | 66,940 | ||||||
84,000 | Jiangsu Expressway Co., Ltd., Series H | 116,675 | ||||||
54,700 | Malaysia Airports Holdings Berhad | 111,089 | ||||||
15,232 | Promotora Y Operadora de Infraestructura SAB de CV | 145,623 | ||||||
150,707 | PT Jasa Marga Persero Tbk | 44,862 | ||||||
72,000 | Shenzhen International Holdings, Ltd. | 137,833 | ||||||
142,000 | Taiwan High Speed Rail Corp. | 140,319 | ||||||
11,315 | TAV Havalimanlari Holding AS | 51,210 | ||||||
70,800 | Westports Holding Berhad | 62,105 | ||||||
106,000 | Zhejiang Expressway Co., Ltd. | 92,214 | ||||||
|
| |||||||
3,107,380 | ||||||||
|
| |||||||
Water Utilities (0.3%): | ||||||||
180,991 | Aguas Andinas SA, Class A | 99,615 | ||||||
404,000 | Beijing Enterprises Water Group, Ltd. | 206,209 |
See accompanying notes to the financial statements.
12
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Water Utilities, continued | ||||||||
19,612 | Cia Saneamento Basico Do Estado de Sao Paulo | $ | 159,414 | |||||
214,000 | Guangdong Investment, Ltd. | 412,160 | ||||||
|
| |||||||
877,398 | ||||||||
|
| |||||||
Wireless Telecommunication Services (3.1%): | ||||||||
57,400 | Advanced Info Service Public Co., Ltd. | 305,267 | ||||||
2,218,694 | America Movil SAB de C.V., Series L | 1,579,798 | ||||||
200,600 | Axiata Group Berhad | 190,284 | ||||||
87,515 | Bharti Airtel, Ltd. | 390,709 | ||||||
405,000 | China Mobile, Ltd. | 3,903,321 | ||||||
36,300 | China United Network Communications, Ltd. | 27,313 | ||||||
215,900 | DIGI.com Berhad | 235,460 | ||||||
8,615 | Empresa Nacional de Telecomunicaciones SA | 66,848 | ||||||
110,000 | Far EasTone Telecommunications Co., Ltd. | 272,915 | ||||||
2,300 | Globe Telecom, Inc. | 83,107 | ||||||
162,600 | Maxis Berhad | 210,326 | ||||||
35,164 | Mobile TeleSystems PJSC, ADR | 246,148 | ||||||
110,172 | MTN Group, Ltd. | 683,771 | ||||||
6,290 | PLDT, Inc. | 134,700 | ||||||
1,259 | SK Telecom Co., Ltd. | 304,344 | ||||||
96,000 | Taiwan Mobile Co., Ltd. | 332,375 | ||||||
58,509 | Tim Participacoes SA | 178,910 | ||||||
64,877 | Turkcell Iletisim Hizmetleri AS | 149,261 | ||||||
36,034 | Vodacom Group, Ltd. | 331,698 | ||||||
156,118 | Vodafone Idea, Ltd.* | 84,158 | ||||||
|
| |||||||
9,710,713 | ||||||||
|
| |||||||
Total Common Stocks (Cost $270,912,572) | 305,219,663 | |||||||
|
| |||||||
Preferred Stocks (2.4%): | ||||||||
Automobiles (0.1%): | ||||||||
2,422 | Hyundai Motor Co., Ltd., 1.30%, 1/24/19 | 166,893 | ||||||
|
| |||||||
Banks (1.5%): | ||||||||
218,259 | Banco Bradesco SA, 0.45%, 1/31/19 | 2,176,789 | ||||||
316,115 | Itau Unibanco Holding SA, Series S, 0.47%, 2/4/19 | 2,895,797 | ||||||
|
| |||||||
5,072,586 | ||||||||
|
| |||||||
Chemicals (0.0%)†: | ||||||||
11,261 | Braskem SA, Class A, 3.98%, 3/13/19 | 137,679 | ||||||
|
| |||||||
Food & Staples Retailing (0.1%): | ||||||||
10,818 | Companhia Brasileira de Destribuicao Grupo Pao de Acucar, Series A, 0.02%, 2/20/19 | 226,058 | ||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining (0.1%): | ||||||||
69,364 | Gerdau SA, 1.08%, 2/21/19 | $ | 265,263 | |||||
|
| |||||||
Multiline Retail (0.1%): | ||||||||
47,314 | Lojas Americanas SA, 0.08%, 3/20/19 | 240,520 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.5%): | ||||||||
55,845 | Samsung Electronics Co., Ltd., 4.60%, 10/31/18 | 1,593,121 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $6,582,450) | 7,702,120 | |||||||
|
| |||||||
Convertible Preferred Stock (0.0%)†: | ||||||||
Industrial Conglomerates (0.0%)†: | ||||||||
107 | CJ Corp., 3/7/19*(a) | 2,588 | ||||||
|
| |||||||
Total Convertible Preferred Stock (Cost $2,890) | 2,588 | |||||||
|
| |||||||
Rights (0.0%)†: | ||||||||
Airlines (0.0%)†: | ||||||||
8,292 | EVA Airways Corp. — Rights, Expires on 1/21/19* | 755 | ||||||
|
| |||||||
Electric Utilities (0.0%)†: | ||||||||
178,922 | Rushydro Pjsc — Rights, Expires on 12/31/49* | — | ||||||
|
| |||||||
Total Rights (Cost $—) | 755 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.1%): | ||||||||
261,830 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(b) | 261,830 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $261,830) | 261,830 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (0.6%) | ||||||||
Miscellaneous Investments (0.6%) | ||||||||
2,005,100 | Short-Term Investments(c) | 2,005,100 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 2,005,100 | ||||||
|
| |||||||
Total Investment Securities (Cost $279,764,842) — 100.1%(d) | 315,192,056 | |||||||
Net other assets (liabilities) — (0.1)% | (280,854 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 314,911,202 | ||||||
|
|
Amount shown as “—“ are $0 or round to less than $1.
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
GDR—Global Depositary Receipt
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $1,880,660. |
† | Represents less than 0.05%. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.01% of the net assets of the fund. |
(b) | The rate represents the effective yield at December 31, 2018. |
(c) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
13
AZL MSCI Emerging Markets Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
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 December 31, 2018:
(Unaudited)
Country | Percentage | |||
Bermuda | 0.3 | % | ||
Brazil | 7.4 | % | ||
Cayman Islands | 1.6 | % | ||
Chile | 1.1 | % | ||
China | 21.5 | % | ||
Colombia | 0.4 | % | ||
Czech Republic | 0.2 | % | ||
Egypt | 0.1 | % | ||
Greece | 0.2 | % | ||
Hong Kong | 6.3 | % | ||
Hungary | 0.3 | % | ||
India | 9.3 | % | ||
Indonesia | 2.3 | % | ||
Korea, Republic Of | 0.2 | % | ||
Luxembourg | — | %^ | ||
Malaysia | 2.4 | % | ||
Mexico | 2.7 | % |
Country | Percentage | |||
Pakistan | — | %^ | ||
Peru | 0.1 | % | ||
Philippines | 1.1 | % | ||
Poland | 1.2 | % | ||
Qatar | 1.1 | % | ||
Republic of Korea (South) | 13.4 | % | ||
Romania | 0.1 | % | ||
Russian Federation | 3.7 | % | ||
Singapore | — | %^ | ||
South Africa | 6.1 | % | ||
Switzerland | 0.2 | % | ||
Taiwan, Province Of China | 11.1 | % | ||
Thailand | 2.4 | % | ||
Turkey | 0.6 | % | ||
United Arab Emirates | 0.8 | % | ||
United States | 1.8 | % | ||
|
| |||
100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
Futures Contracts
Cash of $127,000 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Mini MSCI Emerging Markets Index March Futures (U.S. Dollar) | 3/15/19 | 48 | $ | 2,320,320 | $ | (12,484 | ) | |||||||||
|
| |||||||||||||||
$ | (12,484 | ) | ||||||||||||||
|
|
See accompanying notes to the financial statements.
14
AZL MSCI Emerging Markets Equity Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 279,764,842 | |||
|
| ||||
Investment securities, at value(a) | $ | 315,192,056 | |||
Segregated cash for collateral | 127,000 | ||||
Interest and dividends receivable | 802,894 | ||||
Foreign currency, at value (cost $652,739) | 661,186 | ||||
Receivable for investments sold | 507,220 | ||||
Reclaims receivable | 86,959 | ||||
Prepaid expenses | 3,889 | ||||
|
| ||||
Total Assets | 317,381,204 | ||||
|
| ||||
Liabilities: | |||||
Cash overdraft | 328 | ||||
Payable for capital shares redeemed | 49,563 | ||||
Payable for collateral received on loaned securities | 2,005,100 | ||||
Payable for variation margin on futures contracts | 8,400 | ||||
Accrued foreign taxes | 170,584 | ||||
Manager fees payable | 121,928 | ||||
Administration fees payable | 5,626 | ||||
Distribution fees payable | 64,078 | ||||
Custodian fees payable | 6,605 | ||||
Administrative and compliance services fees payable | 508 | ||||
Transfer agent fees payable | 391 | ||||
Trustee fees payable | 195 | ||||
Other accrued liabilities | 36,696 | ||||
|
| ||||
Total Liabilities | 2,470,002 | ||||
|
| ||||
Net Assets | $ | 314,911,202 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 270,967,647 | |||
Total distributable earnings | 43,943,555 | ||||
|
| ||||
Net Assets | $ | 314,911,202 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 17,072,309 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 2,441,587 | ||||
Net Asset Value (offering and redemption price per share) | $ | 6.99 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 297,838,893 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 42,614,410 | ||||
Net Asset Value (offering and redemption price per share) | $ | 6.99 | |||
|
|
(a) | Includes securities on loan of $1,880,660. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 9,290,647 | |||
Income from securities lending | 33,780 | ||||
Foreign withholding tax | (1,084,326 | ) | |||
|
| ||||
Total Investment Income | 8,240,101 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,814,169 | ||||
Administration fees | 171,496 | ||||
Distribution fees — Class 2 | 776,132 | ||||
Custodian fees | 176,902 | ||||
Administrative and compliance services fees | 5,584 | ||||
Transfer agent fees | 10,580 | ||||
Trustee fees | 16,779 | ||||
Professional fees | 15,854 | ||||
Shareholder reports | 19,900 | ||||
Other expenses | 182,270 | ||||
|
| ||||
Total expenses before reductions | 4,189,666 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (1,324,313 | ) | |||
|
| ||||
Net expenses | 2,865,353 | ||||
|
| ||||
Net Investment Income/(Loss) | 5,374,748 | ||||
|
| ||||
Net Realized and Change in Net Unrealized Gains/Losses on Investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 6,625,519 | ||||
Net realized gains/(losses) on futures contracts | (755,285 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (62,853,559 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (110,597 | ) | |||
Change in accrued foreign tax liability | 213,040 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (56,880,882 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (51,506,134 | ) | ||
|
|
See accompanying notes to the financial statements.
15
AZL MSCI Emerging Markets Equity Index Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 5,374,748 | $ | 4,560,575 | ||||||
Net realized gains/(losses) on investments | 5,870,234 | 10,471,475 | ||||||||
Change in unrealized appreciation/depreciation on investments | (62,751,116 | ) | 86,947,108 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (51,506,134 | ) | 101,979,158 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (1,073,981 | ) | (644,604 | ) | ||||||
Class 2 | (15,015,765 | ) | (9,264,665 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (16,089,746 | ) | (9,909,269 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 45,086 | 226,440 | ||||||||
Proceeds from dividends reinvested | 1,073,981 | 644,604 | ||||||||
Value of shares redeemed | (2,620,722 | ) | (3,046,177 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (1,501,655 | ) | (2,175,133 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 50,226,543 | 70,744,659 | ||||||||
Proceeds from dividends reinvested | 15,015,765 | 9,264,665 | ||||||||
Value of shares redeemed | (56,003,214 | ) | (63,012,450 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | 9,239,094 | 16,996,874 | ||||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | 7,737,439 | 14,821,741 | ||||||||
|
|
|
| |||||||
Change in net assets | (59,858,441 | ) | 106,891,630 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 374,769,643 | 267,878,013 | ||||||||
|
|
|
| |||||||
End of period | $ | 314,911,202 | $ | 374,769,643 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 5,252 | 29,685 | ||||||||
Dividends reinvested | 152,989 | 78,803 | ||||||||
Shares redeemed | (324,306 | ) | (381,076 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (166,065 | ) | (272,588 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 6,909,538 | 9,201,042 | ||||||||
Dividends reinvested | 2,138,998 | 1,132,600 | ||||||||
Shares redeemed | (6,567,090 | ) | (7,909,223 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | 2,481,446 | 2,424,419 | ||||||||
|
|
|
| |||||||
Change in shares | 2,315,381 | 2,151,831 | ||||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
16
AZL MSCI Emerging Markets Equity Index Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 8.78 | $ | 6.60 | $ | 6.04 | $ | 7.35 | $ | 7.81 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.16 | 0.12 | 0.06 | 0.07 | 0.10 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.50 | ) | 2.30 | 0.56 | (1.00 | ) | (0.48 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (1.34 | ) | 2.42 | 0.62 | (0.93 | ) | (0.38 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.16 | ) | (0.04 | ) | (0.06 | ) | (0.10 | ) | (0.07 | ) | |||||||||||||||
Net Realized Gains | (0.29 | ) | (0.20 | ) | — | (0.28 | ) | (0.01 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.45 | ) | (0.24 | ) | (0.06 | ) | (0.38 | ) | (0.08 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 6.99 | $ | 8.78 | $ | 6.60 | $ | 6.04 | $ | 7.35 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (15.31 | )% | 36.97 | % | 10.21 | % | (12.69 | )% | (4.96 | )% | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 17,072 | $ | 22,883 | $ | 19,006 | $ | 20,505 | $ | 26,194 | |||||||||||||||
Net Investment Income/(Loss) | 1.89 | % | 1.56 | % | 1.05 | % | 0.86 | % | 1.14 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.03 | % | 1.11 | % | 1.41 | % | 1.49 | % | 1.46 | % | |||||||||||||||
Expenses Net of Reductions | 0.63 | % | 0.71 | % | 1.14 | % | 1.33 | % | 1.31 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly | 0.63 | % | 0.71 | % | 1.14 | % | 1.33 | % | 1.31 | %(c) | |||||||||||||||
Portfolio Turnover Rate(d) | 20 | % | 19 | % | 115 | % | 45 | % | 58 | % | |||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 8.77 | $ | 6.60 | $ | 6.04 | $ | 7.34 | $ | 7.80 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.14 | 0.10 | 0.04 | 0.05 | 0.08 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.49 | ) | 2.30 | 0.56 | (1.00 | ) | (0.48 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (1.35 | ) | 2.40 | 0.60 | (0.95 | ) | (0.40 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.14 | ) | (0.03 | ) | (0.04 | ) | (0.07 | ) | (0.05 | ) | |||||||||||||||
Net Realized Gains | (0.29 | ) | (0.20 | ) | — | (0.28 | ) | (0.01 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.43 | ) | (0.23 | ) | (0.04 | ) | (0.35 | ) | (0.06 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 6.99 | $ | 8.77 | $ | 6.60 | $ | 6.04 | $ | 7.34 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (15.46 | )% | 36.63 | % | 9.89 | % | (12.88 | )% | (5.22 | )% | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 297,839 | $ | 351,886 | $ | 248,872 | $ | 172,238 | $ | 225,276 | |||||||||||||||
Net Investment Income/(Loss) | 1.61 | % | 1.35 | % | 0.80 | % | 0.60 | % | 0.90 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.28 | % | 1.36 | % | 1.64 | % | 1.74 | % | 1.71 | % | |||||||||||||||
Expenses Net of Reductions | 0.88 | % | 0.96 | % | 1.36 | % | 1.58 | % | 1.56 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly | 0.88 | % | 0.96 | % | 1.36 | % | 1.58 | % | 1.56 | %(c) | |||||||||||||||
Portfolio Turnover Rate(d) | 20 | % | 19 | % | 115 | % | 45 | % | 58 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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 is used to pay certain Fund expenses. The Fund ceased participation in the program in June 2014. |
(d) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
See accompanying notes to the financial statements.
17
AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL MSCI Emerging Markets Equity Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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.
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
18
AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $3,319 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $1,999,797 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
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 $3.4 million for the year ended December 31, 2018. 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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | — | Payable for variation margin on futures contracts | $ | 12,484 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities as Variation margin on futures contracts. |
19
AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | (755,285 | ) | $ (110,597) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (118,471 | ) | ||
Class 2 | (1,318,973 | ) | |||
From net realized gains | |||||
Class 1 | (526,133 | ) | |||
Class 2 | (7,945,692 | ) | |||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (9,909,269 | ) | ||
|
|
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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL MSCI Emerging Markets Equity Index Fund Class 1 | 0.85 | % | 0.85 | % | ||||||
AZL MSCI Emerging Markets Equity Index Fund Class 2 | 0.85 | % | 1.10 | % |
* | The Manager voluntarily reduced the management fee to 0.45% on all assets. The Manager reserves the right to increase the management fee to the amount shown in the table above 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
20
AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets (for class 2 only), 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 year ended December 31, 2018, $2,678 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
21
AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Aerospace & Defense | $ | 255,110 | $ | 323,362 | $ | — | $ | 578,472 | ||||||||||||
Airlines | 210,591 | 695,692 | — | 906,283 | ||||||||||||||||
Banks | 7,571,649 | 41,539,886 | — | 49,111,535 | ||||||||||||||||
Beverages | 2,908,921 | 849,017 | — | 3,757,938 | ||||||||||||||||
Capital Markets | 1,112,056 | 2,842,831 | — | 3,954,887 | ||||||||||||||||
Chemicals | 504,992 | 7,244,564 | — | 7,749,556 | ||||||||||||||||
Construction Materials | 481,548 | 3,146,742 | — | 3,628,290 | ||||||||||||||||
Containers & Packaging | 200,687 | — | — | 200,687 | ||||||||||||||||
Diversified Consumer Services | 1,317,200 | — | — | 1,317,200 | ||||||||||||||||
Diversified Telecommunication Services | 366,531 | 4,633,951 | — | 5,000,482 | ||||||||||||||||
Electric Utilities | 1,285,998 | 2,052,028 | — | 3,338,026 | ||||||||||||||||
Entertainment | 1,183,676 | 1,022,396 | — | 2,206,072 | ||||||||||||||||
Equity Real Estate Investment Trusts | 258,206 | 890,185 | — | 1,148,391 | ||||||||||||||||
Food & Staples Retailing | 1,421,436 | 4,035,646 | — | 5,457,082 | ||||||||||||||||
Food Products | 826,193 | 4,802,329 | — | 5,628,522 | ||||||||||||||||
Gas Utilities | 122,557 | 1,979,566 | — | 2,102,123 | ||||||||||||||||
Hotels, Restaurants & Leisure | 1,073,071 | 1,128,027 | — | 2,201,098 | ||||||||||||||||
Household Products | 171,973 | 1,429,712 | — | 1,601,685 | ||||||||||||||||
Independent Power and Renewable Electricity Producers | 230,103 | 1,586,967 | — | 1,817,070 | ||||||||||||||||
Industrial Conglomerates | 333,404 | 4,732,505 | — | 5,065,909 | ||||||||||||||||
Insurance | 528,287 | 10,890,353 | — | 11,418,640 | ||||||||||||||||
Interactive Media & Services | 4,444,395 | 16,083,797 | — | 20,528,192 | ||||||||||||||||
Internet & Direct Marketing Retail | 13,674,460 | 134,374 | — | 13,808,834 | ||||||||||||||||
IT Services | 256,653 | 5,497,044 | — | 5,753,697 | ||||||||||||||||
Machinery | 257,712 | 2,050,018 | — | 2,307,730 | ||||||||||||||||
Media | 419,798 | 6,261,707 | — | 6,681,505 | ||||||||||||||||
Metals & Mining | 5,459,459 | 5,057,000 | — | 10,516,459 | ||||||||||||||||
Multiline Retail | 1,150,580 | 646,798 | — | 1,797,378 | ||||||||||||||||
Oil, Gas & Consumable Fuels | 8,978,765 | 15,776,015 | — | 24,754,780 | ||||||||||||||||
Paper & Forest Products | 817,241 | 752,059 | — | 1,569,300 | ||||||||||||||||
Personal Products | 142,015 | 2,267,915 | — | 2,409,930 | ||||||||||||||||
Pharmaceuticals | 249,028 | 3,934,479 | — | 4,183,507 | ||||||||||||||||
Professional Services | 117,824 | — | — | 117,824 | ||||||||||||||||
Real Estate Management & Development | 320,090 | 8,086,299 | — | 8,406,389 | ||||||||||||||||
Road & Rail | 589,158 | 392,571 | — | 981,729 | ||||||||||||||||
Specialty Retail | 159,421 | 1,338,945 | — | 1,498,366 | ||||||||||||||||
Transportation Infrastructure | 772,193 | 2,335,187 | — | 3,107,380 | ||||||||||||||||
Water Utilities | 259,029 | 618,369 | — | 877,398 | ||||||||||||||||
Wireless Telecommunication Services | 2,071,704 | 7,639,009 | — | 9,710,713 | ||||||||||||||||
Other Common Stocks+ | 68,018,604 | 68,018,604 | ||||||||||||||||||
Preferred Stocks | ||||||||||||||||||||
Automobiles | — | 166,893 | — | 166,893 | ||||||||||||||||
Technology Hardware, Storage & Peripherals | — | 1,593,121 | — | 1,593,121 | ||||||||||||||||
Other Preferred Stocks+ | 5,942,106 | 5,942,106 | ||||||||||||||||||
Convertible Preferred Stock | ||||||||||||||||||||
Industrial Conglomerates | 2,588 | — | — | 2,588 | ||||||||||||||||
Rights | — | 755 | — | 755 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 2,005,100 | — | | 2,005,100 | |||||||||||||||
Unaffiliated Investment Company | 261,830 | — | — | 261,830 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Investment Securities | 68,710,238 | 246,481,818 | — | 315,192,056 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | (12,484 | ) | — | — | (12,484 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Investments | $ | 68,697,754 | $ | 246,481,818 | $ | — | $ | 315,179,572 | ||||||||||||
|
|
|
|
|
|
|
|
+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
22
AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MSCI Emerging Markets Equity Index Fund | $ | 64,174,030 | $ | 67,789,315 |
6. Investment Risks
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 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.
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 December 31, 2018 is $282,335,094. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 55,816,902 | ||
Unrealized (depreciation) | (22,959,940 | ) | ||
|
| |||
Net unrealized appreciation/(depreciation) | $ | 32,856,962 | ||
|
|
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MSCI Emerging Markets Equity Index Fund | $ | 6,718,515 | $ | 9,371,231 | $ | 16,089,746 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MSCI Emerging Markets Equity Index Fund | $ | 1,437,444 | $ | 8,471,825 | $ | 9,909,269 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
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AZL MSCI Emerging Markets Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 Depreciation(a) | Total (Deficit) | |||||||||||||||||||||
AZL MSCI Emerging Markets Equity Index Fund | $ | 4,738,597 | $ | 6,510,267 | $ | — | $ | 32,694,691 | $ | 43,943,554 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 35% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL MSCI Emerging Markets Equity Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL MSCI Emerging Markets Equity Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $1,375,649.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $9,371,232.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions VIP and VIP | Term of Office(2)/ Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
31
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
32
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® MSCI Global Equity Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 22
Page 22
Statements of Changes in Net Assets
Page 23
Page 24
Notes to the Financial Statements
Page 25
Report of Independent Registered Public Accounting Firm
Page 33
Other Federal Income Tax Information
Page 34
Page 35
Approval of Investment Advisory and Subadvisory Agreements
Page 36
Information about the Board of Trustees and Officers
Page 39
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® MSCI Global Equity Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® MSCI Global Equity Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund. | ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018 the AZL® MSCI Global Equity Index Fund (Class 2 Shares) (the “Fund”) returned-8.94%. That compared to a-8.20% for its benchmark the MSCI World Index1.
The Fund seeks investment results, before fees, expenses and fair value adjustments to its portfolio at the close of the New York Stock Exchange, that correspond to the performance of the MSCI World Index. The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the Index. The Index is designed to provide a comprehensive measure of global equity markets.*
Global equities declined over the course of 2018. In the first quarter, market volatility and concerns over trade protectionism weighed on European equity markets. In particular, the U.K. suffered as rising yields on its sovereign bonds drew investors away from defensive sectors, while ongoing political uncertainty weighed on broader investor sentiment. Currency appreciation in Japan buoyed the total return for the MSCI EAFE Index2 as the yen rallied over 6% against the U.S. dollar, and the Bank of Japan announced a reduction in its long-term bond purchasing efforts. In local terms, however, Japanese equities declined due to U.S. protectionism and fears of a slowdown in global trade.
Meanwhile, the U.S. economy remained healthy in the first quarter, despite the lackluster performance by U.S. equities. Unemployment remained at a multi-decade low, consumer confidence remained high and economic indicators pointed to growth--all of which supported the Federal Reserve Board’s (the Fed) decision to raise interest rates in March.
Uncertainty over U.S. trade protectionism continued to drag on developed equity markets throughout the second quarter, as did concerns about European fragmentation, in part due to the formation of Italy’s populist, coalition government. Momentum for eurozone reform weakened as well, as negotiations over immigration policy in the German coalition government broke down. Increased trade tensions, interest rate differentials and favorable U.S. growth conditions strengthened the U.S. dollar, which weighed onun-hedged developing market equity returns during the quarter. For the U.S., the second quarter saw newfound investor confidence in strong economic data, and the Fed chose to raise interest rates a second time, signaling two additional rate increases in 2018.
In the third quarter, steady corporate earnings and economic growth supported domestic markets in the face of rising U.S. protectionism. Japanese equities rallied in the quarter, and the release of second quarter gross domestic product3 numbers indicated U.S. growth had reached an annualized rate of 3%, the fastest growth rate since early
2016. However, continuing uncertainty over Brexit and political tensions weighed on overseas markets, even as investors drove U.S.large-cap equities toall-time highs on impressive U.S. economic growth and earnings results. Volatility in the third quarter declined to levels below that of the first and second quarter, and consumer confidence increased to the highest levels since 2000. Against this backdrop, the Fed moved forward with its third interest rate increase.
By the fourth quarter, developed markets faced considerable headwinds from tightening global financial conditions, slowing growth and heightened macroeconomic uncertainty. In Western Europe, slowing economic activity, risk-averse investor behavior and political uncertainty all weighed on the region’s equity markets, causing a drag on the broader Index. In the U.S., concerns over Fed policy, trade tensions with China and potentially slowing growth contributed to investor anxiety throughout the quarter.
From a sector perspective, most sectors declined, with materials and financials posting the weakest returns. Only healthcare, utilities and information technology stocks posted positive returns in the MSCI World Index (in USD).
The Fund underperformed its benchmark primarily due to expenses incurred by the Fund.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a negative impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. Investors cannot invest directly in an index. |
1 | For a complete description of the Fund’s performance benchmarks please refer to page 2 of this report. |
2 | MSCI EAFE Index is a free float-adjusted market capitalization-weighted index that is unmanaged and is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. Investors cannot invest directly in an index. |
3 | Gross domestic product (GDP) is the measure of the market value of the goods and services produced in a period of time. |
1
AZL® MSCI Global Equity Index Review (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek to match the performance of the MSCI World Index as closely as possible. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 90% of its assets, plus the amount of any borrowing for investment purposes, in securities of the MSCI World Index (the “Underlying Index”) and in depositary receipts representing securities of the Underlying Index.
|
| |||
Investment Concerns
| ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
| ||||
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
| ||||
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
| ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines.
| ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
| ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | 5 Year | Since Inception (5/1/09) | |||||||||||||
AZL®MSCI Global Equity Index Fund (Class 2 Shares) | -8.94 | % | 3.30 | % | -1.80 | % | 5.28 | % | ||||||||
MSCI World Index (gross of withholding taxes) | -8.20 | % | 6.91 | % | 5.14 | % | 10.82 | % | ||||||||
MSCI World Index (net of withholding taxes) | -8.71 | % | 6.30 | % | 4.56 | % | 10.21 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®MSCI Global Equity Index Fund (Class 2 Shares) | 1.16 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.31% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.80% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Morgan Stanley Capital International World Index (“MSCI World Index”), an unmanaged broad equity benchmark that represents large- andmid-cap equity performance across 23 developed markets countries. The Index noted as “gross of withholding taxes” reflects the maximum possible reinvestment of dividends with no adjustment for withholding tax deductions or tax credits. The Index noted as “net of withholding taxes” reflects the reinvestment of dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable tonon-resident institutional investors who do not benefit from double taxation treaties. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL MSCI Global Equity Index Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL MSCI Global Equity Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL MSCI Global Equity Index Fund | $ | 1,000.00 | $ | 907.40 | $ | 3.70 | 0.77 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL MSCI Global Equity Index Fund | $ | 1,000.00 | $ | 1,021.32 | $ | 3.92 | 0.77 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Financials | 15.9 | % | |||
Information Technology | 14.7 | ||||
Health Care | 13.4 | ||||
Industrials | 10.8 | ||||
Consumer Discretionary | 10.1 | ||||
Consumer Staples | 8.6 | ||||
Telecommunication Services | 8.2 | ||||
Energy | 5.9 | ||||
Materials | 4.6 | ||||
Utilities | 3.4 | ||||
Real Estate | 3.2 | ||||
|
| ||||
Total Common Stocks and Preferred Stocks | 98.8 | ||||
Rights | —^ | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 1.1 | ||||
Money Markets | 0.6 | ||||
|
| ||||
Total Investment Securities | 100.5 | ||||
Net other assets (liabilities) | (0.5 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (98.6%): | ||||||||
Aerospace & Defense (2.0%): | ||||||||
1,624 | Arconic, Inc. | $ | 27,381 | |||||
11,607 | BAE Systems plc | 67,734 | ||||||
1,935 | Boeing Co. (The) | 624,037 | ||||||
6,773 | Bombardier, Inc., Class B* | 10,073 | ||||||
946 | CAE, Inc. | 17,388 | ||||||
10 | Dassault Aviation SA | 13,845 | ||||||
106 | Elbit Systems, Ltd. | 12,195 | ||||||
2,091 | European Aeronautic Defence & Space Co. NV | 199,958 | ||||||
401 | Finmeccanica SpA | 3,529 | ||||||
893 | General Dynamics Corp. | 140,389 | ||||||
396 | Harris Corp. | 53,321 | ||||||
165 | Huntington Ingalls Industries, Inc. | 31,401 | ||||||
272 | L3 Technologies, Inc. | 47,236 | ||||||
910 | Lockheed Martin Corp. | 238,274 | ||||||
3,047 | Meggitt plc | 18,225 | ||||||
198 | MTU Aero Engines AG | 35,958 | ||||||
574 | Northrop Grumman Corp. | 140,573 | ||||||
997 | Raytheon Co. | 152,890 | ||||||
5,970 | Rolls-Royce Holdings plc | 62,816 | ||||||
1,190 | Safran SA | 142,948 | ||||||
6,300 | Singapore Technologies Engineering, Ltd. | 16,071 | ||||||
369 | Spirit AeroSystems Holdings, Inc., Class A | 26,601 | ||||||
833 | Textron, Inc. | 38,310 | ||||||
368 | Thales SA | 42,802 | ||||||
166 | TransDigm Group, Inc.* | 56,450 | ||||||
2,870 | United Technologies Corp. | 305,597 | ||||||
|
| |||||||
2,526,002 | ||||||||
|
| |||||||
Air Freight & Logistics (0.5%): | ||||||||
3,854 | Bollore, Inc. | 15,395 | ||||||
478 | C.H. Robinson Worldwide, Inc. | 40,195 | ||||||
3,396 | Deutsche Post AG | 93,000 | ||||||
617 | Expeditors International of Washington, Inc. | 42,012 | ||||||
900 | FedEx Corp. | 145,197 | ||||||
3,442 | Royal Mail plc | 11,948 | ||||||
2,460 | United Parcel Service, Inc., Class B | 239,924 | ||||||
437 | XPO Logistics, Inc.* | 24,926 | ||||||
1,100 | Yamato Holdings Co., Ltd. | 29,980 | ||||||
|
| |||||||
642,577 | ||||||||
|
| |||||||
Airlines (0.1%): | ||||||||
400 | All Nippon Airways Co., Ltd. | 14,421 | ||||||
468 | American Airlines Group, Inc. | 15,027 | ||||||
624 | Delta Air Lines, Inc. | 31,138 | ||||||
966 | Deutsche Lufthansa AG, Registered Shares | 21,783 | ||||||
585 | easyJet plc | 8,211 | ||||||
2,262 | International Consolidated Airlines Group SA | 17,949 | ||||||
400 | Japan Airlines Co., Ltd. | 14,170 | ||||||
2,200 | Singapore Airlines, Ltd. | 15,151 | ||||||
491 | Southwest Airlines Co. | 22,822 | ||||||
239 | United Continental Holdings, Inc.* | 20,011 | ||||||
|
| |||||||
180,683 | ||||||||
|
| |||||||
Auto Components (0.4%): | ||||||||
500 | Aisin Sieki Co., Ltd. | 17,255 | ||||||
914 | Aptiv plc | 56,275 | ||||||
266 | Autoliv, Inc.^ | 18,681 | ||||||
686 | BorgWarner, Inc. | 23,832 | ||||||
2,200 | Bridgestone Corp. | 84,444 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Auto Components, continued | ||||||||
626 | Compagnie Generale des Establissements Michelin SCA, Class B | $ | 61,883 | |||||
363 | Continental AG | 50,188 | ||||||
1,600 | Denso Corp. | 71,018 | ||||||
299 | Faurecia | 11,221 | ||||||
724 | Goodyear Tire & Rubber Co. | 14,777 | ||||||
400 | Koito Manufacturing Co., Ltd. | 20,408 | ||||||
251 | Lear Corp. | 30,838 | ||||||
1,106 | Magna Internationl, Inc. | 50,212 | ||||||
2,000 | Minth Group, Ltd. | 6,383 | ||||||
700 | NGK Spark Plug Co., Ltd. | 13,810 | ||||||
459 | Nokian Renkaat OYJ | 14,142 | ||||||
1,473 | Pirelli & C SpA* | 9,471 | ||||||
600 | Stanley Electric Co., Ltd. | 16,735 | ||||||
2,900 | Sumitomo Electric Industries, Ltd. | 38,289 | ||||||
700 | Sumitomo Rubber Industries, Ltd. | 8,332 | ||||||
300 | Toyoda Gosei Co., Ltd. | 5,982 | ||||||
500 | Toyota Industries Corp. | 23,011 | ||||||
842 | Valeo SA | 24,412 | ||||||
300 | Yokohama Rubber Co., Ltd. (The) | 5,597 | ||||||
|
| |||||||
677,196 | ||||||||
|
| |||||||
Automobiles (1.5%): | ||||||||
1,168 | Bayerische Motoren Werke AG (BMW) | 94,580 | ||||||
3,196 | Daimler AG, Registered Shares | 168,012 | ||||||
445 | Ferrari NV^ | 44,260 | ||||||
4,033 | Fiat Chrysler Automobiles NV* | 58,627 | ||||||
13,261 | Ford Motor Co. | 101,447 | ||||||
2,100 | Fuji Heavy Industries, Ltd. | 44,836 | ||||||
4,452 | General Motors Co. | 148,919 | ||||||
541 | Harley-Davidson, Inc. | 18,459 | ||||||
5,900 | Honda Motor Co., Ltd. | 154,194 | ||||||
1,900 | Isuzu Motors, Ltd. | 26,532 | ||||||
2,200 | Mazda Motor Corp. | 22,634 | ||||||
2,700 | Mitsubishi Motors Corp. | 14,909 | ||||||
8,100 | Nissan Motor Co., Ltd. | 65,293 | ||||||
1,900 | PSA Peugeot Citroen SA | 40,383 | ||||||
650 | Renault SA | 40,459 | ||||||
1,200 | Suzuki Motor Corp. | 60,729 | ||||||
447 | Tesla Motors, Inc.* | 148,762 | ||||||
8,100 | Toyota Motor Corp. | 470,518 | ||||||
130 | Volkswagen AG | 20,710 | ||||||
1,100 | Yamaha Motor Co., Ltd. | 21,412 | ||||||
|
| |||||||
1,765,675 | ||||||||
|
| |||||||
Banks (8.5%): | ||||||||
1,626 | ABN AMRO Group NV | 38,081 | ||||||
3,636 | AIB Group plc | 15,282 | ||||||
400 | Aozora Bank, Ltd. | 11,863 | ||||||
10,309 | Australia & New Zealand Banking Group, Ltd. | 177,598 | ||||||
23,201 | Banco Bilbao Vizcaya Argentaria SA | 122,369 | ||||||
21,685 | Banco de Sabadell SA | 24,670 | ||||||
57,056 | Banco Santander SA | 257,449 | ||||||
3,600 | Bank Hapoalim BM | 22,856 | ||||||
5,141 | Bank LeumiLe-Israel Corp. | 31,161 | ||||||
33,400 | Bank of America Corp. | 822,976 | ||||||
4,800 | Bank of East Asia, Ltd. (The) | 15,193 | ||||||
3,384 | Bank of Ireland Group plc | 18,779 |
See accompanying notes to the financial statements.
4
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
200 | Bank of Kyoto, Ltd. (The) | $ | 8,203 | |||||
2,300 | Bank of Montreal | 150,284 | ||||||
4,289 | Bank of Nova Scotia | 213,822 | ||||||
1,540 | Bank of Queensland, Ltd. | 10,479 | ||||||
4,962 | Bankia SA^ | 14,447 | ||||||
2,483 | Bankinter SA | 19,842 | ||||||
60,651 | Barclays plc | 116,324 | ||||||
2,732 | BB&T Corp. | 118,350 | ||||||
1,721 | Bendigo & Adelaide Bank, Ltd. | 13,087 | ||||||
3,996 | BNP Paribas SA | 179,948 | ||||||
12,500 | BOC Hong Kong Holdings, Ltd. | 46,171 | ||||||
1,592 | Canadian Imperial Bank of Commerce^ | 118,589 | ||||||
2,200 | Chiba Bank, Ltd. (The) | 12,201 | ||||||
1,100 | Chuo Mitsui Trust Holdings, Inc. | 40,044 | ||||||
464 | CIT Group, Inc. | 17,757 | ||||||
8,907 | Citigroup, Inc. | 463,698 | ||||||
1,764 | Citizens Financial Group, Inc. | 52,444 | ||||||
614 | Comerica, Inc. | 42,176 | ||||||
3,447 | Commerzbank AG* | 22,829 | ||||||
6,173 | Commonwealth Bank of Australia | 314,989 | ||||||
4,400 | Concordia Financial Group, Ltd. | 16,779 | ||||||
4,079 | Credit Agricole SA | 43,868 | ||||||
13,526 | Criteria Caixacorp SA | 48,675 | ||||||
2,612 | Danske Bank A/S | 51,764 | ||||||
6,500 | DBS Group Holdings, Ltd. | 112,334 | ||||||
3,558 | DnB NOR ASA | 57,109 | ||||||
473 | East West Bancorp, Inc. | 20,590 | ||||||
998 | Erste Group Bank AG | 33,249 | ||||||
2,232 | Fifth Third Bancorp | 52,519 | ||||||
566 | First Republic Bank | 49,185 | ||||||
600 | Fukuoka Financial Group, Inc. | 12,101 | ||||||
2,700 | Hang Seng Bank, Ltd. | 60,310 | ||||||
70,337 | HSBC Holdings plc | 577,123 | ||||||
3,736 | Huntington Bancshares, Inc. | 44,533 | ||||||
13,690 | ING Groep NV | 146,693 | ||||||
52,005 | Intesa Sanpaolo SpA | 115,242 | ||||||
1,600 | Japan Post Bank Co., Ltd. | 17,569 | ||||||
11,856 | JPMorgan Chase & Co. | 1,157,382 | ||||||
940 | KBC Group NV | 60,816 | ||||||
3,845 | KeyCorp | 56,829 | ||||||
248,649 | Lloyds Banking Group plc | 164,276 | ||||||
482 | M&T Bank Corp. | 68,989 | ||||||
3,600 | Mebuki Financial Group, Inc. | 9,505 | ||||||
2,255 | Mediobanca SpA | 19,065 | ||||||
41,200 | Mitsubishi UFJ Financial Group, Inc. | 203,191 | ||||||
514 | Mizrahi Tefahot Bank, Ltd. | 8,709 | ||||||
83,600 | Mizuho Financial Group, Inc. | 130,314 | ||||||
9,576 | National Australia Bank, Ltd. | 162,460 | ||||||
1,174 | National Bank of Canada^ | 48,207 | ||||||
10,697 | Nordea Bank AB | 90,268 | ||||||
11,300 | Oversea-Chinese Banking Corp., Ltd. | 92,838 | ||||||
1,195 | People’s United Financial, Inc. | 17,244 | ||||||
1,635 | PNC Financial Services Group, Inc. | 191,148 | ||||||
556 | Raiffeisen International Bank-Holding AG | 14,159 | ||||||
3,951 | Regions Financial Corp. | 52,864 | ||||||
7,200 | Resona Holdings, Inc. | 34,446 | ||||||
5,126 | Royal Bank of Canada | 350,895 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
17,623 | Royal Bank of Scotland Group plc | $ | 48,448 | |||||
2,100 | Seven Bank, Ltd. | 5,990 | ||||||
400 | Shinsei Bank, Ltd. | 4,735 | ||||||
1,500 | Shizuoka Bank, Ltd. (The) | 11,677 | ||||||
207 | Signature Bank | 21,282 | ||||||
5,566 | Skandinaviska Enskilda Banken AB, Class A | 54,211 | ||||||
2,733 | Societe Generale | 86,758 | ||||||
10,199 | Standard Chartered plc | 78,823 | ||||||
4,600 | Sumitomo Mitsui Financial Group, Inc. | 151,714 | ||||||
1,589 | SunTrust Banks, Inc. | 80,149 | ||||||
195 | SVB Financial Group* | 37,034 | ||||||
5,247 | Svenska Handelsbanken AB, Class A | 58,156 | ||||||
3,130 | Swedbank AB, Class A | 69,813 | ||||||
6,417 | Toronto-Dominion Bank (The) | 319,017 | ||||||
5,446 | U.S. Bancorp | 248,882 | ||||||
6,841 | Unicredit SpA | 77,593 | ||||||
5,004 | United Overseas Bank, Ltd. | 89,714 | ||||||
16,097 | Wells Fargo & Co. | 741,750 | ||||||
12,158 | Westpac Banking Corp. | 214,390 | ||||||
1,000 | Yamaguchi Financial Group, Inc. | 9,560 | ||||||
697 | Zions Bancorp | 28,396 | ||||||
|
| |||||||
10,365,301 | ||||||||
|
| |||||||
Beverages (2.0%): | ||||||||
2,658 | Anheuser-Busch InBev NV | 175,889 | ||||||
1,300 | Asahi Breweries, Ltd. | 50,784 | ||||||
933 | Brown-Forman Corp., Class B | 44,392 | ||||||
363 | Carlsberg A/S, Class B | 38,627 | ||||||
1,094 | Coca-Cola Amatil, Ltd. | 6,309 | ||||||
500 | Coca-Cola Bottlers Japan Holdings, Inc. | 14,928 | ||||||
14,291 | Coca-Cola Co. (The) | 676,679 | ||||||
782 | Coca-Cola European Partners plc | 35,965 | ||||||
698 | Coca-Cola HBC AG | 21,715 | ||||||
595 | Constellation Brands, Inc., Class C | 95,688 | ||||||
2,076 | Davide Campari — Milano SpA | 17,568 | ||||||
8,656 | Diageo plc | 307,618 | ||||||
423 | Heineken Holding NV | 35,596 | ||||||
909 | Heineken NV | 80,106 | ||||||
2,900 | Kirin Holdings Co., Ltd. | 61,010 | ||||||
696 | Molson Coors Brewing Co., Class B | 39,087 | ||||||
1,485 | Monster Beverage Corp.* | 73,092 | ||||||
5,016 | PepsiCo, Inc. | 554,168 | ||||||
756 | Pernod Ricard SA | 124,116 | ||||||
74 | Remy Cointreau SA | 8,366 | ||||||
500 | Suntory Beverage & Food, Ltd. | 22,571 | ||||||
2,611 | Treasury Wine Estates, Ltd. | 27,209 | ||||||
|
| |||||||
2,511,483 | ||||||||
|
| |||||||
Biotechnology (1.9%): | ||||||||
5,356 | AbbVie, Inc. | 493,769 | ||||||
760 | Alexion Pharmaceuticals, Inc.* | 73,994 | ||||||
593 | Alkermes plc* | 17,499 | ||||||
336 | Alnylam Pharmaceuticals, Inc.* | 24,498 | ||||||
2,286 | Amgen, Inc. | 445,016 | ||||||
117 | BeiGene, Ltd., ADR* | 16,411 | ||||||
701 | Biogen Idec, Inc.* | 210,945 | ||||||
650 | BioMarin Pharmaceutical, Inc.* | 55,348 | ||||||
2,456 | Celgene Corp.* | 157,405 |
See accompanying notes to the financial statements.
5
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Biotechnology, continued | ||||||||
1,622 | CSL, Ltd. | $ | 211,782 | |||||
222 | Genmab A/S* | 36,388 | ||||||
4,538 | Gilead Sciences, Inc. | 283,852 | ||||||
1,016 | Grifols SA | 26,535 | ||||||
670 | Incyte Corp.* | 42,605 | ||||||
274 | Regeneron Pharmaceuticals, Inc.* | 102,339 | ||||||
349 | Seattle Genetics, Inc.* | 19,774 | ||||||
3,278 | Shire plc | 190,472 | ||||||
176 | United Therapeutics Corp.* | 19,166 | ||||||
921 | Vertex Pharmaceuticals, Inc.* | 152,619 | ||||||
|
| |||||||
2,580,417 | ||||||||
|
| |||||||
Building Products (0.4%): | ||||||||
583 | A.O. Smith Corp. | 24,894 | ||||||
307 | Allegion plc | 24,471 | ||||||
500 | Asahi Glass Co., Ltd. | 15,517 | ||||||
3,747 | Assa Abloy AB, Class B | 67,030 | ||||||
1,758 | Compagnie de Saint-Gobain SA | 58,508 | ||||||
900 | Daikin Industries, Ltd. | 94,720 | ||||||
468 | Fortune Brands Home & Security, Inc. | 17,779 | ||||||
133 | Geberit AG, Registered Shares | 51,838 | ||||||
3,323 | Johnson Controls International plc | 98,527 | ||||||
549 | Kingspan Group plc | 23,511 | ||||||
120 | Lennox International, Inc. | 26,263 | ||||||
1,000 | Lixil Group Corp. | 12,487 | ||||||
1,128 | Masco Corp. | 32,983 | ||||||
422 | Owens Corning, Inc. | 18,560 | ||||||
500 | TOTO, Ltd. | 17,190 | ||||||
|
| |||||||
584,278 | ||||||||
|
| |||||||
Capital Markets (2.6%): | ||||||||
3,720 | 3i Group plc | 36,519 | ||||||
210 | Affiliated Managers Group, Inc. | 20,462 | ||||||
497 | Ameriprise Financial, Inc. | 51,872 | ||||||
220 | Amundi SA | 11,565 | ||||||
606 | ASX, Ltd. | 25,604 | ||||||
3,562 | Bank of New York Mellon Corp. (The) | 167,663 | ||||||
427 | BlackRock, Inc., Class A+ | 167,734 | ||||||
2,875 | Brookfield Asset Management, Inc., Class A | 110,197 | ||||||
412 | CBOE Holdings, Inc. | 40,306 | ||||||
4,317 | Charles Schwab Corp. (The) | 179,285 | ||||||
879 | CI Financial Corp. | 11,128 | ||||||
1,281 | CME Group, Inc. | 240,981 | ||||||
8,729 | Credit Suisse Group AG | 96,234 | ||||||
5,900 | Daiwa Securities Group, Inc. | 30,088 | ||||||
7,107 | Deutsche Bank AG, Registered Shares^ | 56,707 | ||||||
686 | Deutsche Boerse AG | 82,486 | ||||||
977 | E*TRADE Financial Corp. | 42,871 | ||||||
451 | Eaton Vance Corp. | 15,866 | ||||||
1,172 | Franklin Resources, Inc.^ | 34,762 | ||||||
1,253 | Goldman Sachs Group, Inc. (The) | 209,314 | ||||||
1,005 | Hargreaves Lansdown plc | 23,676 | ||||||
4,300 | Hong Kong Exchanges & Clearing, Ltd. | 123,405 | ||||||
310 | IGM Financial, Inc.^ | 7,047 | ||||||
1,995 | Intercontinental Exchange, Inc. | 150,283 | ||||||
1,286 | Invesco, Ltd. | 21,528 | ||||||
2,442 | Investec plc | 13,623 | ||||||
2,000 | Japan Exchange Group, Inc. | 32,124 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
710 | Julius Baer Group, Ltd. | $ | 25,381 | |||||
1,115 | London Stock Exchange Group plc | 57,531 | ||||||
1,159 | Macquarie Group, Ltd. | 88,668 | ||||||
609 | Moody’s Corp. | 85,284 | ||||||
4,690 | Morgan Stanley | 185,959 | ||||||
316 | MSCI, Inc., Class A | 46,588 | ||||||
392 | NASDAQ OMX Group, Inc. (The) | 31,975 | ||||||
3,360 | Natixis | 15,851 | ||||||
11,500 | Nomura Holdings, Inc. | 43,852 | ||||||
762 | Northern Trust Corp. | 63,696 | ||||||
63 | Partners Group Holding AG | 38,309 | ||||||
434 | Raymond James Financial, Inc. | 32,294 | ||||||
874 | S&P Global, Inc. | 148,528 | ||||||
800 | SBI Holdings, Inc. | 15,618 | ||||||
341 | Schroders plc | 10,574 | ||||||
413 | SEI Investments Co. | 19,081 | ||||||
3,200 | Singapore Exchange, Ltd. | 16,725 | ||||||
1,995 | St. James Place plc | 23,899 | ||||||
1,360 | State Street Corp. | 85,775 | ||||||
859 | T. Rowe Price Group, Inc. | 79,303 | ||||||
1,046 | TD Ameritrade Holding Corp. | 51,212 | ||||||
13,758 | UBS Group AG | 171,811 | ||||||
|
| |||||||
3,341,244 | ||||||||
|
| |||||||
Chemicals (2.7%): | ||||||||
1,517 | Air Liquide SA | 187,788 | ||||||
764 | Air Products & Chemicals, Inc. | 122,278 | ||||||
700 | Air Water, Inc. | 10,518 | ||||||
858 | AkzoNobel NV | 68,959 | ||||||
365 | Albemarle Corp. | 28,131 | ||||||
263 | Arkema SA | 22,440 | ||||||
4,400 | Asahi Kasei Corp. | 44,900 | ||||||
832 | Axalta Coating Systems, Ltd.* | 19,485 | ||||||
3,214 | BASF SE | 222,380 | ||||||
464 | Celanese Corp., Series A | 41,746 | ||||||
758 | CF Industries Holdings, Inc. | 32,981 | ||||||
702 | Chemours Co. (The) | 19,810 | ||||||
311 | Christian Hansen Holding A/S | 27,549 | ||||||
883 | Clariant AG | 16,299 | ||||||
708 | Covestro AG | 35,022 | ||||||
399 | Croda International plc | 23,697 | ||||||
1,000 | Daicel Chemical Industries, Ltd. | 10,278 | ||||||
8,140 | DowDuPont, Inc. | 435,328 | ||||||
519 | Eastman Chemical Co. | 37,944 | ||||||
910 | Ecolab, Inc. | 134,089 | ||||||
34 | EMS-Chemie Holding AG | 16,196 | ||||||
653 | Evonik Industries AG | 16,307 | ||||||
440 | FMC Corp. | 32,542 | ||||||
275 | Fuchs Petrolub AG | 11,335 | ||||||
32 | Givaudan SA, Registered Shares | 74,252 | ||||||
500 | Hitachi Chemical Co., Ltd. | 7,469 | ||||||
6,485 | Incitec Pivot, Ltd. | 14,978 | ||||||
304 | International Flavor & Fragrances, Inc. | 40,795 | ||||||
2,151 | Israel Chemicals, Ltd. | 12,244 | ||||||
591 | Johnson Matthey plc | 21,083 | ||||||
800 | JSR Corp. | 11,956 | ||||||
500 | Kansai Paint Co., Ltd. | 9,597 | ||||||
650 | Koninklijke DSM NV | 52,881 |
See accompanying notes to the financial statements.
6
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
1,300 | Kuraray Co., Ltd. | $ | 18,241 | |||||
270 | Lanxess AG | 12,434 | ||||||
1,931 | Linde plc | 301,313 | ||||||
1,131 | LyondellBasell Industries NV, Class A | 94,054 | ||||||
244 | Methanex Corp. | 11,737 | ||||||
4,700 | Mitsubishi Chemical Holdings Corp. | 35,364 | ||||||
400 | Mitsubishi Gas Chemical Co., Inc. | 5,977 | ||||||
800 | Mitsui Chemicals, Inc. | 17,952 | ||||||
1,289 | Mosaic Co. (The) | 37,652 | ||||||
600 | Nippon Paint Holdings Co., Ltd. | 20,347 | ||||||
500 | Nissan Chemical Industries, Ltd. | 26,032 | ||||||
500 | Nitto Denko Corp. | 24,967 | ||||||
785 | Novozymes A/S, Class B | 35,095 | ||||||
2,204 | Nutrien, Ltd. | 103,532 | ||||||
1,427 | Orica, Ltd. | 17,333 | ||||||
878 | PPG Industries, Inc. | 89,758 | ||||||
294 | Sherwin Williams Co. | 115,677 | ||||||
1,300 | Shin-Etsu Chemical Co., Ltd. | 100,166 | ||||||
500 | Showa Denko K.K. | 14,668 | ||||||
464 | Sika AG | 58,995 | ||||||
249 | Solvay SA | 24,796 | ||||||
4,700 | Sumitomo Chemical Co., Ltd. | 22,988 | ||||||
400 | Symrise AG | 29,556 | ||||||
600 | Taiyo Nippon Sanso Corp. | 9,880 | ||||||
700 | Teijin, Ltd. | 11,145 | ||||||
5,200 | Toray Industries, Inc. | 36,337 | ||||||
1,000 | Tosoh Corp. | 12,941 | ||||||
776 | Umicore SA^ | 30,859 | ||||||
141 | Westlake Chemical Corp. | 9,330 | ||||||
682 | Yara International ASA | 26,196 | ||||||
|
| |||||||
3,218,579 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.4%): | ||||||||
1,000 | Babcock International Group plc | 6,236 | ||||||
5,458 | Brambles, Ltd. | 39,010 | ||||||
306 | Cintas Corp. | 51,405 | ||||||
760 | Copart, Inc.* | 36,313 | ||||||
1,000 | Dai Nippon Printing Co., Ltd. | 20,810 | ||||||
805 | Edenred | 29,505 | ||||||
6,037 | G4S plc | 15,106 | ||||||
648 | ISS A/S | 18,091 | ||||||
400 | Park24 Co., Ltd. | 8,843 | ||||||
847 | Republic Services, Inc., Class A | 61,060 | ||||||
601 | Rollins, Inc. | 21,696 | ||||||
700 | SECOM Co., Ltd. | 57,802 | ||||||
1,209 | Securitas AB, Class B | 19,448 | ||||||
109 | Societe BIC SA | 11,103 | ||||||
300 | Sohgo Security Services Co., Ltd. | 14,126 | ||||||
1,000 | Toppan Printing Co., Ltd. | 14,637 | ||||||
914 | Waste Connections, Inc. | 67,865 | ||||||
1,502 | Waste Management, Inc. | 133,663 | ||||||
|
| |||||||
626,719 | ||||||||
|
| |||||||
Communications Equipment (0.9%): | ||||||||
188 | Arista Networks, Inc.* | 39,612 | ||||||
16,541 | Cisco Systems, Inc. | 716,721 | ||||||
795 | CommScope Holding Co., Inc.* | 13,030 | ||||||
228 | F5 Networks, Inc.* | 36,943 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Communications Equipment, continued | ||||||||
1,112 | Juniper Networks, Inc. | $ | 29,924 | |||||
566 | Motorola Solutions, Inc. | 65,113 | ||||||
20,385 | Nokia OYJ | 117,766 | ||||||
338 | Palo Alto Networks, Inc.* | 63,662 | ||||||
10,526 | Telefonaktiebolaget LM Ericsson, Class B | 92,827 | ||||||
|
| |||||||
1,175,598 | ||||||||
|
| |||||||
Construction & Engineering (0.4%): | ||||||||
834 | ACS Actividades de Construccion y Servicios SA | 32,057 | ||||||
805 | Bouygues SA | 28,782 | ||||||
349 | Cimic Group, Ltd. | 10,668 | ||||||
295 | Eiffage SA | 24,677 | ||||||
1,625 | Ferrovial SA | 32,770 | ||||||
547 | Fluor Corp. | 17,613 | ||||||
76 | Hochtief AG | 10,242 | ||||||
481 | Jacobs Engineering Group, Inc. | 28,120 | ||||||
800 | JGC Corp. | 11,169 | ||||||
1,500 | Kajima Corp. | 20,110 | ||||||
2,600 | Obayashi Corp. | 23,349 | ||||||
2,000 | Shimizu Corp. | 16,439 | ||||||
1,213 | Skanska AB, Class B | 19,378 | ||||||
583 | SNC-Lavalin Group, Inc. | 19,613 | ||||||
800 | TAISEI Corp. | 34,017 | ||||||
1,791 | Vinci SA | 147,160 | ||||||
377 | WSP Global, Inc. | 16,204 | ||||||
|
| |||||||
492,368 | ||||||||
|
| |||||||
Construction Materials (0.3%): | ||||||||
4,102 | Boral, Ltd. | 14,269 | ||||||
3,045 | CRH plc | 80,256 | ||||||
3,025 | Fletcher Building, Ltd.* | 9,901 | ||||||
529 | HeidelbergCement AG | 32,348 | ||||||
71 | Imerys SA | 3,396 | ||||||
1,726 | James Hardie Industries SE | 18,377 | ||||||
1,767 | LafargeHolcim, Ltd., Registered Shares | 73,046 | ||||||
202 | Martin Marietta Materials, Inc. | 34,718 | ||||||
500 | Taiheiyo Cement Corp. | 15,391 | ||||||
496 | Vulcan Materials Co. | 49,005 | ||||||
|
| |||||||
330,707 | ||||||||
|
| |||||||
Consumer Finance (0.4%): | ||||||||
1,300 | ACOM Co., Ltd. | 4,278 | ||||||
400 | Aeon Credit Service Co., Ltd. | 7,186 | ||||||
1,383 | Ally Financial, Inc. | 31,339 | ||||||
2,570 | American Express Co. | 244,971 | ||||||
1,679 | Capital One Financial Corp. | 126,916 | ||||||
700 | Credit Saison Co., Ltd. | 8,165 | ||||||
1,196 | Discover Financial Services | 70,540 | ||||||
2,362 | Synchrony Financial | 55,413 | ||||||
|
| |||||||
548,808 | ||||||||
|
| |||||||
Containers & Packaging (0.2%): | ||||||||
3,908 | Amcor, Ltd.^ | 36,463 | ||||||
282 | Avery Dennison Corp. | 25,332 | ||||||
1,091 | Ball Corp. | 50,164 | ||||||
545 | CCL Industries, Inc. | 19,987 | ||||||
409 | Crown Holdings, Inc.* | 17,002 | ||||||
1,337 | International Paper Co. | 53,962 | ||||||
370 | Packaging Corp. of America | 30,880 |
See accompanying notes to the financial statements.
7
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Containers & Packaging, continued | ||||||||
609 | Sealed Air Corp. | $ | 21,218 | |||||
820 | Smurfit Kappa Group plc | 21,773 | ||||||
600 | Toyo Seikan Kaisha, Ltd. | 13,689 | ||||||
841 | WestRock Co. | 31,756 | ||||||
|
| |||||||
322,226 | ||||||||
|
| |||||||
Distributors (0.1%): | ||||||||
510 | Genuine Parts Co. | 48,970 | ||||||
400 | Jardine Cycle & Carriage, Ltd. | 10,328 | ||||||
1,183 | LKQ Corp.* | 28,073 | ||||||
|
| |||||||
87,371 | ||||||||
|
| |||||||
Diversified Consumer Services (0.0%)†: | ||||||||
400 | Benesse Holdings, Inc. | 10,173 | ||||||
633 | H&R Block, Inc. | 16,059 | ||||||
|
| |||||||
26,232 | ||||||||
|
| |||||||
Diversified Financial Services (1.1%): | ||||||||
11,633 | AMP, Ltd. | 20,076 | ||||||
856 | AXA Equitable Holdings, Inc. | 14,235 | ||||||
4,569 | Berkshire Hathaway, Inc., Class B* | 932,898 | ||||||
200 | Century Tokyo Leasing Corp. | 8,703 | ||||||
2,251 | Challenger, Ltd. | 15,043 | ||||||
152 | Eurazeo Se | 10,729 | ||||||
446 | EXOR NV | 24,097 | ||||||
262 | Groupe Bruxelles Lambert SA | 22,751 | ||||||
681 | Industrivarden AB, Class C | 13,823 | ||||||
1,625 | Investor AB, Class B | 69,106 | ||||||
1,211 | Jefferies Financial Group, Inc. | 21,023 | ||||||
827 | Kinnevik AB | 20,021 | ||||||
342 | L E Lundbergforetagen AB | 10,114 | ||||||
1,300 | Mitsubishi UFJ Lease & Finance Co., Ltd. | 6,230 | ||||||
317 | Onex Corp. | 17,267 | ||||||
4,600 | ORIX Corp. | 66,845 | ||||||
88 | Pargesa Holding SA | 6,360 | ||||||
7,483 | Standard Life Aberdeen plc | 24,481 | ||||||
633 | Voya Financial, Inc. | 25,409 | ||||||
105 | Wendel | 12,593 | ||||||
|
| |||||||
1,341,804 | ||||||||
|
| |||||||
Diversified Telecommunication Services (2.0%): | ||||||||
25,757 | AT&T, Inc. | 735,105 | ||||||
597 | BCE, Inc. | 23,587 | ||||||
582 | Belgacom SA | 15,706 | ||||||
6,945 | Bezeq Israeli Telecommunication Corp., Ltd. (The) | 6,800 | ||||||
28,671 | BT Group plc | 86,775 | ||||||
3,542 | CenturyLink, Inc. | 53,661 | ||||||
11,755 | Deutsche Telekom AG, Registered Shares | 199,651 | ||||||
563 | Elisa OYJ | 23,311 | ||||||
7,242 | France Telecom SA | 117,177 | ||||||
14,000 | HKT Trust & HKT, Ltd. | 20,158 | ||||||
103 | Iliad SA | 14,393 | ||||||
10,691 | Koninklijke (Royal) KPN NV | 31,243 | ||||||
2,400 | Nippon Telegraph & Telephone Corp. | 97,732 | ||||||
21,000 | PCCW, Ltd. | 12,082 | ||||||
27,900 | Singapore Telecommunications, Ltd. | 59,860 | ||||||
88 | Swisscom AG, Registered Shares | 42,130 | ||||||
6,633 | Telecom Corp. of New Zealand, Ltd. | 18,417 | ||||||
21,887 | Telecom Italia SpA | 10,460 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Telecommunication Services, continued | ||||||||
41,770 | Telecom Italia SpA* | $ | 23,137 | |||||
3,135 | Telefonica Deutschland Holding AG | 12,265 | ||||||
16,429 | Telefonica SA | 138,646 | ||||||
2,495 | Telenor ASA | 48,196 | ||||||
10,107 | Telia Co AB | 47,987 | ||||||
12,950 | Telstra Corp., Ltd. | 25,989 | ||||||
752 | TELUS Corp.^ | 24,929 | ||||||
838 | TPG Telecom, Ltd. | 3,800 | ||||||
475 | United Internet AG, Registered Shares | 20,776 | ||||||
14,539 | Verizon Communications, Inc. | 817,382 | ||||||
709 | Zayo Group Holdings, Inc.* | 16,194 | ||||||
|
| |||||||
2,747,549 | ||||||||
|
| |||||||
Electric Utilities (2.0%): | ||||||||
765 | Alliant Energy Corp. | 32,321 | ||||||
1,767 | American Electric Power Co., Inc. | 132,066 | ||||||
6,654 | AusNet Services | 7,290 | ||||||
2,200 | Chubu Electric Power Co., Inc. | 31,288 | ||||||
1,100 | Chugoku Electric Power Co., Inc. (The) | 14,264 | ||||||
2,000 | CK Infrastructure Holdings, Ltd. | 15,098 | ||||||
6,000 | CLP Holdings, Ltd. | 67,640 | ||||||
2,524 | Duke Energy Corp. | 217,821 | ||||||
1,181 | Edison International | 67,045 | ||||||
9,354 | EDP — Energias de Portugal SA | 32,627 | ||||||
2,156 | Electricite de France | 33,967 | ||||||
225 | Emera, Inc. | 7,205 | ||||||
1,138 | Endesa SA^ | 26,188 | ||||||
28,886 | Enel SpA | 166,623 | ||||||
637 | Entergy Corp. | 54,827 | ||||||
999 | Evergy, Inc. | 56,713 | ||||||
1,167 | Eversource Energy | 75,902 | ||||||
3,369 | Exelon Corp. | 151,942 | ||||||
1,742 | FirstEnergy Corp. | 65,412 | ||||||
1,522 | Fortis, Inc. | 50,745 | ||||||
1,472 | Fortum OYJ | 32,280 | ||||||
7,500 | HK Electric Investments, Ltd.^ | 7,558 | ||||||
4,500 | Hongkong Electric Holdings, Ltd. | 31,244 | ||||||
1,223 | Hydro One, Ltd.^ | 18,143 | ||||||
21,782 | Iberdrola SA^ | 174,264 | ||||||
2,500 | Kansai Electric Power Co., Inc. (The) | 37,545 | ||||||
1,100 | Kyushu Electric Power Co., Inc. | 13,082 | ||||||
1,671 | NextEra Energy, Inc. | 290,453 | ||||||
776 | OGE Energy Corp. | 30,411 | ||||||
680 | Orsted A/S | 45,527 | ||||||
1,798 | PG&E Corp.* | 42,703 | ||||||
367 | Pinnacle West Capital Corp. | 31,268 | ||||||
2,382 | PPL Corp. | 67,482 | ||||||
1,396 | Red Electrica Corporacion SA | 31,091 | ||||||
3,382 | Scottish & Southern Energy plc | 46,493 | ||||||
3,593 | Southern Co. (The) | 157,805 | ||||||
5,043 | Terna SpA | 28,623 | ||||||
1,200 | Tohoku Electric Power Co., Inc. | 15,775 | ||||||
5,700 | Tokyo Electric Power Co., Inc. (The)* | 33,713 | ||||||
244 | Verbund AG, Class A | 10,411 | ||||||
1,789 | Xcel Energy, Inc. | 88,144 | ||||||
|
| |||||||
2,540,999 | ||||||||
|
|
See accompanying notes to the financial statements.
8
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electrical Equipment (0.9%): | ||||||||
6,365 | ABB, Ltd. | $ | 121,402 | |||||
124 | Acuity Brands, Inc. | 14,254 | ||||||
852 | AMETEK, Inc. | 57,680 | ||||||
1,570 | Eaton Corp. plc | 107,796 | ||||||
2,178 | Emerson Electric Co. | 130,135 | ||||||
400 | Fuji Electric Holdings Co., Ltd. | 11,665 | ||||||
901 | Legrand SA | 50,705 | ||||||
17,934 | Melrose Industries plc | 37,132 | ||||||
6,500 | Mitsubishi Electric Corp. | 71,269 | ||||||
800 | Nidec Corp. | 91,696 | ||||||
350 | OSRAM Licht AG | 15,194 | ||||||
907 | Prysmian SpA | 17,584 | ||||||
449 | Rockwell Automation, Inc. | 67,566 | ||||||
1,955 | Schneider Electric SA | 133,033 | ||||||
672 | Sensata Technologies Holding plc* | 30,132 | ||||||
973 | Siemens Gamesa Renewable Energy* | 11,788 | ||||||
702 | Vestas Wind Systems A/S | 53,313 | ||||||
|
| |||||||
1,022,344 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.8%): | ||||||||
700 | ALPS Electric Co., Ltd. | 13,521 | ||||||
1,094 | Amphenol Corp., Class A | 88,637 | ||||||
272 | Arrow Electronics, Inc.* | 18,754 | ||||||
509 | CDW Corp. | 41,254 | ||||||
658 | Cognex Corp. | 25,445 | ||||||
2,778 | Corning, Inc. | 83,923 | ||||||
2,085 | Flextronics International, Ltd.* | 15,867 | ||||||
420 | FLIR Systems, Inc. | 18,287 | ||||||
500 | Hamamatsu Photonics K.K. | 16,920 | ||||||
890 | Hexagon AB, Class B | 41,102 | ||||||
105 | Hirose Electric Co., Ltd. | 10,393 | ||||||
300 | Hitachi High-Technologies Corp. | 9,359 | ||||||
3,400 | Hitachi, Ltd. | 90,391 | ||||||
218 | Ingenico Group^ | 12,328 | ||||||
143 | IPG Photonics Corp.* | 16,200 | ||||||
300 | Keyence Corp. | 151,215 | ||||||
683 | Keysight Technologies, Inc.* | 42,401 | ||||||
1,200 | Kyocera Corp. | 59,683 | ||||||
600 | Murata Manufacturing Co., Ltd. | 82,684 | ||||||
400 | Nippon Electric Glass Co., Ltd. | 9,727 | ||||||
700 | Omron Corp. | 25,234 | ||||||
700 | Shimadzu Corp. | 13,699 | ||||||
400 | TDK Corp. | 28,466 | ||||||
1,254 | TE Connectivity, Ltd. | 94,840 | ||||||
896 | Trimble Navigation, Ltd.* | 29,487 | ||||||
1,000 | Venture Corp., Ltd. | 10,137 | ||||||
700 | Yaskawa Electric Corp. | 16,954 | ||||||
900 | Yokogawa Electric Corp. | 15,440 | ||||||
|
| |||||||
1,082,348 | ||||||||
|
| |||||||
Energy Equipment & Services (0.2%): | ||||||||
1,805 | Baker Hughes, a GE Co. | 38,808 | ||||||
2,980 | Halliburton Co. | 79,208 | ||||||
427 | Helmerich & Payne, Inc. | 20,470 | ||||||
2,567 | John Wood Group plc | 16,433 | ||||||
1,360 | National-Oilwell Varco, Inc. | 34,952 | ||||||
4,918 | Schlumberger, Ltd. | 177,441 | ||||||
1,519 | Technipfmc plc | 29,742 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Energy Equipment & Services, continued | ||||||||
1,915 | Tenaris SA | $ | 20,525 | |||||
1,151 | WorleyParsons, Ltd. | 9,255 | ||||||
|
| |||||||
426,834 | ||||||||
|
| |||||||
Entertainment (1.4%): | ||||||||
2,550 | Activision Blizzard, Inc. | 118,754 | ||||||
500 | DeNA Co., Ltd. | 8,322 | ||||||
1,079 | Electronic Arts, Inc.* | 85,144 | ||||||
300 | Konami Corp. | 13,212 | ||||||
765 | Liberty Media Group, Class C* | 23,486 | ||||||
548 | Live Nation, Inc.* | 26,989 | ||||||
1,531 | Netflix, Inc.* | 409,787 | ||||||
1,400 | Nexon Co., Ltd.* | 17,887 | ||||||
400 | Nintendo Co., Ltd. | 105,699 | ||||||
402 | Take-Two Interactive Software, Inc.* | 41,382 | ||||||
400 | Toho Co., Ltd. | 14,457 | ||||||
3,701 | Twenty-First Century Fox, Inc. | 178,092 | ||||||
1,543 | Twenty-First Century Fox, Inc., Class B | 73,725 | ||||||
274 | UbiSoft Entertainment SA* | 21,979 | ||||||
1,259 | Viacom, Inc., Class B | 32,356 | ||||||
3,773 | Vivendi Universal SA | 91,661 | ||||||
5,270 | Walt Disney Co. (The) | 577,855 | ||||||
|
| |||||||
1,840,787 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (2.4%): | ||||||||
373 | Alexandria Real Estate Equities, Inc. | 42,985 | ||||||
1,545 | American Tower Corp. | 244,404 | ||||||
9,400 | Ascendas Real Estate Investment Trust | 17,679 | ||||||
493 | AvalonBay Communities, Inc. | 85,807 | ||||||
553 | Boston Properties, Inc. | 62,240 | ||||||
2,984 | British Land Co. plc | 20,273 | ||||||
881 | Brookfield Property REIT, Inc., Class A | 14,184 | ||||||
349 | Camden Property Trust | 30,729 | ||||||
10,600 | CapitaLand Commercial Trust | 13,585 | ||||||
10,000 | CapitaMall Trust | 16,550 | ||||||
1,476 | Crown Castle International Corp. | 160,338 | ||||||
5 | Daiwahouse Residential Investment Corp. | 11,194 | ||||||
3,890 | Dexus Property Group | 29,086 | ||||||
710 | Digital Realty Trust, Inc. | 75,651 | ||||||
1,337 | Duke Realty Corp. | 34,628 | ||||||
272 | Equinix, Inc. | 95,896 | ||||||
1,317 | Equity Residential Property Trust | 86,935 | ||||||
221 | Essex Property Trust, Inc. | 54,191 | ||||||
424 | Extra Space Storage, Inc. | 38,364 | ||||||
237 | Federal Realty Investment Trust | 27,975 | ||||||
126 | Fonciere des Regions SA | 12,129 | ||||||
158 | Gecina SA | 20,394 | ||||||
7,223 | GPT Group | 27,161 | ||||||
290 | H&R Real Estate Investment Trust | 4,387 | ||||||
3,070 | Hammerson plc | 12,854 | ||||||
1,580 | HCP, Inc. | 44,129 | ||||||
2,539 | Host Hotels & Resorts, Inc. | 42,325 | ||||||
90 | ICADE | 6,841 | ||||||
1,183 | Invitation Homes, Inc. | 23,755 | ||||||
957 | Iron Mountain, Inc. | 31,016 | ||||||
2 | Japan Prime Realty Investment Corp. | 7,596 | ||||||
5 | Japan Real Estate Investment Corp. | 28,082 | ||||||
11 | Japan Retail Fund Investment Corp. | 22,028 |
See accompanying notes to the financial statements.
9
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Equity Real Estate Investment Trusts, continued | ||||||||
1,638 | Kimco Realty Corp. | $ | 23,997 | |||||
640 | Klepierre | 19,702 | ||||||
2,886 | Land Securities Group plc | 29,581 | ||||||
566 | Liberty Property Trust | 23,704 | ||||||
7,500 | Link REIT (The) | 75,534 | ||||||
365 | Macerich Co. (The) | 15,797 | ||||||
5,806 | Macquarie Goodman Group | 43,449 | ||||||
370 | Mid-America Apartment Communities, Inc. | 35,409 | ||||||
14,289 | Mirvac Group | 22,539 | ||||||
493 | National Retail Properties, Inc. | 23,915 | ||||||
5 | Nippon Building Fund, Inc. | 31,493 | ||||||
6 | Nippon Prologis REIT, Inc. | 12,668 | ||||||
15 | Nomura Real Estate Master Fund, Inc. | 19,743 | ||||||
2,185 | ProLogis, Inc. | 128,303 | ||||||
557 | Public Storage, Inc. | 112,742 | ||||||
1,040 | Realty Income Corp. | 65,562 | ||||||
566 | Regency Centers Corp. | 33,213 | ||||||
626 | RioCan REIT | 10,915 | ||||||
397 | SBA Communications Corp.* | 64,270 | ||||||
17,626 | Scentre Group | 48,403 | ||||||
3,901 | SERGO plc | 29,257 | ||||||
1,084 | Simon Property Group, Inc. | 182,101 | ||||||
320 | SL Green Realty Corp. | 25,306 | ||||||
240 | Smart Real Estate Investment Trust | 5,421 | ||||||
8,725 | Stockland Trust Group | 21,641 | ||||||
8,200 | Suntec REIT | 10,687 | ||||||
891 | UDR, Inc. | 35,301 | ||||||
491 | Unibail-Rodamco-Westfield | 75,833 | ||||||
11 | United Urban Investment Corp. | 17,059 | ||||||
1,261 | Ventas, Inc. | 73,882 | ||||||
2,998 | VEREIT, Inc. | 21,436 | ||||||
12,778 | Vicinity Centres | 23,391 | ||||||
592 | Vornado Realty Trust | 36,722 | ||||||
1,360 | Welltower, Inc. | 94,398 | ||||||
2,695 | Weyerhaeuser Co. | 58,913 | ||||||
576 | WP Carey, Inc. | 37,636 | ||||||
|
| |||||||
3,035,314 | ||||||||
|
| |||||||
Food & Staples Retailing (1.6%): | ||||||||
2,100 | Aeon Co., Ltd. | 41,334 | ||||||
1,573 | Alimentation Couche-Tard, Inc. | 78,257 | ||||||
2,139 | Carrefour SA | 36,452 | ||||||
240 | Casino Guichard-Perrachon SA | 9,962 | ||||||
4,032 | Coles Group, Ltd.* | 33,334 | ||||||
152 | Colruyt SA | 10,827 | ||||||
1,545 | Costco Wholesale Corp. | 314,732 | ||||||
1,200 | Dairy Farm International Holdings, Ltd. | 10,838 | ||||||
460 | Empire Co., Ltd., Class A | 9,716 | ||||||
200 | FamilyMart Co., Ltd. | 25,271 | ||||||
182 | ICA Gruppen AB | 6,515 | ||||||
6,388 | J Sainsbury plc | 21,537 | ||||||
1,005 | Jeronimo Martins SGPS SA | 11,897 | ||||||
4,353 | Koninklijke Ahold Delhaize NV | 109,801 | ||||||
2,807 | Kroger Co. (The) | 77,193 | ||||||
200 | LAWSON, Inc. | 12,701 | ||||||
685 | Loblaw Cos., Ltd. | 30,667 | ||||||
706 | METRO AG^ | 10,854 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food & Staples Retailing, continued | ||||||||
776 | Metro, Inc. | $ | 26,913 | |||||
2,700 | Seven & I Holdings Co., Ltd. | 117,580 | ||||||
200 | Sundrug Co., Ltd. | 5,950 | ||||||
1,723 | Sysco Corp. | 107,963 | ||||||
34,175 | Tesco plc | 82,799 | ||||||
100 | Tsuruha Holdings, Inc. | 8,579 | ||||||
2,951 | Walgreens Boots Alliance, Inc. | 201,642 | ||||||
5,233 | Wal-Mart Stores, Inc. | 487,453 | ||||||
200 | Welcia Holdings Co., Ltd. | 9,085 | ||||||
4,032 | Wesfarmers, Ltd. | 91,545 | ||||||
310 | Weston (George), Ltd. | 20,451 | ||||||
8,734 | William Morrison Supermarkets plc | 23,669 | ||||||
4,614 | Woolworths, Ltd. | 95,586 | ||||||
|
| |||||||
2,131,103 | ||||||||
|
| |||||||
Food Products (1.8%): | ||||||||
2,687 | A2 Milk Co., Ltd.* | 19,865 | ||||||
1,500 | Ajinomoto Co., Inc. | 26,614 | ||||||
1,952 | Archer-Daniels-Midland Co. | 79,973 | ||||||
1,195 | Associated British Foods plc | 31,075 | ||||||
8 | Barry Callebaut AG, Registered Shares | 12,446 | ||||||
553 | Bunge, Ltd. | 29,552 | ||||||
300 | Calbee, Inc. | 9,377 | ||||||
713 | Campbell Soup Co. | 23,522 | ||||||
1,740 | Conagra Brands, Inc. | 37,166 | ||||||
2,221 | Danone SA | 156,513 | ||||||
2,121 | General Mills, Inc. | 82,592 | ||||||
17,600 | Golden Agri-Resources, Ltd. | 3,156 | ||||||
477 | Hershey Co. (The) | 51,125 | ||||||
1,046 | Hormel Foods Corp. | 44,643 | ||||||
220 | Ingredion, Inc. | 20,108 | ||||||
436 | JM Smucker Co. (The) | 40,762 | ||||||
921 | Kellogg Co. | 52,506 | ||||||
593 | Kerry Group plc, Class A | 58,572 | ||||||
500 | Kikkoman Corp. | 26,836 | ||||||
2,157 | Kraft Heinz Co. (The) | 92,837 | ||||||
525 | Lamb Weston Holdings, Inc. | 38,619 | ||||||
4 | Lindt & Spruengli AG | 24,858 | ||||||
1,474 | Marine Harvest | 31,051 | ||||||
410 | McCormick & Co. | 57,088 | ||||||
400 | Meiji Holdings Co., Ltd. | 32,598 | ||||||
5,133 | Mondelez International, Inc., Class A | 205,475 | ||||||
10,978 | Nestle SA, Registered Shares | 892,884 | ||||||
300 | Nippon Meat Packers, Inc. | 11,279 | ||||||
800 | Nisshin Seifun Group, Inc. | 16,518 | ||||||
200 | Nissin Foods Holdings Co., Ltd. | 12,552 | ||||||
3,107 | Orkla ASA, Class A | 24,448 | ||||||
790 | Saputo, Inc. | 22,681 | ||||||
300 | Toyo Suisan Kaisha, Ltd. | 10,471 | ||||||
1,095 | Tyson Foods, Inc., Class A | 58,473 | ||||||
31,500 | WH Group, Ltd. | 24,021 | ||||||
7,700 | Wilmar International, Ltd. | 17,645 | ||||||
400 | Yakult Honsha Co., Ltd. | 28,049 | ||||||
500 | Yamazaki Baking Co., Ltd. | 10,476 | ||||||
|
| |||||||
2,418,426 | ||||||||
|
| |||||||
Gas Utilities (0.3%): | ||||||||
608 | AltaGas, Ltd. | 6,191 |
See accompanying notes to the financial statements.
10
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Gas Utilities, continued | ||||||||
3,678 | APA Group | $ | 22,014 | |||||
417 | Atmos Energy Corp. | 38,665 | ||||||
1,377 | Gas Natural SDG SA | 34,929 | ||||||
32,340 | Hong Kong & China Gas Co., Ltd. | 66,748 | ||||||
1,300 | Osaka Gas Co., Ltd. | 23,758 | ||||||
300 | Toho Gas Co., Ltd. | 12,643 | ||||||
1,400 | Tokyo Gas Co., Ltd. | 35,410 | ||||||
558 | UGI Corp. | 29,769 | ||||||
|
| |||||||
270,127 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (2.6%): | ||||||||
6,236 | Abbott Laboratories | 451,050 | ||||||
153 | ABIOMED, Inc.* | 49,731 | ||||||
280 | Align Technology, Inc.* | 58,640 | ||||||
300 | Asahi Intecc Co., Ltd. | 12,771 | ||||||
1,790 | Baxter International, Inc. | 117,818 | ||||||
929 | Becton, Dickinson & Co. | 209,322 | ||||||
159 | bioMerieux | 10,479 | ||||||
4,956 | Boston Scientific Corp.* | 175,145 | ||||||
212 | Cochlear, Ltd. | 25,755 | ||||||
461 | Coloplast A/S, Class B | 42,833 | ||||||
4,781 | Convatec Group plc | 8,444 | ||||||
163 | Cooper Cos., Inc. (The) | 41,484 | ||||||
2,230 | Danaher Corp. | 229,958 | ||||||
721 | Dentsply Sirona, Inc. | 26,828 | ||||||
317 | DexCom, Inc.* | 37,977 | ||||||
747 | Edwards Lifesciences Corp.* | 114,418 | ||||||
1,016 | Essilor International SA Compagnie Generale d’Optique | 128,276 | ||||||
1,684 | Fisher & Paykel Healthcare Corp., Ltd. | 14,597 | ||||||
974 | Hologic, Inc.* | 40,031 | ||||||
1,300 | HOYA Corp. | 79,470 | ||||||
314 | IDEXX Laboratories, Inc.* | 58,410 | ||||||
405 | Intuitive Surgical, Inc.* | 193,963 | ||||||
3,253 | Koninklijke Philips Electronics NV | 114,630 | ||||||
4,741 | Medtronic plc | 431,241 | ||||||
1,100 | Olympus Co., Ltd. | 33,641 | ||||||
482 | ResMed, Inc. | 54,885 | ||||||
129 | Sartorius AG | 16,107 | ||||||
556 | Siemens Healthineers AG* | 23,276 | ||||||
2,931 | Smith & Nephew plc | 54,503 | ||||||
211 | Sonova Holding AG, Registered Shares | 34,418 | ||||||
39 | Straumann Holding AG, Registered Shares | 24,678 | ||||||
1,183 | Stryker Corp. | 185,435 | ||||||
600 | Sysmex Corp. | 28,952 | ||||||
170 | Teleflex, Inc. | 43,942 | ||||||
1,000 | Terumo Corp. | 56,187 | ||||||
318 | Varian Medical Systems, Inc.* | 36,033 | ||||||
379 | William Demant Holding A/S* | 10,746 | ||||||
735 | Zimmer Holdings, Inc. | 76,234 | ||||||
|
| |||||||
3,352,308 | ||||||||
|
| |||||||
Health Care Providers & Services (2.0%): | ||||||||
700 | Alfresa Holdings Corp. | 18,113 | ||||||
588 | AmerisourceBergen Corp. | 43,747 | ||||||
907 | Anthem, Inc. | 238,205 | ||||||
1,143 | Cardinal Health, Inc. | 50,978 | ||||||
746 | Centene Corp.* | 86,014 | ||||||
1,348 | Cigna Corp. | 256,012 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Providers & Services, continued | ||||||||
4,594 | CVS Health Corp. | $ | 300,999 | |||||
479 | DaVita, Inc.* | 24,649 | ||||||
746 | Fresenius Medical Care AG & Co., KGaA | 48,451 | ||||||
1,407 | Fresenius SE & Co. KGaA | 68,001 | ||||||
982 | HCA Healthcare, Inc. | 122,210 | ||||||
559 | Henry Schein, Inc.* | 43,893 | ||||||
479 | Humana, Inc. | 137,224 | ||||||
366 | Laboratory Corp. of America Holdings* | 46,248 | ||||||
692 | McKesson Corp. | 76,445 | ||||||
400 | Medipal Holdings Corp. | 8,654 | ||||||
378 | NMC Health plc | 13,212 | ||||||
496 | Quest Diagnostics, Inc. | 41,302 | ||||||
548 | Ramsay Health Care, Ltd. | 22,277 | ||||||
947 | Ryman Healthcare, Ltd. | 6,803 | ||||||
1,491 | Sonic Healthcare, Ltd. | 23,213 | ||||||
300 | Suzuken Co., Ltd. | 15,399 | ||||||
3,389 | UnitedHealth Group, Inc. | 844,267 | ||||||
292 | Universal Health Services, Inc., Class B | 34,036 | ||||||
179 | WellCare Health Plans, Inc.* | 42,260 | ||||||
|
| |||||||
2,612,612 | ||||||||
|
| |||||||
Health Care Technology (0.1%): | ||||||||
1,083 | Cerner Corp.* | 56,793 | ||||||
1,400 | M3, Inc. | 18,974 | ||||||
435 | Veeva Systems, Inc., Class A* | 38,854 | ||||||
|
| |||||||
114,621 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.7%): | ||||||||
683 | Accor SA | 28,961 | ||||||
929 | Aramark Holdings Corp. | 26,913 | ||||||
2,102 | Aristocrat Leisure, Ltd. | 32,096 | ||||||
1,555 | Carnival Corp., Class A | 76,662 | ||||||
602 | Carnival plc | 28,872 | ||||||
93 | Chipotle Mexican Grill, Inc.* | 40,156 | ||||||
5,600 | Compass Group plc | 117,552 | ||||||
1,460 | Crown, Ltd. | 12,193 | ||||||
413 | Darden Restaurants, Inc. | 41,242 | ||||||
255 | Domino’s Pizza Enterprises, Ltd. | 7,299 | ||||||
131 | Domino’s Pizza, Inc. | 32,487 | ||||||
207 | Flight Centre, Ltd. | 6,256 | ||||||
7,000 | Galaxy Entertainment Group, Ltd. | 43,941 | ||||||
21,700 | Genting Singapore, Ltd. | 15,538 | ||||||
1,984 | GVC Holdings plc | 17,050 | ||||||
1,039 | Hilton Worldwide Holdings, Inc. | 74,600 | ||||||
574 | Intercontinental Hotels Group plc | 30,887 | ||||||
1,404 | Las Vegas Sands Corp. | 73,078 | ||||||
1,017 | Marriott International, Inc., Class A | 110,406 | ||||||
2,750 | McDonald’s Corp. | 488,317 | ||||||
200 | McDonald’s Holdings Co., Ltd.^ | 8,522 | ||||||
763 | Melco Resorts & Entertainment, Ltd., ADR | 13,444 | ||||||
2,822 | Merlin Entertainments plc | 11,419 | ||||||
2,400 | MGM China Holdings, Ltd. | 4,040 | ||||||
1,831 | MGM Resorts International | 44,420 | ||||||
784 | Norwegian Cruise Line Holdings, Ltd.* | 33,234 | ||||||
700 | Oriental Land Co., Ltd. | 71,082 | ||||||
308 | Paddy Power plc | 25,230 | ||||||
873 | Restaurant Brands International, Inc. | 45,614 | ||||||
578 | Royal Caribbean Cruises, Ltd. | 56,523 |
See accompanying notes to the financial statements.
11
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
8,000 | Sands China, Ltd. | $ | 34,646 | |||||
4,000 | Shangri-La Asia, Ltd. | 5,894 | ||||||
10,000 | SJM Holdings, Ltd. | 9,220 | ||||||
301 | Sodexo SA | 30,780 | ||||||
4,778 | Starbucks Corp. | 307,703 | ||||||
634 | Stars Group, Inc. (The)* | 10,469 | ||||||
5,762 | Tabcorp Holdings, Ltd. | 17,406 | ||||||
1,739 | TUI AG | 24,953 | ||||||
136 | Vail Resorts, Inc. | 28,672 | ||||||
593 | Whitbread plc | 34,515 | ||||||
5,200 | Wynn Macau, Ltd. | 11,190 | ||||||
365 | Wynn Resorts, Ltd. | 36,102 | ||||||
1,155 | Yum! Brands, Inc. | 106,168 | ||||||
|
| |||||||
2,275,752 | ||||||||
|
| |||||||
Household Durables (0.6%): | ||||||||
3,899 | Barratt Developments plc | 23,011 | ||||||
503 | Berkeley Group Holdings plc (The) | 22,307 | ||||||
900 | Casio Computer Co., Ltd. | 10,783 | ||||||
1,209 | D.R. Horton, Inc. | 41,903 | ||||||
862 | Electrolux AB, Series B, B Shares | 18,274 | ||||||
343 | Garmin, Ltd. | 21,719 | ||||||
1,713 | Husqvarna AB, Class B | 12,743 | ||||||
600 | Iida Group Holdings Co., Ltd. | 10,485 | ||||||
538 | Leggett & Platt, Inc. | 19,282 | ||||||
1,070 | Lennar Corp., Class A | 41,890 | ||||||
220 | Mohawk Industries, Inc.* | 25,731 | ||||||
1,786 | Newell Brands, Inc. | 33,202 | ||||||
1,300 | Nikon Corp. | 19,267 | ||||||
11 | NVR, Inc.* | 26,807 | ||||||
8,200 | Panasonic Corp. | 73,585 | ||||||
1,137 | Persimmon plc | 27,852 | ||||||
948 | PulteGroup, Inc. | 24,639 | ||||||
100 | Rinnai Corp. | 6,550 | ||||||
92 | SEB SA | 11,838 | ||||||
1,200 | Sekisui Chemical Co., Ltd. | 17,758 | ||||||
1,900 | Sekisui House, Ltd. | 27,861 | ||||||
800 | Sharp Corp. | 8,131 | ||||||
4,500 | Sony Corp. | 216,735 | ||||||
10,282 | Taylor Wimpey plc | 17,782 | ||||||
4,000 | Techtronic Industries Co., Ltd. | 21,085 | ||||||
255 | Whirlpool Corp. | 27,252 | ||||||
|
| |||||||
808,472 | ||||||||
|
| |||||||
Household Products (1.2%): | ||||||||
869 | Church & Dwight Co., Inc. | 57,145 | ||||||
440 | Clorox Co. (The) | 67,822 | ||||||
2,895 | Colgate-Palmolive Co. | 172,310 | ||||||
2,044 | Essity AB, Class B | 50,257 | ||||||
336 | Henkel AG & Co. KGaA | 33,039 | ||||||
1,250 | Kimberly-Clark Corp. | 142,425 | ||||||
1,000 | Lion Corp. | 20,630 | ||||||
400 | Pigeon Corp. | 17,274 | ||||||
8,829 | Procter & Gamble Co. (The) | 811,562 | ||||||
2,332 | Reckitt Benckiser Group plc | 178,058 | ||||||
1,300 | Unicharm Corp. | 42,005 | ||||||
|
| |||||||
1,592,527 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Independent Power and Renewable Electricity Producers (0.1%): | ||||||||
2,498 | AES Corp. (The) | $ | 36,121 | |||||
500 | Electric Power Development Co., Ltd. | 11,844 | ||||||
3,164 | Meridian Energy, Ltd. | 7,200 | ||||||
1,087 | NRG Energy, Inc. | 43,045 | ||||||
787 | Uniper SE | 20,373 | ||||||
1,185 | Vistra Energy Corp.* | 27,125 | ||||||
|
| |||||||
145,708 | ||||||||
|
| |||||||
Industrial Conglomerates (1.4%): | ||||||||
2,081 | 3M Co., Class C | 396,514 | ||||||
9,500 | CK Hutchison Holdings, Ltd. | 90,791 | ||||||
329 | DCC plc | 25,006 | ||||||
30,807 | General Electric Co. | 233,209 | ||||||
2,627 | Honeywell International, Inc. | 347,079 | ||||||
800 | Jardine Matheson Holdings, Ltd. | 55,703 | ||||||
700 | Jardine Strategic Holdings, Ltd. | 25,574 | ||||||
400 | Keihan Electric Railway Co., Ltd. | 16,273 | ||||||
4,300 | Keppel Corp., Ltd. | 18,687 | ||||||
5,370 | NWS Holdings, Ltd. | 11,021 | ||||||
361 | Roper Industries, Inc. | 96,214 | ||||||
700 | Seibu Holdings, Inc. | 12,144 | ||||||
3,000 | SembCorp Industries, Ltd. | 5,604 | ||||||
2,721 | Siemens AG, Registered Shares | 303,430 | ||||||
1,528 | Smiths Group plc | 26,451 | ||||||
2,300 | Toshiba Corp. | 65,300 | ||||||
|
| |||||||
1,729,000 | ||||||||
|
| |||||||
Insurance (4.0%): | ||||||||
586 | Admiral Group plc | 15,231 | ||||||
6,113 | AEGON NV | 28,414 | ||||||
2,742 | Aflac, Inc. | 124,926 | ||||||
624 | Ageas NV | 28,029 | ||||||
43,200 | AIA Group, Ltd. | 355,397 | ||||||
57 | Alleghany Corp. | 35,529 | ||||||
1,541 | Allianz SE, Registered Shares+ | 309,184 | ||||||
1,256 | Allstate Corp. (The) | 103,783 | ||||||
235 | American Financial Group, Inc. | 21,275 | ||||||
3,162 | American International Group, Inc. | 124,614 | ||||||
843 | Aon plc | 122,538 | ||||||
1,506 | Arch Capital Group, Ltd.* | 40,239 | ||||||
626 | Arthur J. Gallagher & Co. | 46,136 | ||||||
4,263 | Assicurazioni Generali SpA | 71,325 | ||||||
174 | Assurant, Inc. | 15,563 | ||||||
572 | Athene Holding, Ltd.* | 22,783 | ||||||
13,387 | Aviva plc | 63,839 | ||||||
7,004 | AXA SA | 150,885 | ||||||
160 | Baloise Holding AG, Registered Shares | 22,093 | ||||||
327 | Brighthouse Financial, Inc.* | 9,967 | ||||||
1,663 | Chubb, Ltd. | 214,826 | ||||||
539 | Cincinnati Financial Corp. | 41,729 | ||||||
697 | CNP Assurances SA | 14,741 | ||||||
3,700 | Dai-ichi Life Insurance Co., Ltd. | 57,340 | ||||||
5,556 | Direct Line Insurance Group plc | 22,500 | ||||||
130 | Everest Re Group, Ltd. | 28,309 | ||||||
91 | Fairfax Financial Holdings, Ltd. | 40,065 | ||||||
928 | FNF Group | 29,176 | ||||||
727 | Gjensidige Forsikring ASA | 11,331 |
See accompanying notes to the financial statements.
12
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Insurance, continued | ||||||||
1,141 | Great-West Lifeco, Inc. | $ | 23,556 | |||||
228 | Hannover Rueck SE | 30,730 | ||||||
1,259 | Hartford Financial Services Group, Inc. (The) | 55,963 | ||||||
396 | Industrial Alliance Insurance & Financial Services, Inc. | 12,640 | ||||||
8,236 | Insurance Australia Group, Ltd. | 40,596 | ||||||
462 | Intact Financial Corp. | 33,572 | ||||||
5,500 | Japan Post Holdings Co., Ltd. | 63,245 | ||||||
22,081 | Legal & General Group plc | 64,782 | ||||||
739 | Lincoln National Corp. | 37,918 | ||||||
993 | Loews Corp. | 45,201 | ||||||
6,859 | Manulife Financial Corp. | 97,332 | ||||||
2,456 | MAPFRE SA^ | 6,509 | ||||||
47 | Markel Corp.* | 48,788 | ||||||
1,777 | Marsh & McLennan Cos., Inc. | 141,717 | ||||||
10,769 | Medibank Private, Ltd. | 19,489 | ||||||
3,031 | MetLife, Inc. | 124,453 | ||||||
1,600 | MS&AD Insurance Group Holdings, Inc. | 45,423 | ||||||
523 | Muenchener Rueckversicherungs-Gesellschaft AG | 114,119 | ||||||
1,200 | NKSJ Holdings, Inc. | 40,511 | ||||||
1,129 | NN Group NV | 44,843 | ||||||
1,409 | Poste Italiane SpA | 11,307 | ||||||
1,028 | Power Corp. of Canada | 18,474 | ||||||
922 | Power Financial Corp. | 17,447 | ||||||
968 | Principal Financial Group, Inc. | 42,757 | ||||||
2,056 | Progressive Corp. (The) | 124,038 | ||||||
1,492 | Prudential Financial, Inc. | 121,673 | ||||||
8,994 | Prudential plc | 160,671 | ||||||
4,484 | QBE Insurance Group, Ltd. | 31,890 | ||||||
228 | Reinsurance Group of America, Inc. | 31,972 | ||||||
160 | RenaissanceRe Holdings, Ltd. | 21,392 | ||||||
4,071 | RSA Insurance Group plc | 26,558 | ||||||
1,525 | Sampo OYJ, Class A | 67,032 | ||||||
535 | SCOR SA | 24,092 | ||||||
500 | Sony Financial Holdings, Inc. | 9,282 | ||||||
2,176 | Sun Life Financial, Inc. | 72,199 | ||||||
4,547 | Suncorp-Metway, Ltd. | 40,439 | ||||||
130 | Swiss Life Holding AG, Registered Shares | 50,198 | ||||||
1,048 | Swiss Re AG | 96,332 | ||||||
1,800 | T&D Holdings, Inc. | 20,768 | ||||||
2,400 | Tokio Marine Holdings, Inc. | 114,101 | ||||||
389 | Torchmark Corp. | 28,992 | ||||||
948 | Travelers Cos., Inc. (The) | 113,523 | ||||||
433 | Tryg A/S | 10,902 | ||||||
730 | UnumProvident Corp. | 21,447 | ||||||
358 | W.R. Berkley Corp. | 26,460 | ||||||
443 | Willis Towers Watson plc | 67,274 | ||||||
551 | Zurich Insurance Group AG | 164,700 | ||||||
|
| |||||||
4,799,074 | ||||||||
|
| |||||||
Interactive Media & Services (2.8%): | ||||||||
1,053 | Alphabet, Inc., Class A* | 1,100,343 | ||||||
1,110 | Alphabet, Inc., Class C* | 1,149,527 | ||||||
3,847 | Auto Trader Group plc | 22,199 | ||||||
8,506 | Facebook, Inc., Class A* | 1,115,052 | ||||||
281 | IAC/InterActiveCorp.* | 51,434 | ||||||
700 | Kakaku.com, Inc. | 12,312 | ||||||
200 | Line Corp.* | 6,838 | ||||||
117 | REA Group, Ltd. | 6,095 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Interactive Media & Services, continued | ||||||||
342 | TripAdvisor, Inc.* | $ | 18,447 | |||||
2,488 | Twitter, Inc.* | 71,505 | ||||||
10,200 | Yahoo! Japan Corp. | 25,628 | ||||||
443 | Zillow Group, Inc., Class C*^ | 13,990 | ||||||
|
| |||||||
3,593,370 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (2.1%): | ||||||||
1,465 | Amazon.com, Inc.* | 2,200,387 | ||||||
167 | Booking Holdings, Inc.* | 287,644 | ||||||
335 | Delivery Hero AG* | 12,440 | ||||||
3,315 | eBay, Inc.* | 93,052 | ||||||
419 | Expedia, Inc. | 47,200 | ||||||
324 | GrubHub, Inc.* | 24,886 | ||||||
151 | MercadoLibre, Inc.* | 44,220 | ||||||
1,663 | Qurate Retail, Inc.* | 32,462 | ||||||
3,100 | Rakuten, Inc. | 20,615 | ||||||
700 | Start Today Co., Ltd. | 12,637 | ||||||
203 | Wayfair, Inc., Class A* | 18,286 | ||||||
340 | Zalando SE*^ | 8,736 | ||||||
|
| |||||||
2,802,565 | ||||||||
|
| |||||||
IT Services (3.4%): | ||||||||
2,253 | Accenture plc, Class C | 317,697 | ||||||
597 | Akamai Technologies, Inc.* | 36,465 | ||||||
169 | Alliance Data Systems Corp. | 25,364 | ||||||
1,573 | Amadeus IT Holding SA | 109,512 | ||||||
346 | Atos Origin SA | 28,148 | ||||||
1,534 | Automatic Data Processing, Inc. | 201,138 | ||||||
403 | Broadridge Financial Solutions, Inc. | 38,789 | ||||||
584 | Capgemini SA | 57,648 | ||||||
903 | CGI Group, Inc., Class A* | 55,238 | ||||||
2,065 | Cognizant Technology Solutions Corp., Class A | 131,086 | ||||||
1,800 | Computershare, Ltd. | 21,788 | ||||||
1,004 | DXC Technology Co. | 53,383 | ||||||
1,178 | Fidelity National Information Services, Inc. | 120,804 | ||||||
1,734 | First Data Corp., Class A* | 29,322 | ||||||
1,435 | Fiserv, Inc.* | 105,458 | ||||||
295 | FleetCor Technologies, Inc.* | 54,787 | ||||||
700 | Fujitsu, Ltd. | 43,889 | ||||||
324 | Gartner, Inc.* | 41,420 | ||||||
543 | Global Payments, Inc. | 56,000 | ||||||
543 | GoDaddy, Inc., Class A* | 35,632 | ||||||
3,237 | International Business Machines Corp. | 367,950 | ||||||
261 | Jack Henry & Associates, Inc. | 33,022 | ||||||
478 | Leidos Holdings, Inc. | 25,200 | ||||||
3,264 | MasterCard, Inc., Class A | 615,754 | ||||||
440 | Nomura Research Institute, Ltd. | 16,177 | ||||||
2,500 | NTT Data Corp. | 27,317 | ||||||
200 | OBIC Co., Ltd. | 15,308 | ||||||
400 | Otsuka Corp. | 10,953 | ||||||
1,176 | Paychex, Inc. | 76,616 | ||||||
3,936 | PayPal Holdings, Inc.* | 330,978 | ||||||
986 | Sabre Corp. | 21,337 | ||||||
300 | Shopify, Inc., Class A* | 41,535 | ||||||
1,081 | Square, Inc., Class A* | 60,633 | ||||||
563 | Total System Services, Inc. | 45,766 | ||||||
393 | VeriSign, Inc.* | 58,278 | ||||||
6,301 | Visa, Inc., Class A | 831,353 |
See accompanying notes to the financial statements.
13
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services, continued | ||||||||
1,477 | Western Union Co. | $ | 25,198 | |||||
411 | Wirecard AG | 62,559 | ||||||
155 | Wix.com, Ltd.* | 14,003 | ||||||
1,079 | Worldpay, Inc., Class A* | 82,468 | ||||||
|
| |||||||
4,325,973 | ||||||||
|
| |||||||
Leisure Products (0.2%): | ||||||||
443 | Hasbro, Inc. | 35,993 | ||||||
1,326 | Mattel, Inc.*^ | 13,247 | ||||||
700 | Namco Bandai Holdings, Inc. | 31,236 | ||||||
239 | Polaris Industries, Inc. | 18,327 | ||||||
200 | Sankyo Co., Ltd. | 7,574 | ||||||
800 | Sega Sammy Holdings, Inc. | 11,283 | ||||||
200 | Shimano, Inc. | 28,437 | ||||||
500 | Yamaha Corp. | 21,231 | ||||||
|
| |||||||
167,328 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.7%): | ||||||||
1,170 | Agilent Technologies, Inc. | 78,928 | ||||||
44 | Eurofins Scientific SE | 16,337 | ||||||
508 | Illumina, Inc.* | 152,364 | ||||||
581 | IQVIA Holdings, Inc.* | 67,495 | ||||||
267 | Lonza Group AG, Registered Shares | 69,442 | ||||||
83 | Mettler-Toledo International, Inc.* | 46,943 | ||||||
839 | Qiagen NV* | 28,605 | ||||||
99 | Sartorius Stedim Biotech | 9,877 | ||||||
1,422 | Thermo Fisher Scientific, Inc. | 318,230 | ||||||
282 | Waters Corp.* | 53,199 | ||||||
|
| |||||||
841,420 | ||||||||
|
| |||||||
Machinery (1.8%): | ||||||||
1,121 | Alfa Laval AB | 23,945 | ||||||
607 | Alstom SA | 24,445 | ||||||
1,300 | AMADA Co., Ltd. | 11,596 | ||||||
291 | Andritz AG | 13,384 | ||||||
2,458 | Atlas Copco AB, Class A | 58,756 | ||||||
1,444 | Atlas Copco AB, Class B | 31,677 | ||||||
2,118 | Caterpillar, Inc. | 269,134 | ||||||
3,515 | CNH Industrial NV | 31,618 | ||||||
528 | Cummins, Inc. | 70,562 | ||||||
400 | Daifuku Co., Ltd. | 18,034 | ||||||
1,074 | Deere & Co. | 160,209 | ||||||
526 | Dover Corp. | 37,320 | ||||||
2,458 | Epiroc AB, Class A* | 23,356 | ||||||
1,444 | Epiroc AB, Class B* | 12,933 | ||||||
700 | FANUC Corp. | 105,252 | ||||||
458 | Flowserve Corp. | 17,413 | ||||||
1,055 | Fortive Corp. | 71,381 | ||||||
524 | GEA Group AG | 13,511 | ||||||
1,200 | Hino Motors, Ltd. | 11,270 | ||||||
200 | Hitachi Construction Machinery Co., Ltd. | 4,633 | ||||||
200 | Hoshizaki Electric Co., Ltd. | 12,253 | ||||||
258 | IDEX Corp. | 32,575 | ||||||
600 | IHI Corp. | 16,472 | ||||||
1,072 | Illinois Tool Works, Inc. | 135,812 | ||||||
891 | Ingersoll-Rand plc | 81,286 | ||||||
800 | JTEKT Corp. | 8,854 | ||||||
500 | Kawasaki Heavy Industries, Ltd. | 10,634 | ||||||
282 | Kion Group AG | 14,310 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
3,300 | Komatsu, Ltd. | $ | 70,305 | |||||
1,245 | Kone OYJ, Class B | 59,299 | ||||||
3,700 | Kubota Corp. | 52,106 | ||||||
200 | Kurita Water Industries, Ltd. | 4,805 | ||||||
800 | Makita Corp. | 28,333 | ||||||
472 | Metso Corp. OYJ | 12,448 | ||||||
210 | Middleby Corp. (The)* | 21,573 | ||||||
1,400 | Minebea Co., Ltd. | 20,107 | ||||||
1,000 | Misumi Group, Inc. | 20,873 | ||||||
1,100 | Mitsubishi Heavy Industries, Ltd. | 39,517 | ||||||
400 | Nabtesco Corp. | 8,608 | ||||||
1,000 | NGK Insulators, Ltd. | 13,482 | ||||||
1,100 | NSK, Ltd. | 9,431 | ||||||
1,294 | PACCAR, Inc. | 73,939 | ||||||
468 | Parker Hannifin Corp. | 69,798 | ||||||
503 | Pentair plc | 19,003 | ||||||
3,740 | Sandvik AB | 53,543 | ||||||
141 | Schindler Holding AG | 28,024 | ||||||
74 | Schindler Holding AG, Registered Shares | 14,397 | ||||||
1,203 | SKF AB, Class B | 18,328 | ||||||
200 | SMC Corp. | 59,748 | ||||||
190 | Snap-On, Inc. | 27,605 | ||||||
529 | Stanley Black & Decker, Inc. | 63,342 | ||||||
400 | Sumitomo Heavy Industries, Ltd. | 11,794 | ||||||
400 | THK Co., Ltd. | 7,434 | ||||||
5,294 | Volvo AB, Class B | 69,648 | ||||||
210 | WABCO Holdings, Inc.* | 22,541 | ||||||
287 | Wabtec Corp.^ | 20,162 | ||||||
1,402 | Wartsila Corp. OYJ, Class B | 22,247 | ||||||
830 | Weir Group plc (The) | 13,645 | ||||||
611 | Xylem, Inc. | 40,766 | ||||||
8,500 | Yangzijiang Shipbuilding Holdings, Ltd. | 7,730 | ||||||
|
| |||||||
2,327,206 | ||||||||
|
| |||||||
Marine (0.0%)†: | ||||||||
11 | A.P. Moeller — Maersk A/S, Class A | 12,986 | ||||||
22 | A.P. Moeller — Maersk A/S, Class B | 27,770 | ||||||
180 | Kuehne & Nagel International AG, Registered Shares | 23,214 | ||||||
500 | Mitsui O.S.K. Lines, Ltd. | 10,865 | ||||||
600 | Nippon Yusen Kabushiki Kaisha | 9,298 | ||||||
|
| |||||||
84,133 | ||||||||
|
| |||||||
Media (0.9%): | ||||||||
179 | Axel Springer AG | 10,120 | ||||||
1,226 | CBS Corp., Class B | 53,601 | ||||||
564 | Charter Communications, Inc., Class A* | 160,723 | ||||||
16,218 | Comcast Corp., Class A | 552,224 | ||||||
400 | Cyberagent, Inc. | 15,621 | ||||||
800 | Dentsu, Inc. | 35,569 | ||||||
447 | Discovery Communications, Inc., Class A* | 11,059 | ||||||
1,175 | Discovery Communications, Inc., Class C* | 27,119 | ||||||
890 | DISH Network Corp., Class A* | 22,223 | ||||||
678 | Eutelsat Communications SA | 13,406 | ||||||
600 | Hakuhodo DY Holdings, Inc. | 8,515 | ||||||
4,548 | Informa plc | 36,464 | ||||||
1,246 | Interpublic Group of Cos., Inc. (The) | 25,705 | ||||||
13,978 | ITV plc | 22,179 | ||||||
176 | JCDecaux SA | 4,925 |
See accompanying notes to the financial statements.
14
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media, continued | ||||||||
341 | Liberty Broadband Corp., Class C* | $ | 24,562 | |||||
692 | Liberty Global plc, Class A* | 14,767 | ||||||
1,880 | Liberty Global plc, Class C* | 38,803 | ||||||
369 | Liberty SiriusXM Group, Class A* | 13,579 | ||||||
619 | Liberty SiriusXM Group, Class C* | 22,891 | ||||||
1,432 | News Corp., Class A | 16,253 | ||||||
804 | Omnicom Group, Inc.^ | 58,885 | ||||||
2,536 | Pearson plc | 30,228 | ||||||
854 | ProSiebenSat.1 Media AG | 15,187 | ||||||
762 | Publicis Groupe SA | 43,605 | ||||||
170 | RTL Group | 9,098 | ||||||
351 | Schibsted ASA, Class B | 10,656 | ||||||
1,102 | SES Global, Class A | 21,105 | ||||||
1,640 | Shaw Communications, Inc., Class B | 29,688 | ||||||
1,500 | Singapore Press Holdings, Ltd. | 2,578 | ||||||
5,788 | Sirius XM Holdings, Inc.^ | 33,049 | ||||||
227 | Telenet Group Holding NV | 10,537 | ||||||
4,388 | WPP plc | 47,121 | ||||||
|
| |||||||
1,442,045 | ||||||||
|
| |||||||
Metals & Mining (1.7%): | ||||||||
732 | Agnico Eagle Mines, Ltd. | 29,548 | ||||||
10,099 | Alumina, Ltd. | 16,209 | ||||||
3,834 | Anglo American plc | 84,742 | ||||||
1,249 | Antofagasta plc | 12,376 | ||||||
2,245 | ArcelorMittal | 46,314 | ||||||
4,195 | Barrick Gold Corp.^ | 56,639 | ||||||
10,289 | BHP Billiton, Ltd.^ | 248,186 | ||||||
7,636 | BHP Group plc | 159,615 | ||||||
1,801 | BlueScope Steel, Ltd. | 13,898 | ||||||
1,073 | Boliden AB | 23,350 | ||||||
2,679 | First Quantum Minerals, Ltd. | 21,668 | ||||||
6,052 | Fortescue Metals Group, Ltd.^ | 17,732 | ||||||
667 | Franco-Nevada Corp.^ | 46,778 | ||||||
5,129 | Freeport-McMoRan Copper & Gold, Inc. | 52,880 | ||||||
837 | Fresnillo plc | 9,147 | ||||||
40,299 | Glencore International plc | 148,615 | ||||||
3,385 | Goldcorp, Inc. | 33,156 | ||||||
1,100 | Hitachi Metals, Ltd. | 11,425 | ||||||
1,600 | JFE Holdings, Inc. | 25,461 | ||||||
4,800 | Kinross Gold Corp.* | 15,473 | ||||||
1,500 | Kobe Steel, Ltd. | 10,390 | ||||||
1,942 | Lundin Mining Corp. | 8,024 | ||||||
100 | Maruichi Steel Tube, Ltd. | 3,148 | ||||||
400 | Mitsubishi Materials Corp. | 10,488 | ||||||
2,479 | Newcrest Mining, Ltd. | 38,184 | ||||||
1,887 | Newmont Mining Corp. | 65,384 | ||||||
2,700 | Nippon Steel Corp. | 46,176 | ||||||
3,743 | Norsk Hydro ASA | 16,953 | ||||||
1,109 | Nucor Corp. | 57,457 | ||||||
338 | Randgold Resources, Ltd. | 27,958 | ||||||
4,194 | Rio Tinto plc | 199,943 | ||||||
1,254 | Rio Tinto, Ltd. | 69,343 | ||||||
18,228 | South32, Ltd. | 42,996 | ||||||
839 | Steel Dynamics, Inc. | 25,204 | ||||||
700 | Sumitomo Metal & Mining Co., Ltd. | 18,620 | ||||||
1,869 | Teck Cominco, Ltd., Class B | 40,242 | ||||||
1,419 | ThyssenKrupp AG | 24,352 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Metals & Mining, continued | ||||||||
3,978 | Turquoise Hill Resources, Ltd.* | $ | 6,557 | |||||
415 | Voestalpine AG | 12,410 | ||||||
1,722 | Wheaton Precious Metals Corp. | 33,620 | ||||||
|
| |||||||
1,830,661 | ||||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (0.1%): | ||||||||
1,856 | AGNC Investment Corp. | 32,554 | ||||||
4,415 | Annaly Capital Management, Inc. | 43,356 | ||||||
|
| |||||||
75,910 | ||||||||
|
| |||||||
Multiline Retail (0.4%): | ||||||||
218 | Canadian Tire Corp., Class A | 22,797 | ||||||
966 | Dollar General Corp. | 104,405 | ||||||
839 | Dollar Tree, Inc.* | 75,778 | ||||||
1,161 | Dollarama, Inc. | 27,617 | ||||||
400 | Don Quijote Co., Ltd. | 24,819 | ||||||
2,114 | Harvey Norman Holdings, Ltd. | 4,708 | ||||||
1,300 | Isetan Mitsukoshi Holdings, Ltd. | 14,354 | ||||||
900 | J. Front Retailing Co., Ltd. | 10,404 | ||||||
602 | Kohl’s Corp. | 39,937 | ||||||
1,005 | Macy’s, Inc. | 29,929 | ||||||
6,217 | Marks & Spencer Group plc | 19,592 | ||||||
700 | MARUI GROUP Co., Ltd. | 13,538 | ||||||
458 | Next plc | 23,304 | ||||||
372 | Nordstrom, Inc. | 17,339 | ||||||
500 | Takashimaya Co., Ltd. | 6,354 | ||||||
1,721 | Target Corp. | 113,741 | ||||||
|
| |||||||
548,616 | ||||||||
|
| |||||||
Multi-Utilities (0.9%): | ||||||||
2,174 | AGL Energy, Ltd. | 31,451 | ||||||
854 | Ameren Corp. | 55,706 | ||||||
348 | Atco, Ltd.^ | 9,843 | ||||||
463 | Canadian Utilities, Ltd., Class A | 10,624 | ||||||
1,764 | CenterPoint Energy, Inc. | 49,798 | ||||||
19,614 | Centrica plc | 33,722 | ||||||
983 | CMS Energy Corp. | 48,806 | ||||||
1,123 | Consolidated Edison, Inc. | 85,865 | ||||||
2,292 | Dominion Energy, Inc. | 163,785 | ||||||
615 | DTE Energy Co. | 67,835 | ||||||
7,903 | E.ON AG | 78,123 | ||||||
6,347 | Engie Group | 90,700 | ||||||
423 | Innogy SE* | 17,991 | ||||||
12,089 | National Grid plc | 116,890 | ||||||
1,299 | NiSource, Inc. | 32,930 | ||||||
1,833 | Public Service Enterprise Group, Inc. | 95,408 | ||||||
1,932 | RWE AG | 41,995 | ||||||
420 | SCANA Corp. | 20,068 | ||||||
980 | Sempra Energy | 106,026 | ||||||
1,255 | Suez Environnement Co. | 16,539 | ||||||
1,772 | Veolia Environnement SA | 36,342 | ||||||
1,085 | WEC Energy Group, Inc. | 75,147 | ||||||
|
| |||||||
1,285,594 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (5.6%): | ||||||||
398 | AKER BP ASA | 10,086 | ||||||
1,837 | Anadarko Petroleum Corp. | 80,534 | ||||||
597 | Antero Resources Corp.*^ | 5,606 | ||||||
1,421 | Apache Corp. | 37,301 |
See accompanying notes to the financial statements.
15
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
1,033 | ARC Resources, Ltd. | $ | 6,130 | |||||
70,234 | BP plc | 443,068 | ||||||
1,501 | Cabot Oil & Gas Corp. | 33,547 | ||||||
1,032 | Caltex Australia, Ltd. | 18,516 | ||||||
1,442 | Cameco Corp. | 16,353 | ||||||
4,227 | Canadian Natural Resources, Ltd. | 102,005 | ||||||
3,747 | Cenovus Energy, Inc. | 26,353 | ||||||
783 | Cheniere Energy, Inc.* | 46,346 | ||||||
6,786 | Chevron Corp. | 738,249 | ||||||
378 | Cimarex Energy Co. | 23,304 | ||||||
736 | Concho Resources, Inc.* | 75,653 | ||||||
4,073 | ConocoPhillips Co. | 253,952 | ||||||
370 | Continental Resources, Inc.* | 14,870 | ||||||
1,695 | Devon Energy Corp. | 38,205 | ||||||
556 | Diamondback Energy, Inc. | 51,541 | ||||||
595 | Enagas SA | 16,064 | ||||||
7,138 | Enbridge, Inc. | 221,776 | ||||||
3,583 | EnCana Corp. | 20,684 | ||||||
9,030 | ENI SpA | 142,187 | ||||||
2,042 | EOG Resources, Inc. | 178,083 | ||||||
14,931 | Exxon Mobil Corp. | 1,018,146 | ||||||
1,927 | Galp Energia SGPS SA | 30,510 | ||||||
1,008 | Hess Corp. | 40,824 | ||||||
540 | HollyFrontier Corp. | 27,605 | ||||||
1,272 | Husky Energy, Inc. | 13,149 | ||||||
500 | Idemitsu Kosan Co., Ltd. | 16,482 | ||||||
940 | Imperial Oil, Ltd. | 23,820 | ||||||
3,800 | INPEX Corp. | 33,917 | ||||||
1,260 | Inter Pipeline, Ltd. | 17,852 | ||||||
10,850 | JX Holdings, Inc. | 56,876 | ||||||
705 | Keyera Corp. | 13,330 | ||||||
6,985 | Kinder Morgan, Inc. | 107,429 | ||||||
290 | Koninklijke Vopak NV | 13,135 | ||||||
750 | Lundin Petroleum AB | 18,761 | ||||||
2,940 | Marathon Oil Corp. | 42,160 | ||||||
2,466 | Marathon Petroleum Corp. | 145,519 | ||||||
433 | Neste Oil OYJ | 33,428 | ||||||
1,657 | Noble Energy, Inc. | 31,085 | ||||||
2,722 | Occidental Petroleum Corp. | 167,076 | ||||||
4,153 | Oil Search, Ltd. | 20,938 | ||||||
488 | OMV AG | 21,341 | ||||||
1,461 | ONEOK, Inc. | 78,821 | ||||||
6,801 | Origin Energy, Ltd.* | 30,984 | ||||||
929 | Parsley Energy, Inc., Class A* | 14,845 | ||||||
1,867 | Pembina Pipelines Corp.^ | 55,408 | ||||||
1,528 | Phillips 66 | 131,637 | ||||||
593 | Pioneer Natural Resources Co. | 77,991 | ||||||
369 | Plains GP Holdings,LP-CL A | 7,417 | ||||||
775 | Prairiesky Royalty, Ltd.^ | 10,032 | ||||||
5,014 | Repsol SA | 80,591 | ||||||
16,240 | Royal Dutch Shell plc, Class A | 476,579 | ||||||
13,193 | Royal Dutch Shell plc, Class B | 392,521 | ||||||
6,196 | Santos, Ltd. | 23,908 | ||||||
1,158 | Seven Generations Energy* | 9,451 | ||||||
200 | Showa Shell Sekiyu K.K. | 2,801 | ||||||
8,691 | Snam SpA | 38,037 | ||||||
4,188 | Statoil ASA | 89,374 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
5,693 | Suncor Energy, Inc. | $ | 159,029 | |||||
749 | Targa Resources Corp. | 26,979 | ||||||
8,469 | Total SA | 447,340 | ||||||
813 | Tourmaline Oil Corp. | 10,113 | ||||||
3,164 | TransCanada Corp. | 113,000 | ||||||
1,540 | Valero Energy Corp. | 115,454 | ||||||
444 | Vermilion Energy, Inc.^ | 9,355 | ||||||
386 | Washington H. Soul Pattinson & Co., Ltd. | 6,731 | ||||||
4,258 | Williams Cos., Inc. (The) | 93,889 | ||||||
3,349 | Woodside Petroleum, Ltd. | 73,953 | ||||||
|
| |||||||
7,070,036 | ||||||||
|
| |||||||
Paper & Forest Products (0.1%): | ||||||||
1,393 | Mondi plc | 28,820 | ||||||
3,000 | OYI Paper Co., Ltd. | 15,357 | ||||||
2,017 | Stora Enso OYJ, Registered Shares | 23,350 | ||||||
1,815 | UPM-Kymmene OYJ | 46,145 | ||||||
230 | West Fraser Timber Co., Ltd.^ | 11,364 | ||||||
|
| |||||||
125,036 | ||||||||
|
| |||||||
Personal Products (0.9%): | ||||||||
347 | Beiersdorf AG | 36,209 | ||||||
1,897 | Coty, Inc., Class A | 12,444 | ||||||
801 | Estee Lauder Co., Inc. (The), Class A | 104,210 | ||||||
1,700 | Kao Corp. | 125,351 | ||||||
200 | Kobayashi Pharmaceutical Co., Ltd. | 13,699 | ||||||
100 | KOSE Corp. | 15,862 | ||||||
887 | L’Oreal SA | 203,585 | ||||||
400 | Pola Orbis Holdings, Inc. | 10,717 | ||||||
1,400 | Shiseido Co., Ltd. | 87,001 | ||||||
5,485 | Unilever NV | 297,987 | ||||||
3,927 | Unilever plc | 205,499 | ||||||
|
| |||||||
1,112,564 | ||||||||
|
| |||||||
Pharmaceuticals (6.1%): | ||||||||
1,177 | Allergan plc | 157,318 | ||||||
6,700 | Astellas Pharma, Inc. | 85,277 | ||||||
4,491 | AstraZeneca plc | 335,810 | ||||||
2,375 | Aurora Cannabis, Inc.* | 11,797 | ||||||
988 | Bausch Health Cos., Inc.* | 18,276 | ||||||
3,302 | Bayer AG, Registered Shares | 228,933 | ||||||
5,758 | Bristol-Myers Squibb Co. | 299,301 | ||||||
722 | Canopy Growth Corp.* | 19,364 | ||||||
700 | Chugai Pharmaceutical Co., Ltd. | 40,443 | ||||||
2,000 | Daiichi Sankyo Co., Ltd. | 64,303 | ||||||
500 | Dainippon Sumitomo Pharma Co., Ltd. | 16,106 | ||||||
900 | Eisai Co., Ltd. | 70,087 | ||||||
3,420 | Eli Lilly & Co. | 395,762 | ||||||
17,333 | GlaxoSmithKline plc | 328,924 | ||||||
268 | H. Lundbeck A/S | 11,755 | ||||||
200 | Hisamitsu Pharmaceutical Co., Inc. | 10,916 | ||||||
154 | Ipsen SA | 19,859 | ||||||
194 | Jazz Pharmaceuticals plc* | 24,048 | ||||||
9,469 | Johnson & Johnson Co. | 1,221,973 | ||||||
1,000 | Kyowa Hakko Kogyo Co., Ltd. | 18,794 | ||||||
9,433 | Merck & Co., Inc. | 720,776 | ||||||
442 | Merck KGaA | 45,599 | ||||||
900 | Mitsubishi Tanabe Pharma Corp. | 12,932 | ||||||
1,895 | Mylan NV* | 51,923 |
See accompanying notes to the financial statements.
16
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Pharmaceuticals, continued | ||||||||
586 | Nektar Therapeutics* | $ | 19,262 | |||||
7,690 | Novartis AG, Registered Shares | 658,904 | ||||||
6,429 | Novo Nordisk A/S, Class B | 295,586 | ||||||
1,300 | Ono Pharmaceutical Co., Ltd. | 26,313 | ||||||
411 | Orion OYJ, Class B | 14,276 | ||||||
1,400 | Otsuka Holdings Co., Ltd. | 57,139 | ||||||
493 | Perrigo Co. plc | 19,104 | ||||||
20,643 | Pfizer, Inc. | 901,067 | ||||||
427 | Recordati SpA | 14,819 | ||||||
2,492 | Roche Holding AG | 616,458 | ||||||
3,944 | Sanofi-Aventis SA | 340,790 | ||||||
1,400 | Santen Pharmaceutical Co., Ltd. | 20,038 | ||||||
1,000 | Shionogi & Co., Ltd. | 56,711 | ||||||
100 | Taisho Pharmaceutical Holdings Co., Ltd. | 9,943 | ||||||
2,600 | Takeda Pharmacuetical Co., Ltd. | 88,232 | ||||||
3,557 | Teva Pharmaceutical Industries, Ltd., ADR* | 54,849 | ||||||
420 | UCB SA | 34,237 | ||||||
160 | Vifor Pharma AG | 17,373 | ||||||
1,670 | Zoetis, Inc. | 142,852 | ||||||
|
| |||||||
7,598,229 | ||||||||
|
| |||||||
Professional Services (0.8%): | ||||||||
535 | Adecco SA, Registered Shares | 25,065 | ||||||
996 | Bureau Veritas SA | 20,227 | ||||||
129 | CoStar Group, Inc.* | 43,517 | ||||||
425 | Equifax, Inc. | 39,580 | ||||||
3,280 | Experian plc | 79,707 | ||||||
1,406 | IHS Markit, Ltd.* | 67,446 | ||||||
578 | Intertek Group plc | 35,183 | ||||||
191 | ManpowerGroup, Inc. | 12,377 | ||||||
1,114 | Nielsen Holdings plc | 25,990 | ||||||
400 | Persol Holdings Co., Ltd. | 5,875 | ||||||
465 | Randstad Holding NV | 21,265 | ||||||
3,900 | Recruit Holdings Co., Ltd. | 93,382 | ||||||
7,099 | Reed Elsevier plc | 145,784 | ||||||
411 | Robert Half International, Inc. | 23,509 | ||||||
1,229 | Seek, Ltd. | 14,642 | ||||||
20 | SGS SA, Registered Shares | 45,078 | ||||||
177 | Teleperformance | 28,329 | ||||||
724 | Thomson Reuters Corp. | 34,969 | ||||||
690 | TransUnion | 39,192 | ||||||
574 | Verisk Analytics, Inc.* | 62,589 | ||||||
1,061 | Wolters Kluwer NV | 62,647 | ||||||
|
| |||||||
926,353 | ||||||||
|
| |||||||
Real Estate Management & Development (0.7%): | ||||||||
400 | AEON Mall Co., Ltd. | 6,400 | ||||||
2,771 | Aroundtown SA | 22,994 | ||||||
165 | Azrieli Group | 7,887 | ||||||
7,500 | CapitaLand, Ltd. | 17,062 | ||||||
1,177 | CBRE Group, Inc., Class A* | 47,127 | ||||||
900 | City Developments, Ltd. | 5,342 | ||||||
9,500 | CK Asset Holdings, Ltd. | 69,087 | ||||||
200 | Daito Trust Construction Co., Ltd. | 27,321 | ||||||
2,000 | Daiwa House Industry Co., Ltd. | 63,528 | ||||||
1,209 | Deutsche Wohnen AG | 55,409 | ||||||
760 | First Capital Realty, Inc.^ | 10,495 | ||||||
4,000 | Hang Lung Group, Ltd. | 10,163 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Real Estate Management & Development, continued | ||||||||
8,000 | Hang Lung Properties, Ltd. | $ | 15,250 | |||||
4,840 | Henderson Land Development Co., Ltd. | 23,995 | ||||||
4,000 | Hongkong Land Holdings, Ltd. | 25,216 | ||||||
1,400 | Hulic Co., Ltd. | 12,530 | ||||||
2,000 | Hysan Development Co., Ltd. | 9,484 | ||||||
178 | Jones Lang LaSalle, Inc. | 22,535 | ||||||
2,500 | Kerry Properties, Ltd. | 8,494 | ||||||
2,148 | Lend Lease Group | 17,518 | ||||||
4,300 | Mitsubishi Estate Co., Ltd. | 67,394 | ||||||
3,300 | Mitsui Fudosan Co., Ltd. | 73,130 | ||||||
22,308 | New World Development Co., Ltd. | 29,307 | ||||||
400 | Nomura Real Estate Holdings, Inc. | 7,299 | ||||||
12,117 | Sino Land Co., Ltd. | 20,622 | ||||||
1,300 | Sumitomo Realty & Development Co., Ltd. | 47,487 | ||||||
5,500 | Sun Hung Kai Properties, Ltd. | 77,990 | ||||||
2,000 | Swire Pacific, Ltd., Class A | 21,012 | ||||||
4,800 | Swire Properties, Ltd. | 16,774 | ||||||
272 | Swiss Prime Site AG | 22,046 | ||||||
2,200 | Tokyu Fudosan Holdings Corp. | 10,922 | ||||||
1,769 | UOL Group, Ltd. | 8,006 | ||||||
1,727 | Vonovia SE | 78,371 | ||||||
5,000 | Wharf Holdings, Ltd. (The) | 12,972 | ||||||
4,000 | Wharf Real Estate Investment Co., Ltd. | 23,779 | ||||||
3,000 | Wheelock & Co., Ltd. | 17,039 | ||||||
|
| |||||||
1,011,987 | ||||||||
|
| |||||||
Road & Rail (1.3%): | ||||||||
39 | AMERCO, Inc. | 12,796 | ||||||
7,133 | Aurizon Holdings, Ltd. | 21,498 | ||||||
2,579 | Canadian National Railway Co. | 191,035 | ||||||
511 | Canadian Pacific Railway, Ltd., Class 1 | 90,685 | ||||||
500 | Central Japan Railway Co. | 106,258 | ||||||
8,000 | ComfortDelGro Corp., Ltd. | 12,566 | ||||||
2,929 | CSX Corp. | 181,979 | ||||||
652 | DSV A/S | 43,001 | ||||||
1,100 | East Japan Railway Co. | 97,784 | ||||||
900 | Hankyu Hanshin Holdings, Inc. | 30,145 | ||||||
302 | J.B. Hunt Transport Services, Inc. | 28,098 | ||||||
358 | Kansas City Southern | 34,171 | ||||||
1,000 | Keihin Electric Express Railway Co., Ltd. | 16,477 | ||||||
400 | Keio Corp. | 23,414 | ||||||
500 | Keisei Electric Railway Co., Ltd. | 15,568 | ||||||
600 | Kintetsu Corp. | 25,968 | ||||||
346 | Knight-Swift Transportation Holdings, Inc.^ | 8,674 | ||||||
400 | Kyushu Railway Co. | 13,478 | ||||||
5,500 | MTR Corp., Ltd. | 28,948 | ||||||
600 | Nagoya Railroad Co., Ltd. | 15,916 | ||||||
300 | Nippon Express Co., Ltd. | 16,669 | ||||||
986 | Norfolk Southern Corp. | 147,446 | ||||||
1,100 | Odakyu Electric Railway Co., Ltd. | 24,111 | ||||||
235 | Old Dominion Freight Line, Inc. | 29,020 | ||||||
600 | Tobu Railway Co., Ltd. | 16,096 | ||||||
1,600 | Tokyu Corp. | 26,007 | ||||||
2,605 | Union Pacific Corp. | 360,090 | ||||||
600 | West Japan Railway Co. | 42,380 | ||||||
|
| |||||||
1,660,278 | ||||||||
|
|
See accompanying notes to the financial statements.
17
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment (2.7%): | ||||||||
3,346 | Advanced Micro Devices, Inc.* | $ | 61,767 | |||||
1,304 | Analog Devices, Inc. | 111,922 | ||||||
3,523 | Applied Materials, Inc. | 115,343 | ||||||
1,300 | ASM Pacific Technology, Ltd. | 12,458 | ||||||
1,464 | ASML Holding NV | 228,392 | ||||||
1,517 | Broadcom, Inc. | 385,743 | ||||||
100 | Disco Corp. | 11,543 | ||||||
3,972 | Infineon Technologies AG | 79,027 | ||||||
16,354 | Intel Corp. | 767,493 | ||||||
552 | KLA-Tencor Corp. | 49,398 | ||||||
570 | Lam Research Corp. | 77,617 | ||||||
2,226 | Marvell Technology Group, Ltd. | 36,039 | ||||||
990 | Maxim Integrated Products, Inc. | 50,342 | ||||||
875 | Microchip Technology, Inc. | 62,930 | ||||||
4,088 | Micron Technology, Inc.* | 129,712 | ||||||
2,026 | NVIDIA Corp. | 270,471 | ||||||
1,203 | NXP Semiconductors NV | 88,156 | ||||||
1,556 | ON Semiconductor Corp.* | 25,690 | ||||||
393 | Qorvo, Inc.* | 23,867 | ||||||
5,006 | QUALCOMM, Inc. | 284,891 | ||||||
3,100 | Renesas Electronics Corp.* | 14,221 | ||||||
300 | ROHM Co., Ltd. | 18,956 | ||||||
677 | Skyworks Solutions, Inc. | 45,373 | ||||||
2,267 | STMicroelectronics NV | 32,347 | ||||||
900 | SUMCO Corp. | 10,150 | ||||||
3,419 | Texas Instruments, Inc. | 323,096 | ||||||
500 | Tokyo Electron, Ltd. | 57,372 | ||||||
866 | Xilinx, Inc. | 73,757 | ||||||
|
| |||||||
3,448,073 | ||||||||
|
| |||||||
Software (4.4%): | ||||||||
1,733 | Adobe Systems, Inc.* | 392,073 | ||||||
309 | ANSYS, Inc.* | 44,168 | ||||||
762 | Autodesk, Inc.* | 98,001 | ||||||
1,801 | BlackBerry, Ltd.* | 12,812 | ||||||
993 | Cadence Design Systems, Inc.* | 43,176 | ||||||
398 | CDK Global, Inc. | 19,056 | ||||||
440 | Check Point Software Technologies, Ltd.* | 45,165 | ||||||
508 | Citrix Systems, Inc. | 52,050 | ||||||
76 | Constellation Software, Inc.^ | 48,654 | ||||||
446 | Dassault Systemes SA | 52,651 | ||||||
481 | Fortinet, Inc.* | 33,877 | ||||||
861 | Intuit, Inc. | 169,488 | ||||||
1,389 | Micro Focus International plc | 24,273 | ||||||
25,739 | Microsoft Corp. | 2,614,309 | ||||||
187 | NICE Systems, Ltd.* | 20,274 | ||||||
946 | Open Text Corp. | 30,840 | ||||||
10,557 | Oracle Corp. | 476,648 | ||||||
100 | Oracle Corp. Japan | 6,328 | ||||||
401 | PTC, Inc.* | 33,243 | ||||||
636 | Red Hat, Inc.* | 111,707 | ||||||
4,174 | Sage Group plc | 31,952 | ||||||
2,528 | Salesforce.com, Inc.* | 346,260 | ||||||
3,455 | SAP AG | 344,104 | ||||||
612 | ServiceNow, Inc.* | 108,967 | ||||||
515 | Splunk, Inc.* | 53,998 | ||||||
708 | SS&C Technologies Holdings, Inc. | 31,938 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Software, continued | ||||||||
2,098 | Symantec Corp. | $ | 39,642 | |||||
523 | Synopsys, Inc.* | 44,058 | ||||||
219 | Temenos Group AG | 26,403 | ||||||
400 | Trend Micro, Inc. | 21,651 | ||||||
271 | VMware, Inc., Class A | 37,162 | ||||||
523 | Workday, Inc., Class A* | 83,513 | ||||||
|
| |||||||
5,498,441 | ||||||||
|
| |||||||
Specialty Retail (1.6%): | ||||||||
100 | ABC-Mart, Inc. | 5,539 | ||||||
245 | Advance Auto Parts, Inc. | 38,578 | ||||||
96 | AutoZone, Inc.* | 80,481 | ||||||
918 | Best Buy Co., Inc. | 48,617 | ||||||
242 | Burlington Stores, Inc.* | 39,366 | ||||||
633 | CarMax, Inc.* | 39,708 | ||||||
133 | Dufry AG, Registered Shares | 12,637 | ||||||
200 | Fast Retailing Co., Ltd. | 102,322 | ||||||
935 | Gap, Inc. (The) | 24,086 | ||||||
2,995 | Hennes & Mauritz AB, Class B | 42,563 | ||||||
4,058 | Home Depot, Inc. (The) | 697,245 | ||||||
3,805 | Industria de Diseno Textil SA | 96,988 | ||||||
6,987 | Kingfisher plc | 18,482 | ||||||
844 | L Brands, Inc. | 21,665 | ||||||
2,838 | Lowe’s Cos., Inc. | 262,118 | ||||||
300 | Nitori Co., Ltd. | 37,270 | ||||||
289 | O’Reilly Automotive, Inc.* | 99,511 | ||||||
1,358 | Ross Stores, Inc. | 112,986 | ||||||
100 | Shimamura Co., Ltd. | 7,687 | ||||||
407 | Tiffany & Co. | 32,768 | ||||||
4,424 | TJX Cos., Inc. (The) | 197,930 | ||||||
427 | Tractor Supply Co. | 35,629 | ||||||
204 | Ulta Salon, Cosmetics & Fragrance, Inc.* | 49,947 | ||||||
800 | USS Co., Ltd. | 13,354 | ||||||
2,400 | Yamada Denki Co., Ltd. | 11,500 | ||||||
|
| |||||||
2,128,977 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (2.6%): | ||||||||
17,065 | Apple, Inc. | 2,691,832 | ||||||
900 | Brother Industries, Ltd. | 13,212 | ||||||
3,400 | Canon, Inc. | 93,697 | ||||||
471 | Dell Technologies, Inc., Class C* | 23,018 | ||||||
1,400 | Fujifilm Holdings Corp. | 54,032 | ||||||
5,367 | Hewlett Packard Enterprise Co. | 70,898 | ||||||
5,671 | HP, Inc. | 116,029 | ||||||
1,800 | Konica Minolta Holdings, Inc. | 16,158 | ||||||
1,000 | NEC Corp. | 29,942 | ||||||
887 | NetApp, Inc. | 52,927 | ||||||
2,600 | Ricoh Co., Ltd. | 25,432 | ||||||
892 | Seagate Technology plc | 34,422 | ||||||
1,100 | Seiko Epson Corp. | 15,437 | ||||||
1,045 | Western Digital Corp. | 38,634 | ||||||
809 | Xerox Corp. | 15,986 | ||||||
|
| |||||||
3,291,656 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.1%): | ||||||||
672 | Adidas AG | 140,410 | ||||||
600 | ASICS Corp. | 7,606 | ||||||
1,443 | Burberry Group plc | 31,743 | ||||||
1,836 | Compagnie Financiere Richemont SA | 118,043 |
See accompanying notes to the financial statements.
18
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Textiles, Apparel & Luxury Goods, continued | ||||||||
658 | Gildan Activewear, Inc. | $ | 19,976 | |||||
1,456 | Hanesbrands, Inc. | 18,244 | ||||||
113 | Hermes International SA | 62,486 | ||||||
162 | Hugo Boss AG | 9,990 | ||||||
264 | Kering | 123,539 | ||||||
356 | Lululemon Athletica, Inc.* | 43,293 | ||||||
978 | LVMH Moet Hennessy Louis Vuitton SA | 287,341 | ||||||
583 | Michael Kors Holdings, Ltd.* | 22,107 | ||||||
651 | Moncler SpA | 21,751 | ||||||
4,539 | Nike, Inc., Class B | 336,521 | ||||||
370 | Pandora A/S | 15,053 | ||||||
34 | Puma SE | 16,651 | ||||||
273 | PVH Corp. | 25,375 | ||||||
224 | Ralph Lauren Corp. | 23,175 | ||||||
103 | Swatch Group AG (The), Class B | 30,144 | ||||||
210 | Swatch Group AG (The), Registered Shares | 12,178 | ||||||
1,086 | Tapestry, Inc. | 36,653 | ||||||
731 | Under Armour, Inc., Class A*^ | 12,917 | ||||||
702 | Under Armour, Inc., Class C* | 11,351 | ||||||
1,161 | VF Corp. | 82,826 | ||||||
3,000 | Yue Yuen Industrial Holdings, Ltd. | 9,574 | ||||||
|
| |||||||
1,518,947 | ||||||||
|
| |||||||
Tobacco (0.9%): | ||||||||
6,624 | Altria Group, Inc. | 327,159 | ||||||
8,154 | British American Tobacco plc | 259,984 | ||||||
3,330 | Imperial Tobacco Group plc, Class A | 100,684 | ||||||
3,900 | Japan Tobacco, Inc. | 92,540 | ||||||
5,490 | Philip Morris International, Inc. | 366,513 | ||||||
583 | Swedish Match AB, Class B | 22,997 | ||||||
|
| |||||||
1,169,877 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.5%): | ||||||||
373 | AerCap Holdings NV* | 14,771 | ||||||
1,738 | Ashtead Group plc | 36,003 | ||||||
606 | Brenntag AG | 26,151 | ||||||
1,071 | Bunzl plc | 32,220 | ||||||
999 | Fastenal Co. | 52,238 | ||||||
788 | Ferguson plc | 50,460 | ||||||
660 | Finning International, Inc. | 11,508 | ||||||
649 | HD Supply Holdings, Inc.* | 24,350 | ||||||
5,100 | ITOCHU Corp. | 86,028 | ||||||
5,400 | Marubeni Corp. | 37,583 | ||||||
4,900 | Mitsubishi Corp. | 133,753 | ||||||
6,100 | Mitsui & Co., Ltd. | 94,552 | ||||||
400 | MonotaRo Co., Ltd. | 9,756 | ||||||
1,153 | Rexel SA | 12,292 | ||||||
4,100 | Sumitomo Corp. | 57,847 | ||||||
800 | Toyota Tsushu Corp. | 23,532 | ||||||
283 | United Rentals, Inc.* | 29,016 | ||||||
172 | W.W. Grainger, Inc. | 48,566 | ||||||
|
| |||||||
780,626 | ||||||||
|
| |||||||
Transportation Infrastructure (0.1%): | ||||||||
222 | Aena SA | 34,416 | ||||||
85 | Aeroports de Paris | 16,069 | ||||||
1,608 | Atlantia SpA | 33,294 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Transportation Infrastructure, continued | ||||||||
3,464 | Auckland International Airport, Ltd. | $ | 16,622 | |||||
182 | Fraport AG | 13,007 | ||||||
1,770 | Groupe Eurotunnel SA | 23,751 | ||||||
100 | Japan Airport Terminal Co., Ltd. | 3,454 | ||||||
500 | Kamigumi Co., Ltd. | 10,204 | ||||||
3,000 | SATS, Ltd. | 10,283 | ||||||
4,299 | Sydney Airport | 20,373 | ||||||
9,038 | Transurban Group | 74,184 | ||||||
|
| |||||||
255,657 | ||||||||
|
| |||||||
Water Utilities (0.0%)†: | ||||||||
618 | American Water Works Co., Inc. | 56,096 | ||||||
930 | Severn Trent plc | 21,483 | ||||||
2,680 | United Utilities Group plc | 25,092 | ||||||
|
| |||||||
102,671 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.7%): | ||||||||
111 | Drillisch AG | 5,646 | ||||||
6,300 | KDDI Corp. | 150,150 | ||||||
285 | Millicom International Cellular SA, SDR | 18,095 | ||||||
4,800 | NTT DoCoMo, Inc. | 107,799 | ||||||
1,284 | Rogers Communications, Inc. | 65,809 | ||||||
2,900 | SoftBank Group Corp. | 191,179 | ||||||
3,079 | Sprint Corp.* | 17,920 | ||||||
1,473 | Tele2 AB | 18,832 | ||||||
1,158 | T-Mobile US, Inc.* | 73,660 | ||||||
95,023 | Vodafone Group plc | 184,614 | ||||||
|
| |||||||
833,704 | ||||||||
|
| |||||||
Total Common Stocks (Cost $113,482,437) | 126,149,106 | |||||||
|
| |||||||
Preferred Stocks (0.2%): | ||||||||
Automobiles (0.1%): | ||||||||
150 | Bayerische Motoren Werke AG (BMW), 6.47% | 10,674 | ||||||
513 | Porsche Automobil Holding SE, 3.41% | 30,366 | ||||||
677 | Volkswagen AG, 2.85%, 12/31/49 | 107,719 | ||||||
|
| |||||||
148,759 | ||||||||
|
| |||||||
Household Products (0.1%): | ||||||||
656 | Henkel AG & Co. KGaA, 1.88%, 2/21/19 | 71,625 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $212,334) | 220,384 | |||||||
|
| |||||||
Rights (0.0%)†: | ||||||||
Aerospace & Defense (0.0%)†: | ||||||||
274,620 | Rolls-Royce Holdings plc, Expires on 1/08/19* | 350 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.0%)†: | ||||||||
5,014 | Repsol SA, Expires on 1/10/19*^ | 2,298 | ||||||
|
| |||||||
Total Rights (Cost $2,702) | 2,648 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.6%): | ||||||||
728,163 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(a) | 728,163 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $728,163) | 728,163 | |||||||
|
|
See accompanying notes to the financial statements.
19
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan (1.1%) | ||||||||
Miscellaneous Investments (1.1%) | ||||||||
1,417,497 | Short-Term Investments(b) | $ | 1,417,497 | |||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 1,417,497 | ||||||
|
| |||||||
Total Investment Securities (Cost $115,843,133) — | 128,517,798 | |||||||
Net other assets (liabilities) — (0.5)% | (657,685 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 127,860,113 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depository Receipt
SDR—Swedish Depository Receipt
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $1,356,570. |
+ | Affiliated Securities |
† | Represents less than 0.05%. |
(a) | The rate represents the effective yield at December 31, 2018. |
(b) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(c) | See Federal Tax Information listed in the Notes to the Financial Statements. |
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 December 31, 2018:
(Unaudited)
Country | Percentage | |||
Argentina | — | %^ | ||
Australia | 2.5 | % | ||
Austria | 0.1 | % | ||
Belgium | 0.3 | % | ||
Bermuda | 0.2 | % | ||
Canada | 3.3 | % | ||
China | — | %^ | ||
Denmark | 0.6 | % | ||
Finland | 0.4 | % | ||
France | 3.6 | % | ||
Germany | 3.1 | % | ||
Hong Kong | 1.3 | % | ||
Ireland (Republic of) | 0.8 | % | ||
Isle of Man | — | %^ | ||
Israel | 0.2 | % | ||
Italy | 0.7 | % |
Country | Percentage | |||
Japan | 8.3 | % | ||
Liberia | — | %^ | ||
Luxembourg | 0.1 | % | ||
Netherlands | 1.6 | % | ||
New Zealand | 0.1 | % | ||
Norway | 0.3 | % | ||
Panama | 0.1 | % | ||
Portugal | 0.1 | % | ||
Singapore | 0.5 | % | ||
Spain | 1.1 | % | ||
Sweden | 0.8 | % | ||
Switzerland | 3.4 | % | ||
United Arab Emirates | — | %^ | ||
United Kingdom | 5.9 | % | ||
United States | 60.6 | % | ||
|
| |||
100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
See accompanying notes to the financial statements.
20
AZL MSCI Global Equity Index Fund
Schedule of Portfolio Investments
December 31, 2018
Futures Contracts
Cash of $71,887 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
DJ EURO STOXX 50 March Futures (Euro) | 3/15/19 | 8 | $ | 272,560 | $ | (7,512 | ) | |||||||||
FTSE 100 Index March Futures (British Pounds) | 3/15/19 | 2 | 169,725 | (1,650 | ) | |||||||||||
S&P 500 IndexE-Mini March Futures (U.S. Dollar) | 3/15/19 | 7 | 876,820 | (32,648 | ) | |||||||||||
SGX Nikkei 225 Index March Futures (Japanese Yen) | 3/7/19 | 1 | 90,953 | (5,538 | ) | |||||||||||
|
| |||||||||||||||
$ | (47,348 | ) | ||||||||||||||
|
|
See accompanying notes to the financial statements.
21
AZL MSCI Global Equity Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 115,453,649 | |||
Investments in affiliates, at cost | 389,484 | ||||
|
| ||||
Investment securities, at value(a) | $ | 128,040,880 | |||
Investments in affiliates, at value | 476,918 | ||||
Cash | 55,859 | ||||
Segregated cash for collateral | 71,887 | ||||
Interest and dividends receivable | 161,462 | ||||
Foreign currency, at value (cost $389,706) | 393,766 | ||||
Receivable for capital shares issued | 6,506 | ||||
Receivable for variation margin on futures contracts | 19,141 | ||||
Reclaims receivable | 166,326 | ||||
Prepaid expenses | 1,598 | ||||
|
| ||||
Total Assets | 129,394,343 | ||||
|
| ||||
Liabilities: | |||||
Payable for collateral received on loaned securities | 1,417,497 | ||||
Manager fees payable | 34,519 | ||||
Administration fees payable | 9,909 | ||||
Distribution fees payable | 27,838 | ||||
Custodian fees payable | 2,382 | ||||
Administrative and compliance services fees payable | 495 | ||||
Transfer agent fees payable | 468 | ||||
Trustee fees payable | 189 | ||||
Other accrued liabilities | 40,933 | ||||
|
| ||||
Total Liabilities | 1,534,230 | ||||
|
| ||||
Net Assets | $ | 127,860,113 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 123,793,302 | |||
Total distributable earnings | 4,066,811 | ||||
|
| ||||
Net Assets | $ | 127,860,113 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 12,751,049 | ||||
Net Asset Value (offering and redemption price per share) | $ | 10.03 | |||
|
|
(a) | Includes securities on loan of $1,356,570. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends from non-affiliates | $ | 3,736,090 | |||
Dividends from affiliates | 20,802 | ||||
Interest | 136 | ||||
Income from securities lending | 25,362 | ||||
Foreign withholding tax | (198,515 | ) | |||
|
| ||||
Total Investment Income | 3,583,875 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 1,036,564 | ||||
Administration fees | 150,566 | ||||
Distribution fees | 370,200 | ||||
Custodian fees | 31,077 | ||||
Administrative and compliance services fees | 2,483 | ||||
Transfer agent fees | 5,370 | ||||
Trustee fees | 7,845 | ||||
Professional fees | 7,233 | ||||
Shareholder reports | 2,189 | ||||
Dividends on securities sold short | 135 | ||||
Other expenses | 72,824 | ||||
|
| ||||
Total expenses before reductions | 1,686,486 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (577,512 | ) | |||
|
| ||||
Net expenses | 1,108,974 | ||||
|
| ||||
Net Investment Income/(Loss) | 2,474,901 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 3,502,857 | ||||
Net realized gains/(losses) on affiliated securities | 19,353 | ||||
Net realized gains/(losses) on futures contracts | (53,727 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (18,019,064 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated securities | (114,081 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (48,710 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (14,713,372 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (12,238,471 | ) | ||
|
|
See accompanying notes to the financial statements.
22
AZL MSCI Global Equity Index Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 2,474,901 | $ | 2,450,062 | ||||||
Net realized gains/(losses) on investments | 3,468,483 | 3,695,437 | ||||||||
Change in unrealized appreciation/depreciation on investments | (18,181,855 | ) | 23,997,673 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (12,238,471 | ) | 30,143,172 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (2,612,915 | ) | (2,867,182 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (2,612,915 | ) | (2,867,182 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 4,803,640 | 4,875,791 | ||||||||
Proceeds from dividends reinvested | 2,612,915 | 2,867,182 | ||||||||
Value of shares redeemed | (18,562,321 | ) | (28,427,058 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (11,145,766 | ) | (20,684,085 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (25,997,152 | ) | 6,591,905 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 153,857,265 | 147,265,360 | ||||||||
|
|
|
| |||||||
End of period | $ | 127,860,113 | $ | 153,857,265 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 427,508 | 455,901 | ||||||||
Dividends reinvested | 236,677 | 271,257 | ||||||||
Shares redeemed | (1,626,064 | ) | (2,742,092 | ) | ||||||
|
|
|
| |||||||
Change in shares | (961,879 | ) | (2,014,934 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
23
AZL MSCI Global Equity Index Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.22 | $ | 9.36 | $ | 9.71 | $ | 11.51 | $ | 12.88 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.21 | 0.20 | 0.20 | 0.23 | 0.28 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.19 | ) | 1.86 | (0.30 | ) | (1.66 | ) | (0.89 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.98 | ) | 2.06 | (0.10 | ) | (1.43 | ) | (0.61 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.21 | ) | (0.20 | ) | (0.25 | ) | (0.31 | ) | (0.25 | ) | |||||||||||||||
Net Realized Gains | — | — | — | (0.06 | ) | (0.51 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (0.21 | ) | (0.20 | ) | (0.25 | ) | (0.37 | ) | (0.76 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 10.03 | $ | 11.22 | $ | 9.36 | $ | 9.71 | $ | 11.51 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (8.94 | )% | 22.18 | % | (0.93 | )% | (12.57 | )% | (5.26 | )% | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 127,860 | $ | 153,857 | $ | 147,265 | $ | 117,211 | $ | 147,054 | |||||||||||||||
Net Investment Income/(Loss) | 1.67 | % | 1.62 | % | 2.75 | % | 1.80 | % | 2.35 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.14 | % | 1.16 | % | 1.20 | % | 1.24 | % | 1.24 | % | |||||||||||||||
Expenses Net of Reductions | 0.75 | % | 0.77 | % | 1.10 | % | 1.24 | % | 1.24 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly | 0.75 | % | 0.77 | % | 1.10 | % | 1.24 | % | 1.24 | %(c) | |||||||||||||||
Portfolio Turnover Rate | 4 | % | 4 | % | 135 | %(d) | 50 | % | 20 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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 is used to pay certain Fund expenses. The Fund ceased participation in the program in June 2014. |
(d) | 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.
24
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL MSCI Global Equity Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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.
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.
25
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 Fund of Funds Trust.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $2,097 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $1,414,561 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund did not enter into any futures contracts. 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 $1.2 million for the year ended December 31, 2018. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
26
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | — | Payable for variation margin on futures contracts | $ | 47,348 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the 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 year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | (53,727 | ) | $ | (48,710 | ) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (2,867,182 | ) | ||
From net realized gains | — | ||||
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Change in net assets resulting from distributions to shareholders | $ | (2,867,182 | ) | ||
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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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL MSCI Global Equity Index Fund | 0.70 | % | 0.80 | % |
* | The Manager voluntarily reduced the management fee to 0.31% on all assets. The manager reserves the right to increase the management fee to the amount shown in the table at any time. |
27
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
At December 31, 2018, the following investments are noted as Affiliated Securities in the Fund’s Schedule of Portfolio Investments.
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | |||||||||||||||||||||||||||||||||
Allianz SE, Registered Shares | $ | 380,574 | $ | — | $ | (26,756 | ) | $ | 8,243 | $ | (52,877 | ) | $ | 309,184 | 1,541 | $ | 15,556 | |||||||||||||||||||||||
BlackRock Inc., Class A | 239,389 | 9,335 | (30,896 | ) | 11,110 | (61,204 | ) | 167,734 | 427 | 5,246 | ||||||||||||||||||||||||||||||
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$ | 619,963 | $ | 9,335 | $ | (57,652 | ) | $ | 19,353 | $ | (114,081 | ) | $ | 476,918 | 1,968 | $ | 20,802 | ||||||||||||||||||||||||
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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 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 value 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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $1,185 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
28
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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.
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Aerospace & Defense | $ | 1,909,921 | $ | 616,081 | $ | — | $ | 2,526,002 | ||||||||||||
Air Freight & Logistics | 492,254 | 150,323 | — | 642,577 | ||||||||||||||||
Airlines | 88,998 | 91,685 | — | 180,683 | ||||||||||||||||
Auto Components | 194,615 | 482,581 | — | 677,196 | ||||||||||||||||
Automobiles | 417,587 | 1,348,088 | — | 1,765,675 | ||||||||||||||||
Banks | 5,586,991 | 4,778,310 | — | 10,365,301 | ||||||||||||||||
Beverages | 1,483,106 | 1,028,377 | — | 2,511,483 | ||||||||||||||||
Biotechnology | 2,115,240 | 465,177 | — | 2,580,417 | ||||||||||||||||
Building Products | 243,477 | 340,801 | — | 584,278 | ||||||||||||||||
Capital Markets | 2,300,994 | 1,040,250 | — | 3,341,244 | ||||||||||||||||
Chemicals | 1,708,182 | 1,510,397 | — | 3,218,579 | ||||||||||||||||
Commercial Services & Supplies | 372,002 | 254,717 | — | 626,719 | ||||||||||||||||
Communications Equipment | 965,005 | 210,593 | — | 1,175,598 | ||||||||||||||||
Construction & Engineering | 81,550 | 410,818 | — | 492,368 | ||||||||||||||||
Construction Materials | 83,723 | 246,984 | — | 330,707 | ||||||||||||||||
Consumer Finance | 529,179 | 19,629 | — | 548,808 | ||||||||||||||||
Containers & Packaging | 250,301 | 71,925 | — | 322,226 | ||||||||||||||||
Distributors | 77,043 | 10,328 | — | 87,371 | ||||||||||||||||
Diversified Consumer Services | 16,059 | 10,173 | — | 26,232 | ||||||||||||||||
Diversified Financial Services | 1,010,832 | 330,972 | — | 1,341,804 | ||||||||||||||||
Diversified Telecommunication Services | 1,670,858 | 1,076,691 | — | 2,747,549 | ||||||||||||||||
Electric Utilities | 1,638,408 | 902,591 | — | 2,540,999 | ||||||||||||||||
Electrical Equipment | 407,563 | 614,781 | — | 1,022,344 | ||||||||||||||||
Electronic Equipment, Instruments & Components | 475,095 | 607,253 | — | 1,082,348 | ||||||||||||||||
Energy Equipment & Services | 380,621 | 46,213 | — | 426,834 | ||||||||||||||||
Entertainment | 1,567,570 | 273,217 | — | 1,840,787 | ||||||||||||||||
Equity Real Estate Investment Trusts | 2,308,882 | 726,432 | — | 3,035,314 | ||||||||||||||||
Food & Staples Retailing | 1,388,321 | 742,782 | — | 2,131,103 | ||||||||||||||||
Food Products | 937,122 | 1,481,304 | — | 2,418,426 | ||||||||||||||||
Gas Utilities | 74,625 | 195,502 | — | 270,127 | ||||||||||||||||
Health Care Equipment & Supplies | 2,632,545 | 719,763 | — | 3,352,308 | ||||||||||||||||
Health Care Providers & Services | 2,388,489 | 224,123 | — | 2,612,612 | ||||||||||||||||
Health Care Technology | 95,647 | 18,974 | — | 114,621 | ||||||||||||||||
Hotels, Restaurants & Leisure | 1,646,210 | 629,542 | — | 2,275,752 | ||||||||||||||||
Household Durables | 262,425 | 546,047 | — | 808,472 | ||||||||||||||||
Household Products | 1,251,264 | 341,263 | — | 1,592,527 | ||||||||||||||||
Independent Power and Renewable Electricity Producers | 106,291 | 39,417 | — | 145,708 | ||||||||||||||||
Industrial Conglomerates | 1,073,016 | 655,984 | — | 1,729,000 | ||||||||||||||||
Insurance | 2,350,246 | 2,448,828 | — | 4,799,074 | ||||||||||||||||
Interactive Media & Services | 3,520,298 | 73,072 | — | 3,593,370 | ||||||||||||||||
Internet & Direct Marketing Retail | 2,748,137 | 54,428 | — | 2,802,565 | ||||||||||||||||
IT Services | 3,932,674 | 393,299 | — | 4,325,973 | ||||||||||||||||
Leisure Products | 67,567 | 99,761 | — | 167,328 | ||||||||||||||||
Life Sciences Tools & Services | 717,159 | 124,261 | — | 841,420 | ||||||||||||||||
Machinery | 1,234,421 | 1,092,785 | — | 2,327,206 | ||||||||||||||||
Marine | — | 84,133 | — | 84,133 |
29
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Media | $ | 1,105,131 | $ | 336,914 | $ | — | $ | 1,442,045 | ||||||||||||
Metals & Mining | 492,630 | 1,338,031 | — | 1,830,661 | ||||||||||||||||
Mortgage Real Estate Investment Trusts | 75,910 | — | — | 75,910 | ||||||||||||||||
Multiline Retail | 431,543 | 117,073 | — | 548,616 | ||||||||||||||||
Multi-Utilities | 821,841 | 463,753 | — | 1,285,594 | ||||||||||||||||
Oil, Gas & Consumable Fuels | 4,531,908 | 2,538,128 | — | 7,070,036 | ||||||||||||||||
Paper & Forest Products | 11,364 | 113,672 | — | 125,036 | ||||||||||||||||
Personal Products | 116,654 | 995,910 | — | 1,112,564 | ||||||||||||||||
Pharmaceuticals | 4,057,672 | 3,540,557 | — | 7,598,229 | ||||||||||||||||
Professional Services | 349,169 | 577,184 | — | 926,353 | ||||||||||||||||
Real Estate Management & Development | 80,157 | 931,830 | — | 1,011,987 | ||||||||||||||||
Road & Rail | 1,083,994 | 576,284 | — | 1,660,278 | ||||||||||||||||
Semiconductors & Semiconductor Equipment | 2,983,607 | 464,466 | — | 3,448,073 | ||||||||||||||||
Software | 4,970,805 | 527,636 | — | 5,498,441 | ||||||||||||||||
Specialty Retail | 1,780,635 | 348,342 | — | 2,128,977 | ||||||||||||||||
Technology Hardware, Storage & Peripherals | 3,043,746 | 247,910 | — | 3,291,656 | ||||||||||||||||
Textiles, Apparel & Luxury Goods | 632,438 | 886,509 | — | 1,518,947 | ||||||||||||||||
Tobacco | 693,672 | 476,205 | — | 1,169,877 | ||||||||||||||||
Trading Companies & Distributors | 180,449 | 600,177 | — | 780,626 | ||||||||||||||||
Transportation Infrastructure | — | 255,657 | — | 255,657 | ||||||||||||||||
Water Utilities | 56,096 | 46,575 | — | 102,671 | ||||||||||||||||
Wireless Telecommunication Services | 157,389 | 676,315 | — | 833,704 | ||||||||||||||||
Preferred Stocks | ||||||||||||||||||||
Automobiles | — | 148,759 | — | 148,759 | ||||||||||||||||
Household Products | — | 71,625 | — | 71,625 | ||||||||||||||||
Rights | — | 2,648 | — | 2,648 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 1,417,497 | — | 1,417,497 | ||||||||||||||||
Unaffiliated Investment Company | 728,163 | — | — | 728,163 | ||||||||||||||||
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Total Investment Securities | 83,187,486 | 45,330,312 | — | 128,517,798 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | (47,348 | ) | — | — | (47,348 | ) | ||||||||||||||
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Total Investments | $ | 83,140,138 | $ | 45,330,312 | $ | — | $ | 128,470,450 | ||||||||||||
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* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL MSCI Global Equity Index Fund | $ | 5,304,954 | $ | 17,076,783 |
6. Investment Risks
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 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.
30
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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.
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 December 31, 2018 is $116,255,849. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 20,756,389 | ||
Unrealized (depreciation) | (8,494,440 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 12,261,949 | ||
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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 December 31, 2018, the Fund utilized $3,458,424 in CLCFs to offset capital gains.
CLCFs not subject to expiration:
Short-Term Amount | Long-Term Amount | Total Amount | |||||||||||||
AZL MSCI Global Equity Index Fund | $ | 8,552,864 | $ | 1,989,391 | $ | 10,542,255 |
During the year ended December 31, 2018, the Fund utilized $3,458,424 in CLCFs to offset capital gains.
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MSCI Global Equity Index Fund | $ | 2,612,915 | $ | — | $ | 2,612,915 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL MSCI Global Equity Index Fund | $ | 2,867,182 | $ | — | $ | 2,867,182 |
(a) | Total distributions paid may differ from the 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 MSCI Global Equity Index Fund | $ | 2,347,800 | $ | — | $ | (10,542,255 | ) | $ | 12,261,266 | $ | 4,066,811 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
31
AZL MSCI Global Equity Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership of 95% 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.
32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL MSCI Global Equity Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL MSCI Global Equity Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 58.62% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
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The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Russell 1000 Growth Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 11
Page 11
Statements of Changes in Net Assets
Page 12
Page 13
Notes to the Financial Statements
Page 14
Report of Independent Registered Public Accounting Firm
Page 20
Other Federal Income Tax Information
Page 21
Page 22
Approval of Investment Advisory and Subadvisory Agreements
Page 23
Information about the Board of Trustees and Officers
Page 26
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® Russell 1000 Growth Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Russell 1000 Growth Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund. | ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Russell 1000 Growth Index Fund (Class 2 Shares) (the “Fund”) returned-2.14%. That compared to a-1.51% total return for its benchmark, the Russell 1000® Growth Index1.
The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the Russell 1000® Growth Index (“Index”). The Index is designed to provide a comprehensive measure of growth stocks’ performance.*
Markets opened the year posting strong gains fueled bytax-reform optimism and ongoing global growth that carried over from 2017. As the first quarter progressed, however, investors grew more concerned that the economy might be overheating. The realized volatility of the S&P 500 Index2 rose to annualized level of 19% during the first quarter, which was up from an average of 6.6% in 2017. Rising yields and trade protectionism fears further weighed on equities. And yet, the underlying U.S. economy remained healthy, with low unemployment, high consumer confidence and accelerating economic indicators. These factors supported the Federal Reserve Board’s (the Fed) decision to increase interest rates in March, which helped drive yields higher.
The second quarter saw renewed gains in U.S. equity markets, in spite of ongoing threats of U.S. tariffs. Unemployment fell to its lowest level since 1975 and earnings growth inspired confidence in investors. The Fed raised interest rates again in June.
U.S.large-cap equities reachedall-time highs in the third quarter. Signs of strong economic growth and positive earnings results helped grow investors’ appetite for risk. Volatility fell in spite of the U.S. announcing tariffs on $505 billion of Chinese goods. The unemployment rate fell as well, dropping to 3.7% in September—the lowest rate since 1969. Meanwhile, consumer confidence reached its
highest level since 2000. The strength of the economy led the Fed to once again raise interest rates, which, combined with positive growth and high levels of U.S. government debt issuance, helped push the yield on10-year U.S. Treasuries up to 3.06%.
Concerns over Fed policy, growing trade protectionism and a potential slowdown in growth contributed to investor anxiety throughout the fourth quarter. Hawkish comments from Fed Chairman Powell about U.S. interest rates drove a temporarysell-off in U.S. Treasuries, and helped spur a return to volatility.
From a sector perspective, the largest negative returns in the Index came from the energy, materials and communication services sectors. Increases were seen in the utilities, information technology, and healthcare sectors.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a positive impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
1
AZL® Russell 1000 Growth Index Fund Review (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to match the total return of the Russell 1000®Growth Index. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in all stocks in the Index in proportion to their weighting in the Index. | ||||
Investment Concerns | ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
Returns on growth stocks may not move in tandem with returns on other categories of stocks or the market as a whole. Growth stocks may be susceptible to rapid price savings or to adverse developments in certain sectors of the market. | ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. | ||||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception | 1 | 3 | 5 | Since | ||||||||||||||
Date | Year | Year | Year | Inception | ||||||||||||||
AZL®Russell 1000 Growth Index Fund (Class 1 Shares) | 10/14/16 | -1.86 | % | — | — | 12.71 | % | |||||||||||
AZL®Russell 1000 Growth Index Fund (Class 2 Shares) | 4/30/10 | -2.14 | % | 10.31 | % | 9.57 | % | 11.99 | % | |||||||||
Russell 1000®Growth Index | 4/30/10 | -1.51 | % | 11.15 | % | 10.40 | % | 12.87 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®Russell 1000 Growth Index Fund (Class 1 Shares) | 0.50 | % | ||
AZL®Russell 1000 Growth Index Fund (Class 2 Shares) | 0.75 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.36% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.59% for Class 1 Shares and 0.84% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Russell 1000® Growth Index, an unmanaged index that measures the performance of thelarge-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higherprice-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Russell 1000 Growth Index Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Russell 1000 Growth Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period | |||||||||||||||||
AZL Russell 1000 Growth Index Fund, Class 1 | $ | 1,000.00 | $ | 916.60 | $ | 2.08 | 0.43 | % | ||||||||||||
AZL Russell 1000 Growth Index Fund, Class 2 | $ | 1,000.00 | $ | 915.40 | $ | 3.28 | 0.68 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Russell 1000 Growth Index Fund, Class 1 | $ | 1,000.00 | $ | 1,023.04 | $ | 2.19 | 0.43 | % | ||||||||||||
AZL Russell 1000 Growth Index Fund, Class 2 | $ | 1,000.00 | $ | 1,021.78 | $ | 3.47 | 0.68 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Information Technology | 31.1 | % | |||
Consumer Discretionary | 14.7 | ||||
Health Care | 13.8 | ||||
Communication Services | 11.6 | ||||
Industrials | 11.4 | ||||
Consumer Staples | 5.8 | ||||
Financials | 4.3 | ||||
Real Estate | 2.3 | ||||
Materials | 1.7 | ||||
Energy | 0.7 | ||||
|
| ||||
Total Common Stocks and Preferred Stocks | 97.4 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 8.8 | ||||
Money Markets | 2.4 | ||||
|
| ||||
Total Investment Securities | 108.6 | ||||
Net other assets (liabilities) | (8.6 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (96.8%): | ||||||||
Aerospace & Defense (3.3%): | ||||||||
36,965 | Boeing Co. (The) | $ | 11,921,214 | |||||
7,003 | BWX Technologies, Inc.^ | 267,725 | ||||||
266 | Curtiss-Wright Corp. | 27,164 | ||||||
8,030 | General Dynamics Corp. | 1,262,396 | ||||||
8,173 | Harris Corp. | 1,100,494 | ||||||
2,638 | HEICO Corp.^ | 204,392 | ||||||
5,191 | HEICO Corp., Class A | 327,033 | ||||||
1,254 | Hexcel Corp. | 71,904 | ||||||
2,501 | Huntington Ingalls Industries, Inc. | 475,965 | ||||||
15,625 | Lockheed Martin Corp. | 4,091,250 | ||||||
11,157 | Northrop Grumman Corp. | 2,732,349 | ||||||
19,805 | Raytheon Co. | 3,037,097 | ||||||
7,398 | Spirit AeroSystems Holdings, Inc., Class A | 533,322 | ||||||
2,820 | Textron, Inc. | 129,692 | ||||||
3,340 | TransDigm Group, Inc.* | 1,135,800 | ||||||
|
| |||||||
27,317,797 | ||||||||
|
| |||||||
Air Freight & Logistics (1.1%): | ||||||||
9,421 | C.H. Robinson Worldwide, Inc. | 792,212 | ||||||
11,862 | Expeditors International of Washington, Inc. | 807,684 | ||||||
16,834 | FedEx Corp. | 2,715,829 | ||||||
47,668 | United Parcel Service, Inc., Class B | 4,649,059 | ||||||
8,513 | XPO Logistics, Inc.*^ | 485,582 | ||||||
|
| |||||||
9,450,366 | ||||||||
|
| |||||||
Airlines (0.2%): | ||||||||
10,866 | Delta Air Lines, Inc. | 542,213 | ||||||
25,379 | Southwest Airlines Co. | 1,179,616 | ||||||
|
| |||||||
1,721,829 | ||||||||
|
| |||||||
Auto Components (0.1%): | ||||||||
15,781 | Aptiv plc | 971,636 | ||||||
3,334 | Garrett Motion, Inc.* | 41,142 | ||||||
12,852 | Gentex Corp.^ | 259,739 | ||||||
456 | Lear Corp. | 56,024 | ||||||
1,320 | Visteon Corp.*^ | 79,570 | ||||||
|
| |||||||
1,408,111 | ||||||||
|
| |||||||
Automobiles (0.4%): | ||||||||
9,451 | Tesla Motors, Inc.*^ | 3,145,293 | ||||||
2,818 | Thor Industries, Inc.^ | 146,536 | ||||||
|
| |||||||
3,291,829 | ||||||||
|
| |||||||
Banks (0.2%): | ||||||||
392 | BOK Financial Corp. | 28,745 | ||||||
558 | Comerica, Inc. | 38,329 | ||||||
868 | East West Bancorp, Inc. | 37,784 | ||||||
2,245 | Pinnacle Financial Partners, Inc.^ | 103,495 | ||||||
2,313 | Signature Bank | 237,800 | ||||||
2,836 | SVB Financial Group* | 538,613 | ||||||
3,363 | Synovus Financial Corp. | 107,582 | ||||||
2,274 | Texas Capital Bancshares, Inc.* | 116,179 | ||||||
3,931 | Western Alliance Bancorp* | 155,235 | ||||||
|
| |||||||
1,363,762 | ||||||||
|
| |||||||
Beverages (2.9%): | ||||||||
3,470 | Brown-Forman Corp., Class A | 164,547 | ||||||
19,415 | Brown-Forman Corp., Class B | 923,766 | ||||||
205,008 | Coca-Cola Co. (The) | 9,707,129 | ||||||
10,700 | Constellation Brands, Inc., Class C | 1,720,774 | ||||||
12,372 | Keurig Dr Pepper, Inc.^ | 317,218 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Beverages, continued | ||||||||
27,523 | Monster Beverage Corp.* | $ | 1,354,682 | |||||
86,753 | PepsiCo, Inc. | 9,584,471 | ||||||
|
| |||||||
23,772,587 | ||||||||
|
| |||||||
Biotechnology (5.0%): | ||||||||
104,608 | AbbVie, Inc.^ | 9,643,811 | ||||||
3,125 | Agios Pharmaceuticals, Inc.*^ | 144,094 | ||||||
12,245 | Alexion Pharmaceuticals, Inc.* | 1,192,173 | ||||||
10,850 | Alkermes plc* | 320,184 | ||||||
5,407 | Alnylam Pharmaceuticals, Inc.*^ | 394,224 | ||||||
41,425 | Amgen, Inc. | 8,064,205 | ||||||
13,166 | Biogen Idec, Inc.* | 3,961,913 | ||||||
12,161 | BioMarin Pharmaceutical, Inc.* | 1,035,509 | ||||||
2,619 | Bluebird Bio, Inc.*^ | 259,805 | ||||||
48,426 | Celgene Corp.*^ | 3,103,622 | ||||||
8,246 | Exact Sciences Corp.*^ | 520,323 | ||||||
20,222 | Exelixis, Inc.* | 397,767 | ||||||
66,578 | Gilead Sciences, Inc. | 4,164,454 | ||||||
12,016 | Incyte Corp.* | 764,097 | ||||||
8,461 | Ionis Pharmaceuticals, Inc.*^ | 457,402 | ||||||
6,217 | Neurocrine Biosciences, Inc.* | 443,956 | ||||||
5,498 | Regeneron Pharmaceuticals, Inc.* | 2,053,503 | ||||||
3,212 | Sage Therapeutics, Inc.*^ | 307,677 | ||||||
4,546 | Sarepta Therapeutics, Inc.*^ | 496,105 | ||||||
7,610 | Seattle Genetics, Inc.*^ | 431,183 | ||||||
2,656 | Tesaro, Inc.*^ | 197,208 | ||||||
17,599 | Vertex Pharmaceuticals, Inc.* | 2,916,330 | ||||||
|
| |||||||
41,269,545 | ||||||||
|
| |||||||
Building Products (0.3%): | ||||||||
9,716 | A.O. Smith Corp.^ | 414,873 | ||||||
5,325 | Allegion plc^ | 424,456 | ||||||
2,988 | Armstrong World Industries, Inc. | 173,931 | ||||||
4,022 | Fortune Brands Home & Security, Inc.^ | 152,796 | ||||||
2,339 | Lennox International, Inc.^ | 511,914 | ||||||
14,350 | Masco Corp. | 419,594 | ||||||
5,430 | Resideo Technologies, Inc.* | 111,587 | ||||||
|
| |||||||
2,209,151 | ||||||||
|
| |||||||
Capital Markets (2.1%): | ||||||||
1,584 | Ameriprise Financial, Inc. | 165,322 | ||||||
7,207 | CBOE Holdings, Inc. | 705,061 | ||||||
82,889 | Charles Schwab Corp. (The) | 3,442,379 | ||||||
2,895 | CME Group, Inc. | 544,607 | ||||||
3,995 | E*TRADE Financial Corp. | 175,301 | ||||||
8,083 | Eaton Vance Corp. | 284,360 | ||||||
2,738 | Evercore Partners, Inc., Class A | 195,931 | ||||||
2,605 | FactSet Research Systems, Inc.^ | 521,339 | ||||||
4,683 | Interactive Brokers Group, Inc., Class A | 255,926 | ||||||
20,037 | Intercontinental Exchange, Inc. | 1,509,387 | ||||||
7,356 | Lazard, Ltd., Class A | 271,510 | ||||||
5,834 | LPL Financial Holdings, Inc. | 356,341 | ||||||
2,506 | MarketAxess Holdings, Inc. | 529,543 | ||||||
11,488 | Moody’s Corp.^ | 1,608,780 | ||||||
1,216 | Morningstar, Inc. | 133,565 | ||||||
6,000 | MSCI, Inc., Class A | 884,580 | ||||||
3,898 | Northern Trust Corp. | 325,834 | ||||||
2,620 | Raymond James Financial, Inc. | 194,954 | ||||||
17,340 | S&P Global, Inc. | 2,946,760 |
See accompanying notes to the financial statements.
4
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
9,025 | SEI Investments Co. | $ | 416,955 | |||||
1,534 | State Street Corp. | 96,749 | ||||||
15,147 | T. Rowe Price Group, Inc. | 1,398,371 | ||||||
19,405 | TD Ameritrade Holding Corp. | 950,069 | ||||||
3,093 | Virtu Financial, Inc.^ | 79,676 | ||||||
|
| |||||||
17,993,300 | ||||||||
|
| |||||||
Chemicals (1.2%): | ||||||||
6,225 | Axalta Coating Systems, Ltd.* | 145,790 | ||||||
5,825 | Celanese Corp., Series A | 524,075 | ||||||
11,686 | Chemours Co. (The) | 329,779 | ||||||
7,942 | Ecolab, Inc. | 1,170,254 | ||||||
3,790 | FMC Corp. | 280,308 | ||||||
3,290 | International Flavor & Fragrances, Inc.^ | 441,748 | ||||||
22,487 | Linde plc | 3,508,871 | ||||||
10,347 | LyondellBasell Industries NV, Class A | 860,457 | ||||||
492 | NewMarket Corp.^ | 202,748 | ||||||
7,902 | Platform Speciality Products Corp.* | 81,628 | ||||||
1,138 | PPG Industries, Inc. | 116,338 | ||||||
1,900 | RPM International, Inc. | 111,682 | ||||||
1,311 | ScottsMiracle-Gro Co. (The)^ | 80,574 | ||||||
5,744 | Sherwin Williams Co. | 2,260,034 | ||||||
3,354 | W.R. Grace & Co. | 217,708 | ||||||
2,217 | Westlake Chemical Corp. | 146,699 | ||||||
|
| |||||||
10,478,693 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.6%): | ||||||||
6,017 | Cintas Corp. | 1,010,797 | ||||||
13,866 | Copart, Inc.*^ | 662,517 | ||||||
8,602 | KAR Auction Services, Inc. | 410,487 | ||||||
871 | Republic Services, Inc., Class A | 62,790 | ||||||
10,131 | Rollins, Inc.^ | 365,729 | ||||||
24,967 | Waste Management, Inc. | 2,221,814 | ||||||
|
| |||||||
4,734,134 | ||||||||
|
| |||||||
Communications Equipment (0.4%): | ||||||||
3,973 | Arista Networks, Inc.* | 837,111 | ||||||
4,166 | F5 Networks, Inc.* | 675,017 | ||||||
1,294 | Motorola Solutions, Inc. | 148,862 | ||||||
6,272 | Palo Alto Networks, Inc.*^ | 1,181,331 | ||||||
1,065 | Ubiquiti Networks, Inc.^ | 105,872 | ||||||
|
| |||||||
2,948,193 | ||||||||
|
| |||||||
Construction & Engineering (0.0%)†: | ||||||||
2,893 | Quanta Services, Inc. | 87,079 | ||||||
|
| |||||||
Construction Materials (0.2%): | ||||||||
2,812 | Eagle Materials, Inc., Class A | 171,616 | ||||||
3,976 | Martin Marietta Materials, Inc. | 683,355 | ||||||
8,464 | Vulcan Materials Co. | 836,244 | ||||||
|
| |||||||
1,691,215 | ||||||||
|
| |||||||
Consumer Finance (0.6%): | ||||||||
33,357 | American Express Co. | 3,179,588 | ||||||
2,496 | Capital One Financial Corp. | 188,673 | ||||||
714 | Credit Acceptance Corp.*^ | 272,577 | ||||||
10,571 | Discover Financial Services | 623,478 | ||||||
619 | Onemain Holdings, Inc.* | 15,036 | ||||||
1,162 | Santander Consumer USA Holdings, Inc.^ | 20,440 | ||||||
18,027 | Synchrony Financial | 422,913 | ||||||
|
| |||||||
4,722,705 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Containers & Packaging (0.3%): | ||||||||
5,974 | Avery Dennison Corp. | $ | 536,645 | |||||
4,489 | Berry Global Group, Inc.* | 213,362 | ||||||
9,058 | Crown Holdings, Inc.*^ | 376,541 | ||||||
4,357 | Graphic Packaging Holding Co.^ | 46,358 | ||||||
3,010 | International Paper Co. | 121,484 | ||||||
6,364 | Packaging Corp. of America | 531,139 | ||||||
5,908 | Sealed Air Corp. | 205,835 | ||||||
1,521 | Silgan Holdings, Inc. | 35,926 | ||||||
|
| |||||||
2,067,290 | ||||||||
|
| |||||||
Distributors (0.1%): | ||||||||
3,465 | LKQ Corp.* | 82,224 | ||||||
2,758 | Pool Corp.^ | 409,977 | ||||||
|
| |||||||
492,201 | ||||||||
|
| |||||||
Diversified Consumer Services (0.2%): | ||||||||
3,333 | Bright Horizons Family Solutions, Inc.* | 371,462 | ||||||
4,831 | Frontdoor, Inc.* | 128,553 | ||||||
3,321 | Grand Canyon Education, Inc.* | 319,281 | ||||||
2,440 | H&R Block, Inc. | 61,903 | ||||||
5,668 | Service Corp. International^ | 228,194 | ||||||
9,226 | ServiceMaster Global Holdings, Inc.* | 338,963 | ||||||
|
| |||||||
1,448,356 | ||||||||
|
| |||||||
Diversified Financial Services (0.4%): | ||||||||
16,848 | Berkshire Hathaway, Inc., Class B* | 3,440,025 | ||||||
672 | Voya Financial, Inc. | 26,974 | ||||||
|
| |||||||
3,466,999 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.0%)†: | ||||||||
15,393 | Zayo Group Holdings, Inc.* | 351,576 | ||||||
|
| |||||||
Electrical Equipment (0.4%): | ||||||||
2,983 | AMETEK, Inc. | 201,949 | ||||||
30,695 | Emerson Electric Co. | 1,834,026 | ||||||
2,570 | Hubbell, Inc. | 255,304 | ||||||
8,275 | Rockwell Automation, Inc. | 1,245,222 | ||||||
5,978 | Sensata Technologies Holding plc*^ | 268,054 | ||||||
|
| |||||||
3,804,555 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.5%): | ||||||||
20,355 | Amphenol Corp., Class A | 1,649,161 | ||||||
10,093 | CDW Corp. | 818,038 | ||||||
11,352 | Cognex Corp.^ | 438,982 | ||||||
1,134 | Coherent, Inc.* | 119,875 | ||||||
1,009 | FLIR Systems, Inc. | 43,932 | ||||||
2,533 | IPG Photonics Corp.*^ | 286,964 | ||||||
1,368 | Littlelfuse, Inc.^ | 234,585 | ||||||
6,161 | National Instruments Corp. | 279,586 | ||||||
3,636 | Zebra Technologies Corp., Class A* | 578,960 | ||||||
|
| |||||||
4,450,083 | ||||||||
|
| |||||||
Energy Equipment & Services (0.2%): | ||||||||
59,987 | Halliburton Co. | 1,594,454 | ||||||
1,711 | RPC, Inc.^ | 16,888 | ||||||
|
| |||||||
1,611,342 | ||||||||
|
| |||||||
Entertainment (2.5%): | ||||||||
51,954 | Activision Blizzard, Inc. | 2,419,498 | ||||||
20,450 | Electronic Arts, Inc.* | 1,613,710 | ||||||
191 | Lions Gate Entertainment Corp., Class A^ | 3,075 | ||||||
704 | Lions Gate Entertainment Corp., Class B | 10,476 |
See accompanying notes to the financial statements.
5
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Entertainment, continued | ||||||||
9,371 | Live Nation, Inc.*^ | $ | 461,522 | |||||
109 | Madison Square Garden Co. (The), Class A* | 29,179 | ||||||
28,761 | Netflix, Inc.* | 7,698,169 | ||||||
4,612 | Take-Two Interactive Software, Inc.* | 474,759 | ||||||
73,739 | Walt Disney Co. (The) | 8,085,481 | ||||||
|
| |||||||
20,795,869 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (2.2%): | ||||||||
630 | Alexandria Real Estate Equities, Inc. | 72,601 | ||||||
30,256 | American Tower Corp. | 4,786,197 | ||||||
3,331 | Colony Capital, Inc.^ | 15,589 | ||||||
2,492 | Coresite Realty Corp. | 217,377 | ||||||
21,519 | Crown Castle International Corp. | 2,337,609 | ||||||
5,522 | Equinix, Inc. | 1,946,836 | ||||||
5,827 | Equity Lifestyle Properties, Inc. | 565,977 | ||||||
7,256 | Extra Space Storage, Inc.^ | 656,523 | ||||||
5,140 | Gaming & Leisure Properties, Inc. | 166,073 | ||||||
1,534 | Hudson Pacific Properties, Inc. | 44,578 | ||||||
5,288 | Lamar Advertising Co., Class A^ | 365,824 | ||||||
222 | Life Storage, Inc.^ | 20,644 | ||||||
1,247 | Omega Healthcare Investors, Inc. | 43,832 | ||||||
10,227 | Public Storage, Inc.^ | 2,070,047 | ||||||
7,720 | SBA Communications Corp.* | 1,249,791 | ||||||
19,498 | Simon Property Group, Inc. | 3,275,469 | ||||||
4,005 | Taubman Centers, Inc.^ | 182,187 | ||||||
|
| |||||||
18,017,154 | ||||||||
|
| |||||||
Food & Staples Retailing (1.0%): | ||||||||
30,152 | Costco Wholesale Corp. | 6,142,264 | ||||||
8,797 | Sprouts Farmers Market, Inc.*^ | 206,817 | ||||||
32,850 | Sysco Corp. | 2,058,381 | ||||||
978 | US Foods Holding Corp.* | 30,944 | ||||||
|
| |||||||
8,438,406 | ||||||||
|
| |||||||
Food Products (0.3%): | ||||||||
8,467 | Campbell Soup Co.^ | 279,326 | ||||||
1,993 | General Mills, Inc. | 77,607 | ||||||
8,788 | Hershey Co. (The) | 941,899 | ||||||
8,535 | Kellogg Co. | 486,580 | ||||||
437 | McCormick & Co. | 60,848 | ||||||
2,577 | Post Holdings, Inc.*^ | 229,688 | ||||||
|
| |||||||
2,075,948 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (2.5%): | ||||||||
2,941 | ABIOMED, Inc.* | 955,943 | ||||||
5,464 | Align Technology, Inc.*^ | 1,144,326 | ||||||
3,833 | Baxter International, Inc. | 252,288 | ||||||
1,695 | Becton, Dickinson & Co. | 381,917 | ||||||
73,100 | Boston Scientific Corp.* | 2,583,354 | ||||||
2,482 | Cantel Medical Corp. | 184,785 | ||||||
547 | Cooper Cos., Inc. (The) | 139,212 | ||||||
5,974 | DexCom, Inc.* | 715,685 | ||||||
14,479 | Edwards Lifesciences Corp.* | 2,217,748 | ||||||
2,944 | Hill-Rom Holdings, Inc. | 260,691 | ||||||
1,076 | ICU Medical, Inc.* | 247,082 | ||||||
5,915 | IDEXX Laboratories, Inc.* | 1,100,308 | ||||||
4,080 | Insulet Corp.*^ | 323,626 | ||||||
3,801 | �� | Integra LifeSciences Holdings Corp.* | 171,425 | |||||
7,750 | Intuitive Surgical, Inc.* | 3,711,629 | ||||||
3,150 | Masimo Corp.* | 338,216 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
2,114 | Penumbra, Inc.*^ | $ | 258,331 | |||||
9,693 | ResMed, Inc. | 1,103,742 | ||||||
23,563 | Stryker Corp. | 3,693,499 | ||||||
618 | Teleflex, Inc. | 159,741 | ||||||
6,354 | Varian Medical Systems, Inc.* | 719,972 | ||||||
1,184 | West Pharmaceutical Services, Inc. | 116,068 | ||||||
|
| |||||||
20,779,588 | ||||||||
|
| |||||||
Health Care Providers & Services (3.3%): | ||||||||
10,846 | AmerisourceBergen Corp. | 806,942 | ||||||
12,347 | Centene Corp.* | 1,423,609 | ||||||
1,074 | Chemed Corp.^ | 304,243 | ||||||
7,249 | Cigna Corp. | 1,376,730 | ||||||
6,827 | CVS Health Corp. | 447,305 | ||||||
4,540 | DaVita, Inc.* | 233,628 | ||||||
6,673 | Encompass Health Corp. | 411,724 | ||||||
13,425 | HCA Healthcare, Inc. | 1,670,741 | ||||||
1,556 | Henry Schein, Inc.*^ | 122,177 | ||||||
9,006 | Humana, Inc. | 2,580,039 | ||||||
382 | Laboratory Corp. of America Holdings* | 48,270 | ||||||
1,716 | McKesson Corp. | 189,567 | ||||||
3,667 | Molina Healthcare, Inc.* | 426,179 | ||||||
1,223 | Premier, Inc., Class A*^ | 45,679 | ||||||
65,978 | UnitedHealth Group, Inc. | 16,436,439 | ||||||
3,197 | WellCare Health Plans, Inc.* | 754,780 | ||||||
|
| |||||||
27,278,052 | ||||||||
|
| |||||||
Health Care Technology (0.2%): | ||||||||
2,766 | athenahealth, Inc.* | 364,918 | ||||||
9,744 | Cerner Corp.*^ | 510,975 | ||||||
8,369 | Veeva Systems, Inc., Class A* | 747,520 | ||||||
|
| |||||||
1,623,413 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (2.1%): | ||||||||
1,664 | Chipotle Mexican Grill, Inc.* | 718,499 | ||||||
2,374 | Choice Hotels International, Inc.^ | 169,931 | ||||||
4,252 | Darden Restaurants, Inc. | 424,605 | ||||||
2,861 | Domino’s Pizza, Inc. | 709,499 | ||||||
5,820 | Dunkin’ Brands Group, Inc.^ | 373,178 | ||||||
8,211 | Extended Stay America, Inc. | 127,271 | ||||||
6,466 | Hilton Grand Vacations, Inc.* | 170,638 | ||||||
19,291 | Hilton Worldwide Holdings, Inc. | 1,385,094 | ||||||
14,988 | Las Vegas Sands Corp. | 780,125 | ||||||
19,505 | Marriott International, Inc., Class A | 2,117,463 | ||||||
10,428 | McDonald’s Corp. | 1,851,700 | ||||||
2,984 | MGM Resorts International^ | 72,392 | ||||||
4,953 | Six Flags Entertainment Corp. | 275,535 | ||||||
83,385 | Starbucks Corp. | 5,369,994 | ||||||
2,799 | Vail Resorts, Inc.^ | 590,085 | ||||||
12,594 | Wendy’s Co. (The)^ | 196,592 | ||||||
6,788 | Wyndham Hotels & Resorts, Inc. | 307,972 | ||||||
6,447 | Wyndham Worldwide Corp. | 231,060 | ||||||
7,048 | Wynn Resorts, Ltd.^ | 697,118 | ||||||
1,974 | Yum China Holdings, Inc. | 66,188 | ||||||
6,313 | Yum! Brands, Inc. | 580,291 | ||||||
|
| |||||||
17,215,230 | ||||||||
|
| |||||||
Household Durables (0.2%): | ||||||||
14,040 | D.R. Horton, Inc. | 486,626 | ||||||
10,472 | Lennar Corp., Class A | 409,979 |
See accompanying notes to the financial statements.
6
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables, continued | ||||||||
551 | Lennar Corp., Class B | $ | 17,263 | |||||
219 | NVR, Inc.* | 533,701 | ||||||
5,846 | PulteGroup, Inc.^ | 151,938 | ||||||
3,266 | Tempur Sealy International, Inc.*^ | 135,212 | ||||||
4,626 | Toll Brothers, Inc. | 152,334 | ||||||
|
| |||||||
1,887,053 | ||||||||
|
| |||||||
Household Products (0.6%): | ||||||||
14,268 | Church & Dwight Co., Inc.^ | 938,264 | ||||||
7,712 | Clorox Co. (The) | 1,188,728 | ||||||
10,976 | Colgate-Palmolive Co. | 653,292 | ||||||
2,402 | Energizer Holdings, Inc. | 108,450 | ||||||
20,931 | Kimberly-Clark Corp. | 2,384,878 | ||||||
1,269 | Spectrum Brands Holdings, Inc.^ | 53,615 | ||||||
|
| |||||||
5,327,227 | ||||||||
|
| |||||||
Industrial Conglomerates (1.3%): | ||||||||
32,861 | 3M Co., Class C^ | 6,261,335 | ||||||
31,976 | Honeywell International, Inc. | 4,224,669 | ||||||
1,309 | Roper Industries, Inc. | 348,875 | ||||||
|
| |||||||
10,834,879 | ||||||||
|
| |||||||
Insurance (1.0%): | ||||||||
105 | Alleghany Corp. | 65,449 | ||||||
8,657 | American International Group, Inc. | 341,172 | ||||||
16,591 | Aon plc | 2,411,668 | ||||||
4,431 | Arch Capital Group, Ltd.* | 118,396 | ||||||
684 | Axis Capital Holdings, Ltd. | 35,322 | ||||||
970 | Brown & Brown, Inc. | 26,733 | ||||||
1,268 | Erie Indemnity Co., Class A | 169,037 | ||||||
1,087 | Everest Re Group, Ltd. | 236,704 | ||||||
76 | Markel Corp.* | 78,892 | ||||||
16,377 | Marsh & McLennan Cos., Inc. | 1,306,066 | ||||||
40,025 | Progressive Corp. (The) | 2,414,707 | ||||||
181 | RenaissanceRe Holdings, Ltd. | 24,200 | ||||||
3,570 | Travelers Cos., Inc. (The) | 427,508 | ||||||
|
| |||||||
7,655,854 | ||||||||
|
| |||||||
Interactive Media & Services (8.4%): | ||||||||
20,627 | Alphabet, Inc., Class A* | 21,554,390 | ||||||
21,018 | Alphabet, Inc., Class C* | 21,766,451 | ||||||
164,154 | Facebook, Inc., Class A* | 21,518,948 | ||||||
5,136 | IAC/InterActiveCorp.* | 940,093 | ||||||
3,561 | Match Group, Inc.^ | 152,304 | ||||||
7,174 | TripAdvisor, Inc.*^ | 386,966 | ||||||
49,355 | Twitter, Inc.* | 1,418,463 | ||||||
2,773 | Zillow Group, Inc., Class A*^ | 87,155 | ||||||
6,318 | Zillow Group, Inc., Class C*^ | 199,522 | ||||||
|
| |||||||
68,024,292 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (6.1%): | ||||||||
28,064 | Amazon.com, Inc.* | 42,151,287 | ||||||
3,272 | Booking Holdings, Inc.* | 5,635,758 | ||||||
13,572 | eBay, Inc.* | 380,966 | ||||||
8,309 | Expedia, Inc. | 936,009 | ||||||
6,309 | GrubHub, Inc.*^ | 484,594 | ||||||
3,963 | Wayfair, Inc., Class A*^ | 356,987 | ||||||
|
| |||||||
49,945,601 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services (8.6%): | ||||||||
44,386 | Accenture plc, Class C | $ | 6,258,869 | |||||
10,183 | Akamai Technologies, Inc.* | 621,978 | ||||||
3,255 | Alliance Data Systems Corp.^ | 488,510 | ||||||
30,402 | Automatic Data Processing, Inc. | 3,986,310 | ||||||
9,699 | Black Knight, Inc.* | 437,037 | ||||||
9,106 | Booz Allen Hamilton Holding Corp. | 410,407 | ||||||
7,975 | Broadridge Financial Solutions, Inc. | 767,594 | ||||||
36,323 | Cognizant Technology Solutions Corp., Class A | 2,305,784 | ||||||
3,633 | CoreLogic, Inc.* | 121,415 | ||||||
3,556 | Epam Systems, Inc.* | 412,532 | ||||||
1,765 | Euronet Worldwide, Inc.*^ | 180,701 | ||||||
1,897 | Fidelity National Information Services, Inc. | 194,537 | ||||||
37,231 | First Data Corp., Class A* | 629,576 | ||||||
27,518 | Fiserv, Inc.* | 2,022,298 | ||||||
6,050 | FleetCor Technologies, Inc.* | 1,123,606 | ||||||
6,092 | Gartner, Inc.* | 778,801 | ||||||
3,634 | Genpact, Ltd. | 98,082 | ||||||
10,938 | Global Payments, Inc. | 1,128,036 | ||||||
11,010 | GoDaddy, Inc., Class A* | 722,476 | ||||||
45,599 | International Business Machines Corp. | 5,183,238 | ||||||
5,271 | Jack Henry & Associates, Inc. | 666,887 | ||||||
63,433 | MasterCard, Inc., Class A | 11,966,635 | ||||||
5,985 | Okta, Inc.*^ | 381,843 | ||||||
22,151 | Paychex, Inc. | 1,443,138 | ||||||
82,005 | PayPal Holdings, Inc.* | 6,895,800 | ||||||
15,005 | Sabre Corp. | 324,708 | ||||||
20,155 | Square, Inc., Class A*^ | 1,130,494 | ||||||
2,579 | Switch, Inc., Class A^ | 18,053 | ||||||
5,752 | Teradata Corp.*^ | 220,647 | ||||||
12,405 | Total System Services, Inc. | 1,008,402 | ||||||
5,080 | Twilio, Inc., Series A*^ | 453,644 | ||||||
7,262 | VeriSign, Inc.* | 1,076,882 | ||||||
121,605 | Visa, Inc., Class A^ | 16,044,565 | ||||||
8,356 | Western Union Co.^ | 142,553 | ||||||
2,812 | WEX, Inc.* | 393,849 | ||||||
1,868 | Worldpay, Inc., Class A* | 142,771 | ||||||
|
| |||||||
70,182,658 | ||||||||
|
| |||||||
Leisure Products (0.1%): | ||||||||
679 | Brunswick Corp. | 31,540 | ||||||
6,198 | Hasbro, Inc.^ | 503,587 | ||||||
5,064 | Mattel, Inc.*^ | 50,589 | ||||||
3,973 | Polaris Industries, Inc.^ | 304,650 | ||||||
|
| |||||||
890,366 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.8%): | ||||||||
2,518 | Bio-Techne Corp. | 364,405 | ||||||
2,726 | Bruker Corp. | 81,153 | ||||||
2,346 | Charles River Laboratories International, Inc.* | 265,520 | ||||||
10,122 | Illumina, Inc.* | 3,035,892 | ||||||
1,693 | Mettler-Toledo International, Inc.* | 957,527 | ||||||
3,922 | PRA Health Sciences, Inc.* | 360,667 | ||||||
1,646 | Thermo Fisher Scientific, Inc. | 368,358 | ||||||
4,804 | Waters Corp.* | 906,275 | ||||||
|
| |||||||
6,339,797 | ||||||||
|
| |||||||
Machinery (2.2%): | ||||||||
7,873 | Allison Transmission Holdings, Inc.^ | 345,703 | ||||||
36,349 | Caterpillar, Inc. | 4,618,867 |
See accompanying notes to the financial statements.
7
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
3,707 | Cummins, Inc. | $ | 495,403 | |||||
22,338 | Deere & Co. | 3,332,159 | ||||||
8,112 | Donaldson Co., Inc.^ | 351,980 | ||||||
18,569 | Fortive Corp. | 1,256,379 | ||||||
2,807 | Gardner Denver Holdings, Inc.* | 57,403 | ||||||
11,343 | Graco, Inc. | 474,705 | ||||||
5,023 | IDEX Corp. | 634,204 | ||||||
22,824 | Illinois Tool Works, Inc. | 2,891,573 | ||||||
9,145 | Ingersoll-Rand plc | 834,298 | ||||||
4,396 | Lincoln Electric Holdings, Inc.^ | 346,625 | ||||||
2,203 | Middleby Corp. (The)*^ | 226,314 | ||||||
3,689 | Nordson Corp. | 440,282 | ||||||
1,635 | Parker Hannifin Corp. | 243,844 | ||||||
7,096 | Toro Co. | 396,524 | ||||||
3,590 | WABCO Holdings, Inc.*^ | 385,351 | ||||||
2,046 | Wabtec Corp.^ | 143,732 | ||||||
8,307 | Welbilt, Inc.* | 92,291 | ||||||
6,845 | Xylem, Inc.^ | 456,698 | ||||||
|
| |||||||
18,024,335 | ||||||||
|
| |||||||
Media (0.6%): | ||||||||
3,008 | AMC Networks, Inc., Class A*^ | 165,079 | ||||||
290 | Cable One, Inc.^ | 237,829 | ||||||
22,431 | CBS Corp., Class B | 980,683 | ||||||
8,504 | Charter Communications, Inc., Class A*^ | 2,423,385 | ||||||
2,400 | Interpublic Group of Cos., Inc. (The)^ | 49,512 | ||||||
10,123 | Omnicom Group, Inc.^ | 741,409 | ||||||
88,942 | Sirius XM Holdings, Inc.^ | 507,859 | ||||||
|
| |||||||
5,105,756 | ||||||||
|
| |||||||
Metals & Mining (0.0%)†: | ||||||||
1,898 | Royal Gold, Inc.^ | 162,564 | ||||||
5,636 | Southern Copper Corp.^ | 173,420 | ||||||
2,286 | Steel Dynamics, Inc. | 68,671 | ||||||
|
| |||||||
404,655 | ||||||||
|
| |||||||
Multiline Retail (0.3%): | ||||||||
18,352 | Dollar General Corp. | 1,983,484 | ||||||
2,750 | Dollar Tree, Inc.* | 248,380 | ||||||
7,984 | Nordstrom, Inc.^ | 372,134 | ||||||
|
| |||||||
2,603,998 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.5%): | ||||||||
11,804 | Anadarko Petroleum Corp. | 517,487 | ||||||
9,221 | Antero Resources Corp.*^ | 86,585 | ||||||
1,890 | Apache Corp.^ | 49,613 | ||||||
21,790 | Cabot Oil & Gas Corp.^ | 487,007 | ||||||
10,981 | Cheniere Energy, Inc.* | 649,965 | ||||||
755 | Cimarex Energy Co. | 46,546 | ||||||
1,733 | Concho Resources, Inc.* | 178,135 | ||||||
3,043 | Continental Resources, Inc.*^ | 122,298 | ||||||
1,883 | Diamondback Energy, Inc. | 174,554 | ||||||
4,568 | EOG Resources, Inc. | 398,375 | ||||||
3,559 | Kosmos Energy, Ltd.* | 14,485 | ||||||
5,133 | Newfield Exploration Co.* | 75,250 | ||||||
11,834 | ONEOK, Inc. | 638,444 | ||||||
12,191 | Parsley Energy, Inc., Class A* | 194,812 | ||||||
6,370 | Pioneer Natural Resources Co. | 837,783 | ||||||
|
| |||||||
4,471,339 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Personal Products (0.2%): | ||||||||
14,759 | Estee Lauder Co., Inc. (The), Class A | $ | 1,920,146 | |||||
1,309 | Herbalife, Ltd.*^ | 77,166 | ||||||
1,104 | Nu Skin Enterprises, Inc., Class A | 67,708 | ||||||
|
| |||||||
2,065,020 | ||||||||
|
| |||||||
Pharmaceuticals (2.0%): | ||||||||
60,050 | Bristol-Myers Squibb Co. | 3,121,399 | ||||||
2,444 | Catalent, Inc.* | 76,204 | ||||||
2,422 | Elanco Animal Health, Inc.*^ | 76,366 | ||||||
39,981 | Eli Lilly & Co. | 4,626,602 | ||||||
3,713 | Jazz Pharmaceuticals plc*^ | 460,263 | ||||||
33,352 | Johnson & Johnson Co. | 4,304,076 | ||||||
12,045 | Merck & Co., Inc. | 920,358 | ||||||
10,684 | Nektar Therapeutics*^ | 351,183 | ||||||
33,412 | Zoetis, Inc. | 2,858,062 | ||||||
|
| |||||||
16,794,513 | ||||||||
|
| |||||||
Professional Services (0.4%): | ||||||||
2,463 | CoStar Group, Inc.* | 830,868 | ||||||
1,138 | Dun & Bradstreet Corp. | 162,438 | ||||||
2,227 | Equifax, Inc.^ | 207,401 | ||||||
8,157 | Robert Half International, Inc. | 466,580 | ||||||
12,650 | TransUnion | 718,520 | ||||||
11,064 | Verisk Analytics, Inc.* | 1,206,419 | ||||||
|
| |||||||
3,592,226 | ||||||||
|
| |||||||
Real Estate Management & Development (0.1%): | ||||||||
10,394 | CBRE Group, Inc., Class A* | 416,176 | ||||||
1,099 | Howard Hughes Corp. (The)* | 107,284 | ||||||
|
| |||||||
523,460 | ||||||||
|
| |||||||
Road & Rail (1.2%): | ||||||||
26,008 | CSX Corp. | 1,615,877 | ||||||
759 | Genesee & Wyoming, Inc., Class A* | 56,181 | ||||||
6,002 | J.B. Hunt Transport Services, Inc. | 558,426 | ||||||
2,901 | Landstar System, Inc.^ | 277,539 | ||||||
4,541 | Old Dominion Freight Line, Inc. | 560,768 | ||||||
724 | Schneider National, Inc. | 13,517 | ||||||
46,948 | Union Pacific Corp. | 6,489,622 | ||||||
|
| |||||||
9,571,930 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.6%): | ||||||||
64,573 | Advanced Micro Devices, Inc.*^ | 1,192,018 | ||||||
4,048 | Analog Devices, Inc. | 347,440 | ||||||
67,758 | Applied Materials, Inc. | 2,218,397 | ||||||
17,027 | Broadcom, Inc. | 4,329,626 | ||||||
16,823 | Cypress Semiconductor Corp. | 213,989 | ||||||
10,550 | KLA-Tencor Corp. | 944,120 | ||||||
10,691 | Lam Research Corp. | 1,455,793 | ||||||
10,826 | Marvell Technology Group, Ltd. | 175,273 | ||||||
19,162 | Maxim Integrated Products, Inc. | 974,388 | ||||||
15,843 | Microchip Technology, Inc.^ | 1,139,429 | ||||||
61,139 | Micron Technology, Inc.* | 1,939,940 | ||||||
3,723 | MKS Instruments, Inc. | 240,543 | ||||||
2,857 | Monolithic Power Systems, Inc.^ | 332,126 | ||||||
40,172 | NVIDIA Corp. | 5,362,961 | ||||||
1,254 | NXP Semiconductors NV | 91,893 | ||||||
28,680 | ON Semiconductor Corp.* | 473,507 | ||||||
8,658 | Skyworks Solutions, Inc. | 580,259 | ||||||
1,973 | Teradyne, Inc. | 61,913 |
See accompanying notes to the financial statements.
8
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
66,337 | Texas Instruments, Inc. | $ | 6,268,846 | |||||
2,958 | Universal Display Corp.^ | 276,780 | ||||||
7,403 | Versum Materials, Inc. | 205,211 | ||||||
17,558 | Xilinx, Inc. | 1,495,415 | ||||||
|
| |||||||
30,319,867 | ||||||||
|
| |||||||
Software (11.0%): | ||||||||
3,640 | 2u, Inc.*^ | 180,981 | ||||||
33,928 | Adobe Systems, Inc.* | 7,675,870 | ||||||
5,735 | ANSYS, Inc.* | 819,761 | ||||||
4,750 | Aspen Technology, Inc.* | 390,355 | ||||||
6,837 | Atlassian Corp. plc, Class A*^ | 608,356 | ||||||
12,698 | Autodesk, Inc.* | 1,633,090 | ||||||
19,198 | Cadence Design Systems, Inc.* | 834,729 | ||||||
9,023 | CDK Global, Inc. | 432,021 | ||||||
2,589 | Ceridian HCM Holding, Inc.* | 89,295 | ||||||
9,315 | Citrix Systems, Inc. | 954,415 | ||||||
5,206 | DocuSign, Inc.*^ | 208,656 | ||||||
499 | Elastic NV*^ | 35,669 | ||||||
1,989 | Fair Isaac Corp.* | 371,943 | ||||||
8,636 | FireEye, Inc.* | 139,990 | ||||||
9,714 | Fortinet, Inc.* | 684,157 | ||||||
5,679 | Guidewire Software, Inc.*^ | 455,626 | ||||||
16,823 | Intuit, Inc. | 3,311,608 | ||||||
2,252 | LogMeIn, Inc.^ | 183,696 | ||||||
4,488 | Manhattan Associates, Inc.*^ | 190,157 | ||||||
495,466 | Microsoft Corp. | 50,324,481 | ||||||
9,503 | Nutanix, Inc., Class A* | 395,230 | ||||||
17,039 | Oracle Corp. | 769,311 | ||||||
3,387 | Paycom Software, Inc.*^ | 414,738 | ||||||
2,621 | Pegasystems, Inc. | 125,362 | ||||||
1,387 | Pluralsight, Inc., Class A*^ | 32,664 | ||||||
3,470 | Proofpoint, Inc.* | 290,821 | ||||||
8,007 | PTC, Inc.* | 663,780 | ||||||
4,838 | RealPage, Inc.*^ | 233,143 | ||||||
12,210 | Red Hat, Inc.* | 2,144,564 | ||||||
4,664 | Ringcentral, Inc.*^ | 384,500 | ||||||
49,621 | Salesforce.com, Inc.* | 6,796,588 | ||||||
12,252 | ServiceNow, Inc.*^ | 2,181,469 | ||||||
1,728 | SolarWinds Corp.*^ | 23,898 | ||||||
10,092 | Splunk, Inc.*^ | 1,058,146 | ||||||
13,406 | SS&C Technologies Holdings, Inc. | 604,745 | ||||||
995 | Synopsys, Inc.* | 83,819 | ||||||
4,914 | Tableau Software, Inc., Class A* | 589,680 | ||||||
2,600 | Tyler Technologies, Inc.* | 483,132 | ||||||
2,126 | Ultimate Software Group, Inc. (The)* | 520,594 | ||||||
4,896 | VMware, Inc., Class A^ | 671,388 | ||||||
10,009 | Workday, Inc., Class A* | 1,598,237 | ||||||
7,163 | Zendesk, Inc.* | 418,104 | ||||||
|
| |||||||
90,008,769 | ||||||||
|
| |||||||
Specialty Retail (3.9%): | ||||||||
1,464 | Advance Auto Parts, Inc. | 230,521 | ||||||
1,536 | AutoZone, Inc.* | 1,287,690 | ||||||
4,272 | Best Buy Co., Inc. | 226,245 | ||||||
4,561 | Burlington Stores, Inc.*^ | 741,938 | ||||||
7,264 | CarMax, Inc.*^ | 455,671 | ||||||
3,571 | Floor & Decor Holdings, Inc., Class A*^ | 92,489 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
704 | Gap, Inc. (The)^ | $ | 18,135 | |||||
79,578 | Home Depot, Inc. (The) | 13,673,092 | ||||||
2,854 | L Brands, Inc. | 73,262 | ||||||
56,362 | Lowe’s Cos., Inc. | 5,205,594 | ||||||
1,387 | Michaels Cos., Inc. (The)*^ | 18,780 | ||||||
5,452 | O’Reilly Automotive, Inc.* | 1,877,287 | ||||||
25,208 | Ross Stores, Inc. | 2,097,306 | ||||||
1,372 | Tiffany & Co. | 110,460 | ||||||
85,463 | TJX Cos., Inc. (The) | 3,823,615 | ||||||
8,330 | Tractor Supply Co. | 695,055 | ||||||
3,899 | Ulta Salon, Cosmetics & Fragrance, Inc.* | 954,631 | ||||||
4,942 | Urban Outfitters, Inc.* | 164,074 | ||||||
1,308 | Williams-Sonoma, Inc.^ | 65,989 | ||||||
|
| |||||||
31,811,834 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (6.4%): | ||||||||
327,833 | Apple, Inc. | 51,712,378 | ||||||
613 | Dell Technologies, Inc., Class C* | 29,957 | ||||||
6,338 | NCR Corp.*^ | 146,281 | ||||||
18,041 | NetApp, Inc.^ | 1,076,506 | ||||||
11,271 | Pure Storage, Inc., Class A* | 181,238 | ||||||
|
| |||||||
53,146,360 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.2%): | ||||||||
3,135 | Carter’s, Inc.^ | 255,879 | ||||||
272 | Columbia Sportswear Co. | 22,872 | ||||||
25,249 | Hanesbrands, Inc.^ | 316,370 | ||||||
6,559 | Lululemon Athletica, Inc.* | 797,640 | ||||||
5,382 | Michael Kors Holdings, Ltd.* | 204,085 | ||||||
86,588 | Nike, Inc., Class C | 6,419,634 | ||||||
4,386 | Skechers U.S.A., Inc., Class A*^ | 100,396 | ||||||
4,078 | Tapestry, Inc. | 137,633 | ||||||
10,217 | Under Armour, Inc., Class A*^ | 180,534 | ||||||
9,799 | Under Armour, Inc., Class C*^ | 158,450 | ||||||
17,156 | VF Corp. | 1,223,909 | ||||||
|
| |||||||
9,817,402 | ||||||||
|
| |||||||
Tobacco (0.8%): | ||||||||
130,691 | Altria Group, Inc. | 6,454,828 | ||||||
|
| |||||||
Trading Companies & Distributors (0.4%): | ||||||||
732 | Air Lease Corp. | 22,114 | ||||||
19,791 | Fastenal Co.^ | 1,034,871 | ||||||
3,997 | HD Supply Holdings, Inc.* | 149,967 | ||||||
1,355 | MSC Industrial Direct Co., Inc., Class A | 104,227 | ||||||
5,579 | United Rentals, Inc.* | 572,015 | ||||||
1,459 | Univar, Inc.* | 25,883 | ||||||
3,134 | W.W. Grainger, Inc.^ | 884,916 | ||||||
1,767 | Watsco, Inc.^ | 245,860 | ||||||
|
| |||||||
3,039,853 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.1%): | ||||||||
13,860 | T-Mobile US, Inc.* | 881,635 | ||||||
|
| |||||||
Total Common Stocks (Cost $610,543,021) | 798,101,865 | |||||||
|
| |||||||
Preferred Stock (0.6%): | ||||||||
Software (0.6%): | ||||||||
841,419 | Palantir Technologies, Inc., Series I*(a)(b) | 4,552,077 | ||||||
|
| |||||||
Total Preferred Stock (Cost $5,157,898) | 4,552,077 | |||||||
|
|
See accompanying notes to the financial statements.
9
AZL Russell 1000 Growth Index Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Unaffiliated Investment Company (2.4%): | ||||||||
19,918,120 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(c) | $ | 19,918,120 | |||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $19,918,120) | 19,918,120 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (8.8%)(d) | ||||||||
Floating Rate Notes (2.1%) | ||||||||
1,298,000 | Bedford Row Funding, 2.82%, 5/23/19 | 1,298,000 | ||||||
1,273,000 | Bedford Row Funding, 2.72%, 8/15/19 | 1,273,000 | ||||||
1,400,000 | Berkshire Hathaway Finance, 2.45%, 1/11/19 | 1,400,101 | ||||||
1,300,000 | Commonwealth Bank of Australia, 2.68%, 5/3/19 | 1,300,027 | ||||||
1,500,000 | Credit Agricole CIB, 2.75%, 4/23/19 | 1,500,000 | ||||||
1,282,000 | HSBC Bank plc, 2.65%, 4/30/19 | 1,282,000 | ||||||
1,884,000 | Svenska Handelsbanken AB, 2.69%, 8/22/19 | 1,884,000 | ||||||
1,626,000 | Swedbank AB, 2.72%, 1/22/19 | 1,626,000 | ||||||
1,500,000 | US Bank NA, 2.76%, 7/23/19 | 1,500,000 | ||||||
1,300,000 | Wells Fargo Bank NA, 2.68%, 5/31/19 | 1,300,000 | ||||||
1,600,000 | Wells Fargo Bank NA, 2.82%, 10/23/19 | 1,600,000 | ||||||
1,300,000 | Westpac Banking Corp., 2.78%, 5/24/19 | 1,300,050 | ||||||
|
| |||||||
17,263,178 | ||||||||
|
| |||||||
Repurchase Agreements (1.5%) | ||||||||
1,455,045 | BNP Paribas SA, 2.54%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $1,455,250, Collateralized by U.S. Treasury Obligations and Corporate Debt Securities, 0.00% - 7.55%, 1/17/19 - 9/15/56, fair value of $1,519,396 | 1,455,045 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Repurchase Agreements, continued | ||||||||
11,108,411 | Mizuho Securities USA LLC, 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $11,110,232, Collateralized by U.S. Government Agency Obligations, 2.00% - 5.50%, 2/1/31 - 2/20/48, fair value of $11,330,579 | $ | 11,108,411 | |||||
|
| |||||||
12,563,456 | ||||||||
|
| |||||||
Time Deposits (0.3%) | ||||||||
2,700,000 | Societe Generale SA, 2.40%, 1/2/19 | 2,700,000 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
39,797,714 | Short-Term Investments(e) | 39,797,714 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 72,324,348 | ||||||
|
| |||||||
Total Investment Securities (Cost $707,943,387) — 108.6%(f) | 894,896,410 | |||||||
Net other assets (liabilities) — (8.6)% | (70,609,688 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 824,286,722 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $71,269,348. |
† | Represents less than 0.05%. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 0.55% of the net assets of the fund. |
(b) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.55% of the net assets of the fund. |
(c) | The rate represents the effective yield at December 31, 2018. |
(d) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $1,182,200 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
NASDAQ 100E-Mini March Futures (U.S. Dollar) | 3/15/19 | 86 | $ | 10,893,190 | $ | 41,616 | ||||||||||
S&P 500 IndexE-Mini March Futures (U.S. Dollar) | 3/15/19 | 86 | 10,772,360 | 43,613 | ||||||||||||
|
| |||||||||||||||
$ | 85,229 | |||||||||||||||
|
|
See accompanying notes to the financial statements.
10
AZL Russell 1000 Growth Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 707,943,387 | |||
|
| ||||
Investment securities, at value(a) | $ | 894,896,410 | |||
Cash | 123,291 | ||||
Segregated cash for collateral | 1,182,200 | ||||
Interest and dividends receivable | 698,507 | ||||
Receivable for capital shares issued | 171,492 | ||||
Receivable for variation margin on futures contracts | 151,360 | ||||
Reclaims receivable | 33,628 | ||||
Prepaid expenses | 10,588 | ||||
|
| ||||
Total Assets | 897,267,476 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 85,457 | ||||
Payable for capital shares redeemed | 7,672 | ||||
Payable for collateral received on loaned securities | 72,324,348 | ||||
Manager fees payable | 260,182 | ||||
Administration fees payable | 3,994 | ||||
Distribution fees payable | 170,064 | ||||
Custodian fees payable | 2,567 | ||||
Administrative and compliance services fees payable | 2,710 | ||||
Transfer agent fees payable | 856 | ||||
Trustee fees payable | 1,038 | ||||
Other accrued liabilities | 121,866 | ||||
|
| ||||
Total Liabilities | 72,980,754 | ||||
|
| ||||
Net Assets | $ | 824,286,722 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 532,852,623 | |||
Total distributable earnings | 291,434,099 | ||||
|
| ||||
Net Assets | $ | 824,286,722 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 48,665,284 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 4,808,835 | ||||
Net Asset Value (offering and redemption price per share) | $ | 10.12 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 775,621,438 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 57,310,269 | ||||
Net Asset Value (offering and redemption price per share) | $ | 13.53 | |||
|
|
(a) | Includes securities on loan of $71,269,348. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 13,635,640 | |||
Interest | 6,856 | ||||
Income from securities lending | 324,856 | ||||
Foreign tax reclaims received | 32,298 | ||||
|
| ||||
Total Investment Income | 13,999,650 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 4,425,716 | ||||
Administration fees | 246,586 | ||||
Distribution fees — Class 2 | 2,375,153 | ||||
Custodian fees | 39,235 | ||||
Administrative and compliance services fees | 15,750 | ||||
Transfer agent fees | 10,922 | ||||
Trustee fees | 50,301 | ||||
Professional fees | 44,953 | ||||
Shareholder reports | 30,427 | ||||
Other expenses | 213,150 | ||||
|
| ||||
Total expenses before reductions | 7,452,193 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (711,316 | ) | |||
|
| ||||
Net expenses | 6,740,877 | ||||
|
| ||||
Net Investment Income/(Loss) | 7,258,773 | ||||
|
| ||||
Net realized and Change in Net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 101,704,649 | ||||
Net realized gains/(losses) on futures contracts | (564,624 | ) | |||
Change in net unrealized appreciation/depreciation on securities | (103,994,965 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | 27,534 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | (2,827,406 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 4,431,367 | |||
|
|
See accompanying notes to the financial statements.
11
AZL Russell 1000 Growth Index Fund
Statements of Changes in Net Assets
For the December 31, 2018 | For the December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 7,258,773 | $ | 9,133,888 | ||||||
Net realized gains/(losses) on investments | 101,140,025 | 79,542,305 | ||||||||
Change in unrealized appreciation/depreciation on investments | (103,967,431 | ) | 201,471,278 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 4,431,367 | 290,147,471 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (6,742,081 | ) | (6,111,763 | ) | ||||||
Class 2 | (80,249,124 | ) | (97,833,977 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (86,991,205 | ) | (103,945,740 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 20,832 | 252,614 | ||||||||
Proceeds from dividends reinvested | 6,742,081 | 6,111,763 | ||||||||
Value of shares redeemed | (6,120,493 | ) | (7,763,906 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | 642,420 | (1,399,529 | ) | |||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 45,892,002 | 8,281,857 | ||||||||
Proceeds from dividends reinvested | 80,249,124 | 97,833,977 | ||||||||
Value of shares redeemed | (321,402,155 | ) | (304,071,723 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (195,261,029 | ) | (197,955,889 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (194,618,609 | ) | (199,355,418 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (277,178,447 | ) | (13,153,687 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 1,101,465,169 | 1,114,618,856 | ||||||||
|
|
|
| |||||||
End of period | $ | 824,286,722 | $ | 1,101,465,169 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 1,674 | 21,691 | ||||||||
Dividends reinvested | 601,435 | 568,008 | ||||||||
Shares redeemed | (505,673 | ) | (675,529 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | 97,436 | (85,830 | ) | |||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 3,002,476 | 575,242 | ||||||||
Dividends reinvested | 5,349,942 | 7,018,219 | ||||||||
Shares redeemed | (19,834,691 | ) | (20,838,277 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (11,482,273 | ) | (13,244,816 | ) | ||||||
|
|
|
| |||||||
Change in shares | (11,384,837 | ) | (13,330,646 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
12
AZL Russell 1000 Growth Index Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016* | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.74 | $ | 10.28 | $ | 10.00 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.13 | 0.14 | 0.03 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.20 | ) | 2.73 | 0.25 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total from Investment Activities | (0.07 | ) | 2.87 | 0.28 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.20 | ) | (0.05 | ) | — | ||||||||||||||||||||
Net Realized Gains | (1.35 | ) | (1.36 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Dividends | (1.55 | ) | (1.41 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Net Asset Value, End of Period | $ | 10.12 | $ | 11.74 | $ | 10.28 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Return(a) | (1.86 | )% | 29.19 | % | 2.80 | %(b) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 48,665 | $ | 55,307 | $ | 49,297 | |||||||||||||||||||
Net Investment Income/(Loss)(c) | 0.96 | % | 1.04 | % | 1.26 | % | |||||||||||||||||||
Expenses Before Reductions(c)(d) | 0.50 | % | 0.50 | % | 0.50 | % | |||||||||||||||||||
Expenses Net of Reductions(c) | 0.43 | % | 0.45 | % | 0.45 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 17 | % | 12 | % | 158 | %(f) | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 15.21 | $ | 12.99 | $ | 15.32 | $ | 17.11 | $ | 16.55 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.15 | 0.13 | 0.04 | 0.19 | 0.17 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.33 | ) | 3.49 | 0.84 | 0.54 | 1.80 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (0.18 | ) | 3.62 | 0.88 | 0.73 | 1.97 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.15 | ) | (0.04 | ) | (0.16 | ) | (0.19 | ) | (0.17 | ) | |||||||||||||||
Net Realized Gains | (1.35 | ) | (1.36 | ) | (3.05 | ) | (2.33 | ) | (1.24 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (1.50 | ) | (1.40 | ) | (3.21 | ) | (2.52 | ) | (1.41 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 13.53 | $ | 15.21 | $ | 12.99 | $ | 15.32 | $ | 17.11 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (2.14 | )% | 28.89 | % | 6.43 | % | 4.86 | % | 12.21 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 775,621 | $ | 1,046,158 | $ | 1,065,322 | $ | 101,530 | $ | 130,259 | |||||||||||||||
Net Investment Income/(Loss) | 0.71 | % | 0.79 | % | 0.99 | % | 0.86 | % | 0.83 | % | |||||||||||||||
Expenses Before Reductions(d) | 0.75 | % | 0.75 | % | 0.77 | % | 0.78 | % | 0.78 | % | |||||||||||||||
Expenses Net of Reductions | 0.68 | % | 0.70 | % | 0.72 | % | 0.78 | % | 0.78 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 17 | % | 12 | % | 158 | %(f) | 14 | % | 13 | % |
* | Class 1 activity is for the period October 17, 2016 (commencement of operations) to December 31, 2016 |
(a) | 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. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized for periods less than on year. |
(d) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. Not annualized for periods less than one year. |
(f) | 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 158%. |
See accompanying notes to the financial statements.
13
AZL Russell 1000 Growth Index Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Russell 1000 Growth Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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.
14
AZL Russell 1000 Growth Index Fund
Notes to the Financial Statements
December 31, 2018
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $31,991 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $72,259,689 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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 $14.9 million for the year ended December 31, 2018. Realized gains and losses are reported as “Net realized gains/(losses) on futures contracts” on the Statement of Operations.
15
AZL Russell 1000 Growth Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 85,229 | 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 the 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 year ended December 31, 2018:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||||||
Equity Risk | ||||||||||
Equity Contracts | Net realized gains/(losses) on futures contracts/ Change in net unrealized appreciation/depreciation on futures contracts | $ | (564,624 | ) | $ | 27,534 |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (204,799 | ) | ||
Class 2 | (2,763,808 | ) | |||
From net realized gains | |||||
Class 1 | (5,906,964 | ) | |||
Class 2 | (95,070,169 | ) | |||
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Change in net assets resulting from distributions to shareholders | $ | (103,945,740 | ) | ||
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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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Russell 1000 Growth Index Fund Class 1 | 0.44 | % | 0.59 | % | ||||||
AZL Russell 1000 Growth Index Fund Class 2 | 0.44 | % | 0.84 | % |
* | Effective December 1, 2018, the Manager voluntarily reduced the management fee to 0.36% on all assets. Prior to December 1, 2018, the Manager voluntarily reduced the management fee to 0.37% on all assets. The Manager reserves the right to increase the management fee to the amount shown in the table at any time. |
16
AZL Russell 1000 Growth Index Fund
Notes to the Financial Statements
December 31, 2018
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value 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 anannual 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 year ended December 31, 2018, $8,140 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
17
AZL Russell 1000 Growth Index Fund
Notes to the Financial Statements
December 31, 2018
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 December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 798,101,865 | $ | — | $ | — | $ | 798,101,865 | ||||||||||||
Preferred Stock | — | — | 4,552,077 | 4,552,077 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 72,324,348 | — | 72,324,348 | ||||||||||||||||
Unaffiliated Investment Company | 19,918,120 | — | — | 19,918,120 | ||||||||||||||||
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Total Investment Securities | 818,019,985 | 72,324,348 | 4,552,077 | 894,896,410 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | 85,229 | — | — | 85,229 | ||||||||||||||||
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Total Investments | $ | 818,105,214 | $ | 72,324,348 | $ | 4,552,077 | $ | 894,981,639 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally recorded in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Russell 1000 Growth Index Fund | $ | 164,463,962 | $ | 440,004,764 |
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 December 31, 2018 are identified below.
Security | Acquisition Date(a) | Acquisition Cost | Shares or Principal Amount | Fair Value | Percentage of Net Assets | ||||||||||||||||||||
Palantir Technologies, Inc., Series I | 2/7/14 | $ | 5,157,898 | 841,419 | $ | 4,552,077 | 0.55 | % |
(a) | Acquisition date represents the initial purchase date of the security. |
7. Investment Risks
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 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.
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 December 31, 2018 is $711,503,966. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 208,838,310 | ||
Unrealized (depreciation) | (25,445,866 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 183,392,444 | ||
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18
AZL Russell 1000 Growth Index Fund
Notes to the Financial Statements
December 31, 2018
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Russell 1000 Growth Index Fund | $ | 18,689,900 | $ | 68,301,305 | $ | 86,991,205 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Russell 1000 Growth Index Fund | $ | 13,954,599 | $ | 89,991,141 | $ | 103,945,740 |
(a) | Total distributions paid may differ from the 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 Russell 1000 Growth Index Fund | $ | 10,438,843 | $ | 97,602,812 | $ | — | $ | 183,392,444 | $ | 291,434,099 |
(a) | The difference between book-basis andtax-basis unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales. |
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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 70% of the Fund.
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.
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Russell 1000 Growth Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Russell 1000 Growth Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 63.99% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $9,659,784.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $68,301,305.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
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The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Russell 1000 Value Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 13
Page 13
Statements of Changes in Net Assets
Page 14
Page 15
Notes to the Financial Statements
Page 16
Report of Independent Registered Public Accounting Firm
Page 22
Other Federal Income Tax Information
Page 23
Page 24
Approval of Investment Advisory and Subadvisory Agreements
Page 25
Information about the Board of Trustees and Officers
Page 28
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® Russell 1000 Value Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Russell 1000 Value Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund.
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What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Russell 1000 Value Index Fund (Class 2 Shares) (the “Fund”) returned-8.72%. That compared to a-8.27% total return for its benchmark, the Russell 1000® Value Index1.
The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the Russell 1000® Value Index (“Index”). The Index is designed to provide a comprehensive measure of value stocks’ performance.*
Markets opened the year posting strong gains fueled bytax-reform optimism and ongoing global growth that carried over from 2017. As the first quarter progressed, however, investors grew more concerned that the economy might be overheating. The realized volatility of the S&P 500 Index2 rose to annualized level of 19% during the first quarter, which was up from an average of 6.6% in 2017. Rising yields and trade protectionism fears further weighed on equities. And yet, the underlying U.S. economy remained healthy, with low unemployment, high consumer confidence and accelerating economic indicators. These factors supported the Federal Reserve Board’s (the Fed) decision to increase interest rates in March, which helped drive yields higher.
The second quarter saw renewed gains in U.S. equity markets, in spite of ongoing threats of U.S. tariffs. Unemployment fell to its lowest level since 1975 and earnings growth inspired confidence in investors. The Fed raised interest rates again in June.
U.S.large-cap equities reachedall-time highs in the third quarter. Signs of strong economic growth and positive earnings results helped grow investors’ appetite for risk. Volatility fell in spite of the U.S. announcing tariffs on $505 billion of Chinese goods. The unemployment rate fell as well, dropping to 3.7% in September—the lowest rate since 1969. Meanwhile, consumer confidence reached its highest level since 2000. The strength of the economy led the Fed to once again raise interest rates, which, combined with positive growth and high levels of U.S. government debt issuance, helped push the yield on10-year U.S. Treasuries up to 3.06%.
Concerns over Fed policy, growing trade protectionism and a potential slowdown in growth contributed to investor anxiety throughout the fourth quarter. Hawkish comments from Fed Chairman Powell about U.S. interest rates drove a temporarysell-off in U.S. Treasuries, and helped spur a return to volatility.
From a sector perspective, the largest negative returns in the Index came from the industrials, energy and materials sectors. Increases were seen in the healthcare and utilities sectors.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a slight positive impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
1
AZL® Russell 1000 Value Index Fund Review (Unaudited)
Fund Objective
The Fund’s investment objective is to match the total return of the Russell 1000®Value Index. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in all stocks in the Index in proportion to their weighting in the Index.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines.
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
| |||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception | 1 | 3 | 5 | Since | ||||||||||||||
Date | Year | Year | Year | Inception | ||||||||||||||
AZL®Russell 1000 Value Index Fund (Class 1 Shares) | 10/14/16 | -8.50 | % | — | — | 5.23 | % | |||||||||||
AZL®Russell 1000 Value Index Fund (Class 2 Shares) | 4/30/10 | -8.72 | % | 6.21 | % | 5.22 | % | 8.75 | % | |||||||||
Russell 1000®Value Index | 4/30/10 | -8.27 | % | 6.95 | % | 5.95 | % | 9.52 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®Russell 1000 Value Index Fund (Class 1 Shares) | 0.50 | % | ||
AZL®Russell 1000 Value Index Fund (Class 2 Shares) | 0.75 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.36% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.59% for Class 1 Shares and 0.84% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Russell 1000® Value Index, an unmanaged index that measures the performance of thelarge-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lowerprice-to-book ratios and lower expected growth values. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Russell 1000 Value Index Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Russell 1000 Value Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Russell 1000 Value Index Fund, Class 1 | $ | 1,000.00 | $ | 931.60 | $ | 2.09 | 0.43 | % | ||||||||||||
AZL Russell 1000 Value Index Fund, Class 2 | $ | 1,000.00 | $ | 930.60 | $ | 3.31 | 0.68 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Russell 1000 Value Index Fund, Class 1 | $ | 1,000.00 | $ | 1,023.04 | $ | 2.19 | 0.43 | % | ||||||||||||
AZL Russell 1000 Value Index Fund, Class 2 | $ | 1,000.00 | $ | 1,021.78 | $ | 3.47 | 0.68 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Financials | 22.0 | % | |||
Health Care | 15.7 | ||||
Information Technology | 9.2 | ||||
Energy | 9.3 | ||||
Consumer Staples | 7.8 | ||||
Industrials | 7.1 | ||||
Telecommunication Services | 7.2 | ||||
Utilities | 6.5 | ||||
Consumer Discretionary | 5.3 | ||||
Real Estate | 4.8 | ||||
Materials | 3.9 | ||||
|
| ||||
Total Common Stocks | 98.8 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 13.4 | ||||
Money Markets | 1.0 | ||||
|
| ||||
Total Investment Securities | 113.2 | ||||
Net other assets (liabilities) | (13.2 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (98.8%): | ||||||||
Aerospace & Defense (1.3%): | ||||||||
31,860 | Arconic, Inc. | $ | 537,160 | |||||
2,976 | Curtiss-Wright Corp. | 303,909 | ||||||
10,228 | General Dynamics Corp. | 1,607,944 | ||||||
5,156 | Hexcel Corp.^ | 295,645 | ||||||
463 | Huntington Ingalls Industries, Inc. | 88,114 | ||||||
5,604 | L3 Technologies, Inc. | 973,191 | ||||||
1,591 | Lockheed Martin Corp. | 416,587 | ||||||
2,600 | Teledyne Technologies, Inc.* | 538,382 | ||||||
14,720 | Textron, Inc. | 676,973 | ||||||
58,729 | United Technologies Corp. | 6,253,463 | ||||||
|
| |||||||
11,691,368 | ||||||||
|
| |||||||
Airlines (0.6%): | ||||||||
8,850 | Alaska Air Group, Inc. | 538,523 | ||||||
29,522 | American Airlines Group, Inc.^ | 947,951 | ||||||
2,272 | Copa Holdings SA, Class A | 178,829 | ||||||
34,476 | Delta Air Lines, Inc. | 1,720,353 | ||||||
23,290 | JetBlue Airways Corp.* | 374,037 | ||||||
10,786 | Southwest Airlines Co. | 501,333 | ||||||
17,578 | United Continental Holdings, Inc.* | 1,471,806 | ||||||
|
| |||||||
5,732,832 | ||||||||
|
| |||||||
Auto Components (0.2%): | ||||||||
6,811 | Adient plc | 102,574 | ||||||
2,620 | Aptiv plc | 161,313 | ||||||
15,401 | BorgWarner, Inc. | 535,030 | ||||||
2,091 | Garrett Motion, Inc.* | 25,803 | ||||||
6,457 | Gentex Corp.^ | 130,496 | ||||||
17,699 | Goodyear Tire & Rubber Co.^ | 361,237 | ||||||
3,953 | Lear Corp. | 485,666 | ||||||
787 | Visteon Corp.*^ | 47,440 | ||||||
|
| |||||||
1,849,559 | ||||||||
|
| |||||||
Automobiles (0.7%): | ||||||||
280,004 | Ford Motor Co.^ | 2,142,031 | ||||||
94,271 | General Motors Co. | 3,153,364 | ||||||
12,265 | Harley-Davidson, Inc.^ | 418,482 | ||||||
713 | Thor Industries, Inc.^ | 37,076 | ||||||
|
| |||||||
5,750,953 | ||||||||
|
| |||||||
Banks (10.5%): | ||||||||
12,426 | Associated Banc-Corp. | 245,911 | ||||||
667,789 | Bank of America Corp. | 16,454,321 | ||||||
3,052 | Bank of Hawaii Corp.^ | 205,461 | ||||||
7,701 | Bank OZK^ | 175,814 | ||||||
7,603 | BankUnited, Inc. | 227,634 | ||||||
56,316 | BB&T Corp. | 2,439,609 | ||||||
1,907 | BOK Financial Corp. | 139,840 | ||||||
7,754 | CIT Group, Inc. | 296,746 | ||||||
178,233 | Citigroup, Inc. | 9,278,810 | ||||||
33,806 | Citizens Financial Group, Inc. | 1,005,052 | ||||||
11,216 | Comerica, Inc. | 770,427 | ||||||
7,335 | Commerce Bancshares, Inc.^ | 413,474 | ||||||
4,207 | Cullen/Frost Bankers, Inc.^ | 369,964 | ||||||
9,831 | East West Bancorp, Inc. | 427,943 | ||||||
23,766 | F.N.B. Corp.^ | 233,857 | ||||||
47,636 | Fifth Third Bancorp | 1,120,875 | ||||||
586 | First Citizens BancShares, Inc., Class A | 220,951 | ||||||
7,939 | First Hawaiian, Inc. | 178,707 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
23,847 | First Horizon National Corp.^ | $ | 313,827 | |||||
11,417 | First Republic Bank^ | 992,137 | ||||||
75,840 | Huntington Bancshares, Inc.^ | 904,013 | ||||||
241,361 | JPMorgan Chase & Co. | 23,561,660 | ||||||
75,117 | KeyCorp | 1,110,229 | ||||||
10,392 | M&T Bank Corp. | 1,487,407 | ||||||
8,090 | PacWest Bancorp^ | 269,235 | ||||||
25,475 | People’s United Financial, Inc.^ | 367,604 | ||||||
3,207 | Pinnacle Financial Partners, Inc.^ | 147,843 | ||||||
33,537 | PNC Financial Services Group, Inc. | 3,920,811 | ||||||
7,399 | Popular, Inc. | 349,381 | ||||||
4,891 | Prosperity Bancshares, Inc.^ | 304,709 | ||||||
75,819 | Regions Financial Corp. | 1,014,458 | ||||||
1,481 | Signature Bank | 152,262 | ||||||
16,388 | Sterling Bancorp^ | 270,566 | ||||||
33,342 | SunTrust Banks, Inc. | 1,681,770 | ||||||
919 | SVB Financial Group* | 174,536 | ||||||
7,945 | Synovus Financial Corp.^ | 254,161 | ||||||
12,073 | TCF Financial Corp. | 235,303 | ||||||
829 | Texas Capital Bancshares, Inc.* | 42,354 | ||||||
110,952 | U.S. Bancorp | 5,070,506 | ||||||
16,134 | Umpqua Holdings Corp.^ | 256,531 | ||||||
6,726 | Webster Financial Corp.^ | 331,525 | ||||||
309,572 | Wells Fargo & Co. | 14,265,078 | ||||||
2,927 | Western Alliance Bancorp* | 115,587 | ||||||
4,084 | Wintrust Financial Corp. | 271,545 | ||||||
13,125 | Zions Bancorp^ | 534,713 | ||||||
|
| |||||||
92,605,147 | ||||||||
|
| |||||||
Beverages (0.6%): | ||||||||
62,779 | Coca-Cola Co. (The) | 2,972,586 | ||||||
12,231 | Molson Coors Brewing Co., Class B | 686,893 | ||||||
11,817 | PepsiCo, Inc. | 1,305,542 | ||||||
|
| |||||||
4,965,021 | ||||||||
|
| |||||||
Biotechnology (0.4%): | ||||||||
192 | Agios Pharmaceuticals, Inc.*^ | 8,853 | ||||||
2,740 | Alexion Pharmaceuticals, Inc.* | 266,766 | ||||||
721 | Alnylam Pharmaceuticals, Inc.* | 52,568 | ||||||
2,830 | Amgen, Inc. | 550,916 | ||||||
782 | Biogen Idec, Inc.* | 235,319 | ||||||
1,213 | Bluebird Bio, Inc.*^ | 120,330 | ||||||
23,686 | Gilead Sciences, Inc. | 1,481,560 | ||||||
3,155 | United Therapeutics Corp.*^ | 343,580 | ||||||
|
| |||||||
3,059,892 | ||||||||
|
| |||||||
Building Products (0.4%): | ||||||||
1,202 | Allegion plc^ | 95,811 | ||||||
6,221 | Fortune Brands Home & Security, Inc.^ | 236,336 | ||||||
66,318 | Johnson Controls International plc | 1,966,329 | ||||||
167 | Lennox International, Inc. | 36,550 | ||||||
7,381 | Masco Corp. | 215,820 | ||||||
8,068 | Owens Corning, Inc. | 354,831 | ||||||
3,486 | Resideo Technologies, Inc.* | 71,637 | ||||||
6,134 | USG Corp. | 261,676 | ||||||
|
| |||||||
3,238,990 | ||||||||
|
| |||||||
Capital Markets (3.1%): | ||||||||
3,626 | Affiliated Managers Group, Inc. | 353,317 | ||||||
8,533 | Ameriprise Financial, Inc. | 890,589 |
See accompanying notes to the financial statements.
4
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Capital Markets, continued | ||||||||
66,751 | Bank of New York Mellon Corp. (The)^ | $ | 3,141,970 | |||||
19,529 | BGC Partners, Inc., Class A | 100,965 | ||||||
8,886 | BlackRock, Inc., Class A+ | 3,490,599 | ||||||
670 | CBOE Holdings, Inc. | 65,546 | ||||||
22,616 | CME Group, Inc. | 4,254,522 | ||||||
14,240 | E*TRADE Financial Corp. | 624,851 | ||||||
21,641 | Franklin Resources, Inc. | 641,872 | ||||||
25,560 | Goldman Sachs Group, Inc. (The) | 4,269,798 | ||||||
541 | Interactive Brokers Group, Inc., Class A | 29,566 | ||||||
19,969 | Intercontinental Exchange, Inc. | 1,504,265 | ||||||
29,871 | Invesco, Ltd.^ | 500,041 | ||||||
712 | Lazard, Ltd., Class A | 26,280 | ||||||
6,226 | Legg Mason, Inc. | 158,825 | ||||||
88,717 | Morgan Stanley | 3,517,629 | ||||||
8,203 | NASDAQ OMX Group, Inc. (The)^ | 669,119 | ||||||
10,831 | Northern Trust Corp. | 905,363 | ||||||
6,814 | Raymond James Financial, Inc. | 507,030 | ||||||
25,263 | State Street Corp. | 1,593,337 | ||||||
1,213 | T. Rowe Price Group, Inc. | 111,984 | ||||||
|
| |||||||
27,357,468 | ||||||||
|
| |||||||
Chemicals (2.7%): | ||||||||
15,755 | Air Products & Chemicals, Inc. | 2,521,588 | ||||||
7,700 | Albemarle Corp.^ | 593,439 | ||||||
4,582 | Ashland Global Holdings, Inc. | 325,139 | ||||||
9,414 | Axalta Coating Systems, Ltd.* | 220,476 | ||||||
4,576 | Cabot Corp. | 196,493 | ||||||
3,646 | Celanese Corp., Series A | 328,031 | ||||||
16,620 | CF Industries Holdings, Inc. | 723,136 | ||||||
167,651 | DowDuPont, Inc. | 8,965,975 | ||||||
9,894 | Eastman Chemical Co. | 723,350 | ||||||
10,112 | Ecolab, Inc. | 1,490,003 | ||||||
5,855 | FMC Corp. | 433,036 | ||||||
16,061 | Huntsman Corp. | 309,817 | ||||||
3,645 | International Flavor & Fragrances, Inc.^ | 489,414 | ||||||
16,690 | Linde plc | 2,604,308 | ||||||
11,981 | LyondellBasell Industries NV, Class A | 996,340 | ||||||
25,076 | Mosaic Co. (The) | 732,470 | ||||||
29 | NewMarket Corp.^ | 11,951 | ||||||
12,236 | Olin Corp.^ | 246,066 | ||||||
8,646 | Platform Speciality Products Corp.* | 89,313 | ||||||
16,299 | PPG Industries, Inc. | 1,666,247 | ||||||
7,705 | RPM International, Inc. | 452,900 | ||||||
1,540 | ScottsMiracle-Gro Co. (The)^ | 94,648 | ||||||
14,263 | Valvoline, Inc. | 275,989 | ||||||
1,241 | W.R. Grace & Co. | 80,553 | ||||||
252 | Westlake Chemical Corp. | 16,675 | ||||||
|
| |||||||
24,587,357 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.2%): | ||||||||
8,460 | ADT, Inc.^ | 50,845 | ||||||
3,833 | Clean Harbors, Inc.* | 189,159 | ||||||
682 | KAR Auction Services, Inc. | 32,545 | ||||||
14,518 | Republic Services, Inc., Class A | 1,046,602 | ||||||
6,081 | Stericycle, Inc.*^ | 223,112 | ||||||
4,830 | Waste Management, Inc. | 429,821 | ||||||
|
| |||||||
1,972,084 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Communications Equipment (1.9%): | ||||||||
11,844 | ARRIS International plc* | $ | 362,071 | |||||
331,147 | Cisco Systems, Inc. | 14,348,600 | ||||||
13,972 | CommScope Holding Co., Inc.* | 229,001 | ||||||
3,606 | EchoStar Corp., Class A* | 132,412 | ||||||
24,177 | Juniper Networks, Inc. | 650,603 | ||||||
10,255 | Motorola Solutions, Inc. | 1,179,735 | ||||||
|
| |||||||
16,902,422 | ||||||||
|
| |||||||
Construction & Engineering (0.2%): | ||||||||
11,753 | Aecom Technology Corp.* | 311,455 | ||||||
3,604 | Arcosa, Inc.* | 99,795 | ||||||
10,327 | Fluor Corp. | 332,529 | ||||||
9,388 | Jacobs Engineering Group, Inc. | 548,822 | ||||||
8,021 | Quanta Services, Inc.^ | 241,432 | ||||||
1,677 | Valmont Industries, Inc.^ | 186,063 | ||||||
|
| |||||||
1,720,096 | ||||||||
|
| |||||||
Construction Materials (0.0%)†: | ||||||||
470 | Eagle Materials, Inc., Class A | 28,684 | ||||||
384 | Martin Marietta Materials, Inc.^ | 65,998 | ||||||
554 | Vulcan Materials Co. | 54,735 | ||||||
|
| |||||||
149,417 | ||||||||
|
| |||||||
Consumer Finance (0.8%): | ||||||||
29,548 | Ally Financial, Inc. | 669,558 | ||||||
16,353 | American Express Co. | 1,558,768 | ||||||
31,633 | Capital One Financial Corp. | 2,391,138 | ||||||
69 | Credit Acceptance Corp.*^ | 26,341 | ||||||
13,267 | Discover Financial Services | 782,488 | ||||||
19,798 | Navient Corp. | 174,420 | ||||||
5,292 | Onemain Holdings, Inc.* | 128,543 | ||||||
7,264 | Santander Consumer USA Holdings, Inc.^ | 127,774 | ||||||
32,033 | SLM Corp.*^ | 266,194 | ||||||
34,570 | Synchrony Financial | 811,012 | ||||||
|
| |||||||
6,936,236 | ||||||||
|
| |||||||
Containers & Packaging (0.6%): | ||||||||
4,575 | AptarGroup, Inc. | 430,370 | ||||||
1,027 | Ardagh Group SA | 11,379 | ||||||
24,240 | Ball Corp.^ | 1,114,555 | ||||||
6,813 | Bemis Co., Inc. | 312,717 | ||||||
4,929 | Berry Global Group, Inc.* | 234,275 | ||||||
19,372 | Graphic Packaging Holding Co.^ | 206,118 | ||||||
25,780 | International Paper Co. | 1,040,481 | ||||||
11,614 | Owens-Illinois, Inc.*^ | 200,225 | ||||||
5,409 | Sealed Air Corp. | 188,450 | ||||||
3,758 | Silgan Holdings, Inc. | 88,764 | ||||||
7,218 | Sonoco Products Co.^ | 383,492 | ||||||
17,776 | WestRock Co. | 671,222 | ||||||
|
| |||||||
4,882,048 | ||||||||
|
| |||||||
Distributors (0.2%): | ||||||||
10,076 | Genuine Parts Co. | 967,497 | ||||||
18,249 | LKQ Corp.* | 433,049 | ||||||
|
| |||||||
1,400,546 | ||||||||
|
| |||||||
Diversified Consumer Services (0.1%): | ||||||||
708 | Bright Horizons Family Solutions, Inc.* | 78,907 | ||||||
310 | Graham Holdings Co., Class B | 198,580 |
See accompanying notes to the financial statements.
5
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Consumer Services, continued | ||||||||
12,466 | H&R Block, Inc. | $ | 316,262 | |||||
6,832 | Service Corp. International^ | 275,056 | ||||||
|
| |||||||
868,805 | ||||||||
|
| |||||||
Diversified Financial Services (3.0%): | ||||||||
11,776 | AXA Equitable Holdings, Inc.^ | 195,835 | ||||||
123,264 | Berkshire Hathaway, Inc., Class B*^ | 25,168,043 | ||||||
22,260 | Jefferies Financial Group, Inc.^ | 386,434 | ||||||
10,334 | Voya Financial, Inc.^ | 414,807 | ||||||
|
| |||||||
26,165,119 | ||||||||
|
| |||||||
Diversified Telecommunication Services (3.8%): | ||||||||
528,903 | AT&T, Inc.^ | 15,094,892 | ||||||
68,631 | CenturyLink, Inc.^ | 1,039,760 | ||||||
301,342 | Verizon Communications, Inc. | 16,941,447 | ||||||
|
| |||||||
33,076,099 | ||||||||
|
| |||||||
Electric Utilities (3.8%): | ||||||||
16,304 | Alliant Energy Corp.^ | 688,844 | ||||||
36,051 | American Electric Power Co., Inc. | 2,694,452 | ||||||
4,183 | Avangrid, Inc.^ | 209,526 | ||||||
52,238 | Duke Energy Corp.^ | 4,508,139 | ||||||
22,808 | Edison International | 1,294,810 | ||||||
13,104 | Entergy Corp. | 1,127,861 | ||||||
19,289 | Evergy, Inc. | 1,095,037 | ||||||
23,247 | Eversource Energy | 1,511,985 | ||||||
70,012 | Exelon Corp. | 3,157,541 | ||||||
35,708 | FirstEnergy Corp.^ | 1,340,835 | ||||||
7,968 | Hawaiian Electric Industries, Inc.^ | 291,788 | ||||||
34,933 | NextEra Energy, Inc. | 6,072,055 | ||||||
14,685 | OGE Energy Corp.^ | 575,505 | ||||||
37,215 | PG&E Corp.* | 883,856 | ||||||
7,768 | Pinnacle West Capital Corp.^ | 661,834 | ||||||
52,007 | PPL Corp.^ | 1,473,358 | ||||||
75,343 | Southern Co. (The) | 3,309,065 | ||||||
37,059 | Xcel Energy, Inc. | 1,825,897 | ||||||
|
| |||||||
32,722,388 | ||||||||
|
| |||||||
Electrical Equipment (0.7%): | ||||||||
2,932 | Acuity Brands, Inc.^ | 337,033 | ||||||
13,139 | AMETEK, Inc. | 889,510 | ||||||
31,252 | Eaton Corp. plc | 2,145,763 | ||||||
12,917 | Emerson Electric Co. | 771,791 | ||||||
4,490 | GrafTech International, Ltd.^ | 51,366 | ||||||
1,298 | Hubbell, Inc. | 128,943 | ||||||
11,799 | nVent Electric plc | 265,005 | ||||||
3,196 | Regal-Beloit Corp. | 223,880 | ||||||
5,783 | Sensata Technologies Holding plc*^ | 259,310 | ||||||
|
| |||||||
5,072,601 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.6%): | ||||||||
6,405 | Arrow Electronics, Inc.* | 441,625 | ||||||
8,623 | Avnet, Inc. | 311,290 | ||||||
515 | Coherent, Inc.* | 54,441 | ||||||
57,035 | Corning, Inc. | 1,723,028 | ||||||
4,552 | Dolby Laboratories, Inc., Class A | 281,496 | ||||||
9,008 | FLIR Systems, Inc. | 392,208 | ||||||
12,323 | Jabil, Inc. | 305,487 | ||||||
13,243 | Keysight Technologies, Inc.* | 822,126 | ||||||
334 | Littlelfuse, Inc.^ | 57,274 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components, continued | ||||||||
1,593 | National Instruments Corp. | $ | 72,290 | |||||
18,363 | Trimble Navigation, Ltd.* | 604,326 | ||||||
|
| |||||||
5,065,591 | ||||||||
|
| |||||||
Energy Equipment & Services (0.8%): | ||||||||
5,618 | Apergy Corp.*^ | 152,135 | ||||||
36,383 | Baker Hughes, a GE Co.^ | 782,235 | ||||||
7,814 | Helmerich & Payne, Inc. | 374,603 | ||||||
25,982 | Nabors Industries, Ltd. | 51,964 | ||||||
27,310 | National-Oilwell Varco, Inc. | 701,867 | ||||||
16,273 | Patterson-UTI Energy, Inc. | 168,426 | ||||||
2,937 | RPC, Inc.^ | 28,988 | ||||||
100,049 | Schlumberger, Ltd. | 3,609,768 | ||||||
35,157 | Transocean, Ltd.* | 243,990 | ||||||
73,916 | Weatherford International plc* | 41,319 | ||||||
|
| |||||||
6,155,295 | ||||||||
|
| |||||||
Entertainment (1.3%): | ||||||||
7,822 | Cinemark Holdings, Inc.^ | 280,028 | ||||||
1,716 | Liberty Media Group, Class A*^ | 51,000 | ||||||
14,529 | Liberty Media Group, Class C*^ | 446,040 | ||||||
3,570 | Lions Gate Entertainment Corp., Class A^ | 57,477 | ||||||
6,558 | Lions Gate Entertainment Corp., Class B | 97,583 | ||||||
1,215 | Madison Square Garden Co. (The), Class A* | 325,256 | ||||||
3,385 | Take-Two Interactive Software, Inc.* | 348,452 | ||||||
75,725 | Twenty-First Century Fox, Inc. | 3,643,886 | ||||||
35,643 | Twenty-First Century Fox, Inc., Class B | 1,703,023 | ||||||
871 | Viacom, Inc., Class A | 24,223 | ||||||
24,925 | Viacom, Inc., Class B | 640,573 | ||||||
30,594 | Walt Disney Co. (The) | 3,354,631 | ||||||
55,879 | Zynga, Inc.* | 219,604 | ||||||
|
| |||||||
11,191,776 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (4.7%): | ||||||||
6,941 | Alexandria Real Estate Equities, Inc. | 799,881 | ||||||
10,028 | American Campus Communities, Inc. | 415,059 | ||||||
19,034 | American Homes 4 Rent, Class A | 377,825 | ||||||
11,494 | Apartment Investment & Management Co., Class A | 504,357 | ||||||
15,946 | Apple Hospitality REIT, Inc. | 227,390 | ||||||
9,932 | AvalonBay Communities, Inc. | 1,728,665 | ||||||
11,214 | Boston Properties, Inc. | 1,262,136 | ||||||
13,373 | Brandywine Realty Trust | 172,111 | ||||||
22,206 | Brixmor Property Group, Inc. | 326,206 | ||||||
11,783 | Brookfield Property REIT, Inc., Class A | 189,706 | ||||||
6,537 | Camden Property Trust | 575,583 | ||||||
34,735 | Colony Capital, Inc. | 162,560 | ||||||
8,924 | Columbia Property Trust, Inc. | 172,679 | ||||||
7,444 | Corporate Office Properties Trust | 156,547 | ||||||
7,555 | Crown Castle International Corp. | 820,700 | ||||||
13,793 | CubeSmart^ | 395,721 | ||||||
7,684 | Cyrusone, Inc. | 406,330 | ||||||
14,980 | Digital Realty Trust, Inc.^ | 1,596,119 | ||||||
11,823 | Douglas Emmett, Inc. | 403,519 | ||||||
24,697 | Duke Realty Corp. | 639,652 | ||||||
10,249 | Empire State Realty Trust, Inc., Class A | 145,843 | ||||||
5,428 | EPR Properties | 347,555 | ||||||
8,643 | Equity Commonwealth^ | 259,376 | ||||||
25,666 | Equity Residential Property Trust | 1,694,213 | ||||||
4,783 | Essex Property Trust, Inc. | 1,172,839 |
See accompanying notes to the financial statements.
6
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Equity Real Estate Investment Trusts, continued | ||||||||
1,246 | Extra Space Storage, Inc.^ | $ | 112,738 | |||||
5,364 | Federal Realty Investment Trust | 633,167 | ||||||
9,484 | Gaming & Leisure Properties, Inc. | 306,428 | ||||||
33,648 | HCP, Inc. | 939,789 | ||||||
15,383 | Healthcare Trust of America, Inc., Class A | 389,344 | ||||||
7,483 | Highwoods Properties, Inc. | 289,517 | ||||||
11,980 | Hospitality Properties Trust | 286,082 | ||||||
51,978 | Host Hotels & Resorts, Inc. | 866,473 | ||||||
9,918 | Hudson Pacific Properties, Inc. | 288,217 | ||||||
21,992 | Invitation Homes, Inc.^ | 441,599 | ||||||
20,913 | Iron Mountain, Inc.^ | 677,790 | ||||||
7,758 | JBG SMITH Properties | 270,056 | ||||||
7,134 | Kilroy Realty Corp. | 448,586 | ||||||
29,936 | Kimco Realty Corp.^ | 438,562 | ||||||
604 | Lamar Advertising Co., Class A^ | 41,785 | ||||||
10,856 | Liberty Property Trust | 454,649 | ||||||
3,166 | Life Storage, Inc.^ | 294,406 | ||||||
10,013 | Macerich Co. (The)^ | 433,363 | ||||||
26,713 | Medical Properties Trust, Inc.^ | 429,545 | ||||||
8,043 | Mid-America Apartment Communities, Inc. | 769,715 | ||||||
10,771 | National Retail Properties, Inc. | 522,501 | ||||||
13,227 | Omega Healthcare Investors, Inc.^ | 464,929 | ||||||
10,201 | Outfront Media, Inc. | 184,842 | ||||||
15,595 | Paramount Group, Inc. | 195,873 | ||||||
14,796 | Parks Hotels & Resorts, Inc.^ | 384,400 | ||||||
45,139 | ProLogis, Inc. | 2,650,563 | ||||||
9,455 | Rayonier, Inc. | 261,809 | ||||||
21,244 | Realty Income Corp.^ | 1,339,222 | ||||||
11,186 | Regency Centers Corp. | 656,394 | ||||||
16,474 | Retail Properties of America, Inc., Class A^ | 178,743 | ||||||
1,346 | Retail Value REIT, Inc. | 34,444 | ||||||
17,678 | Senior Housing Properties Trust^ | 207,186 | ||||||
1,920 | Simon Property Group, Inc. | 322,541 | ||||||
11,652 | SITE Centers Corp. | 128,988 | ||||||
5,661 | SL Green Realty Corp. | 447,672 | ||||||
6,270 | Spirit Realty Capital, Inc. | 221,018 | ||||||
13,797 | STORE Capital Corp. | 390,593 | ||||||
6,104 | Sun Communities, Inc. | 620,838 | ||||||
18,650 | UDR, Inc. | 738,913 | ||||||
12,033 | Uniti Group, Inc.^ | 187,354 | ||||||
25,594 | Ventas, Inc. | 1,499,552 | ||||||
71,400 | VEREIT, Inc. | 510,510 | ||||||
28,747 | VICI Properties, Inc. | 539,869 | ||||||
12,079 | Vornado Realty Trust | 749,260 | ||||||
8,754 | Weingarten Realty Investors | 217,187 | ||||||
26,806 | Welltower, Inc. | 1,860,604 | ||||||
54,192 | Weyerhaeuser Co. | 1,184,637 | ||||||
11,497 | WP Carey, Inc.^ | 751,214 | ||||||
|
| |||||||
41,216,039 | ||||||||
|
| |||||||
Food & Staples Retailing (1.9%): | ||||||||
2,733 | Casey’s General Stores, Inc.^ | 350,207 | ||||||
57,175 | Kroger Co. (The)^ | 1,572,313 | ||||||
14,923 | US Foods Holding Corp.* | 472,164 | ||||||
59,521 | Walgreens Boots Alliance, Inc. | 4,067,070 | ||||||
103,549 | Wal-Mart Stores, Inc. | 9,645,588 | ||||||
|
| |||||||
16,107,342 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Food Products (2.0%): | ||||||||
40,104 | Archer-Daniels-Midland Co. | $ | 1,643,061 | |||||
10,367 | Bunge, Ltd. | 554,012 | ||||||
4,043 | Campbell Soup Co.^ | 133,379 | ||||||
34,633 | Conagra Brands, Inc. | 739,761 | ||||||
13,586 | Flowers Foods, Inc.^ | 250,933 | ||||||
40,996 | General Mills, Inc.^ | 1,596,384 | ||||||
7,154 | Hain Celestial Group, Inc.*^ | 113,462 | ||||||
962 | Hershey Co. (The) | 103,107 | ||||||
19,380 | Hormel Foods Corp.^ | 827,138 | ||||||
5,200 | Ingredion, Inc. | 475,280 | ||||||
7,826 | JM Smucker Co. (The)^ | 731,653 | ||||||
9,146 | Kellogg Co. | 521,413 | ||||||
43,072 | Kraft Heinz Co. (The) | 1,853,820 | ||||||
10,790 | Lamb Weston Holdings, Inc. | 793,712 | ||||||
8,405 | McCormick & Co. | 1,170,312 | ||||||
104,448 | Mondelez International, Inc., Class A | 4,181,054 | ||||||
3,789 | Pilgrim’s Pride Corp.* | 58,767 | ||||||
2,059 | Post Holdings, Inc.*^ | 183,519 | ||||||
18 | Seaboard Corp.^ | 63,684 | ||||||
4,049 | TreeHouse Foods, Inc.*^ | 205,325 | ||||||
20,814 | Tyson Foods, Inc., Class A | 1,111,468 | ||||||
|
| |||||||
17,311,244 | ||||||||
|
| |||||||
Gas Utilities (0.2%): | ||||||||
7,564 | Atmos Energy Corp. | 701,334 | ||||||
5,942 | National Fuel Gas Co. | 304,112 | ||||||
12,183 | UGI Corp. | 649,963 | ||||||
|
| |||||||
1,655,409 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (4.1%): | ||||||||
124,524 | Abbott Laboratories | 9,006,821 | ||||||
31,983 | Baxter International, Inc. | 2,105,121 | ||||||
17,565 | Becton, Dickinson & Co. | 3,957,746 | ||||||
22,696 | Boston Scientific Corp.* | 802,077 | ||||||
2,859 | Cooper Cos., Inc. (The) | 727,616 | ||||||
44,968 | Danaher Corp.^ | 4,637,100 | ||||||
15,402 | Dentsply Sirona, Inc. | 573,108 | ||||||
1,674 | Hill-Rom Holdings, Inc. | 148,233 | ||||||
19,221 | Hologic, Inc.* | 789,983 | ||||||
1,182 | Integra LifeSciences Holdings Corp.* | 53,308 | ||||||
98,519 | Medtronic plc | 8,961,288 | ||||||
6,164 | STERIS plc^ | 658,623 | ||||||
2,714 | Teleflex, Inc. | 701,515 | ||||||
4,140 | West Pharmaceutical Services, Inc. | 405,844 | ||||||
14,622 | Zimmer Holdings, Inc. | 1,516,594 | ||||||
|
| |||||||
35,044,977 | ||||||||
|
| |||||||
Health Care Providers & Services (2.5%): | ||||||||
6,518 | Acadia Healthcare Co., Inc.*^ | 167,578 | ||||||
18,881 | Anthem, Inc. | 4,958,717 | ||||||
22,195 | Cardinal Health, Inc. | 989,897 | ||||||
1,774 | Centene Corp.* | 204,542 | ||||||
19,303 | Cigna Corp. | 3,666,026 | ||||||
86,334 | CVS Health Corp. | 5,656,605 | ||||||
4,639 | DaVita, Inc.* | 238,723 | ||||||
5,660 | HCA Healthcare, Inc. | 704,387 | ||||||
9,298 | Henry Schein, Inc.*^ | 730,079 | ||||||
510 | Humana, Inc. | 146,105 |
See accompanying notes to the financial statements.
7
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Providers & Services, continued | ||||||||
6,868 | Laboratory Corp. of America Holdings* | $ | 867,840 | |||||
12,530 | McKesson Corp. | 1,384,189 | ||||||
6,750 | MEDNAX, Inc.* | 222,750 | ||||||
701 | Molina Healthcare, Inc.* | 81,470 | ||||||
2,584 | Premier, Inc., Class A*^ | 96,512 | ||||||
9,670 | Quest Diagnostics, Inc.^ | 805,221 | ||||||
5,938 | Universal Health Services, Inc., Class B | 692,133 | ||||||
259 | WellCare Health Plans, Inc.* | 61,147 | ||||||
|
| |||||||
21,673,921 | ||||||||
|
| |||||||
Health Care Technology (0.1%): | ||||||||
12,412 | Cerner Corp.* | 650,885 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.9%): | ||||||||
17,993 | Aramark Holdings Corp. | 521,257 | ||||||
43,730 | Caesars Entertainment Corp.*^ | 296,927 | ||||||
29,216 | Carnival Corp., Class A | 1,440,349 | ||||||
4,527 | Darden Restaurants, Inc.^ | 452,066 | ||||||
5,298 | Extended Stay America, Inc. | 82,119 | ||||||
3,246 | Hyatt Hotels Corp., Class A | 219,430 | ||||||
6,892 | International Game Technology plc^ | 100,830 | ||||||
10,239 | Las Vegas Sands Corp. | 532,940 | ||||||
45,446 | McDonald’s Corp. | 8,069,846 | ||||||
32,188 | MGM Resorts International | 780,881 | ||||||
15,202 | Norwegian Cruise Line Holdings, Ltd.* | 644,413 | ||||||
11,923 | Royal Caribbean Cruises, Ltd. | 1,165,950 | ||||||
24,197 | Yum China Holdings, Inc. | 811,325 | ||||||
16,026 | Yum! Brands, Inc. | 1,473,110 | ||||||
|
| |||||||
16,591,443 | ||||||||
|
| |||||||
Household Durables (0.5%): | ||||||||
10,485 | D.R. Horton, Inc. | 363,410 | ||||||
8,385 | Garmin, Ltd. | 530,938 | ||||||
9,646 | Leggett & Platt, Inc.^ | 345,713 | ||||||
9,911 | Lennar Corp., Class A | 388,016 | ||||||
523 | Lennar Corp., Class B | 16,386 | ||||||
4,583 | Mohawk Industries, Inc.* | 536,028 | ||||||
31,111 | Newell Brands, Inc.^ | 578,352 | ||||||
13,017 | PulteGroup, Inc.^ | 338,312 | ||||||
5,126 | Toll Brothers, Inc. | 168,799 | ||||||
4,369 | Whirlpool Corp.^ | 466,915 | ||||||
|
| |||||||
3,732,869 | ||||||||
|
| |||||||
Household Products (2.4%): | ||||||||
2,653 | Church & Dwight Co., Inc. | 174,461 | ||||||
1,243 | Clorox Co. (The)^ | 191,596 | ||||||
50,488 | Colgate-Palmolive Co. | 3,005,046 | ||||||
1,845 | Energizer Holdings, Inc. | 83,302 | ||||||
3,332 | Kimberly-Clark Corp. | 379,648 | ||||||
181,343 | Procter & Gamble Co. (The) | 16,669,048 | ||||||
1,682 | Spectrum Brands Holdings, Inc.^ | 71,065 | ||||||
|
| |||||||
20,574,166 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.3%): | ||||||||
46,863 | AES Corp. (The) | 677,639 | ||||||
21,725 | NRG Energy, Inc. | 860,310 | ||||||
29,028 | Vistra Energy Corp.*^ | 664,451 | ||||||
|
| |||||||
2,202,400 | ||||||||
|
| |||||||
Industrial Conglomerates (1.2%): | ||||||||
6,742 | 3M Co., Class C | 1,284,621 | ||||||
4,307 | Carlisle Cos., Inc. | 432,940 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Industrial Conglomerates, continued | ||||||||
626,277 | General Electric Co. | $ | 4,740,916 | |||||
20,464 | Honeywell International, Inc. | 2,703,704 | ||||||
5,886 | Roper Industries, Inc. | 1,568,737 | ||||||
|
| |||||||
10,730,918 | ||||||||
|
| |||||||
Insurance (4.3%): | ||||||||
55,573 | Aflac, Inc. | 2,531,907 | ||||||
885 | Alleghany Corp. | 551,638 | ||||||
24,965 | Allstate Corp. (The) | 2,062,858 | ||||||
5,288 | American Financial Group, Inc. | 478,723 | ||||||
54,857 | American International Group, Inc.^ | 2,161,914 | ||||||
545 | American National Insurance Co. | 69,346 | ||||||
23,983 | Arch Capital Group, Ltd.* | 640,825 | ||||||
12,922 | Arthur J. Gallagher & Co. | 952,351 | ||||||
4,337 | Aspen Insurance Holdings, Ltd. | 182,111 | ||||||
3,857 | Assurant, Inc. | 344,970 | ||||||
7,840 | Assured Guaranty, Ltd. | 300,115 | ||||||
11,694 | Athene Holding, Ltd.* | 465,772 | ||||||
5,358 | Axis Capital Holdings, Ltd. | 276,687 | ||||||
8,817 | Brighthouse Financial, Inc.* | 268,742 | ||||||
15,943 | Brown & Brown, Inc. | 439,389 | ||||||
33,487 | Chubb, Ltd. | 4,325,850 | ||||||
10,958 | Cincinnati Financial Corp. | 848,368 | ||||||
2,066 | CNA Financial Corp. | 91,214 | ||||||
477 | Erie Indemnity Co., Class A | 63,589 | ||||||
1,801 | Everest Re Group, Ltd. | 392,186 | ||||||
7,988 | First American Financial Corp. | 356,584 | ||||||
19,446 | FNF Group^ | 611,382 | ||||||
3,116 | Hanover Insurance Group, Inc. (The) | 363,855 | ||||||
25,715 | Hartford Financial Services Group, Inc. (The) | 1,143,032 | ||||||
15,327 | Lincoln National Corp. | 786,428 | ||||||
19,529 | Loews Corp. | 888,960 | ||||||
881 | Markel Corp.* | 914,522 | ||||||
19,604 | Marsh & McLennan Cos., Inc.^ | 1,563,419 | ||||||
1,950 | Mercury General Corp.^ | 100,835 | ||||||
60,925 | MetLife, Inc. | 2,501,581 | ||||||
20,851 | Old Republic International Corp. | 428,905 | ||||||
20,097 | Principal Financial Group, Inc.^ | 887,684 | ||||||
30,331 | Prudential Financial, Inc. | 2,473,493 | ||||||
4,469 | Reinsurance Group of America, Inc. | 626,688 | ||||||
2,666 | RenaissanceRe Holdings, Ltd. | 356,444 | ||||||
7,762 | Torchmark Corp. | 578,502 | ||||||
15,685 | Travelers Cos., Inc. (The) | 1,878,279 | ||||||
14,665 | UnumProvident Corp. | 430,858 | ||||||
6,995 | W.R. Berkley Corp.^ | 517,000 | ||||||
229 | White Mountains Insurance Group, Ltd.^ | 196,411 | ||||||
9,473 | Willis Towers Watson plc | 1,438,570 | ||||||
|
| |||||||
36,491,987 | ||||||||
|
| |||||||
Interactive Media & Services (0.0%)†: | ||||||||
1,201 | Zillow Group, Inc., Class A*^ | 37,747 | ||||||
2,454 | Zillow Group, Inc., Class C*^ | 77,498 | ||||||
|
| |||||||
115,245 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.2%): | ||||||||
52,616 | eBay, Inc.* | 1,476,932 | ||||||
30,147 | Qurate Retail, Inc.* | 588,469 | ||||||
|
| |||||||
2,065,401 | ||||||||
|
|
See accompanying notes to the financial statements.
8
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services (1.1%): | ||||||||
741 | Akamai Technologies, Inc.* | $ | 45,260 | |||||
10,522 | Amdocs, Ltd. | 616,379 | ||||||
407 | Booz Allen Hamilton Holding Corp. | 18,343 | ||||||
4,185 | Cognizant Technology Solutions Corp., Class A | 265,664 | ||||||
13,990 | Conduent, Inc.* | 148,714 | ||||||
2,311 | CoreLogic, Inc.* | 77,234 | ||||||
20,180 | DXC Technology Co. | 1,072,971 | ||||||
1,788 | Euronet Worldwide, Inc.* | 183,055 | ||||||
21,576 | Fidelity National Information Services, Inc. | 2,212,620 | ||||||
7,026 | Genpact, Ltd. | 189,632 | ||||||
18,602 | International Business Machines Corp. | 2,114,489 | ||||||
10,533 | Leidos Holdings, Inc. | 555,300 | ||||||
3,751 | Sabre Corp. | 81,172 | ||||||
2,393 | Teradata Corp.* | 91,795 | ||||||
24,023 | Western Union Co.^ | 409,832 | ||||||
19,529 | Worldpay, Inc., Class A* | 1,492,601 | ||||||
|
| |||||||
9,575,061 | ||||||||
|
| |||||||
Leisure Products (0.1%): | ||||||||
5,762 | Brunswick Corp. | 267,645 | ||||||
1,829 | Hasbro, Inc.^ | 148,606 | ||||||
19,631 | Mattel, Inc.*^ | 196,114 | ||||||
|
| |||||||
612,365 | ||||||||
|
| |||||||
Life Sciences Tools & Services (1.3%): | ||||||||
22,937 | Agilent Technologies, Inc. | 1,547,330 | ||||||
1,557 | Bio-Rad Laboratories, Inc., Class A* | 361,567 | ||||||
4,351 | Bruker Corp. | 129,529 | ||||||
985 | Charles River Laboratories International, Inc.* | 111,482 | ||||||
11,629 | IQVIA Holdings, Inc.* | 1,350,941 | ||||||
8,099 | PerkinElmer, Inc.^ | 636,176 | ||||||
16,322 | Qiagen NV* | 562,293 | ||||||
27,414 | Thermo Fisher Scientific, Inc. | 6,134,980 | ||||||
405 | Waters Corp.* | 76,403 | ||||||
|
| |||||||
10,910,701 | ||||||||
|
| |||||||
Machinery (1.3%): | ||||||||
4,864 | AGCO Corp. | 270,779 | ||||||
3,467 | Caterpillar, Inc. | 440,552 | ||||||
6,364 | Colfax Corp.* | 133,008 | ||||||
3,660 | Crane Co. | 264,179 | ||||||
6,938 | Cummins, Inc. | 927,194 | ||||||
680 | Donaldson Co., Inc.^ | 29,505 | ||||||
10,207 | Dover Corp. | 724,187 | ||||||
9,633 | Flowserve Corp.^ | 366,247 | ||||||
1,849 | Fortive Corp. | 125,103 | ||||||
5,136 | Gardner Denver Holdings, Inc.* | 105,031 | ||||||
3,502 | Gates Industrial Corp. plc*^ | 46,366 | ||||||
325 | IDEX Corp. | 41,035 | ||||||
8,006 | Ingersoll-Rand plc | 730,387 | ||||||
6,412 | ITT, Inc.^ | 309,507 | ||||||
1,659 | Middleby Corp. (The)*^ | 170,429 | ||||||
311 | Nordson Corp. | 37,118 | ||||||
5,409 | OshKosh Corp. | 331,626 | ||||||
24,272 | PACCAR, Inc.^ | 1,386,901 | ||||||
7,732 | Parker Hannifin Corp. | 1,153,150 | ||||||
10,768 | Pentair plc | 406,815 | ||||||
4,132 | Snap-On, Inc.^ | 600,338 | ||||||
10,996 | Stanley Black & Decker, Inc. | 1,316,661 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
4,889 | Terex Corp. | $ | 134,790 | |||||
5,193 | Timken Co. | 193,803 | ||||||
10,813 | Trinity Industries, Inc.^ | 222,640 | ||||||
4,044 | Wabtec Corp.^ | 284,091 | ||||||
5,821 | Xylem, Inc.^ | 388,377 | ||||||
|
| |||||||
11,139,819 | ||||||||
|
| |||||||
Marine (0.0%)†: | ||||||||
4,318 | Kirby Corp.*^ | 290,860 | ||||||
|
| |||||||
Media (2.0%): | ||||||||
3,653 | Charter Communications, Inc., Class A* | 1,040,995 | ||||||
332,192 | Comcast Corp., Class A | 11,311,138 | ||||||
11,283 | Discovery Communications, Inc., Class A*^ | 279,141 | ||||||
24,350 | Discovery Communications, Inc., Class C*^ | 561,998 | ||||||
16,349 | DISH Network Corp., Class A*^ | 408,235 | ||||||
7,401 | GCI Liberty, Inc., Class A*^ | 304,625 | ||||||
25,400 | Interpublic Group of Cos., Inc. (The)^ | 524,002 | ||||||
3,338 | John Wiley & Sons, Inc., Class A | 156,786 | ||||||
1,955 | Liberty Broadband Corp., Class A* | 140,389 | ||||||
7,338 | Liberty Broadband Corp., Class C* | 528,556 | ||||||
6,355 | Liberty SiriusXM Group, Class A* | 233,864 | ||||||
11,569 | Liberty SiriusXM Group, Class C* | 427,822 | ||||||
28,129 | News Corp., Class A | 319,264 | ||||||
8,694 | News Corp., Class B | 100,416 | ||||||
5,622 | Omnicom Group, Inc.^ | 411,755 | ||||||
6,572 | Tribune Media Co., Class A^ | 298,237 | ||||||
|
| |||||||
17,047,223 | ||||||||
|
| |||||||
Metals & Mining (0.6%): | ||||||||
13,759 | Alcoa Corp.* | 365,714 | ||||||
103,218 | Freeport-McMoRan Copper & Gold, Inc. | 1,064,178 | ||||||
39,022 | Newmont Mining Corp. | 1,352,112 | ||||||
22,486 | Nucor Corp. | 1,165,000 | ||||||
5,165 | Reliance Steel & Aluminum Co. | 367,593 | ||||||
2,872 | Royal Gold, Inc.^ | 245,987 | ||||||
14,110 | Steel Dynamics, Inc. | 423,864 | ||||||
12,941 | United States Steel Corp. | 236,044 | ||||||
|
| |||||||
5,220,492 | ||||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (0.3%): | ||||||||
37,275 | AGNC Investment Corp. | 653,804 | ||||||
93,548 | Annaly Capital Management, Inc. | 918,641 | ||||||
13,672 | Chimera Investment Corp. | 243,635 | ||||||
32,957 | MFA Financial, Inc. | 220,153 | ||||||
25,221 | New Residential Investment Corp.^ | 358,390 | ||||||
19,113 | Starwood Property Trust, Inc. | 376,717 | ||||||
17,949 | Two Harbors Investment Corp. | 230,465 | ||||||
|
| |||||||
3,001,805 | ||||||||
|
| |||||||
Multiline Retail (0.6%): | ||||||||
13,966 | Dollar Tree, Inc.* | 1,261,409 | ||||||
11,905 | Kohl’s Corp.^ | 789,778 | ||||||
21,766 | Macy’s, Inc.^ | 648,191 | ||||||
38,531 | Target Corp. | 2,546,514 | ||||||
|
| |||||||
5,245,892 | ||||||||
|
| |||||||
Multi-Utilities (2.0%): | ||||||||
17,383 | Ameren Corp. | 1,133,893 | ||||||
35,952 | CenterPoint Energy, Inc. | 1,014,925 | ||||||
20,837 | CMS Energy Corp. | 1,034,557 |
See accompanying notes to the financial statements.
9
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Multi-Utilities, continued | ||||||||
22,515 | Consolidated Edison, Inc. | $ | 1,721,497 | |||||
47,519 | Dominion Energy, Inc. | 3,395,707 | ||||||
13,176 | DTE Energy Co. | 1,453,313 | ||||||
14,282 | MDU Resources Group, Inc. | 340,483 | ||||||
26,696 | NiSource, Inc. | 676,744 | ||||||
37,032 | Public Service Enterprise Group, Inc. | 1,927,516 | ||||||
10,463 | SCANA Corp. | 499,922 | ||||||
19,993 | Sempra Energy^ | 2,163,043 | ||||||
6,127 | Vectren Corp. | 441,021 | ||||||
23,393 | WEC Energy Group, Inc.^ | 1,620,199 | ||||||
|
| |||||||
17,422,820 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (8.5%): | ||||||||
24,451 | Anadarko Petroleum Corp. | 1,071,932 | ||||||
8,180 | Antero Resources Corp.*^ | 76,810 | ||||||
25,382 | Apache Corp.^ | 666,278 | ||||||
8,382 | Cabot Oil & Gas Corp.^ | 187,338 | ||||||
13,812 | Centennial Resources Development*^ | 152,208 | ||||||
5,234 | Cheniere Energy, Inc.* | 309,800 | ||||||
65,416 | Chesapeake Energy Corp.*^ | 137,374 | ||||||
138,696 | Chevron Corp. | 15,088,738 | ||||||
6,059 | Cimarex Energy Co. | 373,537 | ||||||
15,518 | CNX Resources Corp.*^ | 177,216 | ||||||
12,154 | Concho Resources, Inc.* | 1,249,310 | ||||||
84,201 | ConocoPhillips Co. | 5,249,932 | ||||||
3,422 | Continental Resources, Inc.*^ | 137,530 | ||||||
35,065 | Devon Energy Corp.^ | 790,365 | ||||||
9,495 | Diamondback Energy, Inc. | 880,187 | ||||||
36,922 | EOG Resources, Inc. | 3,219,968 | ||||||
19,509 | EQT Corp. | 368,525 | ||||||
15,606 | Equitrans Midstream Corp.* | 312,432 | ||||||
7,817 | Extraction Oil & Gas, Inc.*^ | 33,535 | ||||||
308,516 | Exxon Mobil Corp. | 21,037,705 | ||||||
18,965 | Hess Corp. | 768,083 | ||||||
11,478 | HollyFrontier Corp. | 586,755 | ||||||
137,809 | Kinder Morgan, Inc. | 2,119,502 | ||||||
14,322 | Kosmos Energy, Ltd.* | 58,291 | ||||||
60,311 | Marathon Oil Corp. | 864,860 | ||||||
48,333 | Marathon Petroleum Corp. | 2,852,130 | ||||||
12,077 | Murphy Oil Corp. | 282,481 | ||||||
9,586 | Newfield Exploration Co.* | 140,531 | ||||||
34,147 | Noble Energy, Inc.^ | 640,598 | ||||||
55,336 | Occidental Petroleum Corp. | 3,396,524 | ||||||
17,212 | ONEOK, Inc. | 928,587 | ||||||
5,833 | Parsley Energy, Inc., Class A* | 93,211 | ||||||
8,813 | PBF Energy, Inc., Class A | 287,921 | ||||||
30,343 | Phillips 66 | 2,614,049 | ||||||
5,404 | Pioneer Natural Resources Co. | 710,734 | ||||||
17,404 | QEP Resources, Inc.*^ | 97,985 | ||||||
15,955 | Range Resources Corp.^ | 152,689 | ||||||
8,393 | SM Energy Co.^ | 129,924 | ||||||
16,203 | Targa Resources Corp. | 583,632 | ||||||
31,042 | Valero Energy Corp. | 2,327,219 | ||||||
6,557 | Whiting Petroleum Corp.*^ | 148,778 | ||||||
87,022 | Williams Cos., Inc. (The) | 1,918,835 | ||||||
29,224 | WPX Energy, Inc.* | 331,692 | ||||||
|
| |||||||
73,555,731 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Paper & Forest Products (0.0%)†: | ||||||||
4,724 | Domtar Corp. | $ | 165,954 | |||||
|
| |||||||
Personal Products (0.0%)†: | ||||||||
34,298 | Coty, Inc., Class A^ | 224,995 | ||||||
6,609 | Herbalife, Ltd.*^ | 389,601 | ||||||
2,780 | Nu Skin Enterprises, Inc., Class A | 170,497 | ||||||
|
| |||||||
785,093 | ||||||||
|
| |||||||
Pharmaceuticals (7.3%): | ||||||||
24,588 | Allergan plc | 3,286,432 | ||||||
55,709 | Bristol-Myers Squibb Co. | 2,895,754 | ||||||
8,062 | Catalent, Inc.* | 251,373 | ||||||
2,105 | Elanco Animal Health, Inc.* | 66,371 | ||||||
26,428 | Eli Lilly & Co.^ | 3,058,248 | ||||||
387 | Jazz Pharmaceuticals plc*^ | 47,973 | ||||||
160,369 | Johnson & Johnson Co. | 20,695,619 | ||||||
177,371 | Merck & Co., Inc. | 13,552,918 | ||||||
36,803 | Mylan NV* | 1,008,402 | ||||||
8,981 | Perrigo Co. plc | 348,014 | ||||||
422,382 | Pfizer, Inc. | 18,436,974 | ||||||
|
| |||||||
63,648,078 | ||||||||
|
| |||||||
Professional Services (0.3%): | ||||||||
1,570 | Dun & Bradstreet Corp. | 224,102 | ||||||
6,418 | Equifax, Inc.^ | 597,708 | ||||||
26,970 | IHS Markit, Ltd.* | 1,293,751 | ||||||
4,832 | ManpowerGroup, Inc. | 313,114 | ||||||
26,260 | Nielsen Holdings plc^ | 612,646 | ||||||
|
| |||||||
3,041,321 | ||||||||
|
| |||||||
Real Estate Management & Development (0.1%): | ||||||||
12,146 | CBRE Group, Inc., Class A* | 486,325 | ||||||
1,735 | Howard Hughes Corp. (The)* | 169,371 | ||||||
3,338 | Jones Lang LaSalle, Inc. | 422,591 | ||||||
9,285 | Realogy Holdings Corp.^ | 136,304 | ||||||
|
| |||||||
1,214,591 | ||||||||
|
| |||||||
Road & Rail (0.8%): | ||||||||
519 | AMERCO, Inc.^ | 170,289 | ||||||
31,247 | CSX Corp. | 1,941,376 | ||||||
3,427 | Genesee & Wyoming, Inc., Class A*^ | 253,667 | ||||||
7,112 | Kansas City Southern | 678,840 | ||||||
9,440 | Knight-Swift Transportation Holdings, Inc.^ | 236,661 | ||||||
20,104 | Norfolk Southern Corp. | 3,006,352 | ||||||
3,797 | Ryder System, Inc. | 182,826 | ||||||
3,160 | Schneider National, Inc. | 58,997 | ||||||
4,443 | Union Pacific Corp. | 614,156 | ||||||
|
| |||||||
7,143,164 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.5%): | ||||||||
22,339 | Analog Devices, Inc. | 1,917,356 | ||||||
12,085 | Broadcom, Inc.^ | 3,072,974 | ||||||
8,161 | Cypress Semiconductor Corp. | 103,808 | ||||||
5,974 | First Solar, Inc.*^ | 253,626 | ||||||
333,032 | Intel Corp. | 15,629,191 | ||||||
29,325 | Marvell Technology Group, Ltd.^ | 474,772 | ||||||
17,737 | Micron Technology, Inc.* | 562,795 | ||||||
23,355 | NXP Semiconductors NV | 1,711,454 | ||||||
9,301 | Qorvo, Inc.*^ | 564,850 | ||||||
88,547 | QUALCOMM, Inc. | 5,039,210 |
See accompanying notes to the financial statements.
10
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
3,883 | Skyworks Solutions, Inc. | $ | 260,239 | |||||
11,553 | Teradyne, Inc.^ | 362,533 | ||||||
|
| |||||||
29,952,808 | ||||||||
|
| |||||||
Software (1.5%): | ||||||||
313 | Aspen Technology, Inc.* | 25,722 | ||||||
2,576 | Autodesk, Inc.* | 331,299 | ||||||
4,659 | FireEye, Inc.* | 75,522 | ||||||
1,319 | LogMeIn, Inc. | 107,591 | ||||||
29,417 | Microsoft Corp. | 2,987,885 | ||||||
21,010 | Nuance Communications, Inc.* | 277,962 | ||||||
168,422 | Oracle Corp. | 7,604,254 | ||||||
460 | Pluralsight, Inc., Class A*^ | 10,833 | ||||||
1,033 | SS&C Technologies Holdings, Inc. | 46,599 | ||||||
45,580 | Symantec Corp. | 861,234 | ||||||
9,386 | Synopsys, Inc.* | 790,677 | ||||||
|
| |||||||
13,119,578 | ||||||||
|
| |||||||
Specialty Retail (0.5%): | ||||||||
3,636 | Advance Auto Parts, Inc. | 572,525 | ||||||
4,150 | AutoNation, Inc.*^ | 148,155 | ||||||
249 | AutoZone, Inc.* | 208,747 | ||||||
12,851 | Best Buy Co., Inc. | 680,589 | ||||||
5,166 | CarMax, Inc.*^ | 324,063 | ||||||
5,755 | Dick’s Sporting Goods, Inc.^ | 179,556 | ||||||
8,645 | Foot Locker, Inc. | 459,914 | ||||||
15,099 | Gap, Inc. (The)^ | 388,950 | ||||||
13,872 | L Brands, Inc. | 356,094 | ||||||
6,477 | Michaels Cos., Inc. (The)*^ | 87,699 | ||||||
2,726 | Penske Automotive Group, Inc.^ | 109,912 | ||||||
7,257 | Tiffany & Co. | 584,261 | ||||||
4,705 | Williams-Sonoma, Inc.^ | 237,367 | ||||||
|
| |||||||
4,337,832 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.6%): | ||||||||
8,634 | Dell Technologies, Inc., Class C* | 421,944 | ||||||
108,729 | Hewlett Packard Enterprise Co. | 1,436,310 | ||||||
116,120 | HP, Inc. | 2,375,816 | ||||||
1,704 | NCR Corp.*^ | 39,328 | ||||||
21,388 | Western Digital Corp. | 790,714 | ||||||
16,429 | Xerox Corp. | 324,637 | ||||||
|
| |||||||
5,388,749 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.3%): | ||||||||
1,912 | Columbia Sportswear Co.^ | 160,780 | ||||||
4,844 | Michael Kors Holdings, Ltd.* | 183,684 | ||||||
5,639 | PVH Corp. | 524,145 | ||||||
4,045 | Ralph Lauren Corp. | 418,496 | ||||||
5,046 | Skechers U.S.A., Inc., Class A* | 115,503 | ||||||
17,042 | Tapestry, Inc.^ | 575,167 | ||||||
3,652 | Under Armour, Inc., Class A*^ | 64,531 | ||||||
3,247 | Under Armour, Inc., Class C*^ | 52,504 | ||||||
5,482 | VF Corp. | 391,086 | ||||||
|
| |||||||
2,485,896 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.0%)†: | ||||||||
35,066 | New York Community Bancorp, Inc.^ | 329,971 | ||||||
3,447 | TFS Financial Corp.^ | 55,600 | ||||||
|
| |||||||
385,571 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Tobacco (0.9%): | ||||||||
113,056 | Philip Morris International, Inc. | $ | 7,547,619 | |||||
|
| |||||||
Trading Companies & Distributors (0.1%): | ||||||||
6,575 | Air Lease Corp. | 198,631 | ||||||
9,565 | HD Supply Holdings, Inc.* | 358,879 | ||||||
1,787 | MSC Industrial Direct Co., Inc., Class A | 137,456 | ||||||
7,246 | Univar, Inc.* | 128,544 | ||||||
503 | Watsco, Inc.^ | 69,987 | ||||||
3,558 | WESCO International, Inc.* | 170,784 | ||||||
|
| |||||||
1,064,281 | ||||||||
|
| |||||||
Transportation Infrastructure (0.0%)†: | ||||||||
6,000 | Macquarie Infrastructure Corp.^ | 219,360 | ||||||
|
| |||||||
Water Utilities (0.2%): | ||||||||
13,235 | American Water Works Co., Inc. | 1,201,341 | ||||||
13,105 | Aqua America, Inc.^ | 448,060 | ||||||
|
| |||||||
1,649,401 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.1%): | ||||||||
48,683 | Sprint Corp.* | 283,335 | ||||||
7,095 | Telephone & Data Systems, Inc. | 230,871 | ||||||
7,854 | T-Mobile US, Inc.* | 499,593 | ||||||
870 | United States Cellular Corp.* | 45,214 | ||||||
|
| |||||||
1,059,013 | ||||||||
|
| |||||||
Total Common Stocks (Cost $815,761,865) | 858,514,434 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.0%): | ||||||||
7,995,852 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(a) | 7,995,852 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $7,995,852) | 7,995,852 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (13.4%)(b) | ||||||||
Floating Rate Notes (5.8%) | ||||||||
1,442,000 | Bank of Montreal, 2.75%, 11/1/19 | 1,442,000 | ||||||
1,622,000 | Bank of Nova Scotia, 2.64%, 8/14/19 | 1,622,012 | ||||||
1,769,000 | Bedford Row Funding, 2.82%, 5/23/19 | 1,769,000 | ||||||
1,428,000 | BNP Paribas, 2.70%, 5/8/19 | 1,428,000 | ||||||
1,494,000 | BNP Paribas, 2.79%, 5/21/19 | 1,494,000 | ||||||
1,512,000 | Canadian Imperial Bank of Commerce, 2.58%, 7/5/19 | 1,513,177 | ||||||
1,454,000 | Collateralized Commercial Paper Program Co. LLC, 2.78%, 2/26/19 | 1,454,000 | ||||||
1,500,000 | Commonwealth Bank of Australia, 2.74%, 5/20/19 | 1,500,000 | ||||||
1,600,000 | Cooperatieve Rabobank UA, 2.55%, 8/2/19 | 1,600,000 | ||||||
1,756,000 | Credit Agricole CIB, 2.92%, 6/3/19 | 1,758,401 | ||||||
3,092,000 | Credit Industriel et Commercial, 2.74%, 5/20/19 | 3,092,000 | ||||||
1,400,000 | Credit Suisse AG, 2.56%, 4/9/19 | 1,400,000 | ||||||
1,542,000 | Credit Suisse AG, 2.65%, 5/7/19 | 1,542,000 | ||||||
1,400,000 | DNB Bank ASA, 2.57%, 4/24/19 | 1,400,000 | ||||||
1,400,000 | DNB Bank ASA, 2.92%, 9/23/19 | 1,400,000 | ||||||
1,531,000 | HSBC Bank plc, 2.65%, 4/30/19 | 1,531,000 | ||||||
1,500,000 | National Australia Bank, 2.75%, 5/21/19 | 1,500,000 | ||||||
1,600,000 | National Australia Bank, 2.55%, 8/2/19 | 1,600,000 | ||||||
1,400,000 | National Bank of Canada, 2.65%, 5/7/19 | 1,400,000 | ||||||
1,472,000 | Nordea Bank Abp, 2.67%, 1/25/19 | 1,472,251 | ||||||
1,500,000 | Oversea-Chinese Banking Corp., Ltd., 2.62%, 2/20/19 | 1,500,000 |
See accompanying notes to the financial statements.
11
AZL Russell 1000 Value Index Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
2,073,000 | Royal Bank of Canada, 2.76%, 5/20/19 | $ | 2,073,000 | |||||
1,490,000 | Sumitomo Mitsui Banking Corp., 2.65%, 5/2/19 | 1,490,000 | ||||||
1,400,000 | Sumitomo Mitsui Trust Bank, Ltd., 2.67%, 5/7/19 | 1,400,000 | ||||||
1,625,000 | Swedbank AB, 2.72%, 1/22/19 | 1,625,000 | ||||||
1,534,000 | Swedbank AB, 2.50%, 4/5/19 | 1,534,000 | ||||||
1,600,000 | UBS AG, 2.87%, 5/28/19 | 1,601,057 | ||||||
1,600,000 | Wells Fargo Bank NA, 2.68%, 5/31/19 | 1,600,000 | ||||||
2,200,000 | Wells Fargo Bank NA, 2.77%, 12/6/19 | 2,200,000 | ||||||
1,653,000 | Westpac Banking Corp., 2.70%, 8/16/19 | 1,653,000 | ||||||
1,536,000 | Westpac Banking Corp., 2.82%, 10/31/19 | 1,536,000 | ||||||
|
| |||||||
50,129,898 | ||||||||
|
| |||||||
Repurchase Agreements (2.4%) | ||||||||
2,477,529 | BNP Paribas SA, 2.54%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $2,477,879, Collateralized by U.S. Treasury Obligations and Corporate Debt Securities, 0.00% - 7.55%,1/17/19 - 9/15/56, fair value of $2,587,100 | 2,477,529 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Repurchase Agreements, continued | ||||||||
18,533,548 | Mizuho Securities USA LLC, 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $18,536,585, Collateralized by U.S. Government Agency Obligations, 2.00% - 5.50%,2/1/31 - 2/20/48, fair value of $18,904,219 | $ | 18,533,548 | |||||
|
| |||||||
21,011,077 | ||||||||
|
| |||||||
Time Deposits (0.4%) | ||||||||
3,600,000 | Societe Generale SA, 2.40%, 1/2/19 | 3,600,000 | ||||||
|
| |||||||
Miscellaneous Investments (4.8%) | ||||||||
42,118,837 | Short-Term Investments(c) | 42,118,837 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 116,859,812 | ||||||
|
| |||||||
Total Investment Securities (Cost $940,617,529) —113.2%(d) | 983,370,098 | |||||||
Net other assets (liabilities) — (13.2)% | (114,209,225 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 869,160,873 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $115,029,552. |
+ | Affiliated Securities |
† | Represents less than 0.05%. |
(a) | The rate represents the effective yield at December 31, 2018. |
(b) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(c) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $521,200 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 IndexE-Mini March Futures (U.S. Dollar) | 3/15/19 | 86 | $ | 10,772,360 | $ | (104,190 | ) | |||||||||
|
| |||||||||||||||
$ | (104,190 | ) | ||||||||||||||
|
|
See accompanying notes to the financial statements.
12
AZL Russell 1000 Value Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investments innon-affiliates, at cost | $ | 937,610,447 | |||
Investments in affiliates, at cost | 3,007,082 | ||||
|
| ||||
Investments innon-affiliates, at value* | $ | 979,879,499 | |||
Investments in affiliates, at value | 3,490,599 | ||||
Cash | 1,030,053 | ||||
Segregated cash for collateral | 521,200 | ||||
Interest and dividends receivable | 1,541,612 | ||||
Foreign currency, at value (cost $358) | 352 | ||||
Receivable for capital shares issued | 13,282 | ||||
Receivable for variation margin on futures contracts | 82,560 | ||||
Reclaims receivable | 198,704 | ||||
Prepaid expenses | 11,074 | ||||
|
| ||||
Total Assets | 986,768,935 | ||||
|
| ||||
Liabilities: | |||||
Payable for capital shares redeemed | 170,918 | ||||
Payable for collateral received on loaned securities | 116,859,812 | ||||
Manager fees payable | 276,628 | ||||
Administration fees payable | 8,589 | ||||
Distribution fees payable | 159,311 | ||||
Custodian fees payable | 2,837 | ||||
Administrative and compliance services fees payable | 2,820 | ||||
Transfer agent fees payable | 848 | ||||
Trustee fees payable | 1,080 | ||||
Other accrued liabilities | 125,219 | ||||
|
| ||||
Total Liabilities | 117,608,062 | ||||
|
| ||||
Net Assets | $ | 869,160,873 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 765,299,264 | |||
Total distributable earnings | 103,861,609 | ||||
|
| ||||
Net Assets | $ | 869,160,873 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 148,795,826 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 17,401,934 | ||||
Net Asset Value (offering and redemption price per share) | $ | 8.55 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 720,365,047 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 64,182,029 | ||||
Net Asset Value (offering and redemption price per share) | $ | 11.22 | |||
|
|
* | Includes securities on loan of $115,029,552. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends from non-affiliates | $ | 26,383,795 | |||
Dividends from affiliates | 120,310 | ||||
Interest | 7,546 | ||||
Income from securities lending | 361,203 | ||||
Foreign withholding tax | (3,097 | ) | |||
|
| ||||
Total Investment Income | 26,869,757 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 4,666,758 | ||||
Administration fees | 260,945 | ||||
Distribution fees — Class 2 | 2,218,485 | ||||
Custodian fees | 36,558 | ||||
Administrative and compliance services fees | 16,734 | ||||
Transfer agent fees | 11,012 | ||||
Trustee fees | 52,144 | ||||
Professional fees | 47,471 | ||||
Shareholder reports | 29,926 | ||||
Other expenses | 227,169 | ||||
|
| ||||
Total expenses before reductions | 7,567,202 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (750,120 | ) | |||
|
| ||||
Net expenses | 6,817,082 | ||||
|
| ||||
Net Investment Income/(Loss) | 20,052,675 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 47,202,964 | ||||
Net realized gains/(losses) on affiliated securities | 328,459 | ||||
Net realized gains/(losses) on futures contracts | 770,855 | ||||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (150,939,908 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated securities | (1,505,559 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (142,169 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (104,285,358 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (84,232,683 | ) | ||
|
|
See accompanying notes to the financial statements.
13
AZL Russell 1000 Value Index Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 20,052,675 | $ | 21,219,284 | ||||||
Net realized gains/(losses) on investments | 48,302,278 | 80,637,841 | ||||||||
Change in unrealized appreciation/depreciation on investments | (152,587,636 | ) | 40,406,059 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (84,232,683 | ) | 142,263,184 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (20,762,804 | ) | (23,684,981 | ) | ||||||
Class 2 | (77,533,827 | ) | (97,832,414 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (98,296,631 | ) | (121,517,395 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 55,192 | 83,049 | ||||||||
Proceeds from dividends reinvested | 20,762,804 | 23,684,980 | ||||||||
Value of shares redeemed | (23,297,110 | ) | (24,563,697 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (2,479,114 | ) | (795,668 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 121,859,508 | 8,299,028 | ||||||||
Proceeds from dividends reinvested | 77,533,827 | 97,832,415 | ||||||||
Value of shares redeemed | (224,526,648 | ) | (225,323,862 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (25,133,313 | ) | (119,192,419 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (27,612,427 | ) | (119,988,087 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (210,141,741 | ) | (99,242,298 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 1,079,302,614 | 1,178,544,912 | ||||||||
|
|
|
| |||||||
End of period | $ | 869,160,873 | $ | 1,079,302,614 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 5,211 | 7,628 | ||||||||
Dividends reinvested | 2,194,799 | 2,354,372 | ||||||||
Shares redeemed | (2,254,717 | ) | (2,251,661 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (54,707 | ) | 110,339 | |||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 8,832,225 | 811,790 | ||||||||
Dividends reinvested | 6,237,637 | 7,625,286 | ||||||||
Shares redeemed | (16,752,274 | ) | (16,595,649 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (1,682,412 | ) | (8,158,573 | ) | ||||||
|
|
|
| |||||||
Change in shares | (1,737,119 | ) | (8,048,234 | ) | ||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
14
AZL Russell 1000 Value Index Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016* | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.65 | $ | 10.79 | $ | 10.00 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.24 | 0.27 | 0.08 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.02 | ) | 1.08 | 0.71 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total from Investment Activities | (0.78 | ) | 1.35 | 0.79 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.30 | ) | (0.10 | ) | — | ||||||||||||||||||||
Net Realized Gains | (1.02 | ) | (1.39 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Dividends | (1.32 | ) | (1.49 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Net Asset Value, End of Period | $ | 8.55 | $ | 10.65 | $ | 10.79 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Return(a) | (8.50 | )% | 13.38 | % | 7.90 | %(b) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 148,796 | $ | 185,903 | $ | 187,248 | |||||||||||||||||||
Net Investment Income/(Loss)(c) | 2.10 | % | 2.07 | % | 2.11 | % | |||||||||||||||||||
Expenses Before Reductions(c)(d) | 0.50 | % | 0.50 | % | 0.51 | % | |||||||||||||||||||
Expenses Net of Reductions(c) | 0.43 | % | 0.45 | % | 0.46 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 22 | % | 12 | % | 131 | %(f) | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.56 | $ | 13.39 | $ | 12.91 | $ | 14.82 | $ | 14.70 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.28 | 0.24 | 0.11 | 0.22 | 0.24 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.34 | ) | 1.42 | 1.85 | (0.92 | ) | 1.55 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (1.06 | ) | 1.66 | 1.96 | (0.70 | ) | 1.79 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.26 | ) | (0.10 | ) | (0.25 | ) | (0.23 | ) | (0.23 | ) | |||||||||||||||
Net Realized Gains | (1.02 | ) | (1.39 | ) | (1.23 | ) | (0.98 | ) | (1.44 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (1.28 | ) | (1.49 | ) | (1.48 | ) | (1.21 | ) | (1.67 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 11.22 | $ | 13.56 | $ | 13.39 | $ | 12.91 | $ | 14.82 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (8.72 | )% | 13.02 | % | 16.15 | % | (4.42 | )% | 12.59 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 720,365 | $ | 893,400 | $ | 991,296 | $ | 193,094 | $ | 219,158 | |||||||||||||||
Net Investment Income/(Loss) | 1.85 | % | 1.81 | % | 2.05 | % | 1.54 | % | 1.60 | % | |||||||||||||||
Expenses Before Reductions(d) | 0.75 | % | 0.75 | % | 0.77 | % | 0.77 | % | 0.76 | % | |||||||||||||||
Expenses Net of Reductions | 0.68 | % | 0.70 | % | 0.72 | % | 0.77 | % | 0.76 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 22 | % | 12 | % | 131 | %(f) | 16 | % | 16 | % |
* | Class 1 activity is for the period October 17, 2016 (commencement of share class) to December 31, 2016. |
(a) | 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. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized for periods less than one year. |
(d) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. Not annualized for periods less than one year. |
(f) | 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 131%. |
See accompanying notes to the financial statements.
15
AZL Russell 1000 Value Index Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Russell 1000 Value Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
16
AZL Russell 1000 Value Index Fund
Notes to the Financial Statements
December 31, 2018
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $35,569 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $116,778,442 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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 $15.4 million for the year ended December 31, 2018. 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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | — | Payable for variation margin on futures contracts | $ | 104,190 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities as Variation margin on futures contracts. |
17
AZL Russell 1000 Value Index Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | 770,855 | $(142,169) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (1,632,621 | ) | ||
Class 2 | (6,305,794 | ) | |||
From net realized gains | |||||
Class 1 | (22,052,360 | ) | |||
Class 2 | (91,526,620 | ) | |||
|
| ||||
Change in net assets resulting from distributions to shareholders | $ | (121,517,395 | ) | ||
|
|
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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL Russell 1000 Value Index Fund Class 1 | 0.44 | % | 0.59 | % | ||||||
AZL Russell 1000 Value Index Fund Class 2 | 0.44 | % | 0.84 | % |
* | Effective December 1, 2018, the Manager voluntarily reduced the management fee to 0.36% on all assets. Prior to December 1, 2018, the Manager voluntarily reduced the management fee to 0.37% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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AZL Russell 1000 Value Index Fund
Notes to the Financial Statements
December 31, 2018
At December 31, 2018, the following investments are noted as Affiliated Securities in the Fund’s Schedule of Portfolio Investments.
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | |||||||||||||||||||||||||||||||||
BlackRock Inc., Class A | $ | 5,389,332 | $ | 454,351 | $ | (1,175,984 | ) | $ | 328,459 | $ | (1,505,559 | ) | $ | 3,490,599 | 8,886 | $ | 120,310 | |||||||||||||||||||||||
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$ | 5,389,332 | $ | 454,351 | $ | (1,175,984 | ) | $ | 328,459 | $ | (1,505,559 | ) | $ | 3,490,599 | 8,886 | $ | 120,310 | ||||||||||||||||||||||||
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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 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 value 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 anannual 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 year ended December 31, 2018, $8,582 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
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AZL Russell 1000 Value Index Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 858,514,434 | $ | — | $ | — | $ | 858,514,434 | ||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 116,859,812 | — | 116,859,812 | ||||||||||||||||
Unaffiliated Investment Company | 7,995,852 | — | — | 7,995,852 | ||||||||||||||||
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Total Investment Securities | 866,510,286 | 116,859,812 | — | 983,370,098 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | (104,190 | ) | — | — | (104,190 | ) | ||||||||||||||
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Total Investments | $ | 866,406,096 | $ | 116,859,812 | $ | — | $ | 983,265,908 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL Russell 1000 Value Index Fund | $ | 230,060,886 | $ | 317,489,742 |
6. Investment Risks
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 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.
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 December 31, 2018 is $947,282,545. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 115,446,181 | ||
Unrealized (depreciation) | (79,358,628 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 36,087,553 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Russell 1000 Value Index Fund | $ | 37,419,832 | $ | 60,876,799 | $ | 98,296,631 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
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AZL Russell 1000 Value Index Fund
Notes to the Financial Statements
December 31, 2018
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL Russell 1000 Value Index Fund | $ | 9,061,367 | $ | 112,456,028 | $ | 121,517,395 |
(a) | Total distributions paid may differ from the 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 Russell 1000 Value Index Fund | $ | 24,493,121 | $ | 43,282,393 | $ | — | $ | 36,086,095 | $ | 103,861,609 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership in excess of 60% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Russell 1000 Value Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Russell 1000 Value Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 51.95% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $16,709,314.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $60,876,799.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
26
The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and
distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
27
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions VIP and VIP | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of VIP and VIP | Other Directorships AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. | |||||
Interested Trustees(3)
| ||||||||||
Name, Address, and Year of Birth | Positions VIP and VIP | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of VIP and VIP | Other Directorships AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
28
Officers
Name, Address, and Age | Positions Held with VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
29
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® S&P 500 Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 11
Page 11
Statements of Changes in Net Assets
Page 12
Page 13
Notes to the Financial Statements
Page 14
Report of Independent Registered Public Accounting Firm
Page 20
Other Federal Income Tax Information
Page 21
Page 22
Approval of Investment Advisory and Subadvisory Agreements
Page 23
Information about the Board of Trustees and Officers
Page 26
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® S&P 500 Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® S&P 500 Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund. | ||||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® S&P 500 Index Fund (Class 2 Shares) (the “Fund”) returned-4.84%. That compared to a-4.38% total return for its benchmark, the S&P 500® Index (“Index”)1.
The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the Index. The Index is designed to provide a comprehensive measure of the U.S. Stock market as a whole.*
Markets opened the year posting strong gains fueled bytax-reform optimism and ongoing global growth that carried over from 2017. As the first quarter progressed, however, investors grew more concerned that the economy might be overheating. The realized volatility of the Index rose to annualized level of 19% during the first quarter, which was up from an average of 6.6% in 2017. Rising yields and trade protectionism fears further weighed on equities. And yet, the underlying U.S. economy remained healthy, with low unemployment, high consumer confidence and accelerating economic indicators. These factors supported the Federal Reserve Board’s (the Fed) decision to increase interest rates in March, which helped drive yields higher.
The second quarter saw renewed gains in U.S. equity markets, in spite of ongoing threats of U.S. tariffs. Unemployment fell to its lowest level since 1975 and earnings growth inspired confidence in investors. The Fed raised interest rates again in June.
U.S.large-cap equities reachedall-time highs in the third quarter. Signs of strong economic growth and positive earnings results helped grow investors’ appetite for risk. Volatility fell in spite of the U.S. announcing tariffs on $505 billion of Chinese goods. The unemployment rate fell as well, dropping to 3.7% in September—the lowest rate since 1969. Meanwhile, consumer confidence reached its highest level since 2000. The strength of the economy led
the Fed to once again raise interest rates, which, combined with positive growth and high levels of U.S. government debt issuance, helped push the yield on10-year U.S. Treasuries up to 3.06%.
Concerns over Fed policy, growing trade protectionism and a potential slowdown in growth contributed to investor anxiety throughout the fourth quarter. Hawkish comments from Fed Chairman Powell about U.S. interest rates drove a temporarysell-off in U.S. Treasuries, and helped spur a return to volatility.
From a sector perspective, the largest negative returns in the Index came from the energy, materials and industrials sectors. Increases were seen in the healthcare, utilities and information technology sectors.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a positive impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
1
AZL® S&P 500 Index Fund Review (Unaudited)
Fund Objective
| ||||
The Fund’s investment objective is to seek to match the total return of the Standard & Poor’s 500®Index. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in all 500 stocks in the Index in proportion to their weighting in the Index. | ||||
Investment Concerns | ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines. | ||||
Investing in a single industry or sector, or concentrating investments in a limited number of industries or sectors, tends to increase the risk that economic, political, or regulatory developments affecting certain industries or sectors will have a large impact on the value of the portfolio. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. | ||||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception Date | 1 Year | 3 Year | 5 Year | 10 Year | ||||||||||||||
AZL®S&P 500 Index Fund (Class 1 Shares) | 5/14/07 | -4.63 | % | 9.04 | % | 8.26 | % | 12.81 | % | |||||||||
AZL®S&P 500 Index Fund (Class 2 Shares) | 5/1/07 | -4.84 | % | 8.78 | % | 8.01 | % | 12.54 | % | |||||||||
S&P 500®Index | 5/1/07 | -4.38 | % | 9.26 | % | 8.49 | % | 13.12 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®S&P 500 Index Fund (Class 1 Shares) | 0.23 | % | ||
AZL®S&P 500 Index Fund (Class 2 Shares) | 0.48 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.46% for Class 1 Shares and 0.71% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Standard & Poor’s 500® Index (“S&P 500®”), which is an unmanaged index that is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
Expense Examples
(Unaudited)
As a shareholder of the AZL S&P 500 Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL S&P 500 Index Fund, Class 1 | $ | 1,000.00 | $ | 930.30 | $ | 1.12 | 0.23 | % | ||||||||||||
AZL S&P 500 Index Fund, Class 2 | $ | 1,000.00 | $ | 929.70 | $ | 2.34 | 0.48 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL S&P 500 Index Fund, Class 1 | $ | 1,000.00 | $ | 1,024.05 | $ | 1.17 | 0.23 | % | ||||||||||||
AZL S&P 500 Index Fund, Class 2 | $ | 1,000.00 | $ | 1,022.79 | $ | 2.45 | 0.48 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Information Technology | 20.0 | % | |||
Health Care | 15.4 | ||||
Financials | 13.3 | ||||
Telecommunication Services | 10.0 | ||||
Consumer Discretionary | 9.9 | ||||
Industrials | 9.1 | ||||
Consumer Staples | 7.4 | ||||
Energy | 5.3 | ||||
Utilities | 3.3 | ||||
Real Estate | 2.9 | ||||
Materials | 2.7 | ||||
|
| ||||
Total Common Stocks | 99.3 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 7.0 | ||||
Money Markets | 0.6 | ||||
|
| ||||
Total Investment Securities | 106.9 | ||||
Net other assets (liabilities) | (6.9 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (99.3%): | ||||||||
Aerospace & Defense (2.4%): | ||||||||
49,214 | Arconic, Inc. | $ | 829,748 | |||||
60,686 | Boeing Co. (The) | 19,571,235 | ||||||
31,870 | General Dynamics Corp. | 5,010,283 | ||||||
13,426 | Harris Corp. | 1,807,811 | ||||||
4,877 | Huntington Ingalls Industries, Inc. | 928,142 | ||||||
8,936 | L3 Technologies, Inc. | 1,551,826 | ||||||
28,351 | Lockheed Martin Corp. | 7,423,426 | ||||||
19,925 | Northrop Grumman Corp. | 4,879,633 | ||||||
32,643 | Raytheon Co. | 5,005,804 | ||||||
28,256 | Textron, Inc. | 1,299,493 | ||||||
5,536 | TransDigm Group, Inc.* | 1,882,572 | ||||||
93,115 | United Technologies Corp. | 9,914,885 | ||||||
|
| |||||||
60,104,858 | ||||||||
|
| |||||||
Air Freight & Logistics (0.6%): | ||||||||
15,809 | C.H. Robinson Worldwide, Inc.^ | 1,329,379 | ||||||
19,825 | Expeditors International of Washington, Inc. | 1,349,884 | ||||||
27,839 | FedEx Corp. | 4,491,266 | ||||||
79,885 | United Parcel Service, Inc., Class B | 7,791,184 | ||||||
|
| |||||||
14,961,713 | ||||||||
|
| |||||||
Airlines (0.4%): | ||||||||
14,257 | Alaska Air Group, Inc. | 867,538 | ||||||
46,691 | American Airlines Group, Inc.^ | 1,499,248 | ||||||
71,935 | Delta Air Lines, Inc. | 3,589,557 | ||||||
58,152 | Southwest Airlines Co. | 2,702,905 | ||||||
26,116 | United Continental Holdings, Inc.* | 2,186,693 | ||||||
|
| |||||||
10,845,941 | ||||||||
|
| |||||||
Auto Components (0.1%): | ||||||||
30,206 | Aptiv plc | 1,859,783 | ||||||
23,460 | BorgWarner, Inc. | 815,000 | ||||||
26,938 | Goodyear Tire & Rubber Co. | 549,805 | ||||||
|
| |||||||
3,224,588 | ||||||||
|
| |||||||
Automobiles (0.4%): | ||||||||
447,985 | Ford Motor Co.^ | 3,427,085 | ||||||
150,148 | General Motors Co. | 5,022,451 | ||||||
18,711 | Harley-Davidson, Inc.^ | 638,419 | ||||||
|
| |||||||
9,087,955 | ||||||||
|
| |||||||
Banks (5.6%): | ||||||||
1,048,778 | Bank of America Corp. | 25,841,890 | ||||||
88,621 | BB&T Corp. | 3,839,062 | ||||||
280,618 | Citigroup, Inc. | 14,608,973 | ||||||
53,766 | Citizens Financial Group, Inc. | 1,598,463 | ||||||
18,580 | Comerica, Inc. | 1,276,260 | ||||||
75,900 | Fifth Third Bancorp | 1,785,927 | ||||||
18,799 | First Republic Bank | 1,633,633 | ||||||
121,977 | Huntington Bancshares, Inc.^ | 1,453,966 | ||||||
382,113 | JPMorgan Chase & Co. | 37,301,870 | ||||||
119,923 | KeyCorp | 1,772,462 | ||||||
16,128 | M&T Bank Corp. | 2,308,401 | ||||||
43,371 | People’s United Financial, Inc.^ | 625,844 | ||||||
53,131 | PNC Financial Services Group, Inc. | 6,211,545 | ||||||
118,799 | Regions Financial Corp. | 1,589,531 | ||||||
51,626 | SunTrust Banks, Inc. | 2,604,015 | ||||||
6,138 | SVB Financial Group* | 1,165,729 | ||||||
174,558 | U.S. Bancorp | 7,977,301 | ||||||
486,805 | Wells Fargo & Co. | 22,431,974 | ||||||
22,425 | Zions Bancorp^ | 913,595 | ||||||
|
| |||||||
136,940,441 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Beverages (2.0%): | ||||||||
19,186 | Brown-Forman Corp., Class B^ | $ | 912,870 | |||||
440,192 | Coca-Cola Co. (The) | 20,843,091 | ||||||
19,209 | Constellation Brands, Inc., Class C | 3,089,191 | ||||||
21,419 | Molson Coors Brewing Co., Class B | 1,202,891 | ||||||
45,401 | Monster Beverage Corp.* | 2,234,637 | ||||||
162,199 | PepsiCo, Inc.^ | 17,919,746 | ||||||
|
| |||||||
46,202,426 | ||||||||
|
| |||||||
Biotechnology (2.6%): | ||||||||
172,845 | AbbVie, Inc. | 15,934,580 | ||||||
25,424 | Alexion Pharmaceuticals, Inc.* | 2,475,281 | ||||||
73,221 | Amgen, Inc. | 14,253,931 | ||||||
23,152 | Biogen Idec, Inc.* | 6,966,900 | ||||||
80,487 | Celgene Corp.* | 5,158,412 | ||||||
148,342 | Gilead Sciences, Inc. | 9,278,792 | ||||||
20,352 | Incyte Corp.* | 1,294,184 | ||||||
8,865 | Regeneron Pharmaceuticals, Inc.* | 3,311,078 | ||||||
29,244 | Vertex Pharmaceuticals, Inc.* | 4,846,023 | ||||||
|
| |||||||
63,519,181 | ||||||||
|
| |||||||
Building Products (0.3%): | ||||||||
16,540 | A.O. Smith Corp. | 706,258 | ||||||
11,004 | Allegion plc | 877,129 | ||||||
16,428 | Fortune Brands Home & Security, Inc.^ | 624,100 | ||||||
105,840 | Johnson Controls International plc | 3,138,156 | ||||||
34,684 | Masco Corp. | 1,014,160 | ||||||
|
| |||||||
6,359,803 | ||||||||
|
| |||||||
Capital Markets (2.7%): | ||||||||
6,163 | Affiliated Managers Group, Inc. | 600,523 | ||||||
16,013 | Ameriprise Financial, Inc. | 1,671,277 | ||||||
104,528 | Bank of New York Mellon Corp. (The) | 4,920,133 | ||||||
13,954 | BlackRock, Inc., Class A+ | 5,481,410 | ||||||
12,612 | CBOE Holdings, Inc. | 1,233,832 | ||||||
137,598 | Charles Schwab Corp. (The) | 5,714,445 | ||||||
41,111 | CME Group, Inc. | 7,733,802 | ||||||
29,609 | E*TRADE Financial Corp. | 1,299,243 | ||||||
34,196 | Franklin Resources, Inc. | 1,014,253 | ||||||
39,750 | Goldman Sachs Group, Inc. (The) | 6,640,238 | ||||||
65,619 | Intercontinental Exchange, Inc. | 4,943,079 | ||||||
47,392 | Invesco, Ltd.^ | 793,342 | ||||||
19,081 | Moody’s Corp. | 2,672,103 | ||||||
150,220 | Morgan Stanley | 5,956,223 | ||||||
10,115 | MSCI, Inc., Class A^ | 1,491,254 | ||||||
13,031 | NASDAQ OMX Group, Inc. (The)^ | 1,062,939 | ||||||
25,571 | Northern Trust Corp. | 2,137,480 | ||||||
14,818 | Raymond James Financial, Inc. | 1,102,607 | ||||||
28,779 | S&P Global, Inc. | 4,890,703 | ||||||
43,389 | State Street Corp. | 2,736,544 | ||||||
27,780 | T. Rowe Price Group, Inc. | 2,564,650 | ||||||
|
| |||||||
66,660,080 | ||||||||
|
| |||||||
Chemicals (2.1%): | ||||||||
25,092 | Air Products & Chemicals, Inc. | 4,015,975 | ||||||
12,204 | Albemarle Corp.^ | 940,562 | ||||||
15,356 | Celanese Corp., Series A | 1,381,579 | ||||||
26,994 | CF Industries Holdings, Inc. | 1,174,509 | ||||||
263,624 | DowDuPont, Inc. | 14,098,611 | ||||||
16,167 | Eastman Chemical Co. | 1,181,969 |
See accompanying notes to the financial statements.
4
AZL S&P 500 Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Chemicals, continued | ||||||||
29,093 | Ecolab, Inc. | $ | 4,286,854 | |||||
15,530 | FMC Corp. | 1,148,599 | ||||||
11,582 | International Flavor & Fragrances, Inc.^ | 1,555,115 | ||||||
63,403 | Linde plc | 9,893,404 | ||||||
36,150 | LyondellBasell Industries NV, Class A | 3,006,234 | ||||||
40,442 | Mosaic Co. (The) | 1,181,311 | ||||||
27,670 | PPG Industries, Inc. | 2,828,704 | ||||||
9,467 | Sherwin Williams Co. | 3,724,886 | ||||||
|
| |||||||
50,418,312 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.4%): | ||||||||
9,851 | Cintas Corp. | 1,654,869 | ||||||
23,375 | Copart, Inc.*^ | 1,116,858 | ||||||
24,988 | Republic Services, Inc., Class A | 1,801,385 | ||||||
17,114 | Rollins, Inc.^ | 617,815 | ||||||
45,134 | Waste Management, Inc. | 4,016,475 | ||||||
|
| |||||||
9,207,402 | ||||||||
|
| |||||||
Communications Equipment (1.1%): | ||||||||
5,908 | Arista Networks, Inc.* | 1,244,816 | ||||||
516,617 | Cisco Systems, Inc. | 22,385,014 | ||||||
6,922 | F5 Networks, Inc.* | 1,121,572 | ||||||
39,455 | Juniper Networks, Inc. | 1,061,734 | ||||||
18,790 | Motorola Solutions, Inc. | 2,161,602 | ||||||
|
| |||||||
27,974,738 | ||||||||
|
| |||||||
Construction & Engineering (0.1%): | ||||||||
15,789 | Fluor Corp. | 508,406 | ||||||
13,618 | Jacobs Engineering Group, Inc. | 796,108 | ||||||
16,954 | Quanta Services, Inc. | 510,315 | ||||||
|
| |||||||
1,814,829 | ||||||||
|
| |||||||
Construction Materials (0.1%): | ||||||||
7,282 | Martin Marietta Materials, Inc.^ | 1,251,557 | ||||||
15,290 | Vulcan Materials Co. | 1,510,652 | ||||||
|
| |||||||
2,762,209 | ||||||||
|
| |||||||
Consumer Finance (0.7%): | ||||||||
80,492 | American Express Co. | 7,672,497 | ||||||
54,426 | Capital One Financial Corp. | 4,114,061 | ||||||
38,605 | Discover Financial Services | 2,276,923 | ||||||
75,980 | Synchrony Financial | 1,782,491 | ||||||
|
| |||||||
15,845,972 | ||||||||
|
| |||||||
Containers & Packaging (0.3%): | ||||||||
10,084 | Avery Dennison Corp. | 905,846 | ||||||
39,402 | Ball Corp.^ | 1,811,704 | ||||||
46,750 | International Paper Co. | 1,886,830 | ||||||
10,809 | Packaging Corp. of America | 902,119 | ||||||
18,319 | Sealed Air Corp.^ | 638,234 | ||||||
29,075 | WestRock Co. | 1,097,872 | ||||||
|
| |||||||
7,242,605 | ||||||||
|
| |||||||
Distributors (0.1%): | ||||||||
16,702 | Genuine Parts Co. | 1,603,726 | ||||||
36,212 | LKQ Corp.* | 859,311 | ||||||
|
| |||||||
2,463,037 | ||||||||
|
| |||||||
Diversified Consumer Services (0.0%)†: | ||||||||
23,516 | H&R Block, Inc. | 596,601 | ||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Diversified Financial Services (1.9%): | ||||||||
223,539 | Berkshire Hathaway, Inc., Class B*^ | $ | 45,642,193 | |||||
32,297 | Jefferies Financial Group, Inc. | 560,676 | ||||||
|
| |||||||
46,202,869 | ||||||||
|
| |||||||
Diversified Telecommunication Services (2.1%): | ||||||||
836,292 | AT&T, Inc. | 23,867,774 | ||||||
108,627 | CenturyLink, Inc.^ | 1,645,699 | ||||||
474,797 | Verizon Communications, Inc.^ | 26,693,087 | ||||||
|
| |||||||
52,206,560 | ||||||||
|
| |||||||
Electric Utilities (2.0%): | ||||||||
26,751 | Alliant Energy Corp.^ | 1,130,230 | ||||||
56,380 | American Electric Power Co., Inc. | 4,213,841 | ||||||
81,915 | Duke Energy Corp. | 7,069,265 | ||||||
37,194 | Edison International | 2,111,503 | ||||||
20,599 | Entergy Corp. | 1,772,956 | ||||||
30,273 | Evergy, Inc. | 1,718,598 | ||||||
36,231 | Eversource Energy | 2,356,464 | ||||||
111,116 | Exelon Corp. | 5,011,332 | ||||||
55,693 | FirstEnergy Corp.^ | 2,091,272 | ||||||
54,919 | NextEra Energy, Inc. | 9,546,020 | ||||||
59,178 | PG&E Corp.* | 1,405,478 | ||||||
12,731 | Pinnacle West Capital Corp.^ | 1,084,681 | ||||||
82,756 | PPL Corp.^ | 2,344,477 | ||||||
118,226 | Southern Co. (The) | 5,192,486 | ||||||
59,065 | Xcel Energy, Inc.^ | 2,910,133 | ||||||
|
| |||||||
49,958,736 | ||||||||
|
| |||||||
Electrical Equipment (0.5%): | ||||||||
26,424 | AMETEK, Inc. | 1,788,905 | ||||||
49,583 | Eaton Corp. plc | 3,404,369 | ||||||
71,916 | Emerson Electric Co. | 4,296,981 | ||||||
13,867 | Rockwell Automation, Inc. | 2,086,706 | ||||||
|
| |||||||
11,576,961 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.5%): | ||||||||
34,370 | Amphenol Corp., Class A | 2,784,657 | ||||||
92,635 | Corning, Inc. | 2,798,503 | ||||||
15,696 | FLIR Systems, Inc. | 683,404 | ||||||
4,220 | IPG Photonics Corp.*^ | 478,084 | ||||||
21,623 | Keysight Technologies, Inc.* | 1,342,356 | ||||||
39,417 | TE Connectivity, Ltd. | 2,981,108 | ||||||
|
| |||||||
11,068,112 | ||||||||
|
| |||||||
Energy Equipment & Services (0.5%): | ||||||||
58,177 | Baker Hughes, a GE Co.^ | 1,250,806 | ||||||
100,688 | Halliburton Co. | 2,676,287 | ||||||
12,341 | Helmerich & Payne, Inc. | 591,628 | ||||||
44,190 | National-Oilwell Varco, Inc. | 1,135,683 | ||||||
159,123 | Schlumberger, Ltd.^ | 5,741,157 | ||||||
48,635 | Technipfmc plc^ | 952,273 | ||||||
|
| |||||||
12,347,834 | ||||||||
|
| |||||||
Entertainment (2.0%): | ||||||||
87,244 | Activision Blizzard, Inc. | 4,062,953 | ||||||
34,876 | Electronic Arts, Inc.* | 2,752,065 | ||||||
50,109 | Netflix, Inc.*^ | 13,412,175 | ||||||
13,025 | Take-Two Interactive Software, Inc.* | 1,340,794 | ||||||
121,453 | Twenty-First Century Fox, Inc. | 5,844,318 | ||||||
55,686 | Twenty-First Century Fox, Inc., Class B | 2,660,677 | ||||||
40,444 | Viacom, Inc., Class B | 1,039,411 | ||||||
171,059 | Walt Disney Co. (The) | 18,756,619 | ||||||
|
| |||||||
49,869,012 | ||||||||
|
|
See accompanying notes to the financial statements.
5
AZL S&P 500 Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Equity Real Estate Investment Trusts (2.8%): | ||||||||
12,356 | Alexandria Real Estate Equities, Inc. | $ | 1,423,905 | |||||
50,615 | American Tower Corp. | 8,006,786 | ||||||
18,201 | Apartment Investment & Management Co., Class A | 798,660 | ||||||
15,817 | AvalonBay Communities, Inc. | 2,752,949 | ||||||
17,634 | Boston Properties, Inc. | 1,984,707 | ||||||
47,471 | Crown Castle International Corp. | 5,156,775 | ||||||
23,528 | Digital Realty Trust, Inc. | 2,506,908 | ||||||
40,883 | Duke Realty Corp. | 1,058,870 | ||||||
9,237 | Equinix, Inc. | 3,256,597 | ||||||
42,143 | Equity Residential Property Trust | 2,781,859 | ||||||
7,533 | Essex Property Trust, Inc. | 1,847,167 | ||||||
14,570 | Extra Space Storage, Inc.^ | 1,318,294 | ||||||
8,540 | Federal Realty Investment Trust | 1,008,062 | ||||||
54,196 | HCP, Inc. | 1,513,694 | ||||||
85,753 | Host Hotels & Resorts, Inc. | 1,429,503 | ||||||
32,871 | Iron Mountain, Inc.^ | 1,065,349 | ||||||
48,219 | Kimco Realty Corp.^ | 706,408 | ||||||
12,156 | Macerich Co. (The)^ | 526,112 | ||||||
13,128 | Mid-America Apartment Communities, Inc. | 1,256,350 | ||||||
72,037 | ProLogis, Inc. | 4,230,013 | ||||||
17,147 | Public Storage, Inc.^ | 3,470,724 | ||||||
33,911 | Realty Income Corp. | 2,137,749 | ||||||
19,389 | Regency Centers Corp. | 1,137,747 | ||||||
13,142 | SBA Communications Corp.* | 2,127,558 | ||||||
35,540 | Simon Property Group, Inc. | 5,970,364 | ||||||
9,986 | SL Green Realty Corp. | 789,693 | ||||||
31,662 | UDR, Inc. | 1,254,448 | ||||||
40,750 | Ventas, Inc. | 2,387,543 | ||||||
20,018 | Vornado Realty Trust | 1,241,717 | ||||||
43,164 | Welltower, Inc. | 2,996,013 | ||||||
86,442 | Weyerhaeuser Co. | 1,889,622 | ||||||
|
| |||||||
70,032,146 | ||||||||
|
| |||||||
Food & Staples Retailing (1.6%): | ||||||||
50,353 | Costco Wholesale Corp. | 10,257,410 | ||||||
91,023 | Kroger Co. (The)^ | 2,503,133 | ||||||
54,720 | Sysco Corp. | 3,428,755 | ||||||
92,376 | Walgreens Boots Alliance, Inc. | 6,312,052 | ||||||
163,579 | Wal-Mart Stores, Inc. | 15,237,383 | ||||||
|
| |||||||
37,738,733 | ||||||||
|
| |||||||
Food Products (1.1%): | ||||||||
63,995 | Archer-Daniels-Midland Co. | 2,621,875 | ||||||
22,338 | Campbell Soup Co.^ | 736,931 | ||||||
55,800 | Conagra Brands, Inc. | 1,191,888 | ||||||
68,121 | General Mills, Inc. | 2,652,632 | ||||||
15,914 | Hershey Co. (The) | 1,705,663 | ||||||
31,006 | Hormel Foods Corp.^ | 1,323,336 | ||||||
13,120 | JM Smucker Co. (The)^ | 1,226,589 | ||||||
28,887 | Kellogg Co.^ | 1,646,848 | ||||||
71,155 | Kraft Heinz Co. (The) | 3,062,510 | ||||||
16,801 | Lamb Weston Holdings, Inc. | 1,235,882 | ||||||
13,845 | McCormick & Co. | 1,927,778 | ||||||
167,056 | Mondelez International, Inc., Class A | 6,687,251 | ||||||
33,780 | Tyson Foods, Inc., Class A | 1,803,852 | ||||||
|
| |||||||
27,823,035 | ||||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies (3.4%): | ||||||||
201,815 | Abbott Laboratories | $ | 14,597,279 | |||||
5,140 | ABIOMED, Inc.*^ | 1,670,706 | ||||||
8,431 | Align Technology, Inc.* | 1,765,704 | ||||||
56,857 | Baxter International, Inc. | 3,742,328 | ||||||
30,825 | Becton, Dickinson & Co. | 6,945,489 | ||||||
159,008 | Boston Scientific Corp.* | 5,619,343 | ||||||
5,671 | Cooper Cos., Inc. (The) | 1,443,270 | ||||||
70,874 | Danaher Corp. | 7,308,527 | ||||||
25,295 | Dentsply Sirona, Inc. | 941,227 | ||||||
23,960 | Edwards Lifesciences Corp.* | 3,669,953 | ||||||
30,923 | Hologic, Inc.* | 1,270,935 | ||||||
9,909 | IDEXX Laboratories, Inc.* | 1,843,272 | ||||||
13,122 | Intuitive Surgical, Inc.* | 6,284,388 | ||||||
154,541 | Medtronic plc | 14,057,049 | ||||||
16,261 | ResMed, Inc. | 1,851,640 | ||||||
35,687 | Stryker Corp. | 5,593,937 | ||||||
10,476 | Varian Medical Systems, Inc.* | 1,187,036 | ||||||
23,243 | Zimmer Holdings, Inc. | 2,410,764 | ||||||
|
| |||||||
82,202,847 | ||||||||
|
| |||||||
Health Care Providers & Services (3.2%): | ||||||||
18,021 | AmerisourceBergen Corp. | 1,340,762 | ||||||
29,747 | Anthem, Inc. | 7,812,455 | ||||||
34,235 | Cardinal Health, Inc. | 1,526,881 | ||||||
23,473 | Centene Corp.* | 2,706,437 | ||||||
43,643 | Cigna Corp. | 8,288,679 | ||||||
148,597 | CVS Health Corp. | 9,736,075 | ||||||
14,470 | DaVita, Inc.* | 744,626 | ||||||
30,887 | HCA Healthcare, Inc. | 3,843,887 | ||||||
17,661 | Henry Schein, Inc.*^ | 1,386,742 | ||||||
15,765 | Humana, Inc. | 4,516,357 | ||||||
11,661 | Laboratory Corp. of America Holdings* | 1,473,484 | ||||||
22,450 | McKesson Corp. | 2,480,052 | ||||||
15,710 | Quest Diagnostics, Inc. | 1,308,172 | ||||||
110,544 | UnitedHealth Group, Inc. | 27,538,720 | ||||||
9,930 | Universal Health Services, Inc., Class B | 1,157,441 | ||||||
5,745 | WellCare Health Plans, Inc.* | 1,356,337 | ||||||
|
| |||||||
77,217,107 | ||||||||
|
| |||||||
Health Care Technology (0.1%): | ||||||||
37,486 | Cerner Corp.*^ | 1,965,766 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.8%): | ||||||||
46,061 | Carnival Corp., Class A^ | 2,270,807 | ||||||
2,822 | Chipotle Mexican Grill, Inc.* | 1,218,511 | ||||||
14,198 | Darden Restaurants, Inc.^ | 1,417,812 | ||||||
34,157 | Hilton Worldwide Holdings, Inc. | 2,452,473 | ||||||
32,534 | Marriott International, Inc., Class A | 3,531,891 | ||||||
88,583 | McDonald’s Corp. | 15,729,684 | ||||||
57,965 | MGM Resorts International | 1,406,231 | ||||||
25,277 | Norwegian Cruise Line Holdings, Ltd.* | 1,071,492 | ||||||
19,595 | Royal Caribbean Cruises, Ltd. | 1,916,195 | ||||||
142,419 | Starbucks Corp. | 9,171,784 | ||||||
11,189 | Wynn Resorts, Ltd. | 1,106,704 | ||||||
35,886 | Yum! Brands, Inc. | 3,298,641 | ||||||
|
| |||||||
44,592,225 | ||||||||
|
|
See accompanying notes to the financial statements.
6
AZL S&P 500 Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Household Durables (0.3%): | ||||||||
39,728 | D.R. Horton, Inc. | $ | 1,376,972 | |||||
13,756 | Garmin, Ltd. | 871,030 | ||||||
14,855 | Leggett & Platt, Inc.^ | 532,403 | ||||||
33,138 | Lennar Corp., Class A | 1,297,353 | ||||||
7,315 | Mohawk Industries, Inc.* | 855,562 | ||||||
49,537 | Newell Brands, Inc.^ | 920,893 | ||||||
29,892 | PulteGroup, Inc.^ | 776,893 | ||||||
7,388 | Whirlpool Corp.^ | 789,556 | ||||||
|
| |||||||
7,420,662 | ||||||||
|
| |||||||
Household Products (1.7%): | ||||||||
28,305 | Church & Dwight Co., Inc. | 1,861,337 | ||||||
14,646 | Clorox Co. (The) | 2,257,534 | ||||||
99,297 | Colgate-Palmolive Co. | 5,910,157 | ||||||
39,784 | Kimberly-Clark Corp. | 4,532,989 | ||||||
286,280 | Procter & Gamble Co. (The) | 26,314,858 | ||||||
|
| |||||||
40,876,875 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.1%): | ||||||||
76,268 | AES Corp. (The) | 1,102,835 | ||||||
33,315 | NRG Energy, Inc. | 1,319,274 | ||||||
|
| |||||||
2,422,109 | ||||||||
|
| |||||||
Industrial Conglomerates (1.4%): | ||||||||
66,909 | 3M Co., Class C | 12,748,840 | ||||||
999,473 | General Electric Co. | 7,566,011 | ||||||
84,978 | Honeywell International, Inc. | 11,227,293 | ||||||
11,826 | Roper Industries, Inc. | 3,151,866 | ||||||
|
| |||||||
34,694,010 | ||||||||
|
| |||||||
Insurance (2.4%): | ||||||||
87,768 | Aflac, Inc. | 3,998,710 | ||||||
39,620 | Allstate Corp. (The) | 3,273,801 | ||||||
101,666 | American International Group, Inc. | 4,006,657 | ||||||
27,767 | Aon plc | 4,036,211 | ||||||
21,026 | Arthur J. Gallagher & Co. | 1,549,616 | ||||||
6,075 | Assurant, Inc. | 543,348 | ||||||
14,033 | Brighthouse Financial, Inc.* | 427,726 | ||||||
53,011 | Chubb, Ltd. | 6,847,962 | ||||||
17,481 | Cincinnati Financial Corp. | 1,353,379 | ||||||
4,675 | Everest Re Group, Ltd. | 1,018,028 | ||||||
40,840 | Hartford Financial Services Group, Inc. (The) | 1,815,338 | ||||||
24,795 | Lincoln National Corp. | 1,272,231 | ||||||
31,770 | Loews Corp. | 1,446,170 | ||||||
57,786 | Marsh & McLennan Cos., Inc. | 4,608,434 | ||||||
113,841 | MetLife, Inc. | 4,674,311 | ||||||
30,047 | Principal Financial Group, Inc.^ | 1,327,176 | ||||||
66,725 | Progressive Corp. (The) | 4,025,519 | ||||||
47,457 | Prudential Financial, Inc. | 3,870,118 | ||||||
11,959 | Torchmark Corp. | 891,304 | ||||||
30,437 | Travelers Cos., Inc. (The) | 3,644,831 | ||||||
25,228 | UnumProvident Corp. | 741,199 | ||||||
14,964 | Willis Towers Watson plc | 2,272,433 | ||||||
|
| |||||||
57,644,502 | ||||||||
|
| |||||||
Interactive Media & Services (4.6%): | ||||||||
34,354 | Alphabet, Inc., Class A* | 35,898,556 | ||||||
35,352 | Alphabet, Inc., Class C* | 36,610,885 | ||||||
275,972 | Facebook, Inc., Class A* | 36,177,169 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Interactive Media & Services, continued | ||||||||
11,800 | TripAdvisor, Inc.*^ | $ | 636,492 | |||||
83,099 | Twitter, Inc.* | 2,388,265 | ||||||
|
| |||||||
111,711,367 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (3.6%): | ||||||||
47,196 | Amazon.com, Inc.* | 70,886,976 | ||||||
5,324 | Booking Holdings, Inc.* | 9,170,164 | ||||||
103,997 | eBay, Inc.* | 2,919,196 | ||||||
13,593 | Expedia, Inc.^ | 1,531,251 | ||||||
|
| |||||||
84,507,587 | ||||||||
|
| |||||||
IT Services (4.8%): | ||||||||
73,322 | Accenture plc, Class C | 10,339,135 | ||||||
18,714 | Akamai Technologies, Inc.* | 1,143,051 | ||||||
5,451 | Alliance Data Systems Corp.^ | 818,086 | ||||||
50,130 | Automatic Data Processing, Inc. | 6,573,046 | ||||||
13,211 | Broadridge Financial Solutions, Inc. | 1,271,559 | ||||||
66,397 | Cognizant Technology Solutions Corp., Class A | 4,214,882 | ||||||
32,230 | DXC Technology Co. | 1,713,669 | ||||||
37,627 | Fidelity National Information Services, Inc. | 3,858,649 | ||||||
45,787 | Fiserv, Inc.* | 3,364,887 | ||||||
10,134 | FleetCor Technologies, Inc.* | 1,882,086 | ||||||
10,476 | Gartner, Inc.*^ | 1,339,252 | ||||||
18,088 | Global Payments, Inc. | 1,865,415 | ||||||
104,449 | International Business Machines Corp. | 11,872,718 | ||||||
8,828 | Jack Henry & Associates, Inc. | 1,116,919 | ||||||
104,396 | MasterCard, Inc., Class A | 19,694,305 | ||||||
36,524 | Paychex, Inc. | 2,379,539 | ||||||
135,449 | PayPal Holdings, Inc.* | 11,389,906 | ||||||
19,190 | Total System Services, Inc. | 1,559,955 | ||||||
12,302 | VeriSign, Inc.* | 1,824,264 | ||||||
201,919 | Visa, Inc., Class A^ | 26,641,192 | ||||||
51,591 | Western Union Co.^ | 880,142 | ||||||
|
| |||||||
115,742,657 | ||||||||
|
| |||||||
Leisure Products (0.1%): | ||||||||
13,266 | Hasbro, Inc.^ | 1,077,862 | ||||||
39,733 | Mattel, Inc.*^ | 396,933 | ||||||
|
| |||||||
1,474,795 | ||||||||
|
| |||||||
Life Sciences Tools & Services (1.0%): | ||||||||
36,456 | Agilent Technologies, Inc. | 2,459,322 | ||||||
16,821 | Illumina, Inc.* | 5,045,123 | ||||||
18,205 | IQVIA Holdings, Inc.* | 2,114,875 | ||||||
2,869 | Mettler-Toledo International, Inc.* | 1,622,649 | ||||||
12,733 | PerkinElmer, Inc.^ | 1,000,177 | ||||||
46,259 | Thermo Fisher Scientific, Inc. | 10,352,301 | ||||||
8,704 | Waters Corp.* | 1,642,010 | ||||||
|
| |||||||
24,236,457 | ||||||||
|
| |||||||
Machinery (1.5%): | ||||||||
67,807 | Caterpillar, Inc.^ | 8,616,236 | ||||||
16,974 | Cummins, Inc. | 2,268,405 | ||||||
36,810 | Deere & Co. | 5,490,948 | ||||||
16,902 | Dover Corp. | 1,199,197 | ||||||
15,004 | Flowserve Corp.^ | 570,452 | ||||||
33,770 | Fortive Corp. | 2,284,878 | ||||||
35,076 | Illinois Tool Works, Inc. | 4,443,778 | ||||||
28,071 | Ingersoll-Rand plc | 2,560,917 | ||||||
40,089 | PACCAR, Inc.^ | 2,290,685 |
See accompanying notes to the financial statements.
7
AZL S&P 500 Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Machinery, continued | ||||||||
15,105 | Parker Hannifin Corp. | $ | 2,252,760 | |||||
18,466 | Pentair plc | 697,645 | ||||||
6,506 | Snap-On, Inc.^ | 945,257 | ||||||
17,497 | Stanley Black & Decker, Inc. | 2,095,091 | ||||||
20,719 | Xylem, Inc.^ | 1,382,372 | ||||||
|
| |||||||
37,098,621 | ||||||||
|
| |||||||
Media (1.3%): | ||||||||
38,821 | CBS Corp., Class B^ | 1,697,254 | ||||||
20,254 | Charter Communications, Inc., Class A*^ | 5,771,782 | ||||||
521,684 | Comcast Corp., Class A | 17,763,340 | ||||||
17,669 | Discovery Communications, Inc., Class A*^ | 437,131 | ||||||
41,157 | Discovery Communications, Inc., Class C* | 949,904 | ||||||
26,214 | DISH Network Corp., Class A*^ | 654,564 | ||||||
43,914 | Interpublic Group of Cos., Inc. (The)^ | 905,946 | ||||||
43,872 | News Corp., Class A^ | 497,947 | ||||||
13,127 | News Corp., Class B | 151,617 | ||||||
25,666 | Omnicom Group, Inc.^ | 1,879,778 | ||||||
|
| |||||||
30,709,263 | ||||||||
|
| |||||||
Metals & Mining (0.2%): | ||||||||
166,287 | Freeport-McMoRan Copper & Gold, Inc. | 1,714,419 | ||||||
60,897 | Newmont Mining Corp. | 2,110,081 | ||||||
36,011 | Nucor Corp. | 1,865,730 | ||||||
|
| |||||||
5,690,230 | ||||||||
|
| |||||||
Multiline Retail (0.5%): | ||||||||
30,385 | Dollar General Corp. | 3,284,011 | ||||||
27,194 | Dollar Tree, Inc.* | 2,456,162 | ||||||
19,077 | Kohl’s Corp.^ | 1,265,568 | ||||||
35,410 | Macy’s, Inc. | 1,054,510 | ||||||
12,715 | Nordstrom, Inc.^ | 592,646 | ||||||
60,231 | Target Corp. | 3,980,667 | ||||||
|
| |||||||
12,633,564 | ||||||||
|
| |||||||
Multi-Utilities (1.1%): | ||||||||
28,184 | Ameren Corp. | 1,838,442 | ||||||
57,590 | CenterPoint Energy, Inc. | 1,625,766 | ||||||
32,681 | CMS Energy Corp. | 1,622,612 | ||||||
35,532 | Consolidated Edison, Inc. | 2,716,777 | ||||||
75,433 | Dominion Energy, Inc.^ | 5,390,443 | ||||||
20,756 | DTE Energy Co. | 2,289,387 | ||||||
41,494 | NiSource, Inc.^ | 1,051,873 | ||||||
57,825 | Public Service Enterprise Group, Inc. | 3,009,791 | ||||||
16,498 | SCANA Corp. | 788,274 | ||||||
31,292 | Sempra Energy^ | 3,385,481 | ||||||
36,105 | WEC Energy Group, Inc.^ | 2,500,632 | ||||||
|
| |||||||
26,219,478 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (4.8%): | ||||||||
57,945 | Anadarko Petroleum Corp. | 2,540,309 | ||||||
44,205 | Apache Corp.^ | 1,160,381 | ||||||
49,615 | Cabot Oil & Gas Corp.^ | 1,108,895 | ||||||
219,561 | Chevron Corp. | 23,886,042 | ||||||
10,837 | Cimarex Energy Co. | 668,101 | ||||||
22,914 | Concho Resources, Inc.* | 2,355,330 | ||||||
132,286 | ConocoPhillips Co. | 8,248,032 | ||||||
53,799 | Devon Energy Corp. | 1,212,629 | ||||||
17,723 | Diamondback Energy, Inc. | 1,642,922 | ||||||
66,635 | EOG Resources, Inc. | 5,811,238 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Oil, Gas & Consumable Fuels, continued | ||||||||
486,493 | Exxon Mobil Corp. | $ | 33,173,959 | |||||
28,764 | Hess Corp. | 1,164,942 | ||||||
18,394 | HollyFrontier Corp. | 940,301 | ||||||
217,176 | Kinder Morgan, Inc. | 3,340,167 | ||||||
95,519 | Marathon Oil Corp. | 1,369,742 | ||||||
79,384 | Marathon Petroleum Corp. | 4,684,450 | ||||||
23,512 | Newfield Exploration Co.* | 344,686 | ||||||
55,728 | Noble Energy, Inc.^ | 1,045,457 | ||||||
86,758 | Occidental Petroleum Corp. | 5,325,206 | ||||||
47,016 | ONEOK, Inc. | 2,536,513 | ||||||
48,876 | Phillips 66 | 4,210,667 | ||||||
19,476 | Pioneer Natural Resources Co. | 2,561,484 | ||||||
48,908 | Valero Energy Corp. | 3,666,633 | ||||||
138,390 | Williams Cos., Inc. (The) | 3,051,500 | ||||||
|
| |||||||
116,049,586 | ||||||||
|
| |||||||
Personal Products (0.1%): | ||||||||
52,773 | Coty, Inc., Class A^ | 346,191 | ||||||
25,268 | Estee Lauder Co., Inc. (The), Class A | 3,287,367 | ||||||
|
| |||||||
3,633,558 | ||||||||
|
| |||||||
Pharmaceuticals (5.1%): | ||||||||
36,512 | Allergan plc | 4,880,194 | ||||||
187,551 | Bristol-Myers Squibb Co. | 9,748,901 | ||||||
108,334 | Eli Lilly & Co. | 12,536,410 | ||||||
308,178 | Johnson & Johnson Co. | 39,770,372 | ||||||
298,801 | Merck & Co., Inc. | 22,831,384 | ||||||
58,794 | Mylan NV* | 1,610,956 | ||||||
19,530 | Nektar Therapeutics*^ | 641,951 | ||||||
14,244 | Perrigo Co. plc | 551,955 | ||||||
664,216 | Pfizer, Inc. | 28,993,028 | ||||||
55,136 | Zoetis, Inc. | 4,716,333 | ||||||
|
| |||||||
126,281,484 | ||||||||
|
| |||||||
Professional Services (0.3%): | ||||||||
13,914 | Equifax, Inc. | 1,295,811 | ||||||
41,216 | IHS Markit, Ltd.* | 1,977,132 | ||||||
40,730 | Nielsen Holdings plc^ | 950,231 | ||||||
14,124 | Robert Half International, Inc. | 807,893 | ||||||
18,957 | Verisk Analytics, Inc.* | 2,067,070 | ||||||
|
| |||||||
7,098,137 | ||||||||
|
| |||||||
Real Estate Management & Development (0.1%): | ||||||||
36,286 | CBRE Group, Inc., Class A* | 1,452,891 | ||||||
|
| |||||||
Road & Rail (1.0%): | ||||||||
92,178 | CSX Corp. | 5,727,019 | ||||||
10,140 | J.B. Hunt Transport Services, Inc. | 943,426 | ||||||
11,613 | Kansas City Southern^ | 1,108,461 | ||||||
31,295 | Norfolk Southern Corp. | 4,679,854 | ||||||
84,621 | Union Pacific Corp. | 11,697,161 | ||||||
|
| |||||||
24,155,921 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.7%): | ||||||||
101,058 | Advanced Micro Devices, Inc.*^ | 1,865,531 | ||||||
42,531 | Analog Devices, Inc. | 3,650,436 | ||||||
112,485 | Applied Materials, Inc. | 3,682,759 | ||||||
47,508 | Broadcom, Inc.^ | 12,080,333 | ||||||
524,435 | Intel Corp. | 24,611,734 | ||||||
17,589 | KLA-Tencor Corp.^ | 1,574,040 | ||||||
17,832 | Lam Research Corp. | 2,428,183 |
See accompanying notes to the financial statements.
8
AZL S&P 500 Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
31,862 | Maxim Integrated Products, Inc. | $ | 1,620,183 | |||||
27,187 | Microchip Technology, Inc.^ | 1,955,289 | ||||||
128,707 | Micron Technology, Inc.* | 4,083,873 | ||||||
70,093 | NVIDIA Corp. | 9,357,416 | ||||||
14,493 | Qorvo, Inc.* | 880,160 | ||||||
139,286 | QUALCOMM, Inc. | 7,926,766 | ||||||
20,481 | Skyworks Solutions, Inc. | 1,372,637 | ||||||
110,373 | Texas Instruments, Inc. | 10,430,249 | ||||||
28,941 | Xilinx, Inc. | 2,464,905 | ||||||
|
| |||||||
89,984,494 | ||||||||
|
| |||||||
Software (6.1%): | ||||||||
56,033 | Adobe Systems, Inc.* | 12,676,906 | ||||||
9,740 | ANSYS, Inc.* | 1,392,236 | ||||||
25,017 | Autodesk, Inc.* | 3,217,436 | ||||||
32,609 | Cadence Design Systems, Inc.* | 1,417,839 | ||||||
14,893 | Citrix Systems, Inc. | 1,525,937 | ||||||
16,579 | Fortinet, Inc.* | 1,167,659 | ||||||
29,822 | Intuit, Inc. | 5,870,461 | ||||||
888,105 | Microsoft Corp. | 90,204,824 | ||||||
292,798 | Oracle Corp. | 13,219,829 | ||||||
20,287 | Red Hat, Inc.* | 3,563,209 | ||||||
87,904 | Salesforce.com, Inc.* | 12,040,211 | ||||||
73,413 | Symantec Corp. | 1,387,139 | ||||||
17,140 | Synopsys, Inc.* | 1,443,874 | ||||||
|
| |||||||
149,127,560 | ||||||||
|
| |||||||
Specialty Retail (2.3%): | ||||||||
8,376 | Advance Auto Parts, Inc. | 1,318,885 | ||||||
2,897 | AutoZone, Inc.* | 2,428,671 | ||||||
26,902 | Best Buy Co., Inc. | 1,424,730 | ||||||
20,367 | CarMax, Inc.*^ | 1,277,622 | ||||||
13,477 | Foot Locker, Inc. | 716,976 | ||||||
24,642 | Gap, Inc. (The)^ | 634,778 | ||||||
129,791 | Home Depot, Inc. (The) | 22,300,690 | ||||||
25,967 | L Brands, Inc. | 666,573 | ||||||
92,265 | Lowe’s Cos., Inc. | 8,521,595 | ||||||
9,212 | O’Reilly Automotive, Inc.* | 3,171,968 | ||||||
43,088 | Ross Stores, Inc. | 3,584,922 | ||||||
12,467 | Tiffany & Co. | 1,003,718 | ||||||
142,200 | TJX Cos., Inc. (The) | 6,362,028 | ||||||
13,837 | Tractor Supply Co. | 1,154,559 | ||||||
6,434 | Ulta Salon, Cosmetics & Fragrance, Inc.* | 1,575,301 | ||||||
|
| |||||||
56,143,016 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (3.8%): | ||||||||
518,015 | Apple, Inc. | 81,711,686 | ||||||
163,512 | Hewlett Packard Enterprise Co. | 2,159,994 | ||||||
181,077 | HP, Inc. | 3,704,835 | ||||||
28,943 | NetApp, Inc. | 1,727,029 | ||||||
29,905 | Seagate Technology plc^ | 1,154,034 | ||||||
33,311 | Western Digital Corp. | 1,231,508 | ||||||
24,799 | Xerox Corp. | 490,028 | ||||||
|
| |||||||
92,179,114 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.7%): | ||||||||
41,651 | Hanesbrands, Inc.^ | 521,887 | ||||||
17,338 | Michael Kors Holdings, Ltd.* | 657,457 | ||||||
146,528 | Nike, Inc., Class B | 10,863,586 | ||||||
8,849 | PVH Corp. | 822,515 | ||||||
6,309 | Ralph Lauren Corp. | 652,729 | ||||||
33,293 | Tapestry, Inc. | 1,123,639 | ||||||
21,264 | Under Armour, Inc., Class A*^ | 375,735 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Common Stocks, continued | ||||||||
Textiles, Apparel & Luxury Goods, continued | ||||||||
22,308 | Under Armour, Inc., Class C*^ | $ | 360,720 | |||||
37,191 | VF Corp. | 2,653,206 | ||||||
|
| |||||||
18,031,474 | ||||||||
|
| |||||||
Tobacco (0.9%): | ||||||||
215,723 | Altria Group, Inc. | 10,654,559 | ||||||
178,625 | Philip Morris International, Inc. | 11,925,005 | ||||||
|
| |||||||
22,579,564 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.2%): | ||||||||
33,100 | Fastenal Co.^ | 1,730,799 | ||||||
9,411 | United Rentals, Inc.* | 964,910 | ||||||
5,245 | W.W. Grainger, Inc.^ | 1,480,978 | ||||||
|
| |||||||
4,176,687 | ||||||||
|
| |||||||
Water Utilities (0.1%): | ||||||||
20,595 | American Water Works Co., Inc. | 1,869,408 | ||||||
|
| |||||||
Total Common Stocks (Cost $1,551,927,227) | 2,416,879,705 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.6%): | ||||||||
14,285,605 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(a) | 14,285,605 | ||||||
|
| |||||||
| Total Unaffiliated Investment Company | 14,285,605 | ||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (7.0%)(b) | ||||||||
Floating Rate Notes (2.3%) | ||||||||
3,280,000 | Bank of America NA, 2.67%, 5/9/19 | 3,280,000 | ||||||
3,200,000 | Bank of Nova Scotia, 2.64%, 8/14/19 | 3,200,000 | ||||||
3,061,000 | Bedford Row Funding, 2.82%, 5/23/19 | 3,061,000 | ||||||
3,115,000 | Canadian Imperial Bank of Commerce, 2.58%, 7/5/19 | 3,117,424 | ||||||
3,200,000 | Commonwealth Bank of Australia, 2.61%, 8/12/19 | 3,200,000 | ||||||
3,400,000 | Credit Agricole CIB, 2.75%, 4/23/19 | 3,400,000 | ||||||
3,035,000 | Credit Agricole CIB, 2.92%, 6/3/19 | 3,039,146 | ||||||
5,156,000 | Credit Industriel et Commercial, 2.74%, 5/20/19 | 5,156,000 | ||||||
3,519,000 | Credit Suisse AG, 2.65%, 5/7/19 | 3,519,000 | ||||||
3,100,000 | Skandinaviska Enskilda Banken AB, 2.81%, 6/6/19 | 3,100,000 | ||||||
3,100,000 | Sumitomo Mitsui Trust Bank, Ltd., 2.64%, 2/15/19 | 3,100,000 | ||||||
3,882,000 | Swedbank AB, 2.72%, 1/22/19 | 3,882,000 | ||||||
4,000,000 | UBS AG, 2.87%, 5/28/19 | 4,002,643 | ||||||
3,600,000 | US Bank NA, 2.58%, 5/13/19 | 3,600,000 | ||||||
3,500,000 | US Bank NA, 2.76%, 7/23/19 | 3,500,000 | ||||||
3,100,000 | Westpac Banking Corp., 2.66%, 6/6/19 | 3,100,000 | ||||||
|
| |||||||
55,257,213 | ||||||||
|
| |||||||
Miscellaneous Investments (4.7%) | ||||||||
115,840,184 | Short-Term Investments(c) | 115,840,184 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 171,097,397 | ||||||
|
| |||||||
Total Investment Securities (Cost $1,737,310,229) —106.9%(d) | 2,602,262,707 | |||||||
Net other assets (liabilities) — (6.9)% | (169,116,688 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 2,433,146,019 | ||||||
|
|
See accompanying notes to the financial statements.
9
AZL S&P 500 Index Fund
Schedule of Portfolio Investments
December 31, 2018
Percentages indicated are based on net assets as of December 31, 2018.
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $168,052,759. |
+ | Affiliated Securities |
† | Represents less than 0.05%. |
(a) | The rate represents the effective yield at December 31, 2018. |
(b) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(c) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $800,000 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
S&P 500 IndexE-Mini March Futures (U.S. Dollar) | 3/15/19 | 132 | $ | 16,534,320 | $ | 54,002 | ||||||||||
|
| |||||||||||||||
$ | 54,002 | |||||||||||||||
|
|
See accompanying notes to the financial statements.
10
AZL S&P 500 Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investments innon-affiliates, at cost | $ | 1,734,182,765 | |||
Investments in affiliates, at cost | 3,127,464 | ||||
|
| ||||
Investments innon-affiliates, at value* | $ | 2,596,781,297 | |||
Investments in affiliates, at value | 5,481,410 | ||||
Cash | 14,878 | ||||
Segregated cash for collateral | 800,000 | ||||
Interest and dividends receivable | 2,859,723 | ||||
Receivable for capital shares issued | 132,282 | ||||
Receivable for investments sold | 803,206 | ||||
Receivable for variation margin on futures contracts | 132,254 | ||||
Reclaims receivable | 31,118 | ||||
Prepaid expenses | 26,328 | ||||
|
| ||||
Total Assets | 2,607,062,496 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 1,633,727 | ||||
Payable for capital shares redeemed | 22,036 | ||||
Payable for collateral received on loaned securities | 171,097,397 | ||||
Manager fees payable | 362,603 | ||||
Administration fees payable | 16,330 | ||||
Distribution fees payable | 519,489 | ||||
Custodian fees payable | 7,607 | ||||
Administrative and compliance services fees payable | 10,006 | ||||
Transfer agent fees payable | 1,272 | ||||
Trustee fees payable | 3,832 | ||||
Other accrued liabilities | 242,178 | ||||
|
| ||||
Total Liabilities | 173,916,477 | ||||
|
| ||||
Net Assets | $ | 2,433,146,019 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 1,469,639,259 | |||
Total distributable earnings | 963,506,760 | ||||
|
| ||||
Net Assets | $ | 2,433,146,019 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 62,599,444 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 4,251,411 | ||||
Net Asset Value (offering and redemption price per share) | $ | 14.72 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 2,370,546,575 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 162,281,547 | ||||
Net Asset Value (offering and redemption price per share) | $ | 14.61 | |||
|
|
* | Includes securities on loan of $168,052,759. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends from non-affiliates | $ | 54,325,481 | |||
Dividends from affiliates | 173,587 | ||||
Interest | 14,814 | ||||
Income from securities lending | 550,336 | ||||
Foreign tax reclaims received | 9 | ||||
|
| ||||
Total Investment Income | 55,064,227 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 4,740,985 | ||||
Administration fees | 658,184 | ||||
Distribution fees — Class 2 | 6,789,601 | ||||
Custodian fees | 78,439 | ||||
Administrative and compliance services fees | 46,460 | ||||
Transfer agent fees | 13,901 | ||||
Trustee fees | 146,717 | ||||
Professional fees | 136,193 | ||||
Shareholder reports | 53,879 | ||||
Other expenses | 638,601 | ||||
|
| ||||
Total expenses | 13,302,960 | ||||
|
| ||||
Net Investment Income/(Loss) | 41,761,267 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 82,737,918 | ||||
Net realized gains/(losses) on affiliated securities | 196,920 | ||||
Net realized gains/(losses) on futures contracts | (193,700 | ) | |||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (232,830,680 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated securities | (1,913,160 | ) | |||
Change in net unrealized appreciation/depreciation on futures contracts | (91,540 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (152,094,242 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (110,332,975 | ) | ||
|
|
See accompanying notes to the financial statements.
11
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 41,761,267 | $ | 43,514,476 | ||||||
Net realized gains/(losses) on investments | 82,741,138 | 92,090,661 | ||||||||
Change in unrealized appreciation/depreciation on investments | (234,835,380 | ) | 396,228,000 | |||||||
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Change in net assets resulting from operations | (110,332,975 | ) | 531,833,137 | |||||||
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Distributions to Shareholders:(a) | ||||||||||
Class 1 | (3,603,867 | ) | (4,098,753 | ) | ||||||
Class 2 | (128,336,323 | ) | (146,017,998 | ) | ||||||
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Change in net assets resulting from distributions to shareholders | (131,940,190 | ) | (150,116,751 | ) | ||||||
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Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 21,167 | 291,055 | ||||||||
Proceeds from dividends reinvested | 3,603,867 | 4,098,753 | ||||||||
Value of shares redeemed | (10,821,638 | ) | (11,407,094 | ) | ||||||
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Total Class 1 Shares | (7,196,604 | ) | (7,017,286 | ) | ||||||
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Class 2 | ||||||||||
Proceeds from shares issued | 34,574,035 | 39,504,184 | ||||||||
Proceeds from dividends reinvested | 128,336,323 | 146,017,998 | ||||||||
Value of shares redeemed | (344,688,784 | ) | (330,649,414 | ) | ||||||
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Total Class 2 Shares | (181,778,426 | ) | (145,127,232 | ) | ||||||
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Change in net assets resulting from capital transactions | (188,975,030 | ) | (152,144,518 | ) | ||||||
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Change in net assets | (431,248,195 | ) | 229,571,868 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 2,864,394,214 | 2,634,822,346 | ||||||||
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End of period | $ | 2,433,146,019 | $ | 2,864,394,214 | ||||||
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Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 1,308 | 18,260 | ||||||||
Dividends reinvested | 221,232 | 271,441 | ||||||||
Shares redeemed | (651,499 | ) | (740,720 | ) | ||||||
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Total Class 1 Shares | (428,959 | ) | (451,019 | ) | ||||||
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Class 2 | ||||||||||
Shares issued | 2,171,613 | 2,654,250 | ||||||||
Dividends reinvested | 7,936,693 | 9,734,533 | ||||||||
Shares redeemed | (20,741,869 | ) | (21,667,977 | ) | ||||||
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Total Class 2 Shares | (10,633,563 | ) | (9,279,194 | ) | ||||||
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Change in shares | (11,062,522 | ) | (9,730,213 | ) | ||||||
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(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
12
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.25 | $ | 14.15 | $ | 14.31 | $ | 14.50 | $ | 12.96 | |||||||||||||||
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Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.29 | (a) | 0.28 | 0.28 | 0.27 | 0.24 | |||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.96 | ) | 2.71 | 1.30 | (0.12 | ) | 1.49 | ||||||||||||||||||
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Total from Investment Activities | (0.67 | ) | 2.99 | 1.58 | 0.15 | 1.73 | |||||||||||||||||||
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Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.31 | ) | (0.17 | ) | (0.31 | ) | (0.34 | ) | (0.19 | ) | |||||||||||||||
Net Realized Gains | (0.55 | ) | (0.72 | ) | (1.43 | ) | — | — | |||||||||||||||||
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Total Dividends | (0.86 | ) | (0.89 | ) | (1.74 | ) | (0.34 | ) | (0.19 | ) | |||||||||||||||
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Net Asset Value, End of Period | $ | 14.72 | $ | 16.25 | $ | 14.15 | $ | 14.31 | $ | 14.50 | |||||||||||||||
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Total Return(b) | (4.63 | )% | 21.60 | % | 11.79 | % | 1.16 | % | 13.41 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 62,599 | $ | 76,049 | $ | 72,604 | $ | 20,022 | $ | 21,304 | |||||||||||||||
Net Investment Income/(Loss) | 1.74 | % | 1.83 | % | 1.98 | % | 1.86 | % | 1.76 | % | |||||||||||||||
Expenses Before Reductions(c) | 0.23 | % | 0.23 | % | 0.24 | % | 0.24 | % | 0.24 | % | |||||||||||||||
Expenses Net of Reductions | 0.23 | % | 0.23 | % | 0.24 | % | 0.24 | % | 0.24 | % | |||||||||||||||
Portfolio Turnover Rate(d) | 4 | % | 2 | % | 23 | % | 8 | % | 3 | % | |||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.13 | $ | 14.06 | $ | 14.23 | $ | 14.40 | $ | 12.88 | |||||||||||||||
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Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.25 | (a) | 0.24 | 0.24 | 0.23 | 0.20 | |||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.95 | ) | 2.70 | 1.29 | (0.11 | ) | 1.48 | ||||||||||||||||||
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Total from Investment Activities | (0.70 | ) | 2.94 | 1.53 | 0.12 | 1.68 | |||||||||||||||||||
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Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.27 | ) | (0.15 | ) | (0.27 | ) | (0.29 | ) | (0.16 | ) | |||||||||||||||
Net Realized Gains | (0.55 | ) | (0.72 | ) | (1.43 | ) | — | — | |||||||||||||||||
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Total Dividends | (0.82 | ) | (0.87 | ) | (1.70 | ) | (0.29 | ) | (0.16 | ) | |||||||||||||||
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Net Asset Value, End of Period | $ | 14.61 | $ | 16.13 | $ | 14.06 | $ | 14.23 | $ | 14.40 | |||||||||||||||
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Total Return(b) | (4.84 | )% | 21.36 | % | 11.45 | % | 0.95 | % | 13.12 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 2,370,547 | $ | 2,788,345 | $ | 2,562,218 | $ | 1,223,566 | $ | 1,743,919 | |||||||||||||||
Net Investment Income/(Loss) | 1.49 | % | 1.58 | % | 1.75 | % | 1.58 | % | 1.51 | % | |||||||||||||||
Expenses Before Reductions(c) | 0.48 | % | 0.48 | % | 0.49 | % | 0.49 | % | 0.49 | % | |||||||||||||||
Expenses Net of Reductions | 0.48 | % | 0.48 | % | 0.49 | % | 0.49 | % | 0.49 | % | |||||||||||||||
Portfolio Turnover Rate(d) | 4 | % | 2 | % | 23 | % | 8 | % | 3 | % |
(a) | Average shares method used in calculation. |
(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) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
See accompanying notes to the financial statements.
13
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL S&P 500 Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
14
AZL S&P 500 Index Fund
Notes to the Financial Statements
December 31, 2018
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $54,331 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $171,019,037 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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 $29.1 million for the year ended December 31, 2018. 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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | 54,002 | 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 the current day’s variation margin is reported within the Statement of Assets and Liabilities as Variation margin on futures contracts. |
15
AZL S&P 500 Index Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | (193,700 | ) | $ | (91,540 | ) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (777,776 | ) | ||
Class 2 | (24,758,127 | ) | |||
From net realized gains | |||||
Class 1 | (3,320,977 | ) | |||
Class 2 | (121,259,871 | ) | |||
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Change in net assets resulting from distributions to shareholders | $ | (150,116,751 | ) | ||
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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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL S&P 500 Index Fund Class 1 | 0.17 | % | 0.46 | % | ||||||
AZL S&P 500 Index Fund Class 2 | 0.17 | % | 0.71 | % |
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
16
AZL S&P 500 Index Fund
Notes to the Financial Statements
December 31, 2018
At December 31, 2018, the following investments are noted as Affiliated Securities in the Fund’s Schedule of Portfolio Investments.
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | |||||||||||||||||||||||||||||||||
BlackRock Inc., Class A | $ | 7,816,098 | $ | 83,400 | $ | (701,848 | ) | $ | 196,920 | $ | (1,913,160 | ) | $ | 5,481,410 | 13,954 | $ | 173,587 | |||||||||||||||||||||||
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$ | 7,816,098 | $ | 83,400 | $ | (701,848 | ) | $ | 196,920 | $ | (1,913,160 | ) | $ | 5,481,410 | 13,954 | $ | 173,587 | ||||||||||||||||||||||||
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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 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 value 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 anannual 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 year ended December 31, 2018, $22,213 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
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AZL S&P 500 Index Fund
Notes to the Financial Statements
December 31, 2018
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 2,416,879,705 | $ | — | $ | — | $ | 2,416,879,705 | ||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 171,097,397 | — | 171,097,397 | ||||||||||||||||
Unaffiliated Investment Company | 14,285,605 | — | — | 14,285,605 | ||||||||||||||||
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Total Investment Securities | 2,431,165,310 | 171,097,397 | — | 2,602,262,707 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | 54,002 | — | — | 54,002 | ||||||||||||||||
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Total Investments | $ | 2,431,219,312 | $ | 171,097,397 | $ | — | $ | 2,602,316,709 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL S&P 500 Index Fund | $ | 109,991,673 | $ | 337,901,441 |
6. Investment Risks
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 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.
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 December 31, 2018 is $1,761,009,428. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 915,767,147 | ||
Unrealized (depreciation) | (74,513,868 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 841,253,279 | ||
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AZL S&P 500 Index Fund
Notes to the Financial Statements
December 31, 2018
The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL S&P 500 Index Fund | $ | 46,594,080 | $ | 85,346,110 | $ | 131,940,190 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL S&P 500 Index Fund | $ | 31,392,251 | $ | 118,724,500 | $ | 150,116,751 |
(a) | Total distributions paid may differ from the 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 S&P 500 Index Fund | $ | 41,286,028 | $ | 80,967,443 | $ | — | $ | 841,253,289 | $ | 963,506,760 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership in excess of 30% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL S&P 500 Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL S&P 500 Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 93.89% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $3,932,252.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $85,346,110.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
24
The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
25
Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
26
Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
27
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
AZL® Small Cap Stock Index Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 12
Page 12
Statements of Changes in Net Assets
Page 13
Page 14
Notes to the Financial Statements
Page 15
Report of Independent Registered Public Accounting Firm
Page 21
Other Federal Income Tax Information
Page 22
Page 23
Approval of Investment Advisory and Subadvisory Agreements
Page 24
Information about the Board of Trustees and Officers
Page 27
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® Small Cap Stock Index Fund Review (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® Small Cap Stock Index Fund and BlackRock Investment Management, LLC serves as Subadviser to the Fund. | ||||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® Small Cap Stock Index Fund (Class 2 Shares) (the “Fund”) returned-8.93%. That compared to a-8.48% total return for its benchmark, the S&P SmallCap 600 Index1.
The Fund takes positions in securities that, in combination, should have similar return characteristics as the return of the S&P Small Cap 600 Index (“Index”). The Index is designed to provide a comprehensive measure ofsmall-cap stock performance.*
Markets opened the year posting strong gains fueled bytax-reform optimism and ongoing global growth that carried over from 2017. As the first quarter progressed, however, investors grew more concerned that the economy might be overheating. The realized volatility of the S&P 500 Index2 rose to annualized level of 19% during the first quarter, which was up from an average of 6.6% in 2017. Rising yields and trade protectionism fears further weighed on equities. And yet, the underlying U.S. economy remained healthy, with low unemployment, high consumer confidence and accelerating economic indicators. These factors supported the Federal Reserve Board’s (the Fed) decision to increase interest rates in March, which helped drive yields higher.
The second quarter saw renewed gains in U.S. equity markets, in spite of ongoing threats of U.S. tariffs. Unemployment fell to its lowest level since 1975 and earnings growth inspired confidence in investors. The Fed raised interest rates again in June.
U.S.large-cap equities reachedall-time highs in the third quarter. Signs of strong economic growth and positive earnings results helped grow investors’ appetite for risk. Volatility fell in spite of the U.S. announcing tariffs on $505 billion of Chinese goods. The unemployment rate fell as well, dropping to 3.7% in September—the lowest rate since 1969. Meanwhile, consumer confidence reached its
highest level since 2000. The strength of the economy led the Fed to once again raise interest rates, which, combined with positive growth and high levels of U.S. government debt issuance, helped push the yield on10-year U.S. Treasuries up to 3.06%.
Concerns over Fed policy, growing trade protectionism and a potential slowdown in growth contributed to investor anxiety throughout the fourth quarter. Hawkish comments from Fed Chairman Powell about U.S. interest rates drove a temporarysell-off in U.S. Treasuries, and helped spur a return to volatility.
From a sector perspective, the largest negative returns in the Index came from the energy, materials and industrials sectors. Increases were seen in the healthcare and communication services sectors.
The Fund held derivatives in the form of futures contracts, which it used to hedge its cash position. The futures had a negative impact on relative results.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmark please refer to page 2 of this report. |
2 | The Standard & Poor’s 500 Index is unmanaged and is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. Investors cannot invest directly in an index. |
1
AZL® Small Cap Stock Index Fund Review (Unaudited)
Fund Objective | ||||
The Fund’s investment objective is to seek to match the performance of the Standard & Poor’s SmallCap 600 Index (the “S&P 600”). This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing in all of the stocks in the S&P 600 in proportion to their weighting in the Index. | ||||
Investment Concerns | ||||
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. | ||||
Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility. | ||||
The performance of the Fund is expected to be lower than that of the Index because of Fund fees and expenses. Securities in which the Fund will invest may involve substantial risk and may be subject to sudden severe price declines. | ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments. | ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. | ||||
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
Inception Date | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception | |||||||||||||||||
AZL®Small Cap Stock Index Fund (Class 1 Shares) | 10/14/16 | -8.59 | % | — | — | — | 7.55 | % | ||||||||||||||
AZL®Small Cap Stock Index Fund (Class 2 Shares) | 5/1/07 | -8.93 | % | 8.88 | % | 5.78 | % | 12.98 | % | 7.01 | % | |||||||||||
S&P SmallCap 600 Index | 10/14/16 | -8.48 | % | 9.46 | % | 6.34 | % | 13.61 | % | 7.48 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratios | Gross | |||
AZL®Small Cap Stock Index Fund (Class 1 Shares) | 0.32 | % | ||
AZL®Small Cap Stock Index Fund (Class 2 Shares) | 0.57 | % |
The above expense ratios are based on the current Fund prospectus dated May 1, 2018. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses (such as interest expense), to 0.46% for Class 1 Shares and 0.71% for Class 2 Shares through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratios can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
The Fund’s performance is measured against the Standard & Poor’s SmallCap 600 Index, an unmanaged index which covers approximately 3% of the domestic equities market. Measuring thesmall-cap segment of the market that is typically renowned for poor trading liquidity and financial instability, the index is designed to be an efficient portfolio of companies that meet specific inclusion criteria to ensure that they are investable and financially viable. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL Small Cap Stock Index Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL Small Cap Stock Index 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Small Cap Stock Index Fund, Class 1 | $ | 1,000.00 | $ | 836.10 | $ | 1.53 | 0.33 | % | ||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | $ | 1,000.00 | $ | 834.40 | $ | 2.68 | 0.58 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL Small Cap Stock Index Fund, Class 1 | $ | 1,000.00 | $ | 1,023.54 | $ | 1.68 | 0.33 | % | ||||||||||||
AZL Small Cap Stock Index Fund, Class 2 | $ | 1,000.00 | $ | 1,022.28 | $ | 2.96 | 0.58 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Financials | 19.2 | % | |||
Industrials | 18.6 | ||||
Information Technology | 14.4 | ||||
Consumer Discretionary | 13.9 | ||||
Health Care | 11.5 | ||||
Real Estate | 6.5 | ||||
Materials | 4.1 | ||||
Consumer Staples | 3.5 | ||||
Energy | 3.4 | ||||
Utilities | 2.6 | ||||
Telecommunication Services | 2.0 | ||||
|
| ||||
Total Common Stocks | 99.7 | ||||
Rights | — | ^ | |||
Short-Term Securities Held as Collateral for Securities on Loan | 27.3 | ||||
Money Markets | 0.4 | ||||
|
| ||||
Total Investment Securities | 127.4 | ||||
Net other assets (liabilities) | (27.4 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
^ | Represents less than 0.05%. |
3
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (99.7%): | ||||||||
Aerospace & Defense (2.4%): | ||||||||
36,608 | AAR Corp.^ | $ | 1,366,943 | |||||
81,636 | Aerojet Rocketdyne Holdings, Inc.*^ | 2,876,036 | ||||||
24,107 | AeroVironment, Inc.*^ | 1,638,071 | ||||||
66,093 | Axon Enterprise, Inc.* | 2,891,568 | ||||||
31,924 | Cubic Corp. | 1,715,596 | ||||||
20,801 | Engility Holdings, Inc.* | 591,996 | ||||||
54,655 | Mercury Computer Systems, Inc.*^ | 2,584,635 | ||||||
36,831 | Moog, Inc., Class A | 2,853,666 | ||||||
5,639 | National Presto Industries, Inc.^ | 659,312 | ||||||
57,129 | Triumph Group, Inc.^ | 656,984 | ||||||
|
| |||||||
17,834,807 | ||||||||
|
| |||||||
Air Freight & Logistics (0.7%): | ||||||||
28,942 | Atlas Air Worldwide Holdings, Inc.* | 1,221,063 | ||||||
31,032 | Echo Global Logistics, Inc.*^ | 630,881 | ||||||
33,240 | Forward Air Corp.^ | 1,823,214 | ||||||
38,272 | Hub Group, Inc.* | 1,418,743 | ||||||
|
| |||||||
5,093,901 | ||||||||
|
| |||||||
Airlines (0.7%): | ||||||||
14,440 | Allegiant Travel Co.^ | 1,447,177 | ||||||
57,317 | Hawaiian Holdings, Inc.^ | 1,513,742 | ||||||
59,030 | SkyWest, Inc. | 2,625,064 | ||||||
|
| |||||||
5,585,983 | ||||||||
|
| |||||||
Auto Components (2.1%): | ||||||||
126,522 | American Axle & Manufacturing Holdings, Inc.*^ | 1,404,394 | ||||||
56,637 | Cooper Tire & Rubber Co.^ | 1,831,074 | ||||||
18,816 | Cooper-Standard Holding, Inc.*^ | 1,168,850 | ||||||
33,106 | Dorman Products, Inc.*^ | 2,980,202 | ||||||
42,754 | Fox Factory Holding Corp.*^ | 2,516,928 | ||||||
83,868 | Garrett Motion, Inc.*^ | 1,034,931 | ||||||
39,580 | Gentherm, Inc.*^ | 1,582,408 | ||||||
28,541 | LCI Industries^ | 1,906,539 | ||||||
21,253 | Motorcar Parts of America, Inc.*^ | 353,650 | ||||||
22,920 | Standard Motor Products, Inc.^ | 1,110,016 | ||||||
26,941 | Superior Industries International, Inc.^ | 129,586 | ||||||
|
| |||||||
16,018,578 | ||||||||
|
| |||||||
Automobiles (0.1%): | ||||||||
32,543 | Winnebago Industries, Inc.^ | 787,866 | ||||||
|
| |||||||
Banks (9.5%): | ||||||||
45,582 | Ameris Bancorp^ | 1,443,582 | ||||||
48,898 | Banc of California, Inc.^ | 650,832 | ||||||
36,753 | Banner Corp.^ | 1,965,550 | ||||||
45,573 | Berkshire Hills Bancorp, Inc.^ | 1,229,104 | ||||||
97,192 | Boston Private Financial Holdings, Inc. | 1,027,319 | ||||||
92,073 | Brookline Bancorp, Inc.^ | 1,272,449 | ||||||
33,193 | Central Pacific Financial Corp. | 808,250 | ||||||
17,594 | City Holding Co.^ | 1,189,178 | ||||||
83,466 | Columbia Banking System, Inc. | 3,028,981 | ||||||
58,130 | Community Bank System, Inc.^ | 3,388,979 | ||||||
33,619 | Customers Bancorp, Inc.* | 611,866 | ||||||
116,837 | CVB Financial Corp.^ | 2,363,613 | ||||||
35,860 | Eagle Bancorp, Inc.*^ | 1,746,741 | ||||||
25,388 | Fidelity Southern Corp. | 660,596 | ||||||
246,171 | First Bancorp | 2,117,071 | ||||||
115,294 | First Commonwealth Financial Corp. | 1,392,752 | ||||||
111,326 | First Financial Bancorp | 2,640,653 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Banks, continued | ||||||||
76,832 | First Financial Bankshares, Inc.^ | $ | 4,432,439 | |||||
118,150 | First Midwest Bancorp, Inc.^ | 2,340,552 | ||||||
13,666 | Franklin Financial Network, Inc.*^ | 360,372 | ||||||
95,657 | Glacier Bancorp, Inc.^ | 3,789,931 | ||||||
66,965 | Great Western Bancorp, Inc. | 2,092,656 | ||||||
30,444 | Green BanCorp, Inc. | 521,810 | ||||||
36,810 | Hanmi Financial Corp.^ | 725,157 | ||||||
37,235 | Heritage Financial Corp.^ | 1,106,624 | ||||||
140,619 | Hope BanCorp, Inc.^ | 1,667,741 | ||||||
31,237 | Independent Bank Corp.^ | 2,196,273 | ||||||
50,949 | LegacyTexas Financial Group, Inc.^ | 1,634,953 | ||||||
29,803 | National Bank Holdings Corp.^ | 920,019 | ||||||
50,054 | NBT Bancorp, Inc.^ | 1,731,368 | ||||||
49,698 | OFG Bancorp | 818,029 | ||||||
171,647 | Old National Bancorp^ | 2,643,364 | ||||||
24,366 | Opus Bank^ | 477,330 | ||||||
50,924 | Pacific Premier Bancorp, Inc.*^ | 1,299,580 | ||||||
15,894 | Preferred Bank Los Angeles^ | 689,005 | ||||||
39,975 | S & T Bancorp, Inc.^ | 1,512,654 | ||||||
53,865 | Seacoast Banking Corp.*^ | 1,401,567 | ||||||
52,208 | ServisFirst Bancshares, Inc.^ | 1,663,869 | ||||||
104,289 | Simmons First National Corp., Class A^ | 2,516,494 | ||||||
37,075 | Southside Bancshares, Inc.^ | 1,177,131 | ||||||
14,329 | Tompkins Financial Corp.^ | 1,074,818 | ||||||
27,408 | Triumph BanCorp, Inc.*^ | 814,018 | ||||||
84,123 | United Community Banks, Inc. | 1,805,280 | ||||||
27,345 | Veritex Holdings, Inc.*^ | 584,636 | ||||||
30,296 | Westamerica Bancorp^ | 1,686,881 | ||||||
|
| |||||||
71,222,067 | ||||||||
|
| |||||||
Beverages (0.2%): | ||||||||
5,245 | Coca-Cola Bottling Co. Consolidated | 930,358 | ||||||
14,166 | MGP Ingredients, Inc.^ | 808,170 | ||||||
|
| |||||||
1,738,528 | ||||||||
|
| |||||||
Biotechnology (2.2%): | ||||||||
44,803 | Acorda Therapeutics, Inc.*^ | 698,031 | ||||||
39,562 | AMAG Pharmaceuticals, Inc.* | 600,947 | ||||||
61,827 | Cytokinetics, Inc.*^ | 390,747 | ||||||
12,612 | Eagle Pharmaceuticals, Inc.*^ | 508,137 | ||||||
50,787 | Emergent Biosolutions, Inc.*^ | 3,010,652 | ||||||
17,771 | Enanta Pharmaceuticals, Inc.* | 1,258,720 | ||||||
108,379 | Momenta Pharmaceuticals, Inc.* | 1,196,504 | ||||||
84,589 | Myriad Genetics, Inc.*^ | 2,459,002 | ||||||
95,229 | Progenics Pharmaceuticals, Inc.*^ | 399,962 | ||||||
33,370 | Regenxbio, Inc.*^ | 1,399,872 | ||||||
44,173 | Repligen Corp.*^ | 2,329,684 | ||||||
111,909 | Spectrum Pharmaceuticals, Inc.* | 979,204 | ||||||
59,190 | Vanda Pharmaceuticals, Inc.*^ | 1,546,635 | ||||||
|
| |||||||
16,778,097 | ||||||||
|
| |||||||
Building Products (2.2%): | ||||||||
45,940 | AAON, Inc.^ | 1,610,656 | ||||||
17,733 | American Woodmark Corp.*^ | 987,373 | ||||||
31,729 | Apogee Enterprises, Inc.^ | 947,111 | ||||||
36,412 | Gibraltar Industries, Inc.*^ | 1,295,903 | ||||||
38,632 | Griffon Corp.^ | 403,704 | ||||||
20,492 | Insteel Industries, Inc. | 497,546 | ||||||
26,516 | Patrick Industries, Inc.*^ | 785,139 |
See accompanying notes to the financial statements.
4
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Building Products, continued | ||||||||
65,626 | PGT, Inc.* | $ | 1,040,172 | |||||
39,876 | Quanex Building Products Corp.^ | 541,915 | ||||||
47,192 | Simpson Manufacturing Co., Inc.^ | 2,554,503 | ||||||
66,524 | Trex Co., Inc.*^ | 3,948,865 | ||||||
69,891 | Universal Forest Products, Inc. | 1,814,370 | ||||||
|
| |||||||
16,427,257 | ||||||||
|
| |||||||
Capital Markets (1.2%): | ||||||||
53,932 | Blucora, Inc.*^ | 1,436,748 | ||||||
38,968 | Donnelley Financial Solutions, Inc.*^ | 546,721 | ||||||
22,291 | Greenhill & Co., Inc.^ | 543,900 | ||||||
18,808 | INTL FCStone, Inc.* | 687,997 | ||||||
39,267 | Investment Technology Group, Inc.^ | 1,187,434 | ||||||
17,687 | Piper Jaffray Cos., Inc.^ | 1,164,512 | ||||||
8,446 | Virtus Investment Partners, Inc.^ | 670,866 | ||||||
91,728 | Waddell & Reed Financial, Inc., Class A^ | 1,658,442 | ||||||
134,221 | WisdomTree Investments, Inc.^ | 892,570 | ||||||
|
| |||||||
8,789,190 | ||||||||
|
| |||||||
Chemicals (2.7%): | ||||||||
34,289 | AdvanSix, Inc.* | 834,594 | ||||||
30,742 | American Vanguard Corp.^ | 466,971 | ||||||
36,452 | Balchem Corp.^ | 2,856,014 | ||||||
29,273 | Futurefuel Corp. | 464,270 | ||||||
57,507 | H.B. Fuller Co.^ | 2,453,824 | ||||||
10,906 | Hawkins, Inc. | 446,601 | ||||||
47,653 | Ingevity Corp.*^ | 3,988,079 | ||||||
22,251 | Innophos Holdings, Inc. | 545,817 | ||||||
27,565 | Innospec, Inc.^ | 1,702,414 | ||||||
24,455 | Koppers Holdings, Inc.*^ | 416,713 | ||||||
36,284 | Kraton Performance Polymers, Inc.*^ | 792,443 | ||||||
23,683 | LSB Industries, Inc.*^ | 130,730 | ||||||
15,017 | Quaker Chemical Corp.^ | 2,668,671 | ||||||
57,935 | Rayonier Advanced Materials, Inc.^ | 617,008 | ||||||
22,830 | Stepan Co. | 1,689,420 | ||||||
28,943 | Tredegar Corp. | 459,036 | ||||||
|
| |||||||
20,532,605 | ||||||||
|
| |||||||
Commercial Services & Supplies (2.6%): | ||||||||
74,477 | ABM Industries, Inc.^ | 2,391,456 | ||||||
54,198 | Brady Corp., Class A^ | 2,355,445 | ||||||
37,466 | Essendant, Inc. | 471,322 | ||||||
67,404 | Interface, Inc.^ | 960,507 | ||||||
38,183 | LSC Communications, Inc.^ | 267,281 | ||||||
36,325 | Matthews International Corp., Class A | 1,475,522 | ||||||
50,575 | Mobile Mini, Inc.^ | 1,605,756 | ||||||
15,781 | Multi-Color Corp.^ | 553,755 | ||||||
81,098 | RR Donnelley & Sons Co.^ | 321,148 | ||||||
33,646 | Team, Inc.*^ | 492,914 | ||||||
62,683 | Tetra Tech, Inc. | 3,245,100 | ||||||
17,531 | UniFirst Corp. | 2,508,160 | ||||||
24,961 | US Ecology, Inc. | 1,572,044 | ||||||
23,187 | Viad Corp. | 1,161,437 | ||||||
|
| |||||||
19,381,847 | ||||||||
|
| |||||||
Communications Equipment (1.5%): | ||||||||
53,384 | ADTRAN, Inc. | 573,344 | ||||||
21,220 | Applied Optoelectronics, Inc.*^ | 327,425 | ||||||
40,007 | CalAmp Corp.*^ | 520,491 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Communications Equipment, continued | ||||||||
26,820 | Comtech Telecommunications Corp.^ | $ | 652,799 | |||||
30,714 | Digi International, Inc.* | 309,904 | ||||||
135,550 | Extreme Networks, Inc.*^ | 826,855 | ||||||
132,001 | Finisar Corp.*^ | 2,851,221 | ||||||
100,128 | Harmonic, Inc.*^ | 472,604 | ||||||
35,911 | NETGEAR, Inc.*^ | 1,868,449 | ||||||
256,890 | Viavi Solutions, Inc.*^ | 2,581,745 | ||||||
|
| |||||||
10,984,837 | ||||||||
|
| |||||||
Construction & Engineering (0.6%): | ||||||||
36,720 | Aegion Corp.*^ | 599,270 | ||||||
55,865 | Arcosa, Inc.*^ | 1,546,902 | ||||||
42,133 | Comfort Systems USA, Inc. | 1,840,369 | ||||||
18,698 | MYR Group, Inc.* | 526,723 | ||||||
32,796 | Orion Marine Group, Inc.* | 140,695 | ||||||
|
| |||||||
4,653,959 | ||||||||
|
| |||||||
Construction Materials (0.1%): | ||||||||
18,108 | U.S. Concrete, Inc.*^ | 638,850 | ||||||
|
| |||||||
Consumer Finance (1.6%): | ||||||||
29,775 | Encore Capital Group, Inc.*^ | 699,713 | ||||||
39,048 | Enova International, Inc.*^ | 759,874 | ||||||
60,429 | EZCORP, Inc., Class A*^ | 467,116 | ||||||
49,660 | Firstcash, Inc.^ | 3,592,901 | ||||||
53,977 | Green Dot Corp., Class A*^ | 4,292,251 | ||||||
51,371 | PRA Group, Inc.*^ | 1,251,911 | ||||||
7,045 | World Acceptance Corp.*^ | 720,422 | ||||||
|
| |||||||
11,784,188 | ||||||||
|
| |||||||
Containers & Packaging (0.1%): | ||||||||
39,789 | Myers Industries, Inc. | 601,212 | ||||||
|
| |||||||
Distributors (0.2%): | ||||||||
51,987 | Core Markt Holdngs Co., Inc.^ | 1,208,698 | ||||||
|
| |||||||
Diversified Consumer Services (0.6%): | ||||||||
18,370 | American Public Education, Inc.* | 522,810 | ||||||
78,846 | Career Education Corp.* | 900,421 | ||||||
37,515 | Regis Corp.*^ | 635,879 | ||||||
24,329 | Strategic Education, Inc.^ | 2,759,396 | ||||||
|
| |||||||
4,818,506 | ||||||||
|
| |||||||
Diversified Telecommunication Services (1.2%): | ||||||||
12,402 | ATN International, Inc. | 887,115 | ||||||
57,097 | Cincinnati Bell, Inc.* | 444,215 | ||||||
47,474 | Cogent Communications Group, Inc.^ | 2,146,299 | ||||||
80,558 | Consolidated Communications Holdings, Inc.^ | 795,913 | ||||||
119,852 | Frontier Communications Corp.*^ | 285,248 | ||||||
108,897 | Iridium Communications, Inc.*^ | 2,009,150 | ||||||
248,675 | Vonage Holdings Corp.*^ | 2,170,932 | ||||||
|
| |||||||
8,738,872 | ||||||||
|
| |||||||
Electric Utilities (0.3%): | ||||||||
45,704 | El Paso Electric Co. | 2,291,142 | ||||||
|
| |||||||
Electrical Equipment (0.4%): | ||||||||
29,308 | AZZ, Inc. | 1,182,871 | ||||||
23,469 | Encore Wire Corp. | 1,177,674 | ||||||
9,915 | Powell Industries, Inc. | 247,974 | ||||||
18,177 | Vicor Corp.*^ | 686,909 | ||||||
|
| |||||||
3,295,428 | ||||||||
|
|
See accompanying notes to the financial statements.
5
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Electronic Equipment, Instruments & Components (4.1%): | ||||||||
32,611 | Anixter International, Inc.* | $ | 1,771,103 | |||||
32,825 | Badger Meter, Inc.^ | 1,615,318 | ||||||
11,269 | Bel Fuse, Inc., Class B^ | 207,575 | ||||||
52,588 | Benchmark Electronics, Inc.^ | 1,113,814 | ||||||
29,526 | Control4 Corp.*^ | 519,658 | ||||||
37,574 | CTS Corp. | 972,791 | ||||||
43,644 | Daktronics, Inc.^ | 322,966 | ||||||
38,307 | Electro Scientific Industries, Inc.*^ | 1,147,678 | ||||||
15,582 | ePlus, Inc.*^ | 1,108,971 | ||||||
41,264 | Fabrinet* | 2,117,256 | ||||||
19,181 | FARO Technologies, Inc.*^ | 779,516 | ||||||
66,519 | II-VI, Inc.*^ | 2,159,206 | ||||||
40,220 | Insight Enterprises, Inc.*^ | 1,638,965 | ||||||
37,886 | Itron, Inc.*^ | 1,791,629 | ||||||
64,885 | KEMET Corp.^ | 1,138,083 | ||||||
101,955 | Knowles Corp.*^ | 1,357,021 | ||||||
41,901 | Methode Electronics, Inc., Class A^ | 975,874 | ||||||
20,132 | MTS Systems Corp.^ | 807,897 | ||||||
19,124 | OSI Systems, Inc.*^ | 1,401,789 | ||||||
21,555 | Park Electrochemical Corp.^ | 389,499 | ||||||
36,378 | Plexus Corp.*^ | 1,858,188 | ||||||
20,791 | Rogers Corp.*^ | 2,059,556 | ||||||
76,867 | Sanmina Corp.* | 1,849,420 | ||||||
28,841 | ScanSource, Inc.* | 991,554 | ||||||
104,708 | TTM Technologies, Inc.*^ | 1,018,809 | ||||||
|
| |||||||
31,114,136 | ||||||||
|
| |||||||
Energy Equipment & Services (1.7%): | ||||||||
147,238 | Archrock, Inc.^ | 1,102,813 | ||||||
40,480 | Bristow Group, Inc.*^ | 98,366 | ||||||
72,064 | C&J Energy Services, Inc.*^ | 972,864 | ||||||
25,668 | CARBO Ceramics, Inc.*^ | 89,325 | ||||||
24,576 | Era Group, Inc.* | 214,794 | ||||||
35,630 | Exterran Corp.* | 630,651 | ||||||
15,881 | Geospace Technologies Corp.* | 163,733 | ||||||
14,593 | Gulf Island Fabrication, Inc.*^ | 105,361 | ||||||
156,370 | Helix Energy Solutions Group, Inc.*^ | 845,962 | ||||||
25,342 | KLX Energy Services Holdings, Inc.*^ | 594,270 | ||||||
30,487 | Matrix Service Co.* | 546,937 | ||||||
368,902 | Nabors Industries, Ltd. | 737,804 | ||||||
101,283 | Newpark Resources, Inc.*^ | 695,814 | ||||||
279,178 | Noble Corp. plc*^ | 731,446 | ||||||
67,804 | Oil States International, Inc.*^ | 968,241 | ||||||
89,973 | Pioneer Energy Services Corp.*^ | 110,667 | ||||||
82,277 | Propetro Holding Corp.*^ | 1,013,653 | ||||||
19,375 | SEACOR Holdings, Inc.*^ | 716,875 | ||||||
174,707 | Superior Energy Services, Inc.* | 585,268 | ||||||
144,532 | TETRA Technologies, Inc.* | 242,814 | ||||||
87,679 | U.S. Silica Holdings, Inc.^ | 892,572 | ||||||
61,725 | Unit Corp.*^ | 881,433 | ||||||
|
| |||||||
12,941,663 | ||||||||
|
| |||||||
Entertainment (0.1%): | ||||||||
22,341 | Marcus Corp.^ | 882,470 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts (6.1%): | ||||||||
92,494 | Acadia Realty Trust^ | 2,197,657 | ||||||
39,033 | Agree Realty Corp.^ | 2,307,631 | ||||||
44,008 | American Assets Trust, Inc.^ | 1,767,801 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Equity Real Estate Investment Trusts, continued | ||||||||
54,464 | Armada Hoffler Properties, Inc. | $ | 765,764 | |||||
92,162 | CareTrust REIT, Inc. | 1,701,311 | ||||||
198,556 | CBL & Associates Properties, Inc.^ | 381,228 | ||||||
99,542 | Cedar Shopping Centers, Inc. | 312,562 | ||||||
51,732 | Chatham Lodging Trust | 914,622 | ||||||
68,263 | Chesapeake Lodging Trust^ | 1,662,204 | ||||||
19,264 | Community Healthcare Trust, Inc.^ | 555,381 | ||||||
234,165 | DiamondRock Hospitality, Co.^ | 2,126,218 | ||||||
68,895 | Easterly Government Properties, Inc.^ | 1,080,274 | ||||||
40,578 | EastGroup Properties, Inc.^ | 3,722,219 | ||||||
74,870 | Four Corners Property Trust, Inc.^ | 1,961,594 | ||||||
123,020 | Franklin Street Properties Corp.^ | 766,415 | ||||||
37,925 | Getty Realty Corp.^ | 1,115,374 | ||||||
85,070 | Global Net Lease, Inc.^ | 1,498,933 | ||||||
112,271 | Government Properties Income Trust^ | 771,302 | ||||||
41,187 | Hersha Hospitality Trust^ | 722,420 | ||||||
100,463 | Independence Realty Trust, Inc. | 922,250 | ||||||
78,898 | iStar, Inc.^ | 723,495 | ||||||
94,704 | Kite Realty Group Trust^ | 1,334,379 | ||||||
243,360 | Lexington Realty Trust^ | 1,997,986 | ||||||
44,640 | LTC Properties, Inc.^ | 1,860,595 | ||||||
64,687 | National Storage Affiliates | 1,711,618 | ||||||
74,250 | Pennsylvania Real Estate Investment Trust^ | 441,045 | ||||||
22,586 | PS Business Parks, Inc.^ | 2,958,766 | ||||||
128,149 | Retail Opportunity Investments Corp.^ | 2,035,006 | ||||||
90,336 | RPT Realty^ | 1,079,515 | ||||||
13,273 | Saul Centers, Inc. | 626,751 | ||||||
117,807 | Summit Hotel Properties, Inc.^ | 1,146,262 | ||||||
14,489 | Universal Health Realty Income Trust | 889,190 | ||||||
33,882 | Urstadt Biddle Properties, Inc., Class A | 651,212 | ||||||
210,388 | Washington Prime Group, Inc.^ | 1,022,486 | ||||||
45,696 | Whitestone REIT^ | 560,233 | ||||||
|
| |||||||
46,291,699 | ||||||||
|
| |||||||
Food & Staples Retailing (0.4%): | ||||||||
41,164 | SpartanNash Co. | 707,198 | ||||||
30,170 | The Andersons, Inc.^ | 901,781 | ||||||
26,089 | The Chefs’ Warehouse, Inc.*^ | 834,326 | ||||||
57,048 | United Natural Foods, Inc.*^ | 604,138 | ||||||
|
| |||||||
3,047,443 | ||||||||
|
| |||||||
Food Products (1.6%): | ||||||||
74,660 | B&G Foods, Inc.^ | 2,158,421 | ||||||
17,693 | Calavo Growers, Inc.^ | 1,290,881 | ||||||
34,157 | Cal-Maine Foods, Inc.^ | 1,444,841 | ||||||
186,497 | Darling International, Inc.* | 3,588,201 | ||||||
103,903 | Dean Foods Co.^ | 395,870 | ||||||
16,762 | J & J Snack Foods Corp.^ | 2,423,618 | ||||||
9,869 | John B Sanfilippo And Son, Inc.^ | 549,309 | ||||||
7,330 | Seneca Foods Corp., Class A*^ | 206,853 | ||||||
|
| |||||||
12,057,994 | ||||||||
|
| |||||||
Gas Utilities (1.2%): | ||||||||
32,425 | Northwest Natural Holding Co.^ | 1,960,416 | ||||||
96,778 | South Jersey Industries, Inc.^ | 2,690,428 | ||||||
57,183 | Spire, Inc.^ | 4,236,117 | ||||||
|
| |||||||
8,886,961 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (3.0%): | ||||||||
41,803 | AngioDynamics, Inc.*^ | 841,494 | ||||||
16,390 | Anika Therapeutics, Inc.*^ | 550,868 |
See accompanying notes to the financial statements.
6
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Health Care Equipment & Supplies, continued | ||||||||
29,294 | CONMED Corp. | $ | 1,880,675 | |||||
38,209 | CryoLife, Inc.*^ | 1,084,371 | ||||||
15,957 | Cutera, Inc.*^ | 271,588 | ||||||
7,744 | Heska Corp.*^ | 666,758 | ||||||
33,562 | Integer Holdings Corp.* | 2,559,438 | ||||||
38,214 | Invacare Corp.^ | 164,320 | ||||||
43,298 | Lantheus Holdings, Inc.* | 677,614 | ||||||
18,121 | LeMaitre Vascular, Inc.^ | 428,380 | ||||||
47,229 | Meridian Bioscience, Inc.^ | 819,895 | ||||||
61,955 | Merit Medical Systems, Inc.*^ | 3,457,710 | ||||||
37,603 | Natus Medical, Inc.*^ | 1,279,630 | ||||||
58,762 | Neogen Corp.*^ | 3,349,434 | ||||||
68,792 | OraSure Technologies, Inc.*^ | 803,491 | ||||||
21,196 | Orthofix Medical, Inc.*^ | 1,112,578 | ||||||
15,258 | Surmodics, Inc.* | 721,093 | ||||||
18,890 | Tactile Systems Technology, Inc.*^ | 860,440 | ||||||
43,384 | Varex Imaging Corp.*^ | 1,027,333 | ||||||
|
| |||||||
22,557,110 | ||||||||
|
| |||||||
Health Care Providers & Services (3.3%): | ||||||||
11,193 | Addus HomeCare Corp.*^ | 759,781 | ||||||
32,800 | Amedisys, Inc.*^ | 3,841,207 | ||||||
53,768 | AMN Healthcare Services, Inc.*^ | 3,046,495 | ||||||
37,054 | BioTelemetry, Inc.*^ | 2,212,865 | ||||||
134,139 | Community Health Systems, Inc.*^ | 378,272 | ||||||
10,577 | CorVel Corp.*^ | 652,812 | ||||||
40,344 | Cross Country Healthcare, Inc.*^ | 295,722 | ||||||
64,021 | Diplomat Pharmacy, Inc.*^ | 861,723 | ||||||
55,434 | Ensign Group, Inc. (The)^ | 2,150,285 | ||||||
33,008 | LHC Group, Inc.* | 3,098,791 | ||||||
27,826 | Magellan Health Services, Inc.*^ | 1,583,021 | ||||||
70,457 | Owens & Minor, Inc.^ | 445,993 | ||||||
12,308 | Providence Service Corp.*^ | 738,726 | ||||||
28,082 | Quorum Health Corp.*^ | 81,157 | ||||||
122,577 | Select Medical Holdings Corp.*^ | 1,881,557 | ||||||
45,138 | Tivity Health, Inc.*^ | 1,119,874 | ||||||
14,334 | U.S. Physical Therapy, Inc.^ | 1,467,085 | ||||||
|
| |||||||
24,615,366 | ||||||||
|
| |||||||
Health Care Technology (1.1%): | ||||||||
13,629 | Computer Programs & Systems, Inc.^ | 342,088 | ||||||
28,932 | HealthStream, Inc.^ | 698,708 | ||||||
94,501 | HMS Holdings Corp.* | 2,658,313 | ||||||
53,989 | NextGen Healthcare, Inc.*^ | 817,933 | ||||||
44,429 | Omnicell, Inc.*^ | 2,720,832 | ||||||
19,024 | Tabula Rasa Healthcare, Inc.*^ | 1,212,970 | ||||||
|
| |||||||
8,450,844 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.8%): | ||||||||
101,474 | Belmond, Ltd., Class A* | 2,539,894 | ||||||
23,766 | BJ’s Restaurants, Inc.^ | 1,201,847 | ||||||
18,767 | Chuy’s Holdings, Inc.*^ | 332,927 | ||||||
44,579 | Dave & Buster’s Entertainment, Inc.^ | 1,986,440 | ||||||
20,072 | DineEquity, Inc.^ | 1,351,648 | ||||||
24,433 | El Pollo Loco Holdings, Inc.* | 370,649 | ||||||
26,783 | Fiesta Restaurant Group, Inc.*^ | 415,404 | ||||||
13,250 | Monarch Casino & Resort, Inc.* | 505,355 | ||||||
14,460 | Red Robin Gourmet Burgers*^ | 386,371 | ||||||
31,824 | Ruth’s Hospitality Group, Inc.^ | 723,360 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
29,094 | Shake Shack, Inc., Class A*^ | $ | 1,321,449 | |||||
33,167 | Wingstop, Inc.^ | 2,128,990 | ||||||
|
| |||||||
13,264,334 | ||||||||
|
| |||||||
Household Durables (1.8%): | ||||||||
9,643 | Cavco Industries, Inc.* | 1,257,254 | ||||||
27,575 | Ethan Allen Interiors, Inc.^ | 485,044 | ||||||
25,119 | Installed Building Products, Inc.*^ | 846,259 | ||||||
31,026 | iRobot Corp.*^ | 2,598,118 | ||||||
52,765 | La-Z-Boy, Inc.^ | 1,462,118 | ||||||
20,926 | LGI Homes, Inc.*^ | 946,274 | ||||||
51,245 | M.D.C. Holdings, Inc. | 1,440,497 | ||||||
32,563 | M/I Homes, Inc.*^ | 684,474 | ||||||
43,215 | Meritage Corp.*^ | 1,586,855 | ||||||
40,426 | TopBuild Corp.* | 1,819,170 | ||||||
15,602 | Universal Electronics, Inc.*^ | 394,419 | ||||||
38,060 | William Lyon Homes, Class A*^ | 406,861 | ||||||
|
| |||||||
13,927,343 | ||||||||
|
| |||||||
Household Products (0.6%): | ||||||||
12,445 | Central Garden & Pet Co.*^ | 428,730 | ||||||
45,403 | Central Garden & Pet Co., Class A* | 1,418,844 | ||||||
15,605 | WD-40 Co.^ | 2,859,772 | ||||||
|
| |||||||
4,707,346 | ||||||||
|
| |||||||
Industrial Conglomerates (0.2%): | ||||||||
40,429 | Raven Industries, Inc. | 1,463,126 | ||||||
|
| |||||||
Insurance (3.8%): | ||||||||
51,415 | AMBAC Financial Group, Inc.*^ | 886,395 | ||||||
102,600 | American Equity Investment Life Holding Co.^ | 2,866,644 | ||||||
21,311 | Amerisafe, Inc.^ | 1,208,121 | ||||||
18,383 | eHealth, Inc.*^ | 706,275 | ||||||
37,115 | Employers Holdings, Inc. | 1,557,717 | ||||||
8,637 | HCI Group, Inc.^ | 438,846 | ||||||
46,692 | Horace Mann Educators Corp. | 1,748,615 | ||||||
34,021 | James River Group Holdings | 1,243,127 | ||||||
75,021 | Maiden Holdings, Ltd. | 123,785 | ||||||
26,273 | Navigators Group, Inc. | 1,825,711 | ||||||
60,720 | ProAssurance Corp.^ | 2,462,803 | ||||||
44,515 | RLI Corp.^ | 3,071,089 | ||||||
16,664 | Safety Insurance Group, Inc. | 1,363,282 | ||||||
66,767 | Selective Insurance Group, Inc.^ | 4,068,780 | ||||||
27,079 | Stewart Information Services Corp. | 1,121,071 | ||||||
89,345 | Third Point Reinsurance, Ltd.* | 861,286 | ||||||
23,847 | United Fire Group, Inc.^ | 1,322,316 | ||||||
24,880 | United Insurance Holdings Co.^ | 413,506 | ||||||
36,375 | Universal Insurance Holdings, Inc.^ | 1,379,340 | ||||||
|
| |||||||
28,668,709 | ||||||||
|
| |||||||
Interactive Media & Services (0.1%): | ||||||||
41,267 | QuinStreet, Inc.*^ | 669,763 | ||||||
|
| |||||||
Internet & Direct Marketing Retail (1.0%): | ||||||||
30,173 | Liquidity Services, Inc.* | 186,167 | ||||||
33,344 | Nutri/System, Inc.^ | 1,463,135 | ||||||
23,461 | PetMed Express, Inc.^ | 545,703 | ||||||
38,004 | Shutterfly, Inc.*^ | 1,530,041 | ||||||
20,876 | Shutterstock, Inc.^ | 751,745 | ||||||
19,314 | Stamps.com, Inc.*^ | 3,006,031 | ||||||
|
| |||||||
7,482,822 | ||||||||
|
|
See accompanying notes to the financial statements.
7
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
IT Services (2.1%): | ||||||||
42,400 | Cardtronics plc*^ | $ | 1,102,400 | |||||
37,746 | CSG Systems International, Inc.^ | 1,199,190 | ||||||
68,386 | Evertec, Inc. | 1,962,678 | ||||||
38,829 | Exlservice Holdings, Inc.* | 2,043,182 | ||||||
29,845 | ManTech International Corp., Class A^ | 1,560,744 | ||||||
75,651 | NIC, Inc.^ | 944,124 | ||||||
39,891 | Perficient, Inc.*^ | 887,974 | ||||||
45,424 | Sykes Enterprises, Inc.*^ | 1,123,336 | ||||||
148,701 | Travelport Worldwide, Ltd. | 2,322,710 | ||||||
15,614 | TTEC Holdings, Inc. | 446,092 | ||||||
58,552 | Unisys Corp.*^ | 680,960 | ||||||
31,141 | Virtusa Corp.*^ | 1,326,295 | ||||||
|
| |||||||
15,599,685 | ||||||||
|
| |||||||
Leisure Products (0.5%): | ||||||||
100,535 | Callaway Golf Co.^ | 1,538,186 | ||||||
33,896 | Nautilus Group, Inc.*^ | 369,466 | ||||||
19,697 | Sturm, Ruger & Co., Inc.^ | 1,048,274 | ||||||
65,776 | Vista Outdoor, Inc.*^ | 746,558 | ||||||
|
| |||||||
3,702,484 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.5%): | ||||||||
37,574 | Cambrex Corp.*^ | 1,418,794 | ||||||
47,279 | Luminex Corp.^ | 1,092,618 | ||||||
29,351 | Medpace Holdings, Inc.* | 1,553,548 | ||||||
|
| |||||||
4,064,960 | ||||||||
|
| |||||||
Machinery (5.4%): | ||||||||
69,374 | Actuant Corp., Class A^ | 1,456,160 | ||||||
10,949 | Alamo Group, Inc. | 846,577 | ||||||
32,804 | Albany International Corp., Class A | 2,047,954 | ||||||
26,089 | Astec Industries, Inc.^ | 787,627 | ||||||
53,370 | Barnes Group, Inc. | 2,861,698 | ||||||
47,623 | Briggs & Stratton Corp.^ | 622,909 | ||||||
35,168 | Chart Industries, Inc.*^ | 2,286,975 | ||||||
22,618 | CIRCOR International, Inc.*^ | 481,763 | ||||||
23,621 | EnPro Industries, Inc.^ | 1,419,622 | ||||||
29,039 | ESCO Technologies, Inc. | 1,915,122 | ||||||
67,930 | Federal Signal Corp. | 1,351,807 | ||||||
43,712 | Franklin Electric Co., Inc. | 1,874,371 | ||||||
36,357 | Greenbrier Cos, Inc.^ | 1,437,556 | ||||||
91,555 | Harsco Corp.* | 1,818,282 | ||||||
70,167 | Hillenbrand, Inc. | 2,661,434 | ||||||
35,780 | John Bean Technologies Corp.^ | 2,569,362 | ||||||
12,212 | Lindsay Corp.^ | 1,175,405 | ||||||
19,373 | Lydall, Inc.* | 393,466 | ||||||
65,392 | Mueller Industries, Inc. | 1,527,557 | ||||||
30,597 | Proto Labs, Inc.*^ | 3,451,035 | ||||||
49,073 | SPX Corp.* | 1,374,535 | ||||||
48,440 | SPX FLOW, Inc.* | 1,473,545 | ||||||
14,504 | Standex International Corp. | 974,379 | ||||||
20,560 | Tennant Co.^ | 1,071,382 | ||||||
59,576 | Titan International, Inc. | 277,624 | ||||||
64,845 | Wabash National Corp.^ | 848,173 | ||||||
31,458 | Watts Water Technologies, Inc., Class A^ | 2,029,985 | ||||||
|
| |||||||
41,036,305 | ||||||||
|
| |||||||
Marine (0.2%): | ||||||||
48,105 | Matson, Inc. | 1,540,322 | ||||||
|
|
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Media (0.6%): | ||||||||
65,758 | E.W. Scripps Co. (The), Class A^ | $ | 1,034,373 | |||||
127,452 | Gannett Co., Inc.^ | 1,087,166 | ||||||
62,068 | New Media Investment Group, Inc.^ | 718,127 | ||||||
31,393 | Scholastic Corp.^ | 1,263,882 | ||||||
24,710 | TechTarget, Inc.*^ | 301,709 | ||||||
|
| |||||||
4,405,257 | ||||||||
|
| |||||||
Metals & Mining (0.7%): | ||||||||
358,155 | AK Steel Holding Corp.*^ | 805,849 | ||||||
54,791 | Century Aluminum Co.*^ | 400,522 | ||||||
13,969 | Haynes International, Inc. | 368,782 | ||||||
18,671 | Kaiser Aluminum Corp.^ | 1,667,133 | ||||||
22,727 | Materion Corp.^ | 1,022,488 | ||||||
10,296 | Olympic Steel, Inc. | 146,924 | ||||||
74,791 | SunCoke Energy, Inc.* | 639,463 | ||||||
44,176 | TimkenSteel Corp.*^ | 386,098 | ||||||
|
| |||||||
5,437,259 | ||||||||
|
| |||||||
Mortgage Real Estate Investment Trusts (1.4%): | ||||||||
126,481 | Apollo Commercial Real Estate Finance, Inc.^ | 2,107,173 | ||||||
45,998 | Armour Residential REIT, Inc.^ | 942,959 | ||||||
104,336 | Capstead Mortgage Corp.^ | 695,921 | ||||||
49,747 | Granite Point Mortgage Trust, Inc.^ | 896,938 | ||||||
125,499 | Invesco Mortgage Capital, Inc.^ | 1,817,226 | ||||||
171,594 | New York Mortgage Trust, Inc.^ | 1,010,689 | ||||||
68,313 | PennyMac Mortgage Investment Trust^+ | 1,271,988 | ||||||
96,557 | Redwood Trust, Inc.^ | 1,455,114 | ||||||
|
| |||||||
10,198,008 | ||||||||
|
| |||||||
Multiline Retail (0.0%)†: | ||||||||
361,137 | J.C. Penney Co., Inc.*^ | 375,582 | ||||||
|
| |||||||
Multi-Utilities (0.4%): | ||||||||
74,038 | Avista Corp. | 3,145,134 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.7%): | ||||||||
21,209 | Bonanza Creek Energy, Inc.* | 438,390 | ||||||
96,535 | Carrizo Oil & Gas, Inc.*^ | 1,089,880 | ||||||
87,671 | Cloud Peak Energy, Inc.*^ | 32,114 | ||||||
31,618 | CONSOL Energy, Inc.*^ | 1,002,607 | ||||||
521,305 | Denbury Resources, Inc.*^ | 891,432 | ||||||
44,161 | Green Plains Renewable Energy, Inc.^ | 578,951 | ||||||
178,606 | Gulfport Energy Corp.*^ | 1,169,869 | ||||||
124,869 | HighPoint Resources Corp.*^ | 310,924 | ||||||
172,414 | Laredo Petroleum Holdings, Inc.*^ | 624,139 | ||||||
31,333 | PAR Pacific Holdings, Inc.*^ | 444,302 | ||||||
74,885 | PDC Energy, Inc.*^ | 2,228,577 | ||||||
15,142 | Penn Virginia Corp.*^ | 818,577 | ||||||
42,053 | Renewable Energy Group, Inc.*^ | 1,080,762 | ||||||
6,627 | REX American Resources Corp.*^ | 451,365 | ||||||
64,010 | Ring Energy, Inc.*^ | 325,171 | ||||||
274,359 | SRC Energy, Inc.*^ | 1,289,486 | ||||||
|
| |||||||
12,776,546 | ||||||||
|
| |||||||
Paper & Forest Products (0.5%): | ||||||||
44,258 | Boise Cascade Co. | 1,055,553 | ||||||
18,870 | Clearwater Paper Corp.*^ | 459,862 | ||||||
18,912 | Neenah Paper, Inc. | 1,114,295 | ||||||
49,974 | P.H. Glatfelter Co.^ | 487,746 | ||||||
34,691 | Schweitzer-Mauduit International, Inc.^ | 869,010 | ||||||
|
| |||||||
3,986,466 | ||||||||
|
|
See accompanying notes to the financial statements.
8
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Personal Products (0.5%): | ||||||||
504,655 | Avon Products, Inc.* | $ | 767,076 | |||||
19,573 | Inter Parfums, Inc. | 1,283,402 | ||||||
13,523 | Medifast, Inc.^ | 1,690,645 | ||||||
|
| |||||||
3,741,123 | ||||||||
|
| |||||||
Pharmaceuticals (1.4%): | ||||||||
106,455 | Akorn, Inc.* | 360,882 | ||||||
39,458 | Amphastar Pharmaceuticals, Inc.*^ | 785,214 | ||||||
9,533 | ANI Pharmaceuticals, Inc.*^ | 429,176 | ||||||
73,104 | Assertio Therapeutics, Inc.*^ | 263,905 | ||||||
119,421 | Corcept Therapeutics, Inc.*^ | 1,595,465 | ||||||
225,825 | Endo International plc*^ | 1,648,523 | ||||||
76,580 | Innoviva, Inc.*^ | 1,336,321 | ||||||
35,610 | Lannett Co., Inc.*^ | 176,626 | ||||||
74,238 | Medicines Co. (The)*^ | 1,420,915 | ||||||
22,701 | Phibro Animal Health Corp., Class A^ | 730,064 | ||||||
59,330 | Supernus Pharmaceuticals, Inc.*^ | 1,970,943 | ||||||
|
| |||||||
10,718,034 | ||||||||
|
| |||||||
Professional Services (1.9%): | ||||||||
58,778 | Exponent, Inc.^ | 2,980,633 | ||||||
11,493 | Forrester Research, Inc. | 513,737 | ||||||
43,394 | FTI Consulting, Inc.*^ | 2,891,776 | ||||||
21,279 | Heidrick & Struggles International, Inc. | 663,692 | ||||||
34,861 | Kelly Services, Inc., Class A | 713,953 | ||||||
64,446 | Korn/Ferry International | 2,548,195 | ||||||
51,086 | Navigant Consulting, Inc. | 1,228,618 | ||||||
34,195 | Resources Connection, Inc. | 485,569 | ||||||
45,917 | Trueblue, Inc.*^ | 1,021,653 | ||||||
45,063 | Wageworks, Inc.*^ | 1,223,911 | ||||||
|
| |||||||
14,271,737 | ||||||||
|
| |||||||
Real Estate Management & Development (0.4%): | ||||||||
44,233 | HFF, Inc., Class A^ | 1,466,767 | ||||||
24,022 | Marcus & Millichap, Inc.*^ | 824,675 | ||||||
20,060 | RE/MAX Holdings, Inc., Class A^ | 616,845 | ||||||
|
| |||||||
2,908,287 | ||||||||
|
| |||||||
Road & Rail (0.6%): | ||||||||
28,922 | ArcBest Corp.^ | 990,868 | ||||||
54,232 | Heartland Express, Inc.^ | 992,446 | ||||||
44,416 | Marten Transport, Ltd. | 719,095 | ||||||
29,257 | Saia, Inc.*^ | 1,633,125 | ||||||
|
| |||||||
4,335,534 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.7%): | ||||||||
44,266 | Advanced Energy Industries, Inc.*^ | 1,900,339 | ||||||
36,830 | Axcelis Technologies, Inc.*^ | 655,574 | ||||||
79,898 | Brooks Automation, Inc.^ | 2,091,730 | ||||||
32,471 | Cabot Microelectronics Corp. | 3,096,110 | ||||||
25,419 | CEVA, Inc.*^ | 561,506 | ||||||
45,781 | Cohu, Inc.^ | 735,701 | ||||||
44,454 | Diodes, Inc.*^ | 1,434,086 | ||||||
22,722 | DSP Group, Inc.* | 254,486 | ||||||
84,190 | FormFactor, Inc.*^ | 1,186,237 | ||||||
27,160 | Ichor Holdings, Ltd.*^ | 442,708 | ||||||
66,425 | Kopin Corp.*^ | 66,359 | ||||||
76,361 | Kulicke & Soffa Industries, Inc.^ | 1,547,837 | ||||||
70,982 | MaxLinear, Inc., Class A*^ | 1,249,283 | ||||||
27,424 | Nanometrics, Inc.*^ | 749,498 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Semiconductors & Semiconductor Equipment, continued | ||||||||
32,133 | PDF Solutions, Inc.*^ | $ | 270,881 | |||||
76,407 | Photronics, Inc.*^ | 739,620 | ||||||
33,243 | Power Integrations, Inc.^ | 2,027,158 | ||||||
121,041 | Rambus, Inc.*^ | 928,384 | ||||||
36,554 | Rudolph Technologies, Inc.* | 748,260 | ||||||
74,922 | Semtech Corp.*^ | 3,436,673 | ||||||
14,090 | SMART Global Holdings, Inc.*^ | 418,473 | ||||||
48,371 | Solaredge Technologies, Inc.*^ | 1,697,822 | ||||||
43,617 | Ultra Clean Holdings, Inc.*^ | 369,436 | ||||||
56,283 | Veeco Instruments, Inc.*^ | 417,057 | ||||||
55,840 | Xperi Corp.^ | 1,026,898 | ||||||
|
| |||||||
28,052,116 | ||||||||
|
| |||||||
Software (2.5%): | ||||||||
105,612 | 8x8, Inc.* | 1,905,240 | ||||||
19,781 | Agilysys, Inc.* | 283,660 | ||||||
39,406 | Alarm.com Holding, Inc.*^ | 2,043,989 | ||||||
41,531 | Bottomline Technologies, Inc.* | 1,993,488 | ||||||
25,678 | Ebix, Inc.^ | 1,092,856 | ||||||
65,443 | LivePerson, Inc.*^ | 1,234,255 | ||||||
10,727 | MicroStrategy, Inc., Class A* | 1,370,374 | ||||||
48,638 | Monotype Imaging Holdings, Inc.^ | 754,862 | ||||||
34,973 | OneSpan, Inc.*^ | 452,900 | ||||||
50,996 | Progress Software Corp. | 1,809,848 | ||||||
37,978 | Qualys, Inc.*^ | 2,838,476 | ||||||
19,734 | SPS Commerce, Inc.* | 1,625,687 | ||||||
140,858 | TiVo Corp.^ | 1,325,474 | ||||||
|
| |||||||
18,731,109 | ||||||||
|
| |||||||
Specialty Retail (4.1%): | ||||||||
75,832 | Abercrombie & Fitch Co., Class A^ | 1,520,432 | ||||||
23,035 | Asbury Automotive Group, Inc.*^ | 1,535,513 | ||||||
196,287 | Ascena Retail Group, Inc.*^ | 492,680 | ||||||
39,564 | Barnes & Noble Education, Inc.* | 158,652 | ||||||
65,249 | Barnes & Noble, Inc.^ | 462,615 | ||||||
48,684 | Caleres, Inc.^ | 1,354,876 | ||||||
26,250 | Cato Corp., Class A^ | 374,588 | ||||||
142,160 | Chico’s FAS, Inc.^ | 798,939 | ||||||
18,554 | Children’s Place Retail Stores, Inc. (The)^ | 1,671,530 | ||||||
77,163 | DSW, Inc., Class A^ | 1,905,926 | ||||||
84,185 | Express, Inc.*^ | 430,185 | ||||||
39,456 | Francesca’s Holdings Corp.*^ | 38,304 | ||||||
114,865 | GameStop Corp., Class A^ | 1,449,596 | ||||||
22,859 | Genesco, Inc.*^ | 1,012,654 | ||||||
21,469 | Group 1 Automotive, Inc.^ | 1,131,846 | ||||||
64,206 | Guess?, Inc.^ | 1,333,559 | ||||||
20,990 | Haverty Furniture Cos., Inc.^ | 394,192 | ||||||
21,558 | Hibbett Sports, Inc.*^ | 308,279 | ||||||
18,156 | Kirkland’s, Inc.*^ | 173,027 | ||||||
26,366 | Lithia Motors, Inc., Class A^ | 2,012,517 | ||||||
32,987 | Lumber Liquidators Holdings, Inc.*^ | 314,036 | ||||||
25,472 | MarineMax, Inc.*^ | 466,392 | ||||||
37,120 | Monro Muffler Brake, Inc.^ | 2,552,000 | ||||||
626,414 | Office Depot, Inc. | 1,616,148 | ||||||
50,526 | Rent-A-Center, Inc.* | 818,016 | ||||||
21,180 | Restoration Hardware, Inc.*^ | 2,537,788 | ||||||
11,698 | Shoe Carnival, Inc.^ | 392,000 | ||||||
37,682 | Sleep Number Corp.*^ | 1,195,650 |
See accompanying notes to the financial statements.
9
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Specialty Retail, continued | ||||||||
26,446 | Sonic Automotive, Inc., Class A^ | $ | 363,897 | |||||
56,045 | Tailored Brands, Inc.^ | 764,454 | ||||||
32,311 | The Buckle, Inc.^ | 624,895 | ||||||
43,901 | The Tile Shop Holdings, Inc.^ | 240,577 | ||||||
18,015 | Vitamin Shoppe, Inc.*^ | 85,391 | ||||||
21,297 | Zumiez, Inc.*^ | 408,263 | ||||||
|
| |||||||
30,939,417 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.5%): | ||||||||
128,982 | 3D Systems Corp.*^ | 1,311,746 | ||||||
45,858 | Cray, Inc.*^ | 990,074 | ||||||
86,734 | Diebold, Inc.^ | 215,968 | ||||||
50,357 | Electronics for Imaging, Inc.*^ | 1,248,854 | ||||||
|
| |||||||
3,766,642 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.7%): | ||||||||
77,307 | Crocs, Inc.*^ | 2,008,436 | ||||||
51,495 | Fossil Group, Inc.*^ | 810,016 | ||||||
47,390 | G-III Apparel Group, Ltd.*^ | 1,321,707 | ||||||
18,803 | Movado Group, Inc. | 594,551 | ||||||
19,212 | Oxford Industries, Inc.^ | 1,364,820 | ||||||
90,193 | Steven Madden, Ltd.^ | 2,729,241 | ||||||
16,693 | Unifi, Inc.*^ | 381,268 | ||||||
24,478 | Vera Bradley, Inc.*^ | 209,776 | ||||||
107,487 | Wolverine World Wide, Inc. | 3,427,761 | ||||||
|
| |||||||
12,847,576 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (1.7%): | ||||||||
64,465 | Axos Financial, Inc.*^ | 1,623,229 | ||||||
35,939 | Dime Community Bancshares^ | 610,244 | ||||||
33,275 | Flagstar Bancorp, Inc.* | 878,460 | ||||||
31,391 | HomeStreet, Inc.* | 666,431 | ||||||
31,209 | Meta Financial Group, Inc. | 605,143 | ||||||
74,387 | NMI Holdings, Inc., Class A*^ | 1,327,808 | ||||||
54,886 | Northfield Bancorp, Inc.^ | 743,705 | ||||||
117,089 | Northwest Bancshares, Inc.^ | 1,983,488 | ||||||
44,343 | Oritani Financial Corp.^ | 654,059 | ||||||
69,964 | Provident Financial Services, Inc.^ | 1,688,231 | ||||||
109,419 | TrustCo Bank Corp. | 750,614 | ||||||
32,574 | Wawlker & Dunlop, Inc.^ | 1,408,826 | ||||||
|
| |||||||
12,940,238 | ||||||||
|
| |||||||
Tobacco (0.2%): | ||||||||
28,275 | Universal Corp. | 1,531,091 | ||||||
|
| |||||||
Trading Companies & Distributors (0.7%): | ||||||||
43,659 | Applied Industrial Technologies, Inc. | 2,354,966 | ||||||
17,821 | DXP Enterprises, Inc.* | 496,137 | ||||||
31,610 | Kaman Corp., Class A^ | 1,773,005 | ||||||
12,924 | Veritiv Corp.* | 322,712 | ||||||
|
| |||||||
4,946,820 | ||||||||
|
| |||||||
Water Utilities (0.7%): | ||||||||
41,480 | American States Water Co.^ | 2,780,820 | ||||||
54,455 | California Water Service Group^ | 2,595,325 | ||||||
|
| |||||||
5,376,145 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.0%)†: | ||||||||
19,901 | Spok Holdings, Inc. | 263,887 | ||||||
|
| |||||||
Total Common Stocks (Cost $702,642,922) | 751,873,311 | |||||||
|
|
Contracts, Amount or Principal Amount | Fair Value | |||||||
Right (0.0%)†: | ||||||||
Chemicals (0.0%)†: | ||||||||
34,578 | Schulman, Inc. CVR, Expires on 12/31/49*(a) | $ | 49,533 | |||||
|
| |||||||
Total Right (Cost $—) | 49,533 | |||||||
|
| |||||||
Unaffiliated Investment Company (0.4%): | ||||||||
3,123,293 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(b) | 3,123,293 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $3,123,293) | 3,123,293 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (27.3%)(c) | ||||||||
Floating Rate Notes (13.9%) | ||||||||
1,462,000 | Australia & New Zealand Banking Group, 2.65%, 8/23/19 | 1,462,000 | ||||||
2,924,000 | Australia & New Zealand Banking Group, 2.54%, 9/5/19 | 2,924,000 | ||||||
1,750,000 | Bank of America NA, 2.66%, 1/14/19 | 1,750,000 | ||||||
1,780,000 | Bank of America NA, 2.67%, 5/8/19 | 1,780,000 | ||||||
1,499,000 | Bank of Montreal, 2.75%, 11/1/19 | 1,499,000 | ||||||
2,100,000 | Bank of Montreal, 2.90%, 12/23/19 | 2,100,000 | ||||||
2,310,000 | Bank of Nova Scotia, 2.80%, 5/24/19 | 2,310,000 | ||||||
1,555,000 | Bedford Row Funding, 2.53%, 2/7/19 | 1,555,000 | ||||||
1,453,000 | Bedford Row Funding, 2.82%, 5/23/19 | 1,453,000 | ||||||
1,500,000 | Berkshire Hathaway Finance, 2.37%, 1/11/19 | 1,500,127 | ||||||
1,426,000 | BNP Paribas, 2.63%, 3/18/19 | 1,426,000 | ||||||
1,522,000 | BNP Paribas, 2.63%, 3/18/19 | 1,522,000 | ||||||
2,459,000 | BNP Paribas, 2.79%, 5/21/19 | 2,459,000 | ||||||
1,693,000 | Collateralized Commercial Paper Program Co. LLC, 2.78%, 2/26/19 | 1,693,000 | ||||||
1,356,000 | Collateralized Commercial Paper Program Co. LLC, 2.74%, 4/26/19 | 1,356,000 | ||||||
1,833,000 | Commonwealth Bank of Australia, 2.73%, 1/24/19 | 1,833,000 | ||||||
1,700,000 | Commonwealth Bank of Australia, 2.68%, 3/1/19 | 1,700,000 | ||||||
2,914,000 | Commonwealth Bank of Australia, 3.00%, 3/18/19 | 2,914,000 | ||||||
1,800,000 | Cooperatieve Rabobank UA, 2.68%, 5/7/19 | 1,800,000 | ||||||
2,705,000 | Credit Agricole CIB, 2.55%, 2/11/19 | 2,705,000 | ||||||
2,240,000 | Credit Agricole CIB, 2.68%, 6/7/19 | 2,240,000 | ||||||
2,300,000 | Credit Industriel et Commercial, 2.66%, 6/4/19 | 2,300,000 | ||||||
2,524,000 | Credit Suisse AG, 2.65%, 5/7/19 | 2,524,000 | ||||||
2,100,000 | Credit Suisse AG, 2.87%, 6/28/19 | 2,100,000 | ||||||
1,448,000 | HSBC Bank USA NA, 2.76%, 3/8/19 | 1,448,000 | ||||||
1,310,000 | Ing (US) Funding LLC, 2.53%, 6/3/19 | 1,310,000 | ||||||
2,267,000 | Lloyds Bank plc, 2.67%, 5/8/19 | 2,267,000 | ||||||
2,300,000 | Mitsubishi UFJ Trust and Banking Corp., 2.63%, 1/11/19 | 2,300,000 | ||||||
1,400,000 | Mitsubishi UFJ Trust and Banking Corp., 2.69%, 1/17/19 | 1,400,000 | ||||||
2,336,000 | Mizuho Bank, Ltd., 2.82%, 5/28/19 | 2,336,000 | ||||||
2,200,000 | National Bank of Canada, 2.60%, 1/7/19 | 2,200,000 | ||||||
2,000,000 | Natixis SA, 2.59%, 2/11/19 | 2,000,000 | ||||||
2,500,000 | Nordea Bank Abp, 2.98%, 3/14/19 | 2,500,000 | ||||||
1,730,000 | Nordea Bank Abp, 2.50%, 4/1/19 | 1,729,995 | ||||||
1,778,000 | Oversea-Chinese Banking Corp., Ltd., 2.60%, 4/10/19 | 1,778,000 | ||||||
1,864,000 | Oversea-Chinese Banking Corp., Ltd., 2.51%, 9/4/19 | 1,864,000 |
See accompanying notes to the financial statements.
10
AZL Small Cap Stock Index Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
2,270,000 | Royal Bank of Canada, 2.72%, 5/3/19 | $ | 2,270,000 | |||||
2,000,000 | Skandinaviska Enskilda Banken AB, 2.81%, 6/6/19 | 2,000,000 | ||||||
2,600,000 | Societe Generale SA, 2.63%, 1/7/19 | 2,600,000 | ||||||
2,683,000 | Societe Generale SA, 2.58%, 2/11/19 | 2,683,000 | ||||||
2,367,000 | Sumitomo Mitsui Banking Corp., 2.65%, 5/2/19 | 2,367,000 | ||||||
2,200,000 | Sumitomo Mitsui Trust Bank, Ltd., 2.81%, 5/28/19 | 2,200,000 | ||||||
1,944,000 | Svenska Handelsbanken AB, 2.71%, 1/23/19 | 1,944,000 | ||||||
2,400,000 | Swedbank AB, 2.69%, 1/30/19 | 2,399,981 | ||||||
1,400,000 | Swedbank AB, 2.70%, 2/25/19 | 1,400,000 | ||||||
2,078,000 | Toronto-Dominion Bank (New York), 2.84%, 9/4/19 | 2,078,000 | ||||||
2,000,000 | Toyota Motor Credit Corp., 2.66%, 7/29/19 | 2,000,000 | ||||||
1,920,000 | UBS AG, 2.77%, 8/9/19 | 1,920,000 | ||||||
1,800,000 | US Bank NA, 2.58%, 5/13/19 | 1,800,000 | ||||||
2,500,000 | Wells Fargo Bank NA, 2.61%, 1/7/19 | 2,500,000 | ||||||
2,400,000 | Westpac Banking Corp., 2.78%, 5/24/19 | 2,400,092 | ||||||
2,541,000 | Westpac Banking Corp., 2.81%, 5/29/19 | 2,541,000 | ||||||
|
| |||||||
105,141,195 | ||||||||
|
| |||||||
Repurchase Agreements (8.1%) | ||||||||
7,164,596 | BNP Paribas SA, 2.54%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $7,165,607, Collateralized by U.S. Treasury Obligations and Corporate Debt Securities, 0.00% - 7.55%, 1/17/19 - 9/15/56, fair value of $7,481,457 | 7,164,596 |
Contracts, Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Repurchase Agreements, continued | ||||||||
45,000,000 | NBC Global Finance, Ltd., 2.55%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $45,006,375, Collateralized by U.S. Treasury Obligations, 0.00% - 4.63%, 4/15/20 - 9/9/49, fair value of $45,899,880 | $ | 45,000,000 | |||||
8,980,478 | RBC Capital Markets LLC, 3.00%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $8,981,975, Collateralized by U.S. Government Agency Obligations, 2.21% - 6.50%,2/1/20 - 11/1/48, fair value of $9,160,088 | 8,980,478 | ||||||
|
| |||||||
61,145,074 | ||||||||
|
| |||||||
Time Deposits (0.4%) | ||||||||
2,800,000 | Societe Generale SA, 2.40%, 1/2/19 | 2,800,000 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
36,562,247 | Short-Term Investments(d) | 36,562,247 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 205,648,516 | ||||||
|
| |||||||
Total Investment Securities (Cost $911,414,731) — 127.4%(e) | 960,694,653 | |||||||
Net other assets (liabilities) — (27.4)% | (206,151,671 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 754,542,982 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
CVR—Contingency Valued Rights
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $201,156,280. |
+ | Affiliated Securities |
† | Represents less than 0.05%. |
(a) | Security was valued using unobservable inputs in good faith pursuant to procedures approved by the Board of Trustees as of December 31, 2018. The total of all such securities represent 0.01% of the net assets of the fund. |
(b) | The rate represents the effective yield at December 31, 2018. |
(c) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(d) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | See Federal Tax Information listed in the Notes to the Financial Statements. |
Futures Contracts
Cash of $136,600 has been segregated to cover margin requirements for the following open contracts as of December 31, 2018:
Long Futures
Description | Expiration Date | Number of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Russell 2000 Mini Index March Futures (U.S. Dollar) | 3/15/19 | 38 | $ | 2,563,100 | $ | (18,725 | ) | |||||||||
|
| |||||||||||||||
$ | (18,725 | ) | ||||||||||||||
|
|
See accompanying notes to the financial statements.
11
AZL Small Cap Stock Index Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 910,290,816 | |||
Investments in affiliates, at cost | 1,123,915 | ||||
|
| ||||
Investment securities, at value(a) | $ | 959,422,665 | |||
Investments in affiliates, at value | 1,271,988 | ||||
Cash | 381 | ||||
Segregated cash for collateral | 136,600 | ||||
Interest and dividends receivable | 1,050,259 | ||||
Receivable for capital shares issued | 184,522 | ||||
Receivable for investments sold | 83,000 | ||||
Receivable for variation margin on futures contracts | 22,765 | ||||
Reclaims receivable | 5 | ||||
Prepaid expenses | 9,958 | ||||
|
| ||||
Total Assets | 962,182,143 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 1,553,677 | ||||
Payable for capital shares redeemed | 14,123 | ||||
Payable for collateral received on loaned securities | 205,648,516 | ||||
Manager fees payable | 173,954 | ||||
Administration fees payable | 6,478 | ||||
Distribution fees payable | 158,104 | ||||
Custodian fees payable | 3,014 | ||||
Administrative and compliance services fees payable | 2,813 | ||||
Transfer agent fees payable | 967 | ||||
Trustee fees payable | 1,077 | ||||
Other accrued liabilities | 76,438 | ||||
|
| ||||
Total Liabilities | 207,639,161 | ||||
|
| ||||
Net Assets | $ | 754,542,982 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 622,901,700 | |||
Total distributable earnings | 131,641,282 | ||||
|
| ||||
Net Assets | $ | 754,542,982 | |||
|
| ||||
Class 1 | |||||
Net Assets | $ | 41,285,150 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 4,460,379 | ||||
Net Asset Value (offering and redemption price per share) | $ | 9.26 | |||
|
| ||||
Class 2 | |||||
Net Assets | $ | 713,257,832 | |||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 58,593,184 | ||||
Net Asset Value (offering and redemption price per share) | $ | 12.17 | |||
|
|
(a) | Includes securities on loan of $201,156,280. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends from non-affiliates | $ | 12,422,747 | |||
Dividends from affiliates | 128,505 | ||||
Interest | 7,244 | ||||
Income from securities lending | 1,199,361 | ||||
Foreign withholding tax | (1,920 | ) | |||
|
| ||||
Total Investment Income | 13,755,937 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 2,376,720 | ||||
Administration fees | 225,985 | ||||
Distribution fees — Class 2 | 2,155,912 | ||||
Custodian fees | 40,054 | ||||
Administrative and compliance services fees | 14,741 | ||||
Transfer agent fees | 11,209 | ||||
Trustee fees | 47,762 | ||||
Professional fees | 42,791 | ||||
Shareholder reports | 30,258 | ||||
Other expenses | 205,582 | ||||
|
| ||||
Total expenses | 5,151,014 | ||||
|
| ||||
Net Investment Income/(Loss) | 8,604,923 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities | 82,053,715 | ||||
Net realized gains/(losses) on affiliated investments | 15,940 | ||||
Net realized gains/(losses) on futures contracts | (2,164,559 | ) | |||
Change in net unrealized appreciation/depreciation on securities | (159,996,241 | ) | |||
Change in net unrealized appreciation/depreciation on affiliated securities | 148,073 | ||||
Change in net unrealized appreciation/depreciation on futures contracts | (94,614 | ) | |||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (80,037,686 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | (71,432,763 | ) | ||
|
|
See accompanying notes to the financial statements.
12
AZL Small Cap Stock Index Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 8,604,923 | $ | 8,778,314 | ||||||
Net realized gains/(losses) on investments | 79,905,096 | 86,882,247 | ||||||||
Change in unrealized appreciation/depreciation on investments | (159,942,782 | ) | 11,443,264 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | (71,432,763 | ) | 107,103,825 | |||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Class 1 | (6,592,781 | ) | (4,772,048 | ) | ||||||
Class 2 | (86,898,788 | ) | (59,817,876 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (93,491,569 | ) | (64,589,924 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Class 1 | ||||||||||
Proceeds from shares issued | 20,593 | 303,391 | ||||||||
Proceeds from dividends reinvested | 6,592,781 | 4,772,048 | ||||||||
Value of shares redeemed | (8,576,640 | ) | (8,056,628 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (1,963,266 | ) | (2,981,189 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Proceeds from shares issued | 55,470,879 | 33,009,724 | ||||||||
Proceeds from dividends reinvested | 86,898,788 | 59,817,876 | ||||||||
Value of shares redeemed | (144,028,495 | ) | (173,921,838 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | (1,658,828 | ) | (81,094,238 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | (3,622,094 | ) | (84,075,427 | ) | ||||||
|
|
|
| |||||||
Change in net assets | (168,546,426 | ) | (41,561,526 | ) | ||||||
Net Assets:(a) | ||||||||||
Beginning of period | 923,089,408 | 964,650,934 | ||||||||
|
|
|
| |||||||
End of period | $ | 754,542,982 | $ | 923,089,408 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Class 1 | ||||||||||
Shares issued | 1,696 | 25,960 | ||||||||
Dividends reinvested | 611,575 | 435,406 | ||||||||
Shares redeemed | (716,338 | ) | (702,379 | ) | ||||||
|
|
|
| |||||||
Total Class 1 Shares | (103,067 | ) | (241,013 | ) | ||||||
|
|
|
| |||||||
Class 2 | ||||||||||
Shares issued | 3,377,911 | 2,298,659 | ||||||||
Dividends reinvested | 6,123,946 | 4,281,881 | ||||||||
Shares redeemed | (9,375,471 | ) | (12,052,900 | ) | ||||||
|
|
|
| |||||||
Total Class 2 Shares | 126,386 | (5,472,360 | ) | |||||||
|
|
|
| |||||||
Change in shares | 23,319 | (5,713,373 | ) | |||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
13
AZL Small Cap Stock Index Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016* | 2015 | 2014 | |||||||||||||||||||||
Class 1 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.68 | $ | 11.38 | $ | 10.00 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.16 | 0.16 | 0.06 | ||||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.93 | ) | 1.24 | 1.32 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total from Investment Activities | (0.77 | ) | 1.40 | 1.38 | |||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.18 | ) | (0.08 | ) | — | ||||||||||||||||||||
Net Realized Gains | (1.47 | ) | (1.02 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Dividends | (1.65 | ) | (1.10 | ) | — | ||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Net Asset Value, End of Period | $ | 9.26 | $ | 11.68 | $ | 11.38 | |||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||
Total Return(a) | (8.59 | )% | 12.94 | % | 13.80 | %(b) | |||||||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 41,285 | $ | 53,319 | $ | 54,672 | |||||||||||||||||||
Net Investment Income/(Loss)(c) | 1.17 | % | 1.21 | % | 1.46 | % | |||||||||||||||||||
Expenses Before Reductions(c)(d) | 0.33 | % | 0.32 | % | 0.32 | % | |||||||||||||||||||
Expenses Net of Reductions(c) | 0.33 | % | 0.32 | % | 0.32 | % | |||||||||||||||||||
Portfolio Turnover Rate(e) | 19 | % | 16 | % | 86 | %(f) | |||||||||||||||||||
Class 2 | |||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 14.88 | $ | 14.23 | $ | 13.49 | $ | 15.43 | $ | 15.65 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.15 | 0.15 | 0.07 | 0.19 | 0.12 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (1.25 | ) | 1.59 | 3.06 | (0.58 | ) | 0.65 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | (1.10 | ) | 1.74 | 3.13 | (0.39 | ) | 0.77 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.14 | ) | (0.07 | ) | (0.16 | ) | (0.17 | ) | (0.09 | ) | |||||||||||||||
Net Realized Gains | (1.47 | ) | (1.02 | ) | (2.23 | ) | (1.38 | ) | (0.90 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Dividends | (1.61 | ) | (1.09 | ) | (2.39 | ) | (1.55 | ) | (0.99 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net Asset Value, End of Period | $ | 12.17 | $ | 14.88 | $ | 14.23 | $ | 13.49 | $ | 15.43 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Return(a) | (8.93 | )% | 12.75 | % | 25.71 | % | (2.49 | )% | 5.23 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 713,258 | $ | 869,770 | $ | 909,979 | $ | 276,006 | $ | 381,585 | |||||||||||||||
Net Investment Income/(Loss) | 0.93 | % | 0.96 | % | 1.19 | % | 0.96 | % | 0.81 | % | |||||||||||||||
Expenses Before Reductions(d) | 0.58 | % | 0.57 | % | �� | 0.58 | % | 0.59 | % | 0.59 | % | ||||||||||||||
Expenses Net of Reductions | 0.58 | % | 0.57 | % | 0.58 | % | 0.59 | % | 0.59 | % | |||||||||||||||
Portfolio Turnover Rate(e) | 19 | % | 16 | % | 86 | %(f) | 16 | % | 14 | % |
* | Class 1 activity is for the period October 17, 2016 (commencement of operations) to December 31, 2016. |
(a) | 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. |
(b) | Not annualized for periods less than one year. |
(c) | Annualized for periods less than one year. |
(d) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. Not annualized for periods less than one year. |
(f) | 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 86%. |
See accompanying notes to the financial statements.
14
AZL Small Cap Stock Index Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL Small Cap Stock Index Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
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 year, 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.
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. Each class of shares bears itspro-rata portion of expenses attributable to its series, except that each class separately bears expenses related specifically to that class, such as distribution fees. 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 Fund of Funds Trust.
15
AZL Small Cap Stock Index Fund
Notes to the Financial Statements
December 31, 2018
Class Allocation
The investment income, expenses (other than class specific expenses charged to a class), realized and unrealized gains and losses on investments of the Fund are allocated to each class of shares based upon relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $117,621 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $205,454,024 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, 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.
Futures Contracts
During the year ended December 31, 2018, the Fund used futures contracts to provide market exposure on the Fund’s cash balances. 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 $8.4 million for the year ended December 31, 2018. 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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | Receivable for variation margin on futures contracts | $ | — | Payable for variation margin on futures contracts | $ | 18,725 |
* | For futures contracts, the amounts represent the cumulative appreciation/depreciation of these futures contracts as reported in the Schedule of Portfolio Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities as Variation margin on futures contracts. |
16
AZL Small Cap Stock Index Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
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 in net unrealized appreciation/depreciation on futures contracts | $ | (2,164,559 | ) | $ | (94,614 | ) |
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | |||||
Class 1 | $ | (351,616 | ) | ||
Class 2 | (4,019,299 | ) | |||
From net realized gains | |||||
Class 1 | (4,420,432 | ) | |||
Class 2 | (55,798,577 | ) | |||
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Change in net assets resulting from distributions to shareholders | $ | (64,589,924 | ) | ||
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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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate | Annual Expense Limit | |||||||||
AZL Small Cap Stock Index Fund Class 1 | 0.26 | % | 0.46 | % | ||||||
AZL Small Cap Stock Index Fund Class 2 | 0.26 | % | 0.71 | % |
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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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 year ended December 31, 2018, there were no voluntary waivers.
17
AZL Small Cap Stock Index Fund
Notes to the Financial Statements
December 31, 2018
At December 31, 2018, the following investments are noted as Affiliated Securities in the Fund’s Schedule of Portfolio Investments:
Fair Value 12/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value 12/31/2018 | Shares as of 12/31/2018 | Dividend Income | |||||||||||||||||||||||||||||||||
PennyMac Mortgage Investment Trust | $ | — | $ | 1,345,543 | $ | (237,568 | ) | $ | 15,940 | $ | 148,073 | $ | 1,271,988 | 68,313 | $ | 128,505 | ||||||||||||||||||||||||
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$ | — | $ | 1,345,543 | $ | (237,568 | ) | $ | 15,940 | $ | 148,073 | $ | 1,271,988 | 68,313 | $ | 128,505 | |||||||||||||||||||||||||
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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 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 value 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 anannual 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 year ended December 31, 2018, $7,273 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
18
AZL Small Cap Stock Index Fund
Notes to the Financial Statements
December 31, 2018
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.
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.
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 751,873,311 | $ | — | $ | — | $ | 751,873,311 | ||||||||||||
Right | — | 49,533 | — | 49,533 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 205,648,516 | — | 205,648,516 | ||||||||||||||||
Unaffiliated Investment Company | 3,123,293 | — | — | 3,123,293 | ||||||||||||||||
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Total Investment Securities | 754,996,604 | 205,698,049 | — | 960,694,653 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Futures Contracts | (18,725 | ) | — | — | (18,725 | ) | ||||||||||||||
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Total Investments | $ | 754,977,879 | $ | 205,698,049 | $ | — | $ | 960,675,928 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally presented in the financial statements at variation margin. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||
AZL Small Cap Stock Index Fund | $ | 168,297,828 | $ | 247,522,389 |
6. Investment Risks
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 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.
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.
19
AZL Small Cap Stock Index Fund
Notes to the Financial Statements
December 31, 2018
Cost of securities, including derivatives and short positions as applicable, for federal income tax purposes at December 31, 2018 is $917,495,200. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 140,496,569 | ||
Unrealized (depreciation) | (97,297,116 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 43,199,453 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term Capital Gains | Total Distributions(a) | |||||||||||||
AZL Small Cap Stock Index Fund | $ | 35,593,192 | $ | 57,898,377 | $ | 93,491,569 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term Capital Gains | Total Distributions(a) | |||||||||||||
AZL Small Cap Stock Index Fund | $ | 16,810,431 | $ | 47,779,493 | $ | 64,589,924 |
(a) | Total distributions paid may differ from the 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 Small Cap Stock Index Fund | $ | 9,691,796 | $ | 78,750,033 | $ | — | $ | 43,199,453 | $ | 131,641,282 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had an individual shareholder account which are affiliated with the Manager representing ownership in excess of 60% 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.
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL Small Cap Stock Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL Small Cap Stock Index Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 19.93% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $27,280,305.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $57,898,378.
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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 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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex During Past 5 Years | |||||
Peter R. Burnim (1947) Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for VIP and VIP FOF Trust | Other Directorships Held Outside the AZL Fund Complex During Past 5 Years | |||||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive Minneapolis, MN 55416 | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
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The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. These Funds are not FDIC Insured. | ||
ANNRPT1218 2/19 |
AZL® T. Rowe Price Capital Appreciation Fund
Annual Report
December 31, 2018
Management Discussion and Analysis
Page 1
Expense Examples and Portfolio Composition
Page 3
Schedule of Portfolio Investments
Page 4
Statement of Assets and Liabilities
Page 12
Page 12
Statements of Changes in Net Assets
Page 13
Page 14
Notes to the Financial Statements
Page 15
Report of Independent Registered Public Accounting Firm
Page 22
Other Federal Income Tax Information
Page 23
Page 24
Approval of Investment Advisory and Subadvisory Agreements
Page 25
Information about the Board of Trustees and Officers
Page 28
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® T. Rowe Price Capital Appreciation Fund (Unaudited)
Allianz Investment Management LLC serves as the Manager for the AZL® T. Rowe Price Capital Appreciation Fund and T. Rowe Price Associates, Inc. serves as Subadviser to the Fund. | ||
What factors affected the Fund’s performance during the year ended December 31, 2018?
For the year ended December 31, 2018, the AZL® T. Rowe Price Capital Appreciation Fund (the “Fund”) returned 0.38%. That compared to a-4.38%, 0.01% and-2.26% total return for its benchmarks, the S&P 500 Index1, the Bloomberg Barclays U.S. Aggregate Bond Index1, and the Moderate Composite Index1, respectively.
U.S. stocks declined in 2018. It was the worst year for the U.S. equity market since 2008. Stocks actually rose for much of the year, though the advance was somewhat sluggish. Market volatility was elevated through 2018, thanks partly to rising interest rates: The Federal Reserve Board (the Fed) continued its normalization of monetary policy, with four short-term interest rate hikes in 2018.
While most major U.S. stock indexes reachedall-time highs around the end of the third quarter of 2018, equities plunged in the final months of the year. Several indexes were in bear market territory—down at least 20% from recent highs—by the end of the year. Stocks fell sharply due to multiple factors including: expectations of additional interest rate increases from the Fed in 2019; expectations of slowing corporate earnings growth in 2019, as tailwinds from the late-2017 tax reform that boosted corporate earnings in 2018 subside; signs of slowing economic growth in different parts of the world; and increased U.S.-China tensions.
The equity portion of the Fund strongly outperformed the S&P 500 Index. The portfolio’s fixed income holdings posted a slightly negative return during the12-month period, modestly underperforming the Bloomberg Barclays U.S. Aggregate Bond Index. Within equities, the utilities sector contributed the most to relative performance driven by both an overweight position and stock selection. The information technology sector also contributed to relative results due to stock selection decisions. On the downside, the consumer discretionary sector detracted from relative performance due to stock selection effects.*
The Fund’s above-benchmark exposure to high-yield securities within its fixed income holdings weighed on performance relative to its fixed income benchmark. The portfolio’s underweight to U.S. Treasuries also detracted from relative results as Treasuries outperformed other components of the Bloomberg Barclays U.S. Aggregate Bond Index.*
Overall, the Fund’s exposure to equities increased compared to the beginning of the reporting period. The Fund opportunistically added to several names in the utilities and industrials sectors that offer attractive long-term risk/return profiles. The Fund also trimmed select names that had performed well in the healthcare sector.*
The Fund’s overall weighting in fixed income increased during the year, as the subadviser added to bank loans and select high-quality shorter duration investment-grade bonds. Late in the year, the Fund added to select high-yield and investment-grade bonds amid wider credit spreads.*
The Fund maintained exposure to covered call options—a type of derivative that provided downside protection for the portfolio while offering the benefits of owning a stock, such as dividends and capital appreciation, so long as the stock remains below the option strike price. The Fund’s covered call strategy made a modestly positive contribution to the Fund’s return. The Fund held rights at various points during the period to buy stocks at a predetermined price in the future, generating minimal exposure.*
Past performance does not guarantee future results.
* | The Fund’s portfolio composition is subject to change. There is no guarantee that any sectors mentioned will continue to perform well or that securities in such sectors will be held by the Fund in the future. The information contained in this commentary is for informational purposes only and should not be construed as a recommendation to purchase or sell securities in the sector mentioned. The Fund’s holdings and weightings are as of December 31, 2018. |
1 | For a complete description of the Fund’s performance benchmarks please refer to page 2 of this report. |
1
AZL® T. Rowe Price Capital Appreciation Fund (Unaudited)
Fund Objective
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The Fund’s investment objective is to seek long-term capital appreciation with preservation of capital as an important intermediate-term objective. This objective may be changed by the Trustees of the Fund without shareholder approval. The Fund seeks to achieve its objective by investing at least 50% of its net assets in the common stock of established U.S. Companies that have above-average potential for capital growth. The remaining assets are generally invested in convertible securities, corporate and government debt, bank loans, and foreign securities.
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Investment Concerns
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Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.
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Small- tomid-capitalization companies typically have a higher risk of failure and historically have experienced a greater degree of volatility.
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Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.
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Investing in a single industry or sector, or concentrating investments in a limited number of industries or sectors, tends to increase the risk that economic, political, or regulatory developments affecting certain industries or sectors will have a large impact on the value of the portfolio.
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Debt securities held by the Fund may decline in value due to rising interest rates. Interest rates in the U.S. have been gradually increasing and are expected to continue on this path in the near future, which may increase the Fund’s exposure to risks related to rising rates.
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Mortgage-backed investments involve risk of loss due to prepayments and, like any bond, due to default. Because of the sensitivity of mortgage-related securities to changes in interest rates, the Fund’s performance may be more volatile than if it did not hold these securities.
| ||||
High-yield bonds have a higher risk of default or other adverse credit events, but have the potential to pay higher earnings over investment-grade bonds. The higher risk of default, or the inability of the creditor to repay its debt, is the primary reason for the higher interest rates on high-yield bonds.
| ||||
Investing in derivatives instruments involves risks that may be different from or greater than the risk associated with investing directly in securities or other traditional instruments.
| ||||
For a complete description of these and other risks associated with investing in a mutual Fund, please refer to the Fund’s prospectus. |
Growth of $10,000 Investment
The chart above represents a comparison of a hypothetical investment in the Fund versus a similar investment in the Fund’s benchmarks and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Returns as of December 31, 2018
1 Year | 3 Year | 5 Year | 10 Year | |||||||||||||
AZL®T. Rowe Price Capital Appreciation Fund | 0.38 | % | 7.59 | % | 7.90 | % | 11.69 | % | ||||||||
S&P 500 Index | -4.38 | % | 9.26 | % | 8.49 | % | 13.12 | % | ||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 0.01 | % | 2.06 | % | 2.52 | % | 3.48 | % | ||||||||
Moderate Composite Index | -2.26 | % | 6.52 | % | 6.22 | % | 9.48 | % |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.Allianzlife.com.
Expense Ratio | Gross | |||
AZL®T. Rowe Price Capital Appreciation Fund | 1.08 | % |
The above expense ratio is based on the current Fund prospectus dated May 1, 2018. The Manager voluntarily reduced the management fee to 0.70% on all assets. The Manager and the Fund have entered into a written contract limiting operating expenses, excluding certain expenses such as interest expense and acquired fund fees and expenses, to 1.20% through April 30, 2020. Additional information pertaining to the December 31, 2018 expense ratio can be found in the Financial Highlights.
The total return of the Fund does not reflect the effect of any insurance charges, the annual maintenance fee or the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Such charges, fees and tax payments would reduce the performance quoted.
Acquired fund fees and expenses are incurred indirectly by the Fund through the valuation of the Fund’s investments in the other investment companies. Accordingly, acquired fund fees and expenses affect the Fund’s total returns. Because these fees and expenses are not included in the Fund’s financial highlights, the Fund’s total annual fund operating expenses, as shown in the prospectus, do not correlate to the ratios of expenses to average net assets shown in the Financial Highlights. Without acquired fund fees and expenses the Fund’s gross expense ratio would be 1.05%.
The Fund’s performance is measured against the Standard and Poor’s 500 Index (“S&P 500”), the Bloomberg Barclays U.S. Aggregate Bond Index and the Moderate Composite Index (“Composite”). The S&P 500 is representative of 500 selected common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. Stock market as a whole. The Bloomberg Barclays U.S. Aggregate Bond Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Composite is a blended index comprised of (60%) of the S&P 500 and (40%) of the Bloomberg Barclays U.S. Aggregate Bond Index. These indexes are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for services provided to the Fund. Investors cannot invest directly in an index.
2
AZL T. Rowe Price Capital Appreciation Fund
Expense Examples
(Unaudited)
As a shareholder of the AZL T. Rowe Price Capital Appreciation 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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 1,000.00 | $ | 980.40 | $ | 4.99 | 1.00 | % |
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 7/1/18 | Ending Account Value 12/31/18 | Expenses Paid During Period 7/1/18 - 12/31/18* | Annualized Expense Ratio During Period 7/1/18 - 12/31/18 | |||||||||||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 1,000.00 | $ | 1,020.16 | $ | 5.09 | 1.00 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Portfolio Composition
(Unaudited)
Investments | Percent of Net Assets | ||||
Common Stocks | 67.2 | % | |||
Corporate Bonds | 18.6 | ||||
Short-Term Securities Held as Collateral for Securities on Loan | 8.3 | ||||
Yankee Dollars | 3.3 | ||||
Preferred Stocks | 2.9 | ||||
Bank Loans | 2.5 | ||||
U.S. Treasury Obligations | 2.2 | ||||
Convertible Preferred Stocks | 1.5 | ||||
Money Markets | 1.5 | ||||
Asset Backed Securities | 0.3 | ||||
|
| ||||
Total Investment Securities | 108.3 | ||||
Net other assets (liabilities) | (8.3 | ) | |||
|
| ||||
Net Assets | 100.0 | % | |||
|
|
3
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Shares | Fair Value | |||||||
Common Stocks (67.2%): | ||||||||
Auto Components (2.2%): | ||||||||
143,848 | Aptiv plc | $ | 8,856,721 | |||||
63,297 | Lear Corp. | 7,776,669 | ||||||
173,861 | Magna International, Inc., ADR^ | 7,901,982 | ||||||
|
| |||||||
24,535,372 | ||||||||
|
| |||||||
Banks (1.4%): | ||||||||
128,445 | PNC Financial Services Group, Inc. | 15,016,505 | ||||||
|
| |||||||
Beverages (0.4%): | ||||||||
150,418 | Keurig Dr Pepper, Inc.^ | 3,856,718 | ||||||
|
| |||||||
Capital Markets (2.9%): | ||||||||
136,814 | Intercontinental Exchange, Inc. | 10,306,199 | ||||||
123,347 | S&P Global, Inc. | 20,961,589 | ||||||
|
| |||||||
31,267,788 | ||||||||
|
| |||||||
Commercial Services & Supplies (1.9%): | ||||||||
110,270 | Republic Services, Inc., Class A | 7,949,364 | ||||||
171,857 | Waste Connections, Inc. | 12,760,383 | ||||||
|
| |||||||
20,709,747 | ||||||||
|
| |||||||
Electric Utilities (4.1%): | ||||||||
178,532 | American Electric Power Co., Inc. | 13,343,483 | ||||||
70,170 | Duke Energy Corp. | 6,055,671 | ||||||
88,655 | Eversource Energy | 5,766,121 | ||||||
38,348 | NextEra Energy, Inc. | 6,665,649 | ||||||
245,446 | Xcel Energy, Inc. | 12,093,124 | ||||||
|
| |||||||
43,924,048 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (1.2%): | ||||||||
173,468 | TE Connectivity, Ltd. | 13,119,385 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts (1.2%): | ||||||||
85,036 | American Tower Corp. | 13,451,845 | ||||||
|
| |||||||
Health Care Equipment & Supplies (6.5%): | ||||||||
184,248 | Abbott Laboratories | 13,326,658 | ||||||
107,748 | Becton, Dickinson & Co. | 24,277,779 | ||||||
313,304 | Danaher Corp. | 32,307,909 | ||||||
|
| |||||||
69,912,346 | ||||||||
|
| |||||||
Health Care Providers & Services (3.0%): | ||||||||
49,800 | Anthem, Inc. | 13,078,974 | ||||||
79,400 | UnitedHealth Group, Inc. | 19,780,128 | ||||||
|
| |||||||
32,859,102 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.2%): | ||||||||
36,078 | McDonald’s Corp. | 6,406,370 | ||||||
70,450 | Yum! Brands, Inc. | 6,475,764 | ||||||
|
| |||||||
12,882,134 | ||||||||
|
| |||||||
Industrial Conglomerates (3.1%): | ||||||||
2,267,502 | General Electric Co. | 17,164,990 | ||||||
60,642 | Roper Industries, Inc. | 16,162,306 | ||||||
|
| |||||||
33,327,296 | ||||||||
|
| |||||||
Insurance (3.5%): | ||||||||
471,505 | Marsh & McLennan Cos., Inc. | 37,602,524 | ||||||
|
| |||||||
Interactive Media & Services (3.9%): | ||||||||
4,923 | Alphabet, Inc., Class A* | 5,144,338 | ||||||
21,088 | Alphabet, Inc., Class C* | 21,838,944 | ||||||
116,900 | Facebook, Inc., Class A* | 15,324,421 | ||||||
|
| |||||||
42,307,703 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (3.5%): | ||||||||
20,234 | Amazon.com, Inc.* | 30,390,861 |
Shares | Fair Value | |||||||
Common Stocks, continued | ||||||||
Internet & Direct Marketing Retail, continued | ||||||||
4,200 | Booking Holdings, Inc.* | $ | 7,234,164 | |||||
|
| |||||||
37,625,025 | ||||||||
|
| |||||||
IT Services (7.9%): | ||||||||
259,230 | Fidelity National Information Services, Inc. | 26,584,037 | ||||||
364,488 | Fiserv, Inc.* | 26,786,223 | ||||||
21,585 | MasterCard, Inc., Class A | 4,072,010 | ||||||
209,156 | Visa, Inc., Class A^ | 27,596,042 | ||||||
|
| |||||||
85,038,312 | ||||||||
|
| |||||||
Life Sciences Tools & Services (5.5%): | ||||||||
439,025 | PerkinElmer, Inc.^ | 34,485,413 | ||||||
110,849 | Thermo Fisher Scientific, Inc. | 24,806,898 | ||||||
|
| |||||||
59,292,311 | ||||||||
|
| |||||||
Machinery (1.8%): | ||||||||
285,872 | Fortive Corp. | 19,342,100 | ||||||
|
| |||||||
Multi-Utilities (2.1%): | ||||||||
61,491 | DTE Energy Co. | 6,782,457 | ||||||
612,897 | NiSource, Inc.^ | 15,536,939 | ||||||
|
| |||||||
22,319,396 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.1%): | ||||||||
44,000 | Concho Resources, Inc.* | 4,522,760 | ||||||
320,951 | Enterprise Products Partners LP | 7,892,185 | ||||||
|
| |||||||
12,414,945 | ||||||||
|
| |||||||
Professional Services (1.0%): | ||||||||
121,108 | Equifax, Inc. | 11,278,788 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (3.4%): | ||||||||
259,792 | Maxim Integrated Products, Inc. | 13,210,423 | ||||||
245,829 | Texas Instruments, Inc. | 23,230,841 | ||||||
|
| |||||||
36,441,264 | ||||||||
|
| |||||||
Software (4.0%): | ||||||||
42,278 | Intuit, Inc. | 8,322,424 | ||||||
338,000 | Microsoft Corp. | 34,330,660 | ||||||
|
| |||||||
42,653,084 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.4%): | ||||||||
27,000 | Apple, Inc. | 4,258,980 | ||||||
|
| |||||||
Total Common Stocks (Cost $657,056,793) | 725,436,718 | |||||||
|
| |||||||
Preferred Stocks (3.2%): | ||||||||
Banks (0.4%): | ||||||||
100,000 | JPMorgan Chase & Co., Series D, 5.75%, 3/3/19 | 2,503,000 | ||||||
75,000 | U.S. Bancorp, Series K, 5.50%, 4/15/19^ | 1,851,750 | ||||||
7,099 | U.S. Bancorp, Series F, 6.50%, 4/15/19 | 187,982 | ||||||
|
| |||||||
4,542,732 | ||||||||
|
| |||||||
Capital Markets (0.1%): | ||||||||
55,900 | Charles Schwab Corp. (The), Series C, 6.00%, 3/3/19 | 1,419,301 | ||||||
3,600 | Charles Schwab Corp. (The), Series D, 5.95%, 3/3/19 | 90,000 | ||||||
3,456 | State Street Corp., Series E, 6.00%, 3/17/19 | 86,953 | ||||||
|
| |||||||
1,596,254 | ||||||||
|
| |||||||
Electric Utilities (0.6%): | ||||||||
30,000 | Alabama Power Co., Series A, 5.00%, 4/1/19^ | 712,200 | ||||||
100,000 | Duke Energy Corp., 5.63%, 3/15/19 | 2,380,000 |
See accompanying notes to the financial statements.
4
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Preferred Stocks, continued | ||||||||
Electric Utilities, continued | ||||||||
2,130 | SCE Trust II, 1.06%, Callable 3/20/19 @ 25 | $ | 41,066 | |||||
23,272 | SCE Trust III, Series H, 0.99%, Callable 3/15/24 @ 25 | 538,514 | ||||||
107,700 | SCE Trust IV, Series J, 5.38%, 3/15/19 | 2,186,310 | ||||||
18,000 | SCE Trust V, Series K, 5.45%, 3/15/19 | 375,840 | ||||||
25,000 | SCE Trust VI, 5.00%, 3/15/19 | 454,750 | ||||||
|
| |||||||
6,688,680 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (1.0%): | ||||||||
187,869 | Becton Dickinson and Co., Series A, 6.13%, 2/1/19 | 10,834,405 | ||||||
|
| |||||||
Machinery (0.3%): | ||||||||
3,209 | Fortive Corp., Series A, 5.00%, 4/2/19 | 2,909,183 | ||||||
|
| |||||||
Multi-Utilities (0.8%): | ||||||||
150,000 | CMS Energy Corp., 5.88%, 4/15/19 | 3,609,000 | ||||||
100,000 | DTE Energy Co., Series E, 5.25%, 3/1/19 | 2,225,000 | ||||||
100,000 | NiSource, Inc., Series B, 6.50%, 3/15/19 | 2,504,000 | ||||||
|
| |||||||
8,338,000 | ||||||||
|
| |||||||
Total Preferred Stocks (Cost $30,871,692) | 31,312,774 | |||||||
|
| |||||||
Convertible Preferred Stocks (1.5%): | ||||||||
Banks (1.4%): | ||||||||
11,763 | Wells Fargo & Co., Series L, Class A, 0.13%, 3/17/19 | 14,844,553 | ||||||
|
| |||||||
Electric Utilities (0.1%): | ||||||||
19,115 | Nextra Energy, Inc., 7.50%, 3/1/19^ | 1,101,789 | ||||||
|
| |||||||
Total Convertible Preferred Stocks (Cost $15,888,082) | 15,946,342 | |||||||
|
| |||||||
Asset Backed Securities (0.3%): | ||||||||
1,383,050 | Dominos Pizza Master Issuer LLC, Class A2I, Series2018-1A, 4.12%, 7/25/48, Callable 10/25/22 @ 100(a) | 1,364,476 | ||||||
|
| |||||||
1,457,550 | Domino’s Pizza Master Issuer LLC, Class A23, Series2018-1A, 4.12%, 7/25/47, Callable 7/25/24 @ 100(a) | 1,428,064 | ||||||
|
| |||||||
922,680 | Wendy’s Funding LLC, Class A2I, Series2018-1A, 3.57%, 3/15/48, Callable 3/15/22 @ 100(a) | 884,241 | ||||||
|
| |||||||
Total Asset Backed Securities (Cost $3,726,124) | 3,676,781 | |||||||
|
| |||||||
Bank Loans (2.5%): | ||||||||
Airlines (0.1%): | ||||||||
$ | 1,250,000 | Delta 2 Lux Sarl, 2.50%, 2/1/24 | 1,179,163 | |||||
|
| |||||||
Chemicals (0.3%): | ||||||||
653,227 | H.B. Fuller Co. Term Loan B1, 4.47% (US LIBOR+200bps), 10/20/24, Callable 2/6/19 @ 100 | 613,054 | ||||||
2,661,349 | Kronos, Inc./ M.A. Term LoanB-1, 5.82% (US LIBOR+300bps), 11/1/23, Callable 2/6/19 @ 100 | 2,523,837 | ||||||
|
| |||||||
3,136,891 | ||||||||
|
| |||||||
Diversified Telecommunication Services (0.2%): | ||||||||
700,000 | Zayo Group LLC Term LoanB1-1, 4.52% (LIBOR+0bps), 1/19/21, Callable 2/6/19 @ 100 | 668,752 | ||||||
1,250,000 | Zayo Group LLC Term LoanB2-1, 4.77% (LIBOR+225bps), 1/19/24, Callable 2/6/19 @ 100 | 1,194,200 | ||||||
|
| |||||||
1,862,952 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Bank Loans, continued | ||||||||
Health Care Providers & Services (0.1%): | ||||||||
$ | 974,058 | NVA Holdings, Inc. Term LoanB3-1, 5.37% (LIBOR+275bps), 2/2/25, Callable 2/6/19 @ 100 | $ | 915,614 | ||||
|
| |||||||
Health Care Technology (0.2%): | ||||||||
2,536,188 | Change Healthcare Holdings LLC Term Loan B1, 5.49% (LIBOR+275bps), 3/1/24, Callable 2/6/19 @ 100 | 2,399,867 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.0%)†: | ||||||||
260,000 | Subcom TL 1l Bankdebt, 8.59% (LIBOR+0bps) 11/2/25, Callable 2/6/19 @ 101 | 249,275 | ||||||
|
| |||||||
Insurance (0.8%): | ||||||||
8,661,475 | HUB International, Ltd., 5.23% (LIBOR+275bps), 4/25/25, Callable 2/6/19 @ 100 | 8,160,755 | ||||||
|
| |||||||
IT Services (0.4%): | ||||||||
4,145,000 | Refinitiv US Holdings, Inc. Term LoanB-1, 6.56% (LIBOR+0bps), 10/1/25, Callable 2/6/19 @ 101 | 3,937,750 | ||||||
712,250 | Vantiv LLC Term LoanA4-1, 3.94% (LIBOR+150bps), 1/16/23 | 698,361 | ||||||
|
| |||||||
4,636,111 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.1%): | ||||||||
1,727,472 | Eagleclaw Midstream Term Loan 1, 7.06% (LIBOR+425bps), 6/24/24, Callable 2/6/19 @ 100 | 1,608,708 | ||||||
|
| |||||||
Pharmaceuticals (0.0%)†: | ||||||||
77,758 | Prestige Brands, Inc. Term LoanB5-1, 4.82% (LIBOR+200bps), 1/26/24, Callable 2/6/19 @ 100 | 74,675 | ||||||
|
| |||||||
Professional Services (0.2%): | ||||||||
222,337 | Institutional Shareholder Services, Inc. Term Loan 1, 6.55% (LIBOR+375bps), 10/16/24, Callable 2/6/19 @ 100 | 216,223 | ||||||
20,315 | Institutional Shareholder Services, Inc. Term LoanDD-1, 6.55% (LIBOR+375bps), 10/16/24(b) | 19,756 | ||||||
1,701,450 | Trans Union LLC Term LoanA2-1, 4.54% (US LIBOR+175bps), 6/19/25 | 1,637,646 | ||||||
|
| |||||||
1,873,625 | ||||||||
|
| |||||||
Software (0.1%): | ||||||||
1,240,292 | CCC Information Services, Inc. Term Loan B1, 5.52% (LIBOR+300bps), 4/26/24, Callable 2/6/19 @ 100 | 1,175,177 | ||||||
|
| |||||||
Total Bank Loans (Cost $28,711,439) | 27,272,813 | |||||||
|
| |||||||
Corporate Bonds (18.3%): | ||||||||
Aerospace & Defense (0.2%): | ||||||||
1,730,000 | Northrop Grumman Corp., 2.55%, 10/15/22, Callable 9/15/22 @ 100 | 1,674,039 | ||||||
|
| |||||||
Airlines (0.0%)†: | ||||||||
276,472 | U.S. Airways2010-1A PTT, Series A, 6.25%, 10/22/24 | 292,038 | ||||||
|
| |||||||
Banks (0.3%): | ||||||||
2,145,000 | PNC Financial Services, Series S, 5.00% (US0003M+330 bps), 12/31/49, Callable 11/1/26 @ 100^ | 1,973,400 | ||||||
875,000 | US BanCorp, 5.30% (US0003M+291 bps), Callable 4/15/27 @ 100 | 822,500 | ||||||
|
| |||||||
2,795,900 | ||||||||
|
|
See accompanying notes to the financial statements.
5
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Beverages (0.2%): | ||||||||
$ | 215,000 | Anheuser-Busch InBev NV, 2.65%, 2/1/21, Callable 1/1/21 @ 100 | $ | 211,430 | ||||
930,000 | Anheuser-Busch InBev NV, 3.82% (US0003M+126 bps), 2/1/21 | 935,092 | ||||||
625,000 | Anheuser-Busch InBev NV, 3.30%, 2/1/23, Callable 12/1/22 @ 100 | 607,718 | ||||||
|
| |||||||
1,754,240 | ||||||||
|
| |||||||
Building Products (0.0%)†: | ||||||||
280,000 | Lennox International, Inc., 3.00%, 11/15/23, Callable 9/15/23 @ 100 | 263,483 | ||||||
|
| |||||||
Capital Markets (0.8%): | ||||||||
1,865,000 | Bank of New York Mellon Corp. (The), Series E, 4.95% (US0003M+342 bps), Callable 6/20/20 @ 100^ | 1,818,375 | ||||||
1,060,000 | Bank of New York Mellon Corp. (The), 4.62% (US0003M+313 bps), 12/29/49, Callable 9/20/26 @ 100 | 950,025 | ||||||
2,025,000 | Moody’s Corp., 4.25%, 2/1/29, Callable 11/1/28 @ 100 | 2,062,438 | ||||||
1,355,000 | State Street Corp., Series F, 5.25% (US0003M+360 bps), Callable 9/15/20 @ 100^ | 1,329,594 | ||||||
2,655,000 | State Street Corp., Series H, 5.63% (US0003M+254 bps), 12/31/99, Callable 12/15/23 @ 100^ | 2,508,975 | ||||||
|
| |||||||
8,669,407 | ||||||||
|
| |||||||
Chemicals (0.1%): | ||||||||
570,000 | Ecolab, Inc., 2.00%, 1/14/19 | 569,782 | ||||||
|
| |||||||
Commercial Services & Supplies (0.2%): | ||||||||
1,775,000 | Aramark Services, Inc., 5.00%, 4/1/25, Callable 4/1/20 @ 103.75^(a) | 1,735,062 | ||||||
685,000 | Aramark Services, Inc., 5.00%, 2/1/28, Callable 2/1/23 @ 102.5^(a) | 638,763 | ||||||
|
| |||||||
2,373,825 | ||||||||
|
| |||||||
Containers & Packaging (0.8%): | ||||||||
4,807,743 | Beverage Packaging Holdings Luxemberg, 5.75%, 10/15/20, Callable 2/7/19 @ 100 | 4,795,724 | ||||||
826,491 | Beverage Packaging Holdings Luxemberg, 6.88%, 2/15/21, Callable 2/7/19 @ 101.15 | 826,491 | ||||||
1,560,000 | Reynolds Group Issuer, Inc., 5.94% (US0003M+350 bps), 7/15/21, Callable 2/7/19 @ 101^(a) | 1,554,150 | ||||||
1,230,000 | Reynolds Group Issuer, Inc., 5.13%, 7/15/23, Callable 7/15/19 @ 102.56(a) | 1,171,575 | ||||||
|
| |||||||
8,347,940 | ||||||||
|
| |||||||
Diversified Financial Services (0.2%): | ||||||||
970,000 | Level 3 Communications, Inc., 5.38%, 8/15/22, Callable 2/7/19 @ 101.34 | 951,066 | ||||||
1,310,000 | Level 3 Financing, Inc., 5.63%, 2/1/23, Callable 2/7/19 @ 101.41 | 1,287,075 | ||||||
|
| |||||||
2,238,141 | ||||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Diversified Telecommunication Services (0.6%): | ||||||||
$ | 1,225,000 | Verizon Communications, 3.13%, 3/16/22 | $ | 1,216,834 | ||||
1,225,000 | Verizon Communications, 3.79% (US0003M+100 bps), 3/16/22^ | 1,226,335 | ||||||
4,189,000 | Zayo Group LLC /Zayo Capital, Inc., 5.75%, 1/15/27, Callable 1/15/22 @ 102.88^(a) | 3,738,683 | ||||||
|
| |||||||
6,181,852 | ||||||||
|
| |||||||
Electric Utilities (1.0%): | ||||||||
230,000 | American Electric Power Co., Inc., Series I, 3.65%, 12/1/21 | 231,727 | ||||||
840,000 | American Electric Power Co., Inc., Series J, 4.30%, 12/1/28, Callable 9/1/28 @ 100 | 853,540 | ||||||
1,225,000 | Edison International, 2.13%, 4/15/20 | 1,192,471 | ||||||
750,000 | Eversource Energy, 2.75%, 3/15/22, Callable 2/15/22 @ 100 | 736,987 | ||||||
�� | 365,000 | Eversource Energy, Series N, 3.80%, 12/1/23, Callable 11/1/23 @ 100 | 368,515 | |||||
500,000 | Eversource Energy, Series L, 2.90%, 10/1/24, Callable 8/1/24 @ 100 | 479,182 | ||||||
1,245,000 | Eversource Energy, 3.30%, 1/15/28, Callable 10/15/27 @ 100 | 1,180,807 | ||||||
595,000 | Eversource Energy, Series O, 4.25%, 4/1/29, Callable 1/1/29 @ 100 | 605,739 | ||||||
1,000,000 | NSTAR Electric Co., 3.20%, 5/15/27, Callable 2/15/27 @ 100 | 974,742 | ||||||
610,000 | Southern Co., 1.85%, 7/1/19 | 607,011 | ||||||
365,000 | Virginia Electric & Power Co., Series A, 3.15%, 1/15/26, Callable 10/15/25 @ 100 | 352,485 | ||||||
855,000 | Virginia Electric & Power Co., Series A, 3.50%, 3/15/27, Callable 12/15/26 @ 100 | 842,025 | ||||||
600,000 | Wisconsin Public Service Corp., 3.35%, 11/21/21 | 605,857 | ||||||
980,000 | Xcel Energy, Inc., 4.00%, 6/15/28, Callable 12/15/27 @ 100^ | 991,207 | ||||||
|
| |||||||
10,022,295 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.1%): | ||||||||
750,000 | Amphenol Corp., 2.20%, 4/1/20 | 738,901 | ||||||
375,000 | Amphenol Corp., 3.20%, 4/1/24, Callable 2/1/24 @ 100 | 363,615 | ||||||
|
| |||||||
1,102,516 | ||||||||
|
| |||||||
Entertainment (2.5%): | ||||||||
2,215,000 | Netflix, Inc., 5.88%, 2/15/25 | 2,234,381 | ||||||
4,685,000 | Netflix, Inc., 4.38%, 11/15/26^ | 4,251,638 | ||||||
8,498,000 | Netflix, Inc., 4.88%, 4/15/28 | 7,754,424 | ||||||
8,400,000 | Netflix, Inc., 5.88%, 11/15/28^(a) | 8,162,279 | ||||||
5,530,000 | Netflix, Inc., 6.38%, 5/15/29(a) | 5,453,963 | ||||||
|
| |||||||
27,856,685 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts (1.0%): | ||||||||
1,420,000 | American Tower Corp., Series J, 3.30%, 2/15/21, Callable 1/15/21 @ 100 | 1,411,855 | ||||||
155,000 | Camden Property Trust, 4.10%, 10/15/28, Callable 7/15/28 @ 100^ | 156,924 | ||||||
2,530,000 | Crown Castle International Corp., 4.88%, 4/15/22 | 2,603,328 | ||||||
3,895,000 | Crown Castle International Corp., 5.25%, 1/15/23 | 4,044,660 | ||||||
2,495,000 | SBA Communications Corp., 4.88%, 7/15/22, Callable 2/7/19 @ 102.44 | 2,451,338 | ||||||
|
| |||||||
10,668,105 | ||||||||
|
|
See accompanying notes to the financial statements.
6
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Food & Staples Retailing (0.0%)†: | ||||||||
$ | 340,000 | Kroger Co. (The), 2.00%, 1/15/19 | $ | 339,848 | ||||
|
| |||||||
Food Products (0.6%): | ||||||||
645,000 | B&G Foods, Inc., 4.63%, 6/1/21, Callable 2/7/19 @ 101.16^ | 628,875 | ||||||
510,000 | Conagra Brands, Inc., 3.22% (US0003M+75 bps), 10/22/20, Callable 10/22/19 @ 100 | 508,567 | ||||||
1,110,000 | Conagra Brands, Inc., 3.80%, 10/22/21^ | 1,110,391 | ||||||
4,220,000 | Nestle Holdings, Inc., 3.10%, 9/24/21, Callable 8/24/21 @ 100^(a) | 4,244,449 | ||||||
|
| |||||||
6,492,282 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.7%): | ||||||||
706,000 | Becton Dickinson & Co., 2.68%, 12/15/19 | 699,287 | ||||||
1,080,000 | Becton Dickinson & Co., 3.77% (US0003M+103 bps), 6/6/22 | 1,058,661 | ||||||
1,690,000 | Becton Dickinson & Co., 3.36%, 6/6/24, Callable 4/6/24 @ 100 | 1,623,205 | ||||||
1,340,000 | Hologic, Inc., 4.38%, 10/15/25, Callable 10/15/20 @ 102.19^(a) | 1,246,200 | ||||||
1,470,000 | Medtronic plc, 2.50%, 3/15/20 | 1,462,474 | ||||||
905,000 | Teleflex, Inc., 4.88%, 6/1/26, Callable 6/1/21 @ 102.44^ | 864,275 | ||||||
1,085,000 | Teleflex, Inc., 4.63%, 11/15/27, Callable 11/15/22 @ 102.31 | 1,006,338 | ||||||
|
| |||||||
7,960,440 | ||||||||
|
| |||||||
Health Care Providers & Services (0.7%): | ||||||||
305,000 | Fresenius Medical Care AG & Co. KGaA, 5.75%, 2/15/21(a) | 314,150 | ||||||
1,185,000 | HCA, Inc., 4.25%, 10/15/19 | 1,182,038 | ||||||
5,655,000 | HCA, Inc., 6.50%, 2/15/20 | 5,796,375 | ||||||
|
| |||||||
7,292,563 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (1.8%): | ||||||||
1,101,000 | Cedar Fair, LP /Canada’s Wonderland Co. /Magnum Management Corp., 5.38%, 6/1/24, Callable 6/1/19 @ 102.69^ | 1,076,228 | ||||||
1,718,000 | Cedar Fair, LP /Canada’s Wonderland Co. /Magnum Management Corp. /Millennium Op, 5.38%, 4/15/27, Callable 4/15/22 @ 102.69^ | 1,623,510 | ||||||
690,000 | Hilton Domestic Operating Co., Inc., 4.25%, 9/1/24, Callable 9/1/19 @ 102.13 | 652,050 | ||||||
1,075,000 | KFC Holding Co. /Pizza Hut Holdings LLC /Taco Bell of America LLC, 5.00%, 6/1/24, Callable 6/1/19 @ 103.75^(a) | 1,037,375 | ||||||
1,440,000 | KFC Holding Co. /Pizza Hut Holdings LLC /Taco Bell of America LLC, 5.25%, 6/1/26, Callable 6/1/21 @ 102.63(a) | 1,393,200 | ||||||
5,178,000 | KFC Holding Co. /Pizza Hut Holdings LLC /Taco Bell of America LLC, 4.75%, 6/1/27, Callable 6/1/22 @ 102.38^(a) | 4,815,539 | ||||||
525,000 | Six Flags Entertainment Corp., 4.88%, 7/31/24, Callable 7/31/19 @ 103.66^(a) | 494,813 | ||||||
190,000 | Six Flags Entertainment Corp., 5.50%, 4/15/27, Callable 4/15/22 @ 102.75^(a) | 179,075 | ||||||
540,000 | Yum! Brands, Inc., 5.30%, 9/15/19 | 542,025 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Hotels, Restaurants & Leisure, continued | ||||||||
$ | 1,585,000 | Yum! Brands, Inc., 3.88%, 11/1/20, Callable 8/1/20 @ 100^ | $ | 1,553,300 | ||||
3,569,000 | Yum! Brands, Inc., 3.75%, 11/1/21, Callable 8/1/21 @ 100^ | 3,479,775 | ||||||
1,322,000 | Yum! Brands, Inc., 3.88%, 11/1/23, Callable 8/1/23 @ 100 | 1,249,290 | ||||||
1,042,000 | Yum! Brands, Inc., 6.88%, 11/15/37 | 1,021,160 | ||||||
1,824,000 | Yum! Brands, Inc., 5.35%, 11/1/43, Callable 5/1/43 @ 100 | 1,513,920 | ||||||
|
| |||||||
20,631,260 | ||||||||
|
| |||||||
Household Products (0.1%): | ||||||||
750,000 | Spectrum Brand, Inc., 6.63%, 11/15/22, Callable 2/7/19 @ 102.21^ | 759,375 | ||||||
350,000 | Spectrum Brands, Inc., 6.13%, 12/15/24, Callable 12/15/19 @ 103.06 | 336,875 | ||||||
|
| |||||||
1,096,250 | ||||||||
|
| |||||||
Industrial Conglomerates (0.3%): | ||||||||
725,000 | 3M Co., 3.00%, 9/14/21, Callable 8/14/21 @ 100, MTN | 730,859 | ||||||
1,220,000 | Roper Technologies, Inc., 3.65%, 9/15/23, Callable 8/15/23 @ 100 | 1,220,884 | ||||||
1,100,000 | Roper Technologies, Inc., 4.20%, 9/15/28, Callable 6/15/28 @ 100 | 1,089,041 | ||||||
|
| |||||||
3,040,784 | ||||||||
|
| |||||||
Insurance (0.1%): | ||||||||
530,000 | Marsh & McLennan Cos., Inc., 2.35%, 3/6/20, Callable 2/6/20 @ 100 | 525,301 | ||||||
530,000 | Marsh & McLennan Cos., Inc., 2.75%, 1/30/22, Callable 12/30/21 @ 100 | 519,473 | ||||||
200,000 | Marsh & McLennan Cos., Inc., 3.30%, 3/14/23, Callable 1/14/23 @ 100 | 197,756 | ||||||
|
| |||||||
1,242,530 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.2%): | ||||||||
1,800,000 | Amazon.com, Inc., 2.60%, 12/5/19, Callable 11/5/19 @ 100 | 1,795,436 | ||||||
|
| |||||||
IT Services (0.6%): | ||||||||
1,190,000 | Fiserv, Inc., 2.70%, 6/1/20, Callable 5/1/20 @ 100 | 1,181,155 | ||||||
730,000 | Fiserv, Inc., 3.80%, 10/1/23, Callable 9/1/23 @ 100 | 734,546 | ||||||
730,000 | Fiserv, Inc., 4.20%, 10/1/28, Callable 7/1/28 @ 100 | 728,537 | ||||||
1,645,000 | Refinitiv US Holdings, Inc., 6.25%, 5/15/26, Callable 11/15/21 @ 103.13^(a) | 1,587,425 | ||||||
2,185,000 | Refinitiv US Holdings, Inc., 8.25%, 11/15/26, Callable 11/15/21 @ 104.13^(a) | 1,996,544 | ||||||
|
| |||||||
6,228,207 | ||||||||
|
| |||||||
Machinery (0.2%): | ||||||||
695,000 | Caterpillar Financial Services Corp., 2.25%, 12/1/19, MTN^ | 690,069 | ||||||
13,000 | Fortive Corp., 1.80%, 6/15/19 | 12,845 | ||||||
915,000 | Manitowoc Foodservice, Inc., 9.50%, 2/15/24, Callable 2/15/19 @ 107.13^ | 979,050 | ||||||
200,000 | Xylem, Inc., 3.25%, 11/1/26, Callable 8/1/26 @ 100 | 190,052 | ||||||
|
| |||||||
1,872,016 | ||||||||
|
|
See accompanying notes to the financial statements.
7
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Media (2.0%): | ||||||||
$ | 275,000 | CCO Holdings LLC, 5.25%, 3/15/21, Callable 2/7/19 @ 101.31 | $ | 275,172 | ||||
2,035,000 | CCO Holdings LLC, 5.25%, 9/30/22, Callable 2/7/19 @ 101.75 | 2,017,194 | ||||||
970,000 | CCO Holdings LLC, 5.75%, 9/1/23, Callable 2/7/19 @ 102.88^ | 965,150 | ||||||
875,000 | CCO Holdings LLC, 5.75%, 1/15/24, Callable 2/7/19 @ 102.88 | 866,250 | ||||||
5,149,000 | CCO Holdings LLC, 5.13%, 5/1/27, Callable 5/1/22 @ 102.56^(a) | 4,795,778 | ||||||
7,521,000 | CCO Holdings LLC, 5.00%, 2/1/28, Callable 8/1/22 @ 102.5(a) | 6,919,319 | ||||||
720,000 | Charter Communications Operating LLC, 3.58%, 7/23/20, Callable 6/23/20 @ 100 | 719,224 | ||||||
2,045,000 | Comcast Corp., 3.30%, 10/1/20 | 2,052,822 | ||||||
1,010,000 | Comcast Corp., 2.74% (US0003M+33 bps), 10/1/20 | 1,005,341 | ||||||
935,000 | Comcast Corp., 3.45%, 10/1/21^ | 944,480 | ||||||
795,000 | Comcast Corp., 2.85% (US0003M+44 bps), 10/1/21 | 787,457 | ||||||
815,000 | Sirius XM Radio, Inc., 6.00%, 7/15/24, Callable 7/15/19 @ 103(a) | 817,038 | ||||||
|
| |||||||
22,165,225 | ||||||||
|
| |||||||
Multiline Retail (0.0%)†: | ||||||||
380,000 | Dollar Tree, Inc., 3.15% (US0003M+70 bps), 4/17/20, Callable 4/17/19 @ 100 | 377,576 | ||||||
|
| |||||||
Multi-Utilities (0.9%): | ||||||||
1,020,000 | Berkshire Hathaway Energy Co., 2.40%, 2/1/20, Callable 1/1/20 @ 100 | 1,013,340 | ||||||
150,000 | Dominion Resources, Inc., 2.96%, 7/1/19 | 149,467 | ||||||
615,000 | DTE Energy Co., Series D, 3.70%, 8/1/23, Callable 7/1/23 @ 100 | 610,694 | ||||||
2,625,000 | DTE Energy Co., 3.80%, 3/15/27, Callable 12/15/26 @ 100 | 2,561,176 | ||||||
2,760,000 | NiSource Finance Corp., 3.49%, 5/15/27, Callable 2/15/27 @ 100 | 2,633,714 | ||||||
1,545,000 | NiSource Finance Corp., 4.38%, 5/15/47, Callable 11/15/46 @ 100 | 1,437,304 | ||||||
1,705,000 | NiSource, Inc., 5.65% (H15T5Y+284 bps), 12/31/99, Callable 6/15/23 @ 100^(a) | 1,585,650 | ||||||
|
| |||||||
9,991,345 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.2%): | ||||||||
1,020,000 | Enterprise Products Operating LLC, 3.50%, 2/1/22 | 1,022,702 | ||||||
305,000 | EQT Corp., 8.13%, 6/1/19 | 310,175 | ||||||
290,000 | NGL Energy Part, LP / NGL Energy Finance Finance Corp., 5.13%, 7/15/19, Callable 6/15/19 @ 100^ | 287,825 | ||||||
500,000 | Nustar Logistics, LP, 4.80%, 9/1/20^ | 490,000 | ||||||
|
| |||||||
2,110,702 | ||||||||
|
| |||||||
Personal Products (0.1%): | ||||||||
685,000 | Unilever Capital Corp., 3.00%, 3/7/22 | 679,732 | ||||||
|
|
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Corporate Bonds, continued | ||||||||
Pharmaceuticals (0.3%): | ||||||||
$ | 1,030,000 | Elanco Animal Health, Inc., 3.91%, 8/27/21(a) | $ | 1,036,409 | ||||
500,000 | Elanco Animal Health, Inc., 4.27%, 8/28/23, Callable 7/28/23 @ 100^(a) | 499,577 | ||||||
1,195,000 | Elanco Animal Health, Inc., 4.90%, 8/28/28, Callable 5/28/28 @ 100(a) | 1,216,003 | ||||||
|
| |||||||
2,751,989 | ||||||||
|
| |||||||
Professional Services (0.2%): | ||||||||
2,407,681 | Trans Union LLC Term LoanB-4, 4.54% (LIBOR+200bps), 8/9/22(b) | 2,314,384 | ||||||
|
| |||||||
Software (0.5%): | ||||||||
5,335,000 | Solera LLC, 10.50%, 3/1/24, Callable 3/1/19 @ 107.88(a) | 5,681,775 | ||||||
|
| |||||||
Specialty Retail (0.2%): | ||||||||
130,000 | AutoZone, Inc., 1.63%, 4/21/19 | 129,365 | ||||||
540,000 | AutoZone, Inc., 2.50%, 4/15/21, Callable 3/15/21 @ 100 | 528,049 | ||||||
715,000 | Home Depot, Inc., 3.05% (US0003M+31 bps), 3/1/22 | 707,803 | ||||||
600,000 | Home Depot, Inc., 3.25%, 3/1/22 | 606,228 | ||||||
|
| |||||||
1,971,445 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.3%): | ||||||||
3,180,000 | Apple, Inc., 1.50%, 9/12/19 | 3,152,072 | ||||||
|
| |||||||
Tobacco (0.3%): | ||||||||
1,000,000 | Philip Morris International, Inc., 2.00%, 2/21/20 | 987,520 | ||||||
660,000 | Philip Morris International, Inc., 3.07% (US0003M+42 bps), 2/21/20 | 659,084 | ||||||
1,230,000 | Philip Morris International, Inc., 2.63%, 2/18/22, Callable 1/18/22 @ 100 | 1,190,588 | ||||||
|
| |||||||
2,837,192 | ||||||||
|
| |||||||
Total Corporate Bonds (Cost $197,419,514) | 200,431,781 | |||||||
|
| |||||||
Yankee Dollars (3.3%): | ||||||||
Banks (2.4%): | ||||||||
25,125,000 | Kreditanstalt fuer Wiederaufbau, 2.88%, 4/3/28 | 25,208,719 | ||||||
|
| |||||||
Commercial Services & Supplies (0.0%)†: | ||||||||
480,000 | Waste Connections, Inc., 4.25%, 12/1/28, Callable 9/1/28 @ 100 | 490,503 | ||||||
|
| |||||||
Electrical Equipment (0.2%): | ||||||||
260,000 | Sensata Technologies BV, 5.63%, 11/1/24(a) | 256,100 | ||||||
925,000 | Sensata Technologies BV, 5.00%, 10/1/25(a) | 869,500 | ||||||
600,000 | Sensata Technologies UK Financing Co. PLC, 6.25%, 2/15/26, Callable 2/15/21 @ 103.13(a) | 603,000 | ||||||
|
| |||||||
1,728,600 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.1%): | ||||||||
1,225,000 | Medtronic Global Holdings, 1.70%, 3/28/19 | 1,221,849 | ||||||
|
| |||||||
Household Products (0.0%)†: | ||||||||
1,200,000 | Reckitt Benckiser Treasury Services PLC, 3.38% (US0003M+56 bps), 6/24/22(a) | 1,179,063 | ||||||
|
| |||||||
Insurance (0.1%): | ||||||||
735,000 | Trinity Acquistion plc, 4.40%, 3/15/26, Callable 12/15/25 @ 100 | 730,381 | ||||||
|
|
See accompanying notes to the financial statements.
8
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Yankee Dollars, continued | ||||||||
Media (0.3%): | ||||||||
$ | 2,890,000 | Unitymedia Kabelbw GMBH, 6.13%, 1/15/25, Callable 1/15/20 @ 103.06(a) | $ | 2,904,161 | ||||
|
| |||||||
Oil, Gas & Consumable Fuels (0.2%): | ||||||||
1,650,000 | Shell International Finance BV, 3.07% (US0003M+45 bps), 5/11/20 | 1,652,210 | ||||||
|
| |||||||
Total Yankee Dollars (Cost $34,896,508) | 35,115,486 | |||||||
|
| |||||||
U.S. Treasury Obligation (2.2%): | ||||||||
U.S. Treasury Notes (2.2%) | ||||||||
25,050,000 | 2.25%, 11/15/27 | 24,197,713 | ||||||
|
| |||||||
Total U.S. Treasury Obligation (Cost $24,482,059) | 24,197,713 | |||||||
|
| |||||||
Unaffiliated Investment Company (1.5%): | ||||||||
16,657,778 | Dreyfus Treasury Securities Cash Management Fund, Institutional Shares, 2.20%(c) | 16,657,778 | ||||||
|
| |||||||
Total Unaffiliated Investment Company (Cost $16,657,778) | 16,657,778 | |||||||
|
| |||||||
Short-Term Securities Held as Collateral for Securities on Loan (8.3%)(d) | ||||||||
Floating Rate Notes (2.0%) | ||||||||
1,300,000 | Australia & New Zealand Banking Group, 2.96%, 10/10/19 | 1,299,934 | ||||||
1,195,000 | Bank of America NA, 2.67%, 5/9/19 | 1,195,000 | ||||||
1,400,000 | Bank of Nova Scotia, 2.85%, 2/28/19 | 1,400,195 | ||||||
1,525,000 | BNP Paribas, 2.86%, 6/11/19 | 1,525,000 | ||||||
1,200,000 | Canadian Imperial Bank of Commerce, 2.59%, 1/11/19 | 1,200,000 | ||||||
1,357,000 | Collateralized Commercial Paper Program Co. LLC, 2.84%, 7/25/19 | 1,357,000 | ||||||
1,217,000 | Credit Suisse AG, 2.57%, 10/1/19 | 1,217,000 | ||||||
1,300,000 | Lloyds Bank plc, 2.78%, 5/10/19 | 1,300,000 | ||||||
1,200,000 | Mitsubishi UFJ Trust and Banking Corp., 2.71%, 6/11/19 | 1,200,000 | ||||||
1,200,000 | Natixis SA, 2.72%, 1/25/19 | 1,200,000 | ||||||
1,235,000 | Nordea Bank Abp, 2.60%, 6/13/19 | 1,235,012 |
Contracts, Shares, Notional Amount or Principal Amount | Fair Value | |||||||
Short-Term Securities Held as Collateral for Securities on Loan, continued | ||||||||
Floating Rate Notes, continued | ||||||||
$ | 1,260,000 | Oversea-Chinese Banking Corp., Ltd., 2.78%, 5/22/19 | $ | 1,260,000 | ||||
1,300,000 | Skandinaviska Enskilda Banken AB, 2.81%, 6/6/19 | 1,300,000 | ||||||
1,200,000 | Societe Generale SA, 2.63%, 1/7/19 | 1,200,000 | ||||||
1,174,000 | Sumitomo Mitsui Banking Corp., 2.68%, 1/14/19 | 1,173,996 | ||||||
1,247,000 | Toronto-Dominion Bank, 2.50%, 4/17/19 | 1,247,452 | ||||||
1,300,000 | Wells Fargo Bank NA, 2.82%, 10/23/19 | 1,300,000 | ||||||
|
| |||||||
21,610,589 | ||||||||
|
| |||||||
Repurchase Agreements (1.2%) | ||||||||
1,495,500 | BNP Paribas SA, 2.54%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $1,495,711, Collateralized by U.S. Treasury Obligations and Corporate Debt Securities, 0.00% - 7.55%, 1/17/19 - 9/15/56, fair value of $1,561,640 | 1,495,500 | ||||||
11,721,733 | Mizuho Securities USA LLC, 2.95%, 1/2/19, (Purchased on 12/31/18, proceeds at maturity $11,723,654, Collateralized by U.S. Government Agency Obligations, 2.00% - 5.50%,2/1/31 - 2/20/48, fair value of $11,330,579 | 11,721,733 | ||||||
|
| |||||||
13,217,233 | ||||||||
|
| |||||||
Time Deposits (0.2%) | ||||||||
1,700,000 | Societe Generale SA, 2.40%, 1/2/19 | 1,700,000 | ||||||
|
| |||||||
Miscellaneous Investments (4.9%) | ||||||||
52,969,955 | Short-Term Investments(e) | 52,969,955 | ||||||
|
| |||||||
| Total Short-Term Securities Held as Collateral for Securities on | 89,497,777 | ||||||
|
| |||||||
Total Investment Securities (Cost $1,099,207,766) —108.3%(f) | 1,169,545,963 | |||||||
Net other assets (liabilities) — (8.3)% | (89,938,637 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 1,079,607,326 | ||||||
|
|
Percentages indicated are based on net assets as of December 31, 2018.
ADR—American Depositary Receipt
H15T5Y—5 Year Treasury Constant Maturity Rate
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
US0003M—3 Month US Dollar LIBOR
* | Non-income producing security. |
^ | This security or a partial position of this security was on loan as of December 31, 2018. The total value of securities on loan as of December 31, 2018, was $86,970,698. |
(a) | Rule 144A, Section 4(2) or other security which is restricted to resale to institutional investors. Thesub-adviser has deemed these securities to be liquid based on procedures approved by the Board of Trustees. |
(b) | Thesub-adviser has deemed these securities to be illiquid based on procedures approved by the Board of Trustees. As of December 31, 2018, these securities represent 0.22% of the net assets of the Fund. |
(c) | The rate represents the effective yield at December 31, 2018. |
(d) | 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(e) | Represents various short-term investments 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 December 31, 2018. Refer to Note 2 in the Notes to the Financial Statements for details. |
(f) | See Federal Tax Information listed in the Notes to the Financial Statements. |
See accompanying notes to the financial statements.
9
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
At December 31, 2018, the Fund’sover-the-counter options written were as follows:
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | |||||||||||||||||||
Abbott Laboratories | Citigroup | Call | 65.00 USD | 1/22/19 | 455 | $ | 29,575 | $ | (343,032 | ) | ||||||||||||||||
Abbott Laboratories | Deutsche Bank | Call | 67.50 USD | 1/22/19 | 186 | 12,555 | (97,567 | ) | ||||||||||||||||||
Abbott Laboratories | Citigroup | Call | 67.50 USD | 1/22/19 | 367 | 24,773 | (192,511 | ) | ||||||||||||||||||
Alphabet, Inc. | Credit Suisse First Boston | Call | 1200.00 USD | 1/22/19 | 22 | 26,400 | (1,065 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1200.00 USD | 1/22/19 | 22 | 26,400 | (1,065 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1200.00 USD | 1/22/19 | 32 | 38,400 | (2,329 | ) | ||||||||||||||||||
Alphabet, Inc. | Credit Suisse First Boston | Call | 1200.00 USD | 1/22/19 | 11 | 13,200 | (801 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1260.00 USD | 1/22/19 | 6 | 7,560 | (109 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1260.00 USD | 1/22/19 | 19 | 23,940 | (222 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1300.00 USD | 1/21/20 | 16 | 20,800 | (62,490 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1340.00 USD | 1/21/20 | 14 | 18,760 | (44,497 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1400.00 USD | 1/21/20 | 14 | 19,600 | (32,494 | ) | ||||||||||||||||||
Alphabet, Inc. | Citigroup | Call | 1500.00 USD | 1/21/20 | 14 | 21,000 | (18,958 | ) | ||||||||||||||||||
Amazon.com, Inc. | Citigroup | Call | 2000.00 USD | 1/22/19 | 16 | 32,000 | (221 | ) | ||||||||||||||||||
Amazon.com, Inc. | Citigroup | Call | 2300.00 USD | 1/21/20 | 17 | 39,100 | (57,055 | ) | ||||||||||||||||||
Amazon.com, Inc. | Credit Suisse First Boston | Call | 2500.00 USD | 1/21/20 | 7 | 17,500 | (14,060 | ) | ||||||||||||||||||
Amazon.com, Inc. | Credit Suisse First Boston | Call | 2600.00 USD | 1/21/20 | 7 | 18,200 | (10,860 | ) | ||||||||||||||||||
Amazon.com, Inc. | Credit Suisse First Boston | Call | 2700.00 USD | 1/21/20 | 7 | 18,900 | (8,384 | ) | ||||||||||||||||||
American Electric Power Co., Inc. | Credit Suisse First Boston | Call | 82.50 USD | 1/21/20 | 10 | 825 | (2,182 | ) | ||||||||||||||||||
American Electric Power Co., Inc. | Citigroup | Call | 82.50 USD | 1/21/20 | 96 | 7,920 | (20,945 | ) | ||||||||||||||||||
American Electric Power Co., Inc. | Credit Suisse First Boston | Call | 85.00 USD | 1/21/20 | 10 | 850 | (1,604 | ) | ||||||||||||||||||
American Electric Power Co., Inc. | Citigroup | Call | 85.00 USD | 1/21/20 | 96 | 8,160 | (15,400 | ) | ||||||||||||||||||
American Tower Corp. | JPMorgan Chase | Call | 155.00 USD | 1/22/19 | 101 | 15,655 | (53,973 | ) | ||||||||||||||||||
American Tower Corp. | Credit Suisse First Boston | Call | 155.00 USD | 1/22/19 | 93 | 14,415 | (49,698 | ) | ||||||||||||||||||
American Tower Corp. | JPMorgan Chase | Call | 160.00 USD | 1/22/19 | 96 | 15,360 | (23,507 | ) | ||||||||||||||||||
American Tower Corp. | JPMorgan Chase | Call | 165.00 USD | 1/22/19 | 97 | 16,005 | (8,366 | ) | ||||||||||||||||||
American Tower Corp. | Credit Suisse First Boston | Call | 170.00 USD | 1/21/20 | 84 | 14,280 | (77,948 | ) | ||||||||||||||||||
American Tower Corp. | Credit Suisse First Boston | Call | 175.00 USD | 1/21/20 | 84 | 14,700 | (62,876 | ) | ||||||||||||||||||
Anthem, Inc. | Citigroup | Call | 260.00 USD | 1/22/19 | 58 | 15,080 | (48,749 | ) | ||||||||||||||||||
Anthem, Inc. | Citigroup | Call | 270.00 USD | 1/22/19 | 133 | 35,910 | (46,181 | ) | ||||||||||||||||||
Anthem, Inc. | Citigroup | Call | 300.00 USD | 1/21/20 | 41 | 12,300 | (48,364 | ) | ||||||||||||||||||
Anthem, Inc. | Citigroup | Call | 310.00 USD | 1/21/20 | 41 | 12,710 | (37,345 | ) | ||||||||||||||||||
Apple, Inc. | Credit Suisse First Boston | Call | 200.00 USD | 1/22/19 | 270 | 54,000 | (301 | ) | ||||||||||||||||||
Booking Holdings, Inc. | Citigroup | Call | 1900.00 USD | 1/21/19 | 7 | 13,300 | (3,212 | ) | ||||||||||||||||||
Booking Holdings, Inc. | Citigroup | Call | 2000.00 USD | 1/21/19 | 7 | 14,000 | (651 | ) | ||||||||||||||||||
Booking Holdings, Inc. | Citigroup | Call | 2300.00 USD | 1/22/19 | 12 | 27,600 | (28 | ) | ||||||||||||||||||
Booking Holdings, Inc. | Citigroup | Call | 2100.00 USD | 1/21/20 | 5 | 10,500 | (45,875 | ) | ||||||||||||||||||
Booking Holdings, Inc. | Citigroup | Call | 2125.00 USD | 1/21/20 | 6 | 12,750 | (51,275 | ) | ||||||||||||||||||
Booking Holdings, Inc. | Citigroup | Call | 2200.00 USD | 1/21/20 | 5 | 11,000 | (34,413 | ) | ||||||||||||||||||
Duke Energy Corp. | Goldman Sachs | Call | 85.00 USD | 1/21/20 | 277 | 23,545 | (175,080 | ) | ||||||||||||||||||
Duke Energy Corp. | Goldman Sachs | Call | 90.00 USD | 1/21/20 | 277 | 24,930 | (110,250 | ) | ||||||||||||||||||
Duke Energy Corp. | Bank of America | Call | 100.00 USD | 1/21/20 | 147 | 14,700 | (21,521 | ) | ||||||||||||||||||
Enterprise Products Partners LP | Citigroup | Call | 30.00 USD | 1/22/19 | 1,010 | 30,300 | (789 | ) | ||||||||||||||||||
Facebook, Inc. | Citigroup | Call | 180.00 USD | 1/22/19 | 182 | 32,760 | (32 | ) | ||||||||||||||||||
Facebook, Inc. | Citigroup | Call | 200.00 USD | 1/22/19 | 61 | 12,200 | (1 | ) | ||||||||||||||||||
Intercontinental Exchange, Inc. | Citigroup | Call | 80.00 USD | 1/22/19 | 390 | 31,200 | (6,505 | ) | ||||||||||||||||||
Intuit, Inc. | JPMorgan Chase | Call | 190.00 USD | 1/22/19 | 164 | 31,160 | (167,953 | ) | ||||||||||||||||||
Intuit, Inc. | Goldman Sachs | Call | 260.00 USD | 1/21/20 | 13 | 3,380 | (6,612 | ) | ||||||||||||||||||
Intuit, Inc. | Goldman Sachs | Call | 270.00 USD | 1/21/20 | 13 | 3,510 | (5,042 | ) | ||||||||||||||||||
MasterCard, Inc. | Goldman Sachs | Call | 180.00 USD | 1/22/19 | 107 | 19,260 | (123,007 | ) | ||||||||||||||||||
MasterCard, Inc. | Goldman Sachs | Call | 185.00 USD | 1/22/19 | 108 | 19,980 | (86,753 | ) | ||||||||||||||||||
McDonald’s Corp. | Credit Suisse First Boston | Call | 195.00 USD | 1/21/20 | 70 | 13,650 | (51,025 | ) | ||||||||||||||||||
McDonald’s Corp. | Citigroup | Call | 195.00 USD | 1/21/20 | 38 | 7,410 | (27,699 | ) | ||||||||||||||||||
McDonald’s Corp. | Credit Suisse First Boston | Call | 200.00 USD | 1/21/20 | 70 | 14,000 | (41,191 | ) | ||||||||||||||||||
McDonald’s Corp. | Citigroup | Call | 200.00 USD | 1/21/20 | 38 | 7,600 | (22,360 | ) | ||||||||||||||||||
Microsoft Corp. | JPMorgan Chase | Call | 100.00 USD | 1/22/19 | 319 | 31,900 | (135,915 | ) |
See accompanying notes to the financial statements.
10
AZL T. Rowe Price Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 2018
Description | Counterparty | Put/ Call | Strike Price | Expiration Date | Contracts | Notional Amount(a) | Fair Value | |||||||||||||||||||
Microsoft Corp. | Royal Bank Of Canada | Call | 105.00 USD | 1/22/19 | 151 | $ | 15,855 | $ | (25,863 | ) | ||||||||||||||||
Microsoft Corp. | JPMorgan Chase | Call | 105.00 USD | 1/22/19 | 123 | 12,915 | (21,067 | ) | ||||||||||||||||||
Microsoft Corp. | Deutsche Bank | Call | 110.00 USD | 1/22/19 | 576 | 63,360 | (28,206 | ) | ||||||||||||||||||
Microsoft Corp. | JPMorgan Chase | Call | 110.00 USD | 1/22/19 | 123 | 13,530 | (6,023 | ) | ||||||||||||||||||
Microsoft Corp. | Royal Bank Of Canada | Call | 110.00 USD | 1/22/19 | 151 | 16,610 | (7,394 | ) | ||||||||||||||||||
Microsoft Corp. | Citigroup | Call | 125.00 USD | 1/21/20 | 121 | 15,125 | (49,626 | ) | ||||||||||||||||||
Microsoft Corp. | Citigroup | Call | 130.00 USD | 1/21/20 | 121 | 15,730 | (38,389 | ) | ||||||||||||||||||
Microsoft Corp. | Citigroup | Call | 135.00 USD | 1/21/20 | 122 | 16,470 | (29,818 | ) | ||||||||||||||||||
Nextra Energy, Inc. | Credit Suisse First Boston | Call | 200.00 USD | 1/20/20 | 306 | 61,200 | (105,546 | ) | ||||||||||||||||||
PNC Financial Services Group, Inc. | Citigroup | Call | 130.00 USD | 1/22/19 | 375 | 48,750 | (6,851 | ) | ||||||||||||||||||
PNC Financial Services Group, Inc. | Credit Suisse First Boston | Call | 165.00 USD | 1/22/19 | 249 | 41,085 | (6 | ) | ||||||||||||||||||
PNC Financial Services Group, Inc. | Credit Suisse First Boston | Call | 180.00 USD | 1/22/19 | 25 | 4,500 | — | |||||||||||||||||||
Texas Instruments, Inc. | Goldman Sachs | Call | 125.00 USD | 1/21/19 | 186 | 23,250 | (19 | ) | ||||||||||||||||||
Texas Instruments, Inc. | Goldman Sachs | Call | 130.00 USD | 1/21/19 | 186 | 24,180 | (7 | ) | ||||||||||||||||||
Texas Instruments, Inc. | Goldman Sachs | Call | 130.00 USD | 1/21/20 | 24 | 3,120 | (3,751 | ) | ||||||||||||||||||
Thermo Fisher Scientific, Inc. | Bank of America | Call | 230.00 USD | 1/21/19 | 96 | 22,080 | (26,890 | ) | ||||||||||||||||||
Thermo Fisher Scientific, Inc. | Bank of America | Call | 240.00 USD | 1/21/19 | 97 | 23,280 | (7,954 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Goldman Sachs | Call | 260.00 USD | 1/22/19 | 30 | 7,800 | (8,953 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Citigroup | Call | 260.00 USD | 1/22/19 | 36 | 9,360 | (10,743 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Goldman Sachs | Call | 270.00 USD | 1/22/19 | 166 | 44,820 | (18,175 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Citigroup | Call | 270.00 USD | 1/22/19 | 103 | 27,810 | (11,278 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Goldman Sachs | Call | 290.00 USD | 1/21/20 | 28 | 8,120 | (30,343 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Citigroup | Call | 290.00 USD | 1/21/20 | 56 | 16,240 | (60,685 | ) | ||||||||||||||||||
UnitedHealth Group, Inc. | Citigroup | Call | 300.00 USD | 1/21/20 | 83 | 24,900 | (70,182 | ) | ||||||||||||||||||
Visa, Inc. | Citigroup | Call | 125.00 USD | 1/21/19 | 156 | 19,500 | (132,234 | ) | ||||||||||||||||||
Visa, Inc. | Citigroup | Call | 105.00 USD | 1/22/19 | 57 | 5,985 | (154,697 | ) | ||||||||||||||||||
Visa, Inc. | Citigroup | Call | 110.00 USD | 1/22/19 | 57 | 6,270 | (126,708 | ) | ||||||||||||||||||
Visa, Inc. | Citigroup | Call | 115.00 USD | 1/22/19 | 57 | 6,555 | (99,216 | ) | ||||||||||||||||||
Visa, Inc. | Citigroup | Call | 120.00 USD | 1/22/19 | 158 | 18,960 | (201,617 | ) | ||||||||||||||||||
Visa, Inc. | Credit Suisse First Boston | Call | 135.00 USD | 1/22/19 | 244 | 32,940 | (54,422 | ) | ||||||||||||||||||
Visa, Inc. | Credit Suisse First Boston | Call | 140.00 USD | 1/22/19 | 234 | 32,760 | (18,922 | ) | ||||||||||||||||||
Visa, Inc. | Citigroup | Call | 150.00 USD | 1/22/19 | 406 | 60,900 | (3,134 | ) | ||||||||||||||||||
Visa, Inc. | Credit Suisse First Boston | Call | 165.00 USD | 1/20/20 | 61 | 10,065 | (22,570 | ) | ||||||||||||||||||
Visa, Inc. | Credit Suisse First Boston | Call | 150.00 USD | 1/21/20 | 98 | 14,700 | (72,007 | ) | ||||||||||||||||||
Visa, Inc. | Credit Suisse First Boston | Call | 155.00 USD | 1/21/20 | 99 | 15,345 | (58,169 | ) | ||||||||||||||||||
Visa, Inc. | Credit Suisse First Boston | Call | 160.00 USD | 1/21/20 | 160 | 25,600 | (74,760 | ) | ||||||||||||||||||
Yum! Brands, Inc. | Citigroup | Call | 95.00 USD | 1/22/19 | 267 | 25,365 | (20,077 | ) | ||||||||||||||||||
Yum! Brands, Inc. | Citigroup | Call | 100.00 USD | 1/21/20 | 152 | 15,200 | (72,514 | ) | ||||||||||||||||||
Yum! Brands, Inc. | Citigroup | Call | 105.00 USD | 1/21/20 | 152 | 15,960 | (49,453 | ) | ||||||||||||||||||
|
| |||||||||||||||||||||||||
Total (Premiums received $7,130,108) |
| $ | (4,230,617 | ) | ||||||||||||||||||||||
|
|
(a) | Notional amount is expressed as the number of contracts multiplied by the strike price of the underlying asset. |
Balances Reported in the Statement of Assets and Liabilities for Options Written
Value | ||
Options Written | $(4,230,617) |
See accompanying notes to the financial statements.
11
AZL T. Rowe Price Capital Appreciation Fund
Statement of Assets and Liabilities
December 31, 2018
Assets: | |||||
Investment securities, at cost | $ | 1,099,207,766 | |||
|
| ||||
Investment securities, at value(a) | $ | 1,169,545,963 | |||
Cash | 146,049 | ||||
Interest and dividends receivable | 3,360,586 | ||||
Foreign currency, at value (cost $88) | 88 | ||||
Receivable for investments sold | 4,046,357 | ||||
Reclaims receivable | 12,525 | ||||
Prepaid expenses | 12,130 | ||||
|
| ||||
Total Assets | 1,177,123,698 | ||||
|
| ||||
Liabilities: | |||||
Payable for investments purchased | 2,771,786 | ||||
Payable for capital shares redeemed | 57,978 | ||||
Payable for collateral received on loaned securities | 89,497,777 | ||||
Written Options (Premiums received $7,130,108) | 4,230,617 | ||||
Manager fees payable | 654,287 | ||||
Administration fees payable | 12,697 | ||||
Distribution fees payable | 233,674 | ||||
Custodian fees payable | 4,971 | ||||
Administrative and compliance services fees payable | 4,718 | ||||
Transfer agent fees payable | 649 | ||||
Trustee fees payable | 1,807 | ||||
Other accrued liabilities | 45,411 | ||||
|
| ||||
Total Liabilities | 97,516,372 | ||||
|
| ||||
Net Assets | $ | 1,079,607,326 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid in capital | $ | 930,057,806 | |||
Total distributable earnings | 149,549,520 | ||||
|
| ||||
Net Assets | $ | 1,079,607,326 | |||
|
| ||||
Shares of beneficial interest (unlimited number of shares authorized, no par value) | 63,775,706 | ||||
Net Asset Value (offering and redemption price per share) | $ | 16.93 | |||
|
|
(a) | Includes securities on loan of $86,970,698. |
For the Year Ended December 31, 2018
Investment Income: | |||||
Dividends | $ | 25,814,016 | |||
Interest | 11,098,307 | ||||
Income from securities lending | 502,161 | ||||
Foreign withholding tax | (101,906 | ) | |||
|
| ||||
Total Investment Income | 37,312,578 | ||||
|
| ||||
Expenses: | |||||
Manager fees | 8,616,481 | ||||
Administration fees | 294,103 | ||||
Distribution fees | 2,872,160 | ||||
Custodian fees | 50,993 | ||||
Administrative and compliance services fees | 18,718 | ||||
Transfer agent fees | 6,454 | ||||
Trustee fees | 58,712 | ||||
Professional fees | 56,209 | ||||
Shareholder reports | 31,096 | ||||
Other expenses | 24,571 | ||||
|
| ||||
Total expenses before reductions | 12,029,497 | ||||
Less expenses voluntarily waived/reimbursed by the Manager | (574,449 | ) | |||
|
| ||||
Net expenses | 11,455,048 | ||||
|
| ||||
Net Investment Income/(Loss) | 25,857,530 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments: | |||||
Net realized gains/(losses) on securities and foreign currencies | 54,736,815 | ||||
Net realized gains/(losses) on written options contracts | 205,636 | ||||
Change in net unrealized appreciation/depreciation on securities and foreign currencies | (86,084,983 | ) | |||
Change in net unrealized appreciation/depreciation on written options contracts | 10,587,452 | ||||
|
| ||||
Net realized and Change in net unrealized gains/losses on investments | (20,555,080 | ) | |||
|
| ||||
Change in Net Assets Resulting From Operations | $ | 5,302,450 | |||
|
|
See accompanying notes to the financial statements.
12
AZL T. Rowe Price Capital Appreciation Fund
Statements of Changes in Net Assets
For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||
Change In Net Assets: | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 25,857,530 | $ | 10,548,174 | ||||||
Net realized gains/(losses) on investments | 54,942,451 | 63,427,330 | ||||||||
Change in unrealized appreciation/depreciation on investments | (75,497,531 | ) | 76,089,126 | |||||||
|
|
|
| |||||||
Change in net assets resulting from operations | 5,302,450 | 150,064,630 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders:(a) | ||||||||||
Distributions | (73,943,574 | ) | (54,135,566 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from distributions to shareholders | (73,943,574 | ) | (54,135,566 | ) | ||||||
|
|
|
| |||||||
Capital Transactions: | ||||||||||
Proceeds from shares issued | 32,612,882 | 67,203,687 | ||||||||
Proceeds from dividends reinvested | 73,943,574 | 54,135,566 | ||||||||
Value of shares redeemed | (105,282,159 | ) | (67,640,000 | ) | ||||||
|
|
|
| |||||||
Change in net assets resulting from capital transactions | 1,274,297 | 53,699,253 | ||||||||
|
|
|
| |||||||
Change in net assets | (67,366,827 | ) | 149,628,317 | |||||||
Net Assets:(a) | ||||||||||
Beginning of period | 1,146,974,153 | 997,345,836 | ||||||||
|
|
|
| |||||||
End of period | $ | 1,079,607,326 | $ | 1,146,974,153 | ||||||
|
|
|
| |||||||
Share Transactions: | ||||||||||
Shares issued | 1,759,202 | 3,823,159 | ||||||||
Dividends reinvested | 4,227,763 | 3,102,325 | ||||||||
Shares redeemed | (5,838,367 | ) | (3,829,923 | ) | ||||||
|
|
|
| |||||||
Change in shares | 148,598 | 3,095,561 | ||||||||
|
|
|
|
(a) | Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. See Note 2 in Notes to the Financial Statements. |
See accompanying notes to the financial statements.
13
AZL T. Rowe Price Capital Appreciation Fund
Financial Highlights
(Selected data for a share of beneficial interest outstanding throughout the periods indicated)
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 18.03 | $ | 16.48 | $ | 16.04 | $ | 15.90 | $ | 15.84 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment Activities: | |||||||||||||||||||||||||
Net Investment Income/(Loss) | 0.41 | 0.17 | 0.21 | 0.11 | 0.11 | ||||||||||||||||||||
Net Realized and Unrealized Gains/(Losses) on Investments | (0.31 | ) | 2.28 | 1.03 | 0.68 | 1.69 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total from Investment Activities | 0.10 | 2.45 | 1.24 | 0.79 | 1.80 | ||||||||||||||||||||
|
|
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Distributions to Shareholders From: | |||||||||||||||||||||||||
Net Investment Income | (0.17 | ) | (0.24 | ) | (0.12 | ) | (0.10 | ) | (0.06 | ) | |||||||||||||||
Net Realized Gains | (1.03 | ) | (0.66 | ) | (0.68 | ) | (0.55 | ) | (1.68 | ) | |||||||||||||||
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Total Dividends | (1.20 | ) | (0.90 | ) | (0.80 | ) | (0.65 | ) | (1.74 | ) | |||||||||||||||
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Net Asset Value, End of Period | $ | 16.93 | $ | 18.03 | $ | 16.48 | $ | 16.04 | $ | 15.90 | |||||||||||||||
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Total Return(a) | 0.38 | % | 15.04 | % | 7.84 | % | 5.07 | % | 11.77 | % | |||||||||||||||
Ratios to Average Net Assets/Supplemental Data: | |||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 1,079,607 | $ | 1,146,974 | $ | 997,346 | $ | 1,150,906 | $ | 787,570 | |||||||||||||||
Net Investment Income/(Loss) | 2.25 | % | 0.97 | % | 1.10 | % | 0.98 | % | 0.93 | % | |||||||||||||||
Expenses Before Reductions(b) | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | |||||||||||||||
Expenses Net of Reductions | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||||
Expenses Net of Reductions, Excluding Expenses Paid Indirectly | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | %(c) | |||||||||||||||
Portfolio Turnover Rate | 70 | % | 65 | % | 89 | % | 73 | % | 72 | % |
(a) | 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. |
(b) | Excludes fee reductions. If such fee reductions had not occurred, the ratios would have been as indicated. |
(c) | 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 is used to pay certain Fund expenses. The Fund ceased participation in the program in June 2014. |
See accompanying notes to the financial statements.
14
AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
1. Organization
The Allianz Variable Insurance Products Trust (the “Trust”) was organized as a Delaware statutory trust on July 13, 1999. 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 22 separate investment portfolios (individually a “Fund,” collectively, the “Funds”), of which one is included in this report, the AZL T. Rowe Price Capital Appreciation Fund (the “Fund”), and 21 are presented in separate reports.
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 and variable life insurance policies 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 the 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. 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.
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 year, 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.
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 Fund of Funds Trust.
15
AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
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 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 December 31, 2018 are presented on the Fund’s Schedule of Portfolio Investments.
Cash collateral received in connection with securities lending is invested in short-term investments that have a remaining maturity of 397 days or less, similar to investments held in compliance with Rule 2a-7 under the 1940 Act. Included in short-term investments may be investments in overnight repurchase agreements that are collateralized at 102% with securities issued by the U.S. Treasury; U.S. government or any agency, instrumentality or authority of the U.S. government, or other approved issuers. The securities purchased with cash collateral received are reflected in the Fund’s Schedule of Portfolio Investments under Short-Term Securities Held as Collateral for Securities on Loan. Short-term securities held as collateral for securities on loan are valued at amortized cost which approximates fair value. Under the amortized cost method, discounts or premiums are amortized on a constant basis to the maturity of the security. These are typically categorized as Level 2 in the fair value hierarchy, as defined in Note 4. Income earned on these investments is included in “Income from securities lending” on the Statement of Operations.
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 $49,356 during the year ended December 31, 2018. These fees have been netted against “Income from securities lending” on the Statement of Operations. The Fund had securities lending transactions of $89,408,420 accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of December 31, 2018. At December 31, 2018, there were no master netting provisions in the securities lending agreement.
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 year ended December 31, 2018, the Fund participated in the following cross-trade transactions:
Purchases | Sales | Realized Gain/(Loss) | |||||||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 8,606,002 | $ | 584,991 | $ | (83,367 | ) |
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.
Options Contracts
The Fund may purchase or write put and call options on a security or an index of securities. During the year ended December 31, 2018, 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.
Purchased Options Contracts — The Fund pays a premium which is included in “Investments, at value” on the 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
16
AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
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.
For the year ended December 31, 2018, the monthly average notional amount for written options contracts was $1.4 million. Realized gains and losses are reported as “Net realized gains/(losses) on options 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 December 31, 2018:
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 | ||||||||||||
Equity Contracts | $ | — | Written Options | $ | 4,230,617 |
The following is a summary of the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended December 31, 2018:
Primary Risk Exposure | Location of Gains/(Losses) on Derivatives Recognized | Realized Gains/(Losses) Recognized | Change in Net Unrealized Appreciation/Depreciation on Derivatives Recognized | |||
Equity Risk | ||||||
Equity Contracts | Net realized gains/(losses) on written options contracts/ Change in net unrealized appreciation/depreciation on written option contracts | $205,636 | $10,587,452 |
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 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 December 31, 2018. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to master netting arrangements in the Statement of Assets and Liabilities. This table also summarizes the fair values of derivative instruments on the Fund’s Statement of Assets and Liabilities, categorized by risk exposure, as of December 31, 2018.
As of December 31, 2018, the Fund’s derivative assets and liabilities by type were as follows:
Assets | Liabilities | |||||||||
Derivative Financial Instruments: | ||||||||||
Written option contracts | $ | — | $ | 4,230,617 | ||||||
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| |||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | — | 4,230,617 | ||||||||
Derivatives not subject to a master netting agreement or similar agreement (“MNA”) | — | — | ||||||||
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Total assets and liabilities subject to a MNA | $ | — | $ | 4,230,617 | ||||||
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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 December 31, 2018:
Counterparty | Derivative Liabilities Subject to a MNA by Counterparty | Derivatives for Offset | Non-cash Pledged* | Cash Pledged* | Net Amount of Derivative Liabilities | ||||||||||||||||||||
Bank of America | $ | 56,365 | $ | — | $ | — | $ | — | $ | 56,365 | |||||||||||||||
Citigroup | 2,302,029 | — | — | — | 2,302,029 | ||||||||||||||||||||
Credit Suisse First Boston | 728,397 | — | — | — | 728,397 | ||||||||||||||||||||
Deutsche Bank | 125,773 | — | — | — | 125,773 | ||||||||||||||||||||
Goldman Sachs | 567,992 | — | — | — | 567,992 | ||||||||||||||||||||
JPMorgan Chase | 416,804 | — | — | — | 416,804 | ||||||||||||||||||||
Royal Bank of Canada | 33,257 | — | — | — | 33,257 | ||||||||||||||||||||
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Total | $ | 4,230,617 | $ | — | $ | — | $ | — | $ | 4,230,617 | |||||||||||||||
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* | 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 Statement of Assets and Liabilities. |
17
AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08 “Premium Amortization on Purchased Callable Debt Securities” (“ASU2017-08”), which shortens the premium amortization period for purchasednon-contingently callable debt securities. ASU2017-08 specifies that the premium amortization period ends at the earliest call date for purchasednon-contingently callable debt securities. ASU2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU2017-08 will materially impact the Fund’s financial statements.
In August 2018, FASB issued ASUNo. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an appropriate consideration when evaluating disclosure requirements. ASU2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU2018-13. The Fund has early adopted ASU 2018-13 eliminated and modified disclosures with the financial statements prepared as of December 31, 2018.
In August 2018, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain removals from changes to and additions to existing disclosure requirements under RegulationS-X. The Fund’s adoption of these amendments, effective with the financial statements prepared as of December 31, 2018 had no effect on the Funds’ net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the December 31, 2017 Statement of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Prior to adoption of this amendment, the distributions to shareholders in the December 31, 2017 Statements of Changes in Net Assets appeared as follows:
For the Year Ended December 31, 2017 | |||||
Distributions to Shareholders: | |||||
From net investment income | $ | (14,550,673 | ) | ||
From net realized gains | (39,584,893 | ) | |||
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| ||||
Change in net assets resulting from distributions to shareholders | $ | (54,135,566 | ) | ||
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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 an amended and restated subadvisory agreement, effective November 15, 2013, with T. Rowe Price Associates, Inc. (“T. Rowe Price”), T. Rowe Price 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 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 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.
For the year ended December 31, 2018, the annual rate due to the Manager and the annual expense limit were as follows:
Annual Rate* | Annual Expense Limit | |||||||||
AZL T. Rowe Price Capital Appreciation Fund | 0.75 | % | 1.20 | % |
* | The Manager voluntarily reduced the management fee to 0.70% 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 year are reflected on the Statement of Operations as “Recoupment of prior expenses reimbursed by the Manager.” At December 31, 2018, 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.
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 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 value services, and a Trust-wide
18
AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
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 anannual 12b-1 fee in the maximum amount of 0.25% of the Fund’s average daily net assets, 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 year ended December 31, 2018, $9,067 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 Fund of Funds Trust, eachnon-interested Trustee receives a $174,000 annual Board retainer, the Lead Director receives an additional $43,500 annually and the Chair of the Nominating and Corporate Governance Committee receives an additional $26,100 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 Fund of Funds Trust in proportion to the assets under management of each trust. During the year ended December 31, 2018, actual Trustee compensation was $1,287,600 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 inopen-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.
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.
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.
19
AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
The following is a summary of the valuation inputs used as of December 31, 2018 in valuing the Fund’s investments based upon the three levels defined above:
Investment Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks+ | $ | 725,436,718 | $ | — | $ | — | $ | 725,436,718 | ||||||||||||
Preferred Stocks | ||||||||||||||||||||
Banks | 4,542,732 | — | — | 4,542,732 | ||||||||||||||||
Capital Markets | 1,596,254 | — | — | 1,596,254 | ||||||||||||||||
Electric Utilities | 6,109,100 | — | — | 6,109,100 | ||||||||||||||||
Health Care Equipment & Supplies | 10,834,405 | — | — | 10,834,405 | ||||||||||||||||
Machinery | — | 2,909,183 | — | 2,909,183 | ||||||||||||||||
Multi-Utilities | 4,729,000 | 3,609,000 | — | 8,338,000 | ||||||||||||||||
Convertible Preferred Stocks | ||||||||||||||||||||
Banks | — | 14,844,553 | — | 14,844,553 | ||||||||||||||||
Electric Utilities | 1,101,789 | — | 1,101,789 | |||||||||||||||||
Asset Backed Securities | — | 3,676,781 | — | 3,676,781 | ||||||||||||||||
Bank Loans | — | 27,272,813 | — | 27,272,813 | ||||||||||||||||
Corporate Bonds | ||||||||||||||||||||
Electric Utilities | 579,580 | 10,022,295 | — | 10,601,875 | ||||||||||||||||
Other Corporate Bonds+ | 186,813,006 | — | 186,813,006 | |||||||||||||||||
Yankee Dollars+ | — | 35,115,486 | — | 35,115,486 | ||||||||||||||||
U.S. Treasury Obligations | — | 24,197,713 | — | 24,197,713 | ||||||||||||||||
Short-Term Securities Held as Collateral for Securities on Loan | — | 89,497,777 | — | 89,497,777 | ||||||||||||||||
Unaffiliated Investment Company | 16,657,778 | — | — | 16,657,778 | ||||||||||||||||
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Total Investment Securities | 770,485,567 | 399,060,396 | — | 1,169,545,963 | ||||||||||||||||
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Other Financial Instruments:* | ||||||||||||||||||||
Written Options | — | (4,230,617 | ) | — | (4,230,617 | ) | ||||||||||||||
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Total Investments | $ | 770,485,567 | $ | 394,829,779 | $ | — | $ | 1,165,315,346 | ||||||||||||
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+ | For detailed industry descriptions, see the accompanying Schedule of Portfolio Investments. |
* | Other Financial Instruments would include any derivative instruments, such as written options. |
5. Security Purchases and Sales
For the year ended December 31, 2018, cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) were as follows:
Purchases | Sales | |||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 845,562,203 | $ | 764,638,942 |
For the year ended December 31, 2018, purchases and sales of long-term U.S. government securities were as follows:
Purchases | Sales | |||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 68,815,963 | $ | 69,669,451 |
6. 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.
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 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.
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AZL T. Rowe Price Capital Appreciation Fund
Notes to the Financial Statements
December 31, 2018
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.
Mortgage-Related and Other Asset-Backed Risk: The Fund may invest in a variety of mortgage-related and other asset-backed securities, which are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to call risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates. If a Fund purchases mortgage-backed or asset-backed securities that are subordinated to other interests in the same mortgage pool, the Fund may receive payments only after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless. An unexpectedly high or low rate of prepayments on a pool’s underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination. The risk of non-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. A Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
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 December 31, 2018 is $ 1,095,318,940. The gross unrealized appreciation/(depreciation) on a tax basis is as follows:
Unrealized appreciation | $ | 119,285,421 | ||
Unrealized (depreciation) | (49,289,015 | ) | ||
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Net unrealized appreciation/(depreciation) | $ | 69,996,406 | ||
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The tax character of dividends paid to shareholders during the year ended December 31, 2018 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 26,818,851 | $ | 47,124,723 | $ | 73,943,574 |
(a) | Total distributions paid may differ from the Statements of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
The tax character of dividends paid to shareholders during the year ended December 31, 2017 were as follows:
Ordinary Income | Net Long-Term | Total Distributions(a) | |||||||||||||
AZL T. Rowe Price Capital Appreciation Fund | $ | 14,550,673 | $ | 39,584,893 | $ | 54,135,566 |
(a) | Total distributions paid may differ from the 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 T. Rowe Price Capital Appreciation Fund | $ | 25,828,337 | $ | 54,523,504 | $ | — | $ | 69,996,382 | $ | 150,348,223 |
(a) | The difference between book-basis andtax-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 December 31, 2018, the Fund had multiple shareholder accounts which are affiliated with the Manager representing ownership in excess of 95% 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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Allianz Variable Insurance Products Trust and Shareholders of
AZL T. Rowe Price Capital Appreciation Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of AZL T. Rowe Price Capital Appreciation Fund (one of the funds constituting Allianz Variable Insurance Products Trust, referred to hereafter as the “Fund”) as of December 31, 2018, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations, changes in its net assets, and the financial highlights for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended December 31, 2017 and the financial highlights for each of the periods ended on or prior to December 31, 2017 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 23, 2018 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 22, 2019
We have served as the auditor of one or more investment companies in the Allianz Variable Insurance Products complex since 2018.
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Other Federal Income Tax Information (Unaudited)
For the year ended December 31, 2018, 28.28% of the total ordinary income dividends paid by the Fund qualify for the corporate dividends received deductions available to corporate shareholders.
During the year ended December 31, 2018, the Fund declared net short-term capital gain distributions of $16,176,203.
During the year ended December 31, 2018, the Fund declared net long-term capital gain distributions of $47,124,723.
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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-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 calling800-SEC-0330.
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Approval of Investment Advisory and Subadvisory Agreements (Unaudited)
Subject to the general supervision of the Board of Trustees (the “Board”) and in accordance with the investment objectives and restrictions of each separate series (together, the “Funds”) of the Allianz Variable Insurance Products Trust (the “Trust”), investment advisory services are provided to the Funds by Allianz Investment Management LLC (the “Manager”). As used in this section, “Fund” refers to any of the Funds other than the AZL Moderate Index Strategy Fund. The Manager manages each Fund pursuant to an investment management agreement (the “Management Agreement”) with the Trust in respect of each such Fund. The Management Agreement provides that the Manager, subject to the supervision and approval of the Board, is responsible for the management of each Fund. For management services, each Fund pays the Manager an investment advisory fee based upon each Fund’s average daily net assets. The Manager has contractually agreed to limit the expenses of each Fund by reimbursing the Fund if and when total Fund operating expenses exceed certain amounts until at least May 1, 2020 (the “Expense Limitation Agreement”).
Each Fund is amanager-of-managers fund. That means that the Manager is responsible for monitoring the various Subadvisers that haveday-to-day responsibility for the decisions made for each Fund. The Manager also is responsible for determining, in the first instance, which investment advisers to consider recommending for selection as a Subadviser.
In reviewing the services provided by the Manager and the terms of the Management Agreement, the Board receives and reviews information related to the Manager’s experience and expertise in the variable insurance marketplace. Currently, the Funds are offered only through variable annuities and variable life insurance policies, and not in the retail fund market. In addition, the Board receives information regarding the Manager’s expertise with regard to portfolio diversification and asset allocation requirements within variable insurance products issued by Allianz Life Insurance Company of North America (“Allianz Life”) and its subsidiary, Allianz Life Insurance Company of New York (“Allianz of New York”). Currently, the Funds are offered only through Allianz Life and Allianz of New York variable products.
The Manager has adopted policies and procedures to assist it in the process of analyzing each potential Subadviser with expertise in particular asset classes for purposes of making the recommendation that a specific investment adviser be selected. The Board reviews and considers the information provided by the Manager in deciding which investment advisers to select as a Subadviser. After an investment adviser becomes a Subadviser, a similarly rigorous process is instituted by the Manager to monitor the investment performance and other responsibilities of the Subadviser. The Manager reports to the Board on its analysis at the regular meetings of the Board, which are held at least quarterly. Where warranted, the Manager will add or remove a particular Subadviser from a “watch” list that it maintains. Watch list criteria include, for example: (a) Fund performance over various time periods; (b) Fund risk issues, such as changes in key personnel involved with Fund management, changes in investment philosophy or process, or “capacity” concerns; and (c) organizational risk issues, such as regulatory, compliance or legal concerns, or changes in the ownership of the Subadviser. The Manager may place a Fund on the watch list for other reasons, and if so, will explain its rationale to the Board. Funds which are on the watch list are subject to additional scrutiny by the Manager and the Board. Funds may be removed from such watch list, if for example, performance improves or regulatory matters are satisfactorily resolved. However, in some situations where Funds have been on the watch list, the Manager has recommended the retention of a new Subadviser, and the Board has subsequently considered and approved retention of the new Subadviser.
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board has reviewed and approved the Management Agreement with the Manager and portfolio management agreements (the “Subadvisory Agreements”) with the Subadvisers. The Board’s decision to approve these contracts reflects the exercise of its business judgment on whether to approve new arrangements and continue the existing arrangements. During its review of these contracts, the Board considered many factors, among the most material of which are: the Fund’s investment objectives and long-term performance; the Manager’s and Subadvisers’ (collectively, the “Advisory Organizations”) management philosophy, personnel, processes and investment performance, including their compliance history and the adequacy of their compliance processes; the preferences and expectations of Fund shareholders (and underlying contract owners) and their relative sophistication; the continuing state of competition in the mutual fund industry; and comparable fees in the mutual fund industry.
The Board also considered the compensation and benefits received by the Advisory Organizations. This includes fees received for services provided to the Fund by affiliated persons of the Advisory Organizations and research services received by the Advisory Organizations from brokers that execute Fund trades, as well as advisory fees. The Board considered the fact that: (1) the Manager and the Trust are parties to an Administrative Services Agreement and a Compliance Services Agreement, under which the Manager is compensated by the Trust for performing certain administrative and compliance services including providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer; and (2) Allianz Life Financial Services, LLC, an affiliated person of the Manager, is a registered securities broker-dealer and received (along with its affiliated persons) any payments made by the Funds pursuant toRule 12b-1.
The Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an adviser’s compensation: the nature and quality of the services provided by the adviser, including the performance of the fund; the adviser’s cost of providing the services; the extent to which the adviser may realize “economies of scale” as the fund grows larger; any indirect benefits that may accrue to the adviser and its affiliates as a result of the adviser’s relationship with the fund; performance and expenses of comparable funds; the profitability of acting as adviser to the fund; and the extent to which the independent Board members, who are not “interested persons” of a fund as defined by the 1940 Act, are fully informed about all facts bearing on the adviser’s services and fees. The Board is aware of these factors and takes them into account in its review of the Management Agreement and Subadvisory Agreements (collectively, the “Agreements”).
The Board considered and weighed these circumstances in light of its experience in governing the Trust and working with the Advisory Organizations on matters relating to the Funds, and is assisted in its deliberations by the advice of independent legal counsel to the independent Trustees. In this regard, the Board requests and receives a significant amount of information about the Funds and the Advisory Organizations. Some of this information is provided at each regular meeting of the Board; additional information is provided in connection with the particular meeting or meetings at which the Board’s formal review of an advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board’s evaluation of an advisory contract is informed by reports covering such matters as: an Advisory Organization’s investment philosophy, personnel, and processes; the Fund’s investment performance (in absolute terms as well as in relationship to its benchmark(s), certain competitor or “peer group” funds and similar funds managed by the particular Subadviser), and comments on the reasons for performance; the Fund’s expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for the Expense Limitation Agreement and additional voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Advisory Organizations and their affiliates; compliance and audit reports concerning the Funds and the companies that service them; and relevant developments in the mutual fund industry and how the Funds and/or Advisory Organizations are responding to them.
The Board also receives financial information about the Advisory Organizations, including reports on the compensation and benefits the Advisory Organizations derive from their relationships with the Funds. These reports cover not only the fees under the advisory contracts, but also fees, if any, received for providing other services to the Funds. The reports also discuss any indirect or “fall out” benefits an Advisory Organization may derive from its relationship with the Funds.
In assessing the Advisory Organizations performance of their obligations, the Board may also consider whether there has occurred a circumstance or event that would constitute a reason for it to not renew an advisory contract. In this regard, the Board is mindful of the potential disruption of a Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew a contract.
The Agreements were most recently considered at Board meetings held in the fall of 2018. Information relevant to the approval of such Agreements was considered at a telephonic Board meeting on October 17, 2018, and at an “in person” Board meeting held October 23, 2018. The Agreements were approved at the Board meeting on October 23, 2018. At such meeting the Board also approved the Expense Limitation Agreement between the Manager and the Trust for the period ending April 30, 2020. In connection with such meetings, the
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Trustees requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by an independent third party provider and other sources believed to be reliable by the Manager and the Trustees. Prior to voting, the Trustees reviewed the proposed approval/continuance of the Agreements with management and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed approvals/continuances. The independent Trustees also discussed the proposed approvals/continuances in a private session with such counsel at which no representatives of the Manager were present. In reaching its determinations relating to the approval and/or continuance of the Agreements, in respect of each Fund, the Board considered all factors it believed relevant. The Board based its decision to approve the Agreements on the totality of the circumstances and relevant factors, and with a view to past and future long-term considerations. Not all of the factors and considerations discussed above and below are necessarily relevant to every Fund, and the Board did not assign relative weights to factors discussed herein or deem any one or group of them to be controlling in and of themselves.
An SEC rule requires that shareholder reports include a discussion of certain factors relating to the selection of investment advisers and the approval of advisory fees. The “factors” enumerated by the SEC are set forth below in italics, as well as the Board’s conclusions regarding such factors:
(1) The nature, extent and quality of services provided by the Manager and Subadvisers. The Trustees noted that the Manager, subject to the control of the Board, administers each Fund’s business and other affairs. Under the Management Agreement, the Manager holds the sole and exclusive responsibility to provide, or arrange for other to provide, the management of the Funds’ assets and the placement of orders for the purchase and sale of the securities of the Funds. As each Fund is a manager of managers fund, the Manager is authorized, under the Management Agreement, to retain one or more Subadvisers for each Fund to handleday-to-day management of the Funds’ investment portfolios; the Manager is responsible for determining, in the first instance, which investment advisers to recommend to the Board for selection as a Subadviser. The Board was aware that, notwithstanding the retention of the Subadvisers to handleday-to-day portfolio management, the Manager remains responsible for substantial other matters, including continuously monitoring compliance by each Subadviser with the investment policies and restrictions of the respective Funds, with such other limitations or directions of the Board, and with all legal requirements under federal or state law or regulation. The Manager also is responsible primarily to provide statistical information and other data to the Board regarding the Funds’ portfolio investments and to make available to the Funds’ administrator such information as is necessary for the conduct of its duties.
The Board also noted that the Manager provides the Trust and each Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Trust on behalf of the Funds) and executive and other personnel as are necessary for the operation of the Trust and the Funds. Except for the Trust’s Chief Compliance Officer and certain compliance staff, the Manager pays all of the compensation of Trustees and officers of the Trust who are employees of the Manager or its affiliates.
The Board considered the scope and quality of services provided by the Manager and the Subadvisers and noted that the scope of such services provided had expanded as a result of recent regulatory and other developments. The Board noted that, for example, the Manager and Subadvisers are responsible for maintaining and monitoring their own compliance programs, and these compliance programs are continuously refined and enhanced in light of new regulatory requirements. The Board considered the capabilities and resources which the Manager has dedicated to performing services on behalf of the Trust and its Funds. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Trust and to each of the Funds under the Agreements.
(2) The investment performance of the Funds, the Manager and the Subadvisers. In connection with everyin-person quarterly Board meeting and the fall 2018 contract review process, the Board receives extensive information on the performance results of each of the Funds. This includes performance information on the Funds for the previous quarter, and previousone-, three- and five-year periods. (For Funds that have been in existence for less than five years, the Board receives performance information on shorter time periods to the extent available.) Such performance information includes information on absolute total return, performance versus the appropriate benchmark(s), and performance versus peer groups as reported by Lipper. For example, in connection with the Board meeting held October 23, 2018, the Manager reported that for theone-year period ended June 30, 2018, eight Funds were in the top 40%, eight were in the middle 20%, and six were in the bottom 40%, and for the three-year period ended June 30, 2018, 10 Funds were in the top 40%, three were in the middle 20% and seven were in the bottom 40%. The Manager also reported that for the five-year period ended June 30, 2018, five Funds were in the top 40%, three were in the middle 20%, and five were in the bottom 40%. For Funds which are index funds, the Board each quarter also receives information on the extent, if any, that such Funds deviate from their particular benchmark index (referred to as “index attribution”).
Only three Funds, the AZL Enhanced Bond Index Fund, the AZL Russell 1000 Value Index Fund, and the AZL Government Money Market Fund, were in the bottom 40% for all of theone-, three- and five-year periods. The Board met with the portfolio managers of the AZL Enhanced Bond Index Fund and the AZL Government Money Market Fund, respectively, on September 12, 2018, to review the Funds’ current investment strategy, process and outlook. As a result of these discussions, the Board understood that the performance of these Funds was a consequence of their long-term investment strategies and not a reflection of the nature, extent or quality of services being provided by the respective Subadvisers.
For the AZL Russell 1000 Value Index Fund, the Board understood that the peer groups utilized for performance ranking by Lipper include both active and passive funds. The Board also understood that an index fund’s performance generally should be judged based upon how closely the Fund’s performance matches the performance of the Fund’s benchmark index. The Board quarterly receives information regarding index attribution (performance versus benchmark index) for the AZL Russell 1000 Value Index Fund, and the Board found the performance of the Fund by that measure to be satisfactory. The Board also found that the relative performance of the AZL Government Money Market Fund was attributable to the unprecedented period of low short-term interest rates and the Fund’s reimbursement of expenses waived by the Manager during the period.
Two of the Funds in the bottom 40% for theone-year period did not have longer performance records, and the remaining Funds in the bottom 40% for the three- and five-year periods had shown improved relative performance in later periods. Thus, the Board determined that the overall investment performance of the Funds was acceptable.
(3) The costs of services to be provided and profits to be realized by the Manager and the Subadvisers and their affiliates from their relationship with the Funds. The Manager has supplied information to the Board pertaining to the level of investment advisory fees to which the Funds are subject. The Manager has agreed to temporarily limit Fund expenses at certain levels, and information is provided to the Board setting forth “contractual” advisory fees and “actual” fees after taking expense limits and any temporary fee waivers into account. Based upon the information provided, the “actual” advisory fees payable by the Funds overall are generally comparable to the average level of fees paid by the Funds’ peer groups. For the 22 Funds reviewed by the Board in the fall of 2018, 16 Funds paid “actual” advisory fees in a percentage amount within the 65th percentile or lower for each Fund’s applicable category. (A lower percentile reflects lower fund fees and is better for fund shareholders.) The Board recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Board has concluded that the advisory fees to be paid to the Manager by the Funds are not unreasonable.
Based upon the information provided, the management fee ranking in 2018 for the 22 Funds was as follows: (1) 16 of the Funds had management fee rankings at or below the 65th percentile (with 12 Funds at or below the 50th percentile); (2) for the AZL BlackRock Global Allocation Fund, the AZL Enhanced Bond Index Fund, and the AZL MSCI Global Equity Index Fund, it was determined that there was poor (or no) peer group comparability; (3) for the AZL Government Money Market Fund, although the management fee ranked below the 65th percentile, the Manager proposed increasing the temporary management fee waiver by one basis point due to lower subadvisory fees negotiated by the Manager; and (4) for the AZL Russell 1000 Value Index Fund, the AZL Russell 1000 Growth Fund, and the AZL MetWest Total Return Bond Fund, the Manager recommended increasing a temporary management fee waiver by one basis point for the Russell Funds and by five basis points for the MetWest Fund. Increasing the temporary management fee waivers effectively decreases the management fee paid by a fund.
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The Manager has also supplied information to the Board pertaining to total Fund expenses (which include advisory fees, the 25 basis point12b-1 fee paid by the Funds, and other Fund expenses). As noted above, the Manager has agreed to limit Fund expenses at certain levels.
The Manager has committed to providing the Funds with a high quality of service and working to reduce Fund expenses over time, particularly as the Funds grow larger. The Board concluded therefore that the expense ratios of the Funds were not unreasonable.
The Manager provided information concerning the profitability of the Manager’s investment advisory activities for the period from 2015 through December 31, 2017. The Board recognized that it is difficult to make comparisons of profitability from investment company advisory agreements because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocation of expenses and the adviser’s capital structure and cost of capital. In considering profitability information, the Board considered the possible effect of certainfall-out benefits to the Manager and its affiliates. The Board focused on profitability of the Manager’s relationships with the Funds before taxes and distribution expenses. The Board recognized that the Manager should earn a reasonable level of profits for the services it provides to each Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Funds was not excessive.
The Manager, on behalf of the Board, endeavored to obtain information on the profitability of each Subadviser in connection with its relationship with the Fund or Funds which it subadvised. The Manager was unable to obtain consistent profitability information from some of the Subadvisers that would allow the Board to determine the profits derived from the Subadviser’s relationship to the Fund or Funds, rather than its overall level of profitability. The Board recognized the difficulty of allocating costs to multiple advisory accounts and products of a large advisory organization. The Manager assured the Board, however, that the Agreements with the Subadvisers, all of which currently are not affiliated with the Manager, were negotiated on an “arm’s length” basis, which should not result in excessive profits for the Subadvisers. Based upon the information provided, the Board determined that there was no evidence that the level of such profitability attributable to subadvising the Funds was excessive.
(4) and (5) The extent to which economies of scale would be realized as the Funds grow, and whether fee levels reflect these economies of scale. The Board noted that the advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels, although certain Subadvisory Agreements have such “breakpoints.” The Board recognized that breakpoints may be an appropriate way for the Manager to share its economies of scale, if any, with Funds that have substantial assets. The Board found that there was no uniform methodology for establishing breakpoints that give effect to Fund-specific services provided by the Manager. The Board noted that in the fund industry as a whole, as well as among funds similar to the Funds, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age, size, and other characteristics of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by other funds. The Board also noted that the advisory agreements for many funds do not have breakpoints at all, or if breakpoints exist, they may be at asset levels significantly greater than those of the individual Funds. The Board also noted that the total assets in all of the Funds, as of December 31, 2017, were approximately $17.4 billion, and that no single Fund had assets in excess of $2.9 billion.
The Board noted that the Manager has agreed to temporarily limit Fund expenses under the Expense Limitation Agreement, which has the effect of reducing expenses as would the implementation of advisory fee breakpoints. The Manager has committed to continue to consider the continuation of expense limits and/or advisory fee breakpoints as the Funds grow larger. As noted above, the Manager has agreed to increase the fee waivers for four Funds based, in part, on the increase in their assets during the period. The Board receives quarterly reports on the level of Fund assets. The Board expects to continue to consider: (a) the extent to which economies of scale have been realized, and (b) whether the advisory fee should be modified, either in connection with the next renewal of the Agreements or by modifying the Expense Limitation Agreement, to reflect such economies of scale, if any.
Having taken these factors into account, the Board concluded that the absence of breakpoints in the Funds’ advisory fee rate schedules was acceptable under each Fund’s circumstances.
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Information about the Board of Trustees and Officers (Unaudited)
The Trust is managed by the Trustees in accordance with the laws of the state of Delaware governing business trusts. There are currently eight Trustees, one of whom is an “interested person” of the Trust within the meaning of that term under the 1940 Act. The Trustees and Officers of the Trust, and their addresses, ages, positions held with the Trust, terms of office with the Trust and length of time served, principal occupation(s) during the past five years, the number of portfolios in the Trust they oversee, and other directorships held during the past five years are as follows:
Non-Interested Trustees(1)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Peter R. Burnim (1947) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/07 | Consultant/Chair, various companies: Chairman, Emrys Analytics and subsidiaries, July 2015 to present; Chairman, Argus Investment Strategies Fund Ltd., February 2013 to 2017; Managing Director, iQ Venture Advisors, LLC, 2005 to present; Chairman, Northstar Group Holdings Ltd. Bermuda, 2011 to present; Chairman Sterling Bank & Trust (Bahamas) Ltd., 2016 to present, and Expert Witness, Massachusetts Department of Revenue, 2011 to 2016. | 34 | Argus Group Holdings and Subsidiaries; Northstar Group Holdings; Sterling Trust (Cayman) Ltd.; Sterling Bank & Trust Limited (Bahamas); Emrys Analytics; EGB Insurance. | |||||
Peggy L. Ettestad (1957) 5701 Golden Hills Drive Minneapolis, MN 55416 | Lead Independent Trustee | Since 10/14 (Trustee since 2/07) | Managing Director, Red Canoe Management Consulting LLC, 2008 to present | 34 | Luther College | |||||
Tamara Lynn Fagely (1958) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Retired; Chief Operations Officer, Hartford Funds, March 2012 to December 2013 | 34 | Diamond Hill Funds (13 funds) | |||||
Richard H. Forde (1953) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 12/17 | Member of the Board and Chairman of the Finance and Investment Committee, Connecticut Water Service, Inc., October 2013 to present; Senior Vice President and Chief Investment Officer, CIGNA, 2004 to 2012 | 34 | Connecticut Water Service, Inc. | |||||
Claire R. Leonardi (1955) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Chief Executive Officer, Health eSense Inc., 2015 to Present; CEO, Connecticut Innovations, Inc., 2012 to 2015 | 34 | reSet Social Enterprise Investment Fund | |||||
Dickson W. Lewis (1948) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 2/04 | Retired; Vice President/General Manager, Yearbooks & Canada-Lifetouch National School Studios, 2006 to 2014 | 34 | None | |||||
Arthur C. Reeds, III (1944) 5701 Golden Hills Drive Minneapolis, MN 55416 | Trustee | Since 10/99 | Retired | 34 | Connecticut Water Service, Inc. |
Interested Trustees(3)
Name, Address, and Year of Birth | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen for Allianz VIP and VIP FOF Trust | Other AZL Fund Complex | |||||
Brian Muench (1970) 5701 Golden Hills Drive | Trustee | Since 6/11 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present | 34 | None |
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Officers
Name, Address, and Age | Positions Held with Allianz VIP and VIP FOF Trust | Term of Office(2)/Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Brian Muench (1970) 5701 Golden Hills Drive | President | Since 11/10 | President, Allianz Investment Management LLC, November 2010 to present; Vice President, Allianz Life, April 2011 to present. | |||
Michael Radmer (1945) Dorsey & Whitney LLP, Suite 1500 50 South Sixth Street Minneapolis, MN55402-1498 | Secretary | Since 02/02 | Senior Counsel (previously, Partner), Dorsey and Whitney LLP since 1976. | |||
Bashir C. Asad (1963) Citi Fund Services Ohio, Inc. 4400 Easton Commons, Suite 200 Columbus, OH 43219 | Treasurer, Principal Accounting Officer and Principal Financial Officer | Since 06/16 | Senior Vice President, Citi Fund Services Ohio, Inc. | |||
Chris R. Pheiffer (1968) 5701 Golden Hills Drive Minneapolis, MN 55416 | Chief Compliance Officer(4) and Anti-MoneyLaundering Compliance Officer | Since 02/14 | Chief Compliance Officer of the VIP Trust and the FOF Trust, February 2014 to present; Deputy Chief Compliance Officer of the VIP Trust and the FOF Trust and Compliance Director, Allianz Life, February 2007 to February 2014. |
(1) | Member of the Audit Committee. |
(2) | Indefinite. |
(3) | Is an “interested person”, as defined by the 1940 Act, due to employment by Allianz. |
(4) | The Manager and the Trust are parties to a Chief Compliance Officer Agreement under which the Manager is compensated by the Trust for providing an employee of the Manager or one of its affiliates to act as the Trust’s Chief Compliance Officer. The Chief Compliance Officer and Anti-Money Laundering Compliance Officer is not considered a corporate officer or executive employee of the Trust. |
29
The Allianz VIP Funds are distributed by Allianz Life Financial Services, LLC. | ||
These Funds are not FDIC Insured. | ANNRPT1218 2/19 |
Item 2. | Code of Ethics. |
(a) | The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is included as an Exhibit. |
(b) | During the period covered by the report, with respect to the registrant’s code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2. |
Item 3. | Audit Committee Financial Expert. |
3(a)(1) | The registrant’s board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. |
3(a)(2) | The audit committee financial expert is Arthur C. Reeds III, who is “independent” for purposes of this Item 3 of FormN-CSR. |
Item 4. | Principal Accountant Fees and Services. |
2018 | 2017* | |||||||||
(a) | Audit Fees | $ | 359,200 | $ | 339,500 | |||||
(b) | Audit-Related Fees | $ | 0 | $ | 6,000 | |||||
Related to the consent on FormN-1A for the annual registration statement. | ||||||||||
2018 | 2017* | |||||||||
(c) | Tax Fees | $ | 135,800 | $ | 79,500 | |||||
Preparation of the funds’ federal income tax returns. | ||||||||||
2018 | 2017* | |||||||||
(d) | All Other Fees | $ | 0 | $ | 0 |
4(e)(1) | The Audit Committee (“Committee”) of the Registrant is responsible forpre-approving all audit andnon-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence. Before the Registrant engages the independent auditor to render a service, the engagement must be either specifically approved by the Committee or entered into pursuant to thepre-approval policy. The Committee may delegate preapproval authority to one or more of its members. The member or members to whom such authority is delegated shall report anypre-approval decisions to the Committee at its next scheduled meeting. The Committee may not delegate to management the Committee’s responsibilities topre-approve services performed by the independent auditor. The Committee has delegatedpre-approval authority to its Chairman for any services not exceeding $10,000. |
4(e)(2) | During the previous two fiscal years, the Registrant did not receive anynon-audit services pursuant to a waiver from the audit committee approval orpre-approval requirement under paragraph (c)(7)(i)(C) of Rule2-01 of RegulationS-X. |
4(f) | Not applicable |
4(g) | 2018 | 2017* | ||||||
$ | 135,800 | $ | 85,500 |
4(h) | Not applicable |
* | Fees shown above for the year 2017 are those of the previous audit firm, KPMG LLP. Effective November 2, 2018, PricewaterhouseCoopers LLP replaced KPMG LLP as Principal Accountant. |
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) | The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto. |
(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 Trust
By (Signature and Title) | /s/ Brian Muench | |
Brian Muench, Principal Executive Officer |
Date February 28, 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 |
Date February 28, 2019
By (Signature and Title) | /s/ Bashir C. Asad | |
Bashir C. Asad, Principal Financial Officer & Principal Accounting Officer |
Date February 28, 2019