UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

INVESTMENT COMPANY ACT FILE NUMBER: 811-21319

 

EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER:		Calamos Convertible and High Income Fund
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:		2020 Calamos Court, Naperville, Illinois 60563-2787
NAME AND ADDRESS OF AGENT FOR SERVICE:		John P. Calamos, Sr., Founder,
		Chairman and Global Chief Investment Officer
		Calamos Advisors LLC,
		2020 Calamos Court,
		Naperville, Illinois 60563-2787

 

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 245-7200

 

DATE OF FISCAL YEAR END: October 31, 2018

 

DATE OF REPORTING PERIOD: July 31, 2018

 

 

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

  

Calamos Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

 

See accompanying Notes to Schedule of Investments

 

 

Convertible and High Income Fund

SCHEDULE OF INVESTMENTS JULY 31, 2018 (UNAUDITED)

 

See accompanying Notes to Schedule of Investments

 

 

Note 1 – Organization and Significant Accounting Policies

 

Organization. Calamos Convertible and High Income Fund (the “Fund”) was organized as a Delaware statutory trust on March 12, 2003 and is registered under the Investment Company Act of 1940 (the “1940 Act”) as a diversified, closed-end management investment company. The Fund commenced operations on May 28, 2003. The Fund’s investment strategy is to provide total return through a combination of capital appreciation and current income. Under normal circumstances, the Fund will invest at least 80% of its managed assets in a diversified portfolio of convertibles and non-convertible income securities and under normal circumstances, the Fund will invest at least 20% of its managed assets in convertible securities and at least 20% of its managed assets in below investment grade (high yield/high risk) non-convertible debt securities. “Managed assets” means the Fund’s total assets (including any assets attributable to any leverage that may be outstanding) minus total liabilities (other than debt representing financial leverage).

 

Significant Accounting Policies. The schedule of investments have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following summarizes the significant accounting policies of the Fund:

 

Fund Valuation. The valuation of the Fund’s investments is in accordance with policies and procedures adopted by and under the ultimate supervision of the board of trustees.

 

Fund securities that are traded on U.S. securities exchanges, except option securities, are valued at the official closing price, which is the last current reported sales price on its principal exchange at the time each Fund determines its net asset value (“NAV”). Securities traded in the over-the-counter market and quoted on The NASDAQ Stock Market are valued at the NASDAQ Official Closing Price, as determined by NASDAQ, or lacking a NASDAQ Official Closing Price, the last current reported sale price on NASDAQ at the time a Fund determines its NAV. When a last sale or closing price is not available, equity securities, other than option securities, that are traded on a U.S. securities exchange and other equity securities traded in the over-the-counter market are valued at the mean between the most recent bid and asked quotations on its principal exchange in accordance with guidelines adopted by the board of trustees. Each option security traded on a U.S. securities exchange is valued at the mid-point of the consolidated bid/ask quote for the option security, also in accordance with guidelines adopted by the board of trustees. Each over-the-counter option that is not traded through the Options Clearing Corporation is valued based on a quotation provided by the counterparty to such option under the ultimate supervision of the board of trustees.

 

Fixed income securities, certain convertible preferred securities, and non-exchange traded derivatives are normally valued by independent pricing services or by dealers or brokers who make markets in such securities. Valuations of such fixed income securities, certain convertible preferred securities, and non-exchange traded derivatives consider yield or price of equivalent securities of comparable quality, coupon rate, maturity, type of issue, trading characteristics and other market data and do not rely exclusively upon exchange or over-the-counter prices.

 

Trading on European and Far Eastern exchanges and over-the-counter markets is typically completed at various times before the close of business on each day on which the New York Stock Exchange (“NYSE”) is open. Each security trading on these exchanges or in over-the-counter markets may be valued utilizing a systematic fair valuation model provided by an independent pricing service approved by the board of trustees. The valuation of each security that meets certain criteria in relation to the valuation model is systematically adjusted to reflect the impact of movement in the U.S. market after the foreign markets close. Securities that do not meet the criteria, or that are principally traded in other foreign markets, are valued as of the last reported sale price at the time the Fund determines its NAV, or when reliable market prices or quotations are not readily available, at the mean between the most recent bid and asked quotations as of the close of the appropriate exchange or other designated time. Trading of foreign securities may not take place on every NYSE business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the NYSE is not open and on which the Fund’s NAV is not calculated.

 

If the pricing committee determines that the valuation of a security in accordance with the methods described above is not reflective of a fair value for such security, the security is valued at a fair value by the pricing committee, under the ultimate supervision of the board of trustees, following the guidelines and/or procedures adopted by the board of trustees.

 

The Fund also may use fair value pricing, pursuant to guidelines adopted by the board of trustees and under the ultimate supervision of the board of trustees, if trading in the security is halted or if the value of a security it holds is materially affected by events occurring before the Fund’s pricing time but after the close of the primary market or exchange on which the security is listed. Those procedures may utilize valuations furnished by pricing services approved by the board of trustees, which may be based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders, a computerized matrix system, or appraisals derived from information concerning the securities or similar securities received from recognized dealers in those securities.

 

When fair value pricing of securities is employed, the prices of securities used by a Fund to calculate its NAV may differ from market quotations or official closing prices. In light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security is accurate.

 

Foreign Currency Translation. Values of investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using a rate quoted by a major bank or dealer in the particular currency market, as reported by a recognized quotation dissemination service.

 

Option Transactions. For hedging and investment purposes, the Fund may purchase or write (sell) put and call options. One of the risks associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of premium and change in value should the counterparty not perform under the contract. The Fund as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.

 

Note 2 – Investments

 

The cost basis of investments for federal income tax purposes at July 31, 2018 was as follows*:

 

Cost basis of investments		$	1,294,377,525
Gross unrealized appreciation			53,128,725
Gross unrealized depreciation			(74,975,471	)
Net unrealized appreciation (depreciation)		$	(21,846,746	)

 

* Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. For the previous fiscal year’s federal income tax information, please refer to the Notes to Financial Statements section in the Fund’s most recent semi-annual or annual report.

 

 

Note 3 – Mandatory Redeemable Preferred Shares

 

On September 6, 2017, the Fund issued 4,400,000 mandatory redeemable preferred shares (“MRPS”) with an aggregate liquidation preference of $110.0 million. Offering costs incurred by the Fund in connection with the MRPS issuance are aggregated with the outstanding liability and are being amortized to Interest expense and amortization of offering costs on Mandatory Redeemable Preferred Shares over the respective life of each series of MRPS and shown in the Statement of Operations.

 

The MRPS are divided into three series with different mandatory redemption dates and dividend rates. The table below summarizes the key terms of each series of the MRPS at July 31, 2018.

 

Series	Term Redemption Date	Dividend Rate	Shares (000’s)	Liquidation Preference Per Share	Aggregate Liquidation Preference
Series A	9/06/22	3.70%	1,460	$25	$36,500,000
Series B	9/06/24	4.00%	1,460	$25	$36,500,000
Series C	9/06/27	4.24%	1,480	$25	$37,000,000
				Total	$110,000,000

 

The MRPS are not listed on any exchange or automated quotation system. The MRPS are considered debt of the issuer; therefore, the liquidation preference, which approximates fair value of the MRPS, is recorded as a liability in the Statement of Assets and Liabilities net of deferred offering costs. The MRPS are categorized as Level 2 within the fair value hierarchy.

 

Holders of MRPS are entitled to receive monthly cumulative cash dividends payable on the first business day of each month. The MRPS currently are rated “AA” by Fitch Ratings, Inc. (“Fitch”). If on the first day of a monthly dividend period the MRPS of any class are rated lower than “A” by Fitch (or lower than the equivalent of such rating by any other rating agency providing a rating pursuant to the request of the Fund), the dividend rate for such period shall be increased by 0.5%, 2.0% or 4.0% according to an agreed upon schedule. The MRPS’ dividend rate is also subject to increase during periods when the Fund has not made timely payments to MRPS holders and/or the MRPS do not have a current credit rating, subject to various terms and conditions. Dividends accrued and paid to the shareholders of MRPS are included in “Interest expense and amortization of offering costs on Mandatory Redeemable Preferred Shares” within the Statement of Operations.

 

The MRPS rank junior to the Fund’s borrowings under the SSB Agreement and senior to the Fund’s outstanding common stock. The Fund may, at its option, subject to various terms and conditions, redeem the MRPS, in whole or in part, at the liquidation preference amount plus all accumulated but unpaid dividends, plus a make whole premium equal to the discounted value of the remaining scheduled payments. Each class of MRPS is subject to mandatory redemption on the term redemption date specified in the table above. Periodically, the Fund is subject to an overcollateralization test based on applicable rating agency criteria (the “OC Test”) and an asset coverage test with respect to its outstanding senior securities (the “AC Test”). The Fund may be required to redeem MRPS before their term redemption date if it does not comply with one or both tests. So long as any MRPS are outstanding, the Fund may not declare, pay or set aside for payment cash dividends or other distributions on shares of its common stock unless (1) the Fund has satisfied the OC Test on at least one testing date in the preceding 65 days, (2) immediately after such transaction, the Fund would comply with the AC Test, (3) full cumulative dividends on the MRPS due on or prior to the date of such transaction have been declared and paid and (4) the Fund has redeemed all MRPS required to have been redeemed on such date or has deposited funds sufficient for such redemption, subject to certain grace periods and exceptions.

 

Except as otherwise required pursuant to the Fund’s governing documents or applicable law, the holders of the MRPS have one vote per share and vote together with the holders of common stock of the Fund as a single class except on matters affecting only the holders of MRPS or the holders of common stock. Pursuant to the 1940 Act, holders of the MRPS have the right to elect at least two trustees of the Fund, voting separately as a class. Except during any time when the Fund has failed to make a dividend or redemption payment in respect of MRPS outstanding, the holders of MRPS have agreed to vote in accordance with the recommendation of the board of trustees on any matter submitted to them for their vote or to the vote of shareholders of the Fund generally.

 

Note 4 – Fair Value Measurements

 

Various inputs are used to determine the value of the Fund’s investments. These inputs are categorized into three broad levels as follows:

 

●

Level 1 – Prices are determined using inputs from unadjusted quoted prices from active markets (including securities actively traded on a securities exchange) for identical assets.

 

●

Level 2 – Prices are determined using significant observable market inputs other than unadjusted quoted prices, including quoted prices of similar securities, fair value adjustments to quoted foreign securities, interest rates, credit risk, prepayment speeds, and other relevant data.

 

●

Level 3 – Prices reflect unobservable market inputs (including the Fund’s own judgments about assumptions market participants would use in determining fair value) when observable inputs are unavailable.

 

 

Debt securities are valued based upon evaluated prices received from an independent pricing service or from a dealer or broker who makes markets in such securities. Pricing services utilize various observable market data and as such, debt securities are generally categorized as Level 2. The levels are not necessarily an indication of the risk or liquidity of the Fund’s investments. Transfers between the levels for investment securities or other financial instruments are measured at the end of the reporting period.

 

The following is a summary of the inputs used in valuing the Fund’s holdings at fair value:

 

		LEVEL 1				LEVEL 2				LEVEL 3				TOTAL
Assets:
Corporate Bonds		$	—			$	432,747,143			$	—			$	432,747,143
Convertible Bonds			—				590,026,629				—				590,026,629
U.S. Government and Agency Securities			—				11,022,539				—				11,022,539
Bank Loans			—				33,530,505				—				33,530,505
Synthetic Convertible Securities (Corporate Bonds)			—				7,370,518				—				7,370,518
Synthetic Convertible Securities (U.S. Government and Agency Securities)			—				187,158				—				187,158
Synthetic Convertible Securities (Purchased Options)			1,332,250				—				—				1,332,250
Convertible Preferred Stocks			93,820,006				20,634,401				—				114,454,407
Common Stocks U.S.			58,558,103				927,331				—				59,485,434
Warrant			—				114,299				—				114,299
Purchased Options			946,750				—				—				946,750
Short Term Investments			21,635,707				—				—				21,635,707
TOTAL		$	176,292,816			$	1,096,560,523			$	—			$	1,272,853,339
Liabilities:
Written Option		$	322,560			$	—			$	—			$	322,560
TOTAL		$	322,560			$	—			$	—			$	322,560

 

 

ITEM 2. CONTROLS AND PROCEDURES.

 

a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-Q was recorded, processed, summarized, and reported timely.

 

b) There were no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

ITEM 3. EXHIBITS.

 

(a) Certification of Principal Executive Officer.

 

(b) Certification of Principal Financial Officer.

 

 

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.

 

Calamos Convertible & High Income Fund

 

By:	/s/ John P. Calamos, Sr.
Name:	John P. Calamos, Sr.
Title:	Principal Executive Officer
Date:	September 7, 2018

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Calamos Convertible & High Income Fund

 

By:	/s/ John P. Calamos, Sr.
Name:	John P. Calamos, Sr.
Title:	Principal Executive Officer
Date:	September 7, 2018

 

By:	/s/ Curtis Holloway
Name:	Curtis Holloway
Title:	Principal Financial Officer
Date:	September 7, 2018