Company: NCZ-PA
Filing Date: 2025-04-11
Form Type: N-CSR
Source: 0001193125-25-079060
Chunk: 16

Company: Virtus Convertible & Income Fund II
Filing Date: 2025-04-11
Form: N-CSR
Chunk 16
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 expanded, inflation continued to normalize, the unemployment rate remained low, the manufacturing sector began to stabilize,
and the U.S. Federal Reserve (the “Fed”) cut interest rates by a total of 1.00% during the 12-month period.

What factors affected the Fund’s performance during its
fiscal year?

For the fiscal year ended
January 31, 2025, the Fund’s net asset value (“NAV”) returned 23.29%, while its market price returned 12.80%. For the same period, the Fund’s composite benchmark, which consists of 50% ICE BofA U.S. Convertibles Index
(representing convertible securities), 25% ICE BofA U.S. High Yield Index (representing high yield bonds), and 25% Russell 1000 ® Growth Index (representing equities),
returned 18.19%. The underlying indexes returned 15.43% for convertible securities, 9.67% for high yield bonds, and 32.68% for equities.

The Fund delivered consistent income and a
positive total return for the 12-month period. The portfolio benefited from strength across risk assets including equities, convertible securities, and high yield bonds.

Top contributors to performance were led by a
software company with bitcoin exposure, and a semiconductor company that consistently exceeded expectations due to strong demand for its chips, which train and deploy generative artificial intelligence (“AI”) applications. Other
outperformers included an e-commerce company capitalizing on secular trends around AI and cloud migration, a cruise line operator benefiting from increased travel demand, and a security device manufacturer exhibiting core business strength and a
sizeable order backlog.

Top detractors
included a cybersecurity provider that experienced softer-than-expected subscription trends and a cloud services company that saw slower than expected volume growth for a key segment. Other detractors included a medical device company that
experienced sales weakness stemming from a reorganization, a residential solar provider due to regulatory uncertainty, and a semiconductor company with exposure to electric vehicle manufacturing.

Many written options positions expired below
the strike price, and the portfolio was able to retain the set premiums.

#### Managed Distribution Plan
As discussed on the inside cover of this
Report, the Fund currently operates under a Managed Distribution Plan (the “Plan”) pursuant to which the Fund makes a monthly distribution at a rate of $0.18 per common share. As a result of execution on the Plan, the Fund may pay
distributions in excess of the Fund’s