Company: NCZ-PA
Filing Date: 2025-04-11
Form Type: N-CSR
Source: 0001193125-25-079060
Chunk: 8

Company: Virtus Convertible & Income Fund II
Filing Date: 2025-04-11
Form: N-CSR
Chunk 8
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 (the “Fund”) investment objective is to provide total return through a combination of capital appreciation and high current income. There is no guarantee that the Fund will achieve its investment objective.

The use of leverage currently enables the
Fund to have a blended capital structure combining long-term fixed rates and short-term variable rates which allows the Fund to seek to enhance the yields on its investments. As of January 31, 2025, the Fund’s leverage consisted of $200.0
million of borrowings made pursuant to a combination of cumulative preferred shares, mandatory redeemable preferred shares, margin financing and/or securities lending, which represented approximately 35% of the Fund’s total assets.

Manager Comments - Voya Investment Management Co. LLC
(“Voya IM”)

Voya IM manages
the Fund. As the asset management business of Voya Financial (NYSE: VOYA), Voya IM seeks to understand and anticipate client needs, delivering differentiated solutions across public and private fixed income, equity, and multi-asset platforms,
including private markets and alternatives. The following commentary is provided by the portfolio team at Voya IM.

How did the markets perform during the Fund’s fiscal year
ended January 31, 2025?

Risk assets
advanced during the reporting period, with the convertible securities and high yield bond markets finishing higher for the 12 months ended January 31, 2025. The ICE BofA U.S. Convertibles Index returned 15.43% and the ICE BofA U.S. High Yield Index
returned 9.67%.

Convertible securities
were positively impacted by underlying stock price strength and credit spread tightening. Spread refers to the additional yield over the yield of a risk-free government bond. Sector performance was mostly positive, and primary market activity
increased.

Regarding high yield bonds,
industry gains were also widespread. Lower quality bonds outperformed higher quality bonds, new issuance was strong, and the trailing 12-month default rate remained low.

Against this backdrop, corporate earnings
results were generally better than expected, with most companies beating top- and bottom-line forecasts. The U.S. economy 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