================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT 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: James S. Hamman, Jr., Secretary,
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, 2006
DATE OF REPORTING PERIOD: November 1, 2004 through April 30, 2006
================================================================================
ITEM 1. REPORTS TO SHAREHOLDERS
Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1
under the Act (17 CFR 270.30e-1).
[PICTURE]
CALAMOS(R) CONVERTIBLE AND HIGH INCOME FUND (CHY)
SEMIANNUAL REPORT APRIL 30, 2006
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TABLE OF CONTENTS
Letter to Shareholders............................................. 1
Investment Team Interview.......................................... 4
Schedule of Investments............................................ 8
Statement of Assets and Liabilities................................ 32
Statement of Operations............................................ 33
Statements of Changes In Net Assets................................ 34
Notes to Financial Statements...................................... 35
Financial Highlights............................................... 46
Report of Independent Registered Public Accounting Firm............ 47
Other Information.................................................. 48
About Closed-End Funds............................................. 49
Leverage........................................................... 50
Level Rate Distribution Policy..................................... 51
Automatic Dividend Reinvestment Plan............................... 52
Calamos Closed-End Funds........................................... 53
Letter to Shareholders
[PHOTO OF JOHN P. CALAMOS]
Dear Fellow Shareholders:
Thank you for your investment in CALAMOS CONVERTIBLE AND HIGH INCOME FUND (CHY).
I am very pleased to report that for the six-month period ending April 30, 2006,
the Fund continued to provide you with a consistent, attractive annualized
distribution of 9.13% based on the closing market price of $16.02 at the end of
the period.
FUND STRATEGY
The Fund is actively managed and seeks to provide attractive income to
shareholders in a category we describe as Enhanced Fixed Income. These
strategies utilize all ranges of credit quality and a variety of debt
instruments to achieve the Fund's investment objective. In a low-inflation,
low-interest rate environment, this strategy seeks to provide higher returns
than traditional investment grade debt instruments. As the investment manager of
this strategy, we see that three primary risks need to be addressed: changes in
credit worthiness, equity market volatility and interest rate risk.
Changes in credit worthiness are managed by analyzing each security through a
fundamental analytical process as well as through diversification in the
securities held and the industry groups held. The portfolio also seeks to
mitigate some of the interest rate exposure by accepting some equity-market
exposure in return. This is accomplished by using a combination of both
high-yield bonds and convertible bonds. Interest rate risk is managed using a
variety of techniques including the use of swaps, a hedging technique that seeks
to minimize the impact of short-term interest rate increases, and actively
managing the average duration of the portfolio. Duration takes into
consideration the cash flows from the securities as well as the time to payment
of principal.
The potential advantage to the combination of these securities is that in a
rising-interest-rate environment due to strong economic conditions, these
securities can offset the higher interest rates. Convertible securities, for
example, have an equity component that increases the value of the bond as the
Convertible and High Income Fund
Letter to Shareholders SEMIANNUAL REPORT 1
Letter to Shareholders
underlying stock increases, regardless of what the general trend of interest
rates happen to be at the time.
As an investor, you must decide how much of your fixed-income asset allocation
should be dedicated to an enhanced fixed-income strategy. We feel we are in a
period where this strategy will prove valuable to your fixed-income asset
allocation. For example, during the first calendar quarter of 2006, interest
rates rose and the investment-grade market, as measured by the Lehman Brothers
Aggregate Bond Index,(1) was down -0.65%, whereas the Fund's total return based
on the value of the portfolio, net asset value, increased 4.48% for the first
three months of 2006. This Fund should be considered the portion of your
fixed-income allocation that favors economic growth because the convertible
securities participate in the rising equity markets, while the high-yield bonds
participate as access to capital improves companies' balance sheets whereby
companies experience credit-rating upgrades and the bonds rise in value.
During the semiannual period, the Fund delivered a total of $0.6095 per share in
monthly distributions to shareholders, comprised of earned income. In addition,
the Fund paid short- and long-term capital gains distributions totaling $0.2139
per share in January, reflecting the capacity for the Fund's holdings to not
only generate income, but to also experience capital appreciation.
OUR HISTORY OF INNOVATION
CALAMOS INVESTMENTS has a history of producing innovative closed-end fund
vehicles that offer a dynamic approach to asset allocation. For example, we were
one of the first firms to introduce closed-end fund investors to the merits of
combining convertible securities with other securities such as stocks and
corporate bonds, aiming to provide total return with current income in a
risk-managed framework.
Calamos is dedicated to superior investment performance. The Fund is an example
of the way we have created new strategies based on our core expertise to help
you achieve and benefit from greater portfolio diversification. This is a
recognized way to try to reduce some of the risk that comes with investing.
At CALAMOS INVESTMENTS, we regard ourselves first and foremost as risk managers.
The surest way of building wealth is protecting principal. We believe that by
combining convertible- and- corporate fixed-income securities that provide
significant income as well as exposure to the equity market's upside potential,
we can offer our shareholders the potential for long-term wealth creation in a
manner
Convertible and High Income Fund
2 SEMIANNUAL REPORT Letter to Shareholders
Letter to Shareholders
consistent with our focus on risk management. Talk to your financial advisor
about other Calamos strategies that may fit your investment objectives.
THE CONVENIENCE OF REINVESTMENT
Take advantage of the convenience of accumulating more shares of the Fund
through the dividend reinvestment plan, an efficient method for purchasing
additional shares with a potential for cost savings. For example, if the Fund's
shares are trading at a premium, dividends will be automatically reinvested
through the plan at NAV or 95% of the market price, whichever is greater; if
shares are trading at a discount, dividends will be reinvested by purchasing
shares at the market price, below NAV. For additional information about the
plan, please contact the Plan Agent, The Bank of New York, at 800-432-8224 or
visit us on the web at www.calamos.com/chy.aspx.
STAY CONNECTED WITH CALAMOS
I welcome the opportunity to address shareholders in these reports but urge you
to stay connected with Calamos via our website www.calamos.com where you will
find timely portfolio details, our outlook and special reports.
THANK YOU
Thank you for the confidence you have placed in our team, investment process and
the Calamos Closed-End Funds. We will do our utmost to continue to earn your
trust and look forward to serving your long-term investment plan.
Sincerely,
/s/ John P. Calamos
John P. Calamos, Sr.
Chairman, CEO and Co-CIO
Calamos Advisors LLC
(1) Lehman Brothers Aggregate Bond Index is composed of securities from Lehman
Brothers Government/ Corporate Bond Index, Mortgage-Backed Securities Index, and
the Asset-Backed Securities Index. The index's total return consists of price
appreciation/depreciation plus income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
Source: Russell/Mellon Analytical Services LLC.
This report is presented for informational purposes and should not be considered
investment advice.
Convertible and High Income Fund
Letter to Shareholders SEMIANNUAL REPORT 3
Investment Team Interview
WITH THE CALAMOS INVESTMENT TEAM LED BY CO-CHIEF INVESTMENT OFFICERS, JOHN P.
CALAMOS, SR. AND NICK P. CALAMOS
HOW DOES THE FUND FIT IN AN INVESTOR'S OVERALL ASSET ALLOCATION?
The Fund offers investors an enhanced fixed-income strategy focused on
delivering an attractive income stream with the potential for capital gains. The
types of bonds that the Fund holds (high-yield corporate and convertible
securities) have different characteristics than traditional bonds, providing an
attractive complement to a standard fixed-income allocation. The Fund is
designed to perform well in a period marked by economic expansion and rising
interest rates, whereas traditional high-quality bonds tend to perform poorly in
a rising interest rate environment. (Such a distinction was made especially
clear during the first calendar quarter of 2006, when traditional bonds endured
negative returns, while equity-sensitive high-yield and convertible bonds
enjoyed gains.) It is also worth noting that since the Fund's holdings have
different sensitivities than traditional bonds, the Fund can further diversify
the income-focused portion of an investor's asset allocation.
FUND ASSET ALLOCATION AS OF APRIL 30, 2006
[PIE CHART]
CONVERTIBLE SECURITIES 40.3%
HIGH YIELD/CORPORATE BONDS 58.5%
SHORT-TERM INVESTMENTS 1.2%
Fund asset allocations are based on total investments (excluding security
lending collateral) and may vary over time.
HOW DID THE FUND PERFORM OVER THE REPORTING PERIOD?
The Fund performed well: Its underlying portfolio (as represented by net asset
value or NAV) returned 7.88% during the six-month period, and the Fund's market
price returned 8.85% during the same period.
TOTAL RETURN* AS OF APRIL 30, 2006
COMMON SHARES -- INCEPTION 5/28/03 6 MONTHS 1 YEAR SINCE INCEPTION**
---------------------------------- -------- ------ -----------------
On Share Price 8.85% 15.97% 12.03%
On NAV 7.88 14.52 12.68
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. You can purchase or sell
common shares daily. Like any other stock, market price will fluctuate with the
market. Upon sale, your shares may have a market price that is above or below
net asset value and may be worth more or less than your original investment. Due
to ongoing market volatility, performance is subject to substantial short-term
fluctuations.
*Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of income and capital gains
distributions.
**Annualized since inception.
Convertible and High Income Fund
4 SEMIANNUAL REPORT Investment Team Interview
Investment Team Interview
INTEREST RATES CONTINUED TO MOVE HIGHER OVER THE PERIOD, WITH THE FEDERAL FUNDS
RATE MOVING FROM 4.00% AT THE BEGINNING OF THE PERIOD TO 4.75% AT THE END OF
APRIL 2006. HOW DID THIS RISING RATE ENVIRONMENT IMPACT THE PORTFOLIO?
Rising short-term interest rates have had little impact on the Fund's cost of
leverage. Many closed-end funds leverage the portfolio by borrowing funds at
very short-term rates. As short-term interest rates rise, this increases the
cost of leverage and can impact the yield and total return of the portfolio.
While the Fund does employ leverage, the cost of leverage was locked in for
longer periods at an earlier point in the interest rate cycle, when rates were
lower. As of the end of April 2006, 93% of the leverage for CHY was locked in
longer-term rates and not susceptible to rising short-term interest rates. By
locking in the cost of leverage longer term, the portfolio is not significantly
affected by rising short-term interest rates.
Long-term interest rates also rose over the period, with the yield on the
10-year Treasury moving from 4.57% at the beginning of the period to 5.07% at
the end of April 2006. Rising long-term interest rates tend to negatively affect
traditional high-quality fixed-income securities. As noted above, this portfolio
combines high-yield corporate bonds and convertible bonds that tend to be more
economically sensitive and much less interest-rate sensitive. This is shown by
the positive performance delivered over the period as the portfolio benefited
from continued economic expansion and a rising equity market.
TEN YEAR TREASURY AS OF APRIL 30, 2006
[LINE GRAPH]
31 Oct'05 4.57%
Nov'05 4.49%
Dec'05 4.39%
Jan'06 4.53%
Feb'06 4.55%
Mar'06 4.86%
Apr'06 5.07%
Furthermore, the portfolio continues to provide an attractive yield for
shareholders: CHY's monthly distribution equated to a 9.13% annualized
distribution rate based on the market price as of April 30, 2006.
Convertible and High Income Fund
Investment Team Interview SEMIANNUAL REPORT 5
Investment Team Interview
HOW DID THE FUND BENEFIT FROM POSITIONING DURING THE REPORTING PERIOD?
On a sector basis, the Fund benefited significantly from our selection of
holdings within the Financials, Information Technology, Industrials and Energy
sectors. The portfolio also benefited from our focus on more equity-sensitive
convertible securities, which performed well, reflecting the positive returns in
their underlying equities.
The portfolio has also increased the use of synthetic convertible securities,
which has benefited the performance Synthetic convertible securities are created
by combining a traditional fixed-income bond with a call option. Through the use
of these securities, the portfolio team can effectively manage the credit risk,
interest-rate sensitivity, and equity sensitivity of the portfolio. Synthetic
securities provide an additional tool for the investment team in constructing
the portfolio and managing the overall risk/reward.
SECTOR ALLOCATION
-----------------
Consumer Discretionary 20.6%
Financials 16.3
Industrials 13.4
Energy 11.3
Information Technology 8.9
Consumer Staples 8.1
Health Care 7.7
Materials 7.4
Utilities 4.6
Telecommunication Services 1.7
Sector allocations are based on total investments (excluding security lending
collateral and short-term investments) and may vary over time.
HOW DID THE FUND'S POSITIONING HURT PERFORMANCE OVER THE PERIOD?
While securities within each sector contributed to positive returns, issues
within Materials, Health Care, Consumer Staples and Utilities lagged other
sectors for the period. In addition, the investment team's focus on issues with
solid credits and relatively strong balance sheets was not especially rewarded
over the period, as many of the lowest-quality distressed credits performed well
over the period. While avoiding distressed issues detracted from returns on a
relative basis for this six-month period, we believe that over a full market
cycle our rigorous credit research will provide clients with a portfolio with an
attractive risk/reward profile.
DO YOU ANTICIPATE MAKING ANY CHANGES WITHIN THE PORTFOLIO GOING FORWARD?
The portfolio continues to be actively managed to take advantage of
opportunities in the marketplace. Through extensive fundamental analysis, we are
focusing on
Convertible and High Income Fund
6 SEMIANNUAL REPORT Investment Team Interview
Investment Team Interview
issues that have stable growth prospects and solid balance sheets, which can
benefit from the current economic backdrop. For example, during a
slow-but-stable growth phase of the economy, larger companies tend to
outperform, as do sectors such as Consumer Staples.
We also may continue to make use of synthetic convertible securities, as they
allow the investment team the flexibility to control credit risk, interest-rate
sensitivity and equity sensitivity. We continue to believe that the convertible
market is attractively valued. Valuations within the convertible market had
declined toward the end of 2004 and into 2005 due to selling pressure from hedge
funds employing convertible arbitrage strategies. Valuations remain attractive
within the convertible bond market, and the portfolio is positioned with the
potential to take advantage of an improving convertible bond market. While
current convertible valuations remain attractive, should valuations improve, the
allocation to convertible securities would likely be reduced. We will continue
to make use of our fundamental research as we look for securities with stable
growth prospects, solid balance sheets and good risk/reward profiles.
WHAT IS YOUR MARKET OUTLOOK AND HOW IS THE PORTFOLIO POSITIONED TO TAKE
ADVANTAGE OF THIS ENVIRONMENT?
We believe the economy is in the mid-cycle growth phase characterized by:
- Positive but slowing gross domestic product growth
- Corporate earnings that are strong, albeit slowing
- High household net worth and wage growth
- Strong corporate balance sheets that support increased capital
expenditures
We believe the portfolio will continue to perform well in this environment. The
equity-sensitive nature of high-yield and convertible bonds can benefit from a
positive environment for equity securities. Another positive factor for
equity-sensitive holdings may materialize should the Fed complete this cycle of
raising interest rates. In the past, this has triggered renewed excitement for
stocks and the Fund -- unlike traditional fixed-income holdings -- has the
potential to significantly benefit from such enthusiasm.
Convertible and High Income Fund
Investment Team Interview SEMIANNUAL REPORT 7
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- --------------
CORPORATE BONDS (82.4%)
CONSUMER DISCRETIONARY (19.7%)
$ 2,738,000 Asbury Automotive Group, Inc.
9.000%, 06/15/12 $ 2,840,675
9,126,000 Beazer Homes USA, Inc.
8.375%, 04/15/12 9,548,077
4,563,000 Broder Bros. Co.
11.250%, 10/15/10 4,483,147
4,563,000 DEX Media, Inc.@
8.000%, 11/15/13 4,705,594
1,597,000 DIRECTV Financing Company, Inc.
8.375%, 03/15/13 1,714,779
5,750,000 EchoStar Communications Corp.*
7.125%, 02/01/16 5,642,187
1,711,000 EchoStar DBS Corp.
6.625%, 10/01/14 1,653,254
11,053,000 GBP EMI Group, PLC
9.750%, 05/20/08 21,691,558
730,000 General Motors Corp.
7.125%, 07/15/13 552,975
Goodyear Tire & Rubber Company
6,388,000 7.857%, 08/15/11@ 6,324,120
4,563,000 7.000%, 03/15/28 3,924,180
6,183,000 GSC Holdings Corp.*@
8.000%, 10/01/12 6,221,644
8,487,000 Hasbro, Inc.
6.600%, 07/15/28 7,930,083
5,750,000 Houghton Mifflin Company@
9.875%, 02/01/13 6,181,250
867,000 Hovnanian Enterprises, Inc.
7.750%, 05/15/13 863,749
3,651,000 IMAX Corp.
9.625%, 12/01/10 3,915,697
4,563,000 Interpublic Group of Companies, Inc.
7.250%, 08/15/11 4,254,997
4,563,000 Intrawest Corp.
7.500%, 10/15/13 4,642,852
J.C. Penney Company, Inc.
1,825,000 9.000%, 08/01/12 2,096,867
1,369,000 7.650%, 08/15/16 1,495,750
4,107,000 Jarden Corp.@
9.750%, 05/01/12 4,291,815
Convertible and High Income Fund
8 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 2,930,000 Kellwood Company
7.625%, 10/15/17 $ 2,713,186
4,563,000 Landry's Restaurants, Inc.@
7.500%, 12/15/14 4,403,295
6,388,000 Linens `n Things, Inc.*@++
10.702%, 01/15/14 6,499,790
3,582,000 Mandalay Resort Group@
7.625%, 07/15/13 3,653,640
1,369,000 NCL Holding, ASA
10.625%, 07/15/14 1,389,535
10,795,000 Oxford Industries, Inc.
8.875%, 06/01/11 11,199,812
867,000 Phillips-Van Heusen Corp.
8.125%, 05/01/13 916,853
913,000 Pinnacle Entertainment, Inc.
8.250%, 03/15/12 958,650
2,738,000 Rent-A-Center, Inc.
7.500%, 05/01/10 2,741,423
3,422,000 CAD Rogers Cable, Inc.
7.250%, 12/15/11 3,232,391
4,107,000 CAD Rogers Wireless, Inc.
7.625%, 12/15/11 3,921,312
10,860,000 Royal Caribbean Cruises, Ltd.@
7.500%, 10/15/27 11,141,328
4,563,000 Russell Corp.@
9.250%, 05/01/10 4,791,150
7,849,000 Vail Resorts, Inc.
6.750%, 02/15/14 7,623,341
6,388,000 Warnaco Group, Inc.@
8.875%, 06/15/13 6,755,310
Warner Music Group
1,825,000 GBP 8.125%, 04/15/14 3,469,417
1,825,000 7.375%, 04/15/14@ 1,806,750
WCI Communities, Inc.@
5,932,000 7.875%, 10/01/13 5,679,890
2,738,000 6.625%, 03/15/15 2,402,595
456,000 William Lyon Homes, Inc.
10.750%, 04/01/13 458,280
821,000 Wynn Las Vegas, LLC@
6.625%, 12/01/14 802,528
---------------
191,535,726
---------------
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 9
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
-------------- --------------
CONSUMER STAPLES (7.5%)
$ 1,825,000 Central Garden & Pet Company
9.125%, 02/01/13 $ 1,948,188
5,019,000 Chattem, Inc.
7.000%, 03/01/14 5,044,095
4,107,000 Chiquita Brands International, Inc.
7.500%, 11/01/14 3,573,090
5,161,000 Del Monte Foods Company
8.625%, 12/15/12 5,444,855
Dole Food Company, Inc.
5,287,000 8.875%, 03/15/11 5,181,260
4,070,000 8.625%, 05/01/09 4,039,475
2,062,000 Gold Kist, Inc.@
10.250%, 03/15/14 2,190,875
12,321,000 Jean Coutu Group, Inc.@
8.500%, 08/01/14 11,612,542
4,107,000 NBTY, Inc.*
7.125%, 10/01/15 3,901,650
3,651,000 Pinnacle Foods Holding@
8.250%, 12/01/13 3,678,382
5,841,000 Playtex Products, Inc.
8.000%, 03/01/11 6,191,460
5,932,000 R.J. Reynolds Tobacco Holdings, Inc.
7.300%, 07/15/15 6,050,640
5,019,000 Revlon, Inc.@
9.500%, 04/01/11 4,943,715
1,825,000 Smithfield Foods, Inc.
7.750%, 05/15/13 1,847,813
4,700,000 Spectrum Brands, Inc.@
8.500%, 10/01/13 4,171,250
2,784,000 WH Intermediate Holdings, Ltd.
9.500%, 04/01/11 2,992,800
-------------
72,812,090
-------------
ENERGY (10.2%)
8,214,000 Arch Western Finance, LLC@
6.750%, 07/01/13 8,172,930
Chesapeake Energy Corp.@
3,651,000 6.875%, 01/15/16 3,614,490
1,825,000 7.750%, 01/15/15 1,893,438
3,605,000 Comstock Resources, Inc.
6.875%, 03/01/12 3,541,912
Convertible and High Income Fund
10 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 821,000 Energy Partners, Ltd.
8.750%, 08/01/10 $ 843,578
4,563,000 Forest Oil Corp.@
8.000%, 12/15/11 4,876,706
Giant Industries, Inc.
5,476,000 8.000%, 05/15/14 5,653,970
1,825,000 11.000%, 05/15/12 2,012,063
10,358,000 Houston Exploration Company
7.000%, 06/15/13 10,150,840
6,297,000 KCS Energy, Inc.
7.125%, 04/01/12 6,375,712
2,496,000 Lone Star Technologies, Inc.
9.000%, 06/01/11 2,614,560
4,221,000 Paramount Resources, Ltd.
8.500%, 01/31/13 4,410,945
Petroleo Brasileiro, SA@
6,845,000 8.375%, 12/10/18 7,700,625
4,563,000 9.125%, 07/02/13 5,304,487
15,971,000 Premcor Refining Group, Inc.
7.500%, 06/15/15 16,799,544
2,738,000 Swift Energy Company@
7.625%, 07/15/11 2,758,535
5,932,000 Whiting Petroleum Corp.
7.250%, 05/01/12 5,961,660
6,343,000 Williams Companies, Inc.@
7.750%, 06/15/31 6,652,221
---------------
99,338,216
---------------
FINANCIALS (4.8%)
E*TRADE Financial Corporation
6,936,000 7.375%, 09/15/13 7,092,060
4,928,000 7.875%, 12/01/15 5,199,040
1,278,000 8.000%, 06/15/11 1,325,925
Host Marriott Corp.@
10,039,000 7.125%, 11/01/13 10,239,780
1,917,000 9.250%, 10/01/07 2,003,265
10,952,000 Leucadia National Corp.
7.000%, 08/15/13 10,924,620
867,000 Omega Healthcare Investors, Inc.
7.000%, 04/01/14 853,995
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 11
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
Senior Housing Properties Trust
$ 4,563,000 8.625%, 01/15/12 $ 5,019,300
3,224,000 7.875%, 04/15/15 3,352,960
---------------
46,010,945
---------------
HEALTH CARE (6.4%)
14,853,000 Ameripath, Inc.@
10.500%, 04/01/13 15,855,578
3,222,000 Angiotech Pharmaceuticals, Inc.*@
7.750%, 04/01/14 3,254,220
13,324,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 12,792,066
1,825,000 Bio-Rad Laboratories, Inc.
7.500%, 08/15/13 1,879,750
2,053,000 Biovail Corp.@
7.875%, 04/01/10 2,083,795
821,000 DaVita, Inc.
7.250%, 03/15/15 825,105
639,000 Omnicare, Inc.@
6.875%, 12/15/15 635,006
3,970,000 Psychiatric Solutions, Inc.
7.750%, 07/15/15 4,089,100
9,218,000 Tenet Healthcare Corp.*@
9.250%, 02/01/15 9,425,405
4,883,000 Valeant Pharmaceuticals International
7.000%, 12/15/11 4,858,585
6,388,000 Vanguard Health Systems, Inc.@
9.000%, 10/01/14 6,627,550
---------------
62,326,160
---------------
INDUSTRIALS (11.7%)
2,510,000 Accuride Corp.
8.500%, 02/01/15 2,491,175
5,476,000 American Airlines, Inc.
7.250%, 02/05/09 5,517,070
2,282,000 Armor Holdings, Inc.@
8.250%, 08/15/13 2,447,445
BE Aerospace, Inc.
2,738,000 8.875%, 05/01/11@ 2,874,900
1,825,000 8.500%, 10/01/10 1,957,312
14,602,000 CNH Global, NV
9.250%, 08/01/11 15,587,635
Convertible and High Income Fund
12 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 1,369,000 Columbus McKinnon Corp.@
8.875%, 11/01/13 $ 1,437,450
15,058,000 Esterline Technologies Corp.@
7.750%, 06/15/13 15,547,385
3,194,000 Gardner Denver, Inc.
8.000%, 05/01/13 3,369,670
1,369,000 GATX Corp.
8.875%, 06/01/09 1,477,287
5,357,000 General Cable Corp.@
9.500%, 11/15/10 5,812,345
3,194,000 Greenbrier Companies, Inc.
8.375%, 05/15/15 3,357,692
821,000 Hexcel Corporation
6.750%, 02/01/15 810,738
593,000 Interline Brands, Inc.
11.500%, 05/15/11 661,195
JLG Industries, Inc.
6,936,000 8.250%, 05/01/08 7,317,480
3,194,000 8.375%, 06/15/12@ 3,401,610
3,966,000 Manitowoc Company, Inc.
10.500%, 08/01/12 4,342,770
7,709,000 Mobile Mini, Inc.
9.500%, 07/01/13 8,441,355
4,563,000 Monitronics International, Inc.@
11.750%, 09/01/10 4,551,592
2,190,000 Orbital Sciences Corp.
9.000%, 07/15/11 2,348,775
Sequa Corp.
6,388,000 8.875%, 04/01/08 6,691,430
1,825,000 9.000%, 08/01/09 1,971,000
Terex Corp.
2,510,000 9.250%, 07/15/11@ 2,685,700
1,729,000 7.375%, 01/15/14 1,759,258
2,053,000 Trinity Industries, Inc.
6.500%, 03/15/14 1,986,277
1,825,000 Wesco Distribution, Inc.*
7.500%, 10/15/17 1,870,625
Williams Scotsman International, Inc.
1,825,000 8.500%, 10/01/15 1,884,313
456,000 8.500%, 10/01/15* 470,820
---------------
113,072,304
---------------
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 13
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- ---------------
INFORMATION TECHNOLOGY (6.7%)
$ 5,908,000 Advanced Micro Devices, Inc.
7.750%, 11/01/12 $ 6,203,400
2,501,000 Arrow Electronics, Inc.
6.875%, 06/01/18 2,517,119
821,000 Avago Technologies*@
11.875%, 12/01/15 907,205
Celestica, Inc.@
7,757,000 7.625%, 07/01/13 7,795,785
3,651,000 7.875%, 07/01/11 3,733,148
1,825,000 Flextronics International, Ltd.@
6.500%, 05/15/13 1,806,750
4,563,000 Freescale Semiconductor, Inc.
7.125%, 07/15/14 4,699,890
1,825,000 GBP Iron Mountain, Inc.*
7.250%, 04/15/14 3,303,018
388,000 Sanmina-SCI Corporation
8.125%, 03/01/16 395,760
7,849,000 SunGard Data Systems, Inc.*@
9.125%, 08/15/13 8,418,053
6,388,000 Telcordia Technologies*
10.000%, 03/15/13 5,876,960
18,709,000 Xerox Corp.
7.625%, 06/15/13 19,410,587
---------------
65,067,675
---------------
MATERIALS (9.3%)
Aleris International, Inc.
4,746,000 10.375%, 10/15/10 5,232,465
3,520,000 9.000%, 11/15/14@ 3,696,000
4,563,000 Ball Corp.@
6.875%, 12/15/12 4,631,445
913,000 Crown Holdings, Inc.*
7.750%, 11/15/15 942,673
17,358,000 Equistar Chemicals, LP@
10.625%, 05/01/11 19,007,010
11,727,000 Freeport-McMoRan Copper & Gold, Inc.
10.125%, 02/01/10 12,635,842
821,000 Gibraltar Industries, Inc.*
8.000%, 12/01/15 839,473
Ineos Group Holdings, PLC*
5,476,000 EUR 7.875%, 02/15/16 6,649,454
913,000 8.500%, 02/15/16@ 871,915
Convertible and High Income Fund
14 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 5,476,000 IPSCO, Inc.
8.750%, 06/01/13 $ 5,968,840
8,214,000 Neenah Paper, Inc.@
7.375%, 11/15/14 7,721,160
1,369,000 P.H. Glatfetler Company*
7.125%, 05/01/16 1,369,000
2,738,000 Polyone Corp.@
10.625%, 05/15/10 2,970,730
4,563,000 Sealed Air Corp.*
6.875%, 07/15/33 4,496,138
1,825,000 Texas Industries, Inc.
7.250%, 07/15/13 1,879,750
Union Carbide Corp.
4,426,000 7.875%, 04/01/23 4,681,553
2,966,000 7.500%, 06/01/25 3,101,944
3,377,000 Westlake Chemical Corporation
6.625%, 01/15/16 3,267,247
---------------
89,962,639
---------------
TELECOMMUNICATION SERVICES (2.1%)
5,476,000 AT&T Corp.
9.750%, 11/15/31 6,508,182
639,000 Citizens Communications Company
9.000%, 08/15/31 688,523
6,388,000 Sprint Nextel Corporation
7.375%, 08/01/15 6,673,691
2,510,000 Stratos Global Corp.*@
9.875%, 02/15/13 2,531,962
4,107,000 Syniverse Technologies, Inc.
7.750%, 08/15/13 4,117,267
---------------
20,519,625
---------------
UTILITIES (4.0%)
4,563,000 Centerpoint Energy, Inc.@
6.850%, 06/01/15 4,742,499
Edison International
5,476,000 9.875%, 04/15/11@ 6,201,570
3,651,000 10.000%, 08/15/08 3,947,644
913,000 NRG Energy, Inc.@
7.375%, 02/01/16 923,271
4,563,000 Public Service Enterprise Group, Inc.
8.625%, 02/15/08 4,756,928
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 15
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- ---------------
$11,499,000 Teco Energy, Inc.
7.500%, 06/15/10 $ 12,102,697
6,388,000 TXU Corp.@
6.500%, 11/15/24 5,847,844
---------------
38,522,453
---------------
TOTAL CORPORATE BONDS
(Cost $782,682,824) 799,167,833
===============
CONVERTIBLE BONDS (19.5%)
CONSUMER DISCRETIONARY (3.7%)
6,500,000 Lamar Advertising Company@
2.875%, 12/31/10 7,726,875
7,800,000 Liberty Media Corporation (Motorola, Inc.) [ ]
3.500%, 01/15/31 7,809,750
Liberty Media Corporation (Sprint Corporation PCS) [ ]
4,142,000 3.750%, 02/15/30 2,360,940
1,974,000 4.000%, 11/15/29 1,233,750
3,750,000 GBP Punch Taverns Redwood Jersey Co. Ltd.
5.000%, 12/14/10 7,328,098
9,000,000 Walt Disney Company@
2.125%, 04/15/23 9,607,500
---------------
36,066,913
---------------
ENERGY (1.3%)
9,000,000 Helix Energy Solutions Group*
3.250%, 12/15/25 13,016,250
---------------
FINANCIALS (1.0%)
6,000,000 Deutsche Bank Luxembourg S.A. (USA Interactive)*++[ ]
4.880%, 05/01/12 7,170,000
2,500,000 Travelers Property Casualty Corp.
4.500%, 04/15/32 2,466,000
---------------
9,636,000
---------------
HEALTH CARE (2.6%)
10,500,000 Emdeon Corp.*
3.125%, 09/01/25 10,263,750
6,500,000 Invitrogen Corp.*
3.250%, 06/15/25 6,166,875
8,000,000 Wyeth++
4.239%, 01/15/24 8,516,800
---------------
24,947,425
---------------
Convertible and High Income Fund
16 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- ---------------
INDUSTRIALS (4.7%)
$ 8,000,000 Allied Waste Industries, Inc.@
4.250%, 04/15/34 $ 7,860,000
11,500,000 GATX Corp.
4.499%, 02/01/07 16,315,625
6,400,000 Lockheed Martin Corp.@++
7.200%, 08/15/33 7,450,240
3,500,000 Quanta Services, Inc.
4.500%, 10/01/23 5,508,125
13,000,000 Roper Industries, Inc.++
1.481%, 01/15/34 8,092,500
---------------
45,226,490
---------------
INFORMATION TECHNOLOGY (4.6%)
1,000,000 Conexant Systems, Inc.*@
4.000%, 03/01/26 1,047,500
4,000,000 CSG Systems International, Inc.
2.500%, 06/15/24 4,260,000
5,500,000 DST Systems, Inc.
4.125%, 08/15/23 7,486,875
6,750,000 Electronic Data Systems Corp.
3.875%, 07/15/23 7,045,312
6,000,000 Mentor Graphics Corp.*@
6.250%, 03/01/26 6,615,000
3,000,000 Openwave Systems, Inc.@
2.750%, 09/09/08 3,547,500
14,000,000 Vishay Intertechnology, Inc.
3.625%, 08/01/23 14,525,000
---------------
44,527,187
---------------
UTILITIES (1.6%)
6,500,000 CenterPoint Energy, Inc.@
3.750%, 05/15/23 7,255,625
3,500,000 GBP Scottish and Southern Energy, PLC
3.750%, 10/29/09 8,214,641
---------------
15,470,266
---------------
TOTAL CONVERTIBLE BONDS
(Cost $173,748,485) 188,890,531
===============
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 17
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
SYNTHETIC CONVERTIBLE SECURITIES (9.3%)
CORPORATE BONDS (7.9%)
CONSUMER DISCRETIONARY (1.9%)
$ 262,000 Asbury Automotive Group, Inc.
9.000%, 06/15/12 $ 271,825
874,000 Beazer Homes USA, Inc.
8.375%, 04/15/12 914,422
437,000 Broder Bros. Co.
11.250%, 10/15/10 429,352
437,000 DEX Media, Inc.@
8.000%, 11/15/13 450,656
153,000 DIRECTV Financing Company, Inc.
8.375%, 03/15/13 164,284
550,000 EchoStar Communications Corp.*
7.125%, 02/01/16 539,687
164,000 EchoStar DBS Corp.
6.625%, 10/01/14 158,465
1,058,000 GBP EMI Group, PLC
9.750%, 05/20/08 2,076,329
70,000 General Motors Corp.
7.125%, 07/15/13 53,025
Goodyear Tire & Rubber Company
612,000 7.857%, 08/15/11@ 605,880
437,000 7.000%, 03/15/28 375,820
592,000 GSC Holdings Corp.*@
8.000%, 10/01/12 595,700
813,000 Hasbro, Inc.
6.600%, 07/15/28 759,651
550,000 Houghton Mifflin Company@
9.875%, 02/01/13 591,250
83,000 Hovnanian Enterprises, Inc.
7.750%, 05/15/13 82,689
349,000 IMAX Corp.
9.625%, 12/01/10 374,303
437,000 Interpublic Group of Companies, Inc.
7.250%, 08/15/11 407,503
437,000 Intrawest Corp.
7.500%, 10/15/13 444,647
J.C. Penney Company, Inc.
175,000 9.000%, 08/01/12 201,069
131,000 7.650%, 08/15/16 143,129
393,000 Jarden Corp.@
9.750%, 05/01/12 410,685
Convertible and High Income Fund
18 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- ---------------
$ 280,000 Kellwood Company
7.625%, 10/15/17 $ 259,281
437,000 Landry's Restaurants, Inc.@
7.500%, 12/15/14 421,705
612,000 Linens `n Things, Inc.*@++
10.702%, 01/15/14 622,710
343,000 Mandalay Resort Group@
7.625%, 07/15/13 349,860
131,000 NCL Holding, ASA
10.625%, 07/15/14 132,965
1,033,000 Oxford Industries, Inc.
8.875%, 06/01/11 1,071,737
83,000 Phillips-Van Heusen Corp.
8.125%, 05/01/13 87,773
87,000 Pinnacle Entertainment, Inc.
8.250%, 03/15/12 91,350
262,000 Rent-A-Center, Inc.
7.500%, 05/01/10 262,328
328,000 CAD Rogers Cable, Inc.
7.250%, 12/15/11 309,826
393,000 CAD Rogers Wireless, Inc.
7.625%, 12/15/11 375,231
1,040,000 Royal Caribbean Cruises, Ltd.@
7.500%, 10/15/27 1,066,941
437,000 Russell Corp.@
9.250%, 05/01/10 458,850
751,000 Vail Resorts, Inc.
6.750%, 02/15/14 729,409
612,000 Warnaco Group, Inc.@
8.875%, 06/15/13 647,190
Warner Music Group
175,000 GBP 8.125%, 04/15/14 332,684
175,000 7.375%, 04/15/14@ 173,250
WCI Communities, Inc.@
568,000 7.875%, 10/01/13 543,860
262,000 6.625%, 03/15/15 229,905
44,000 William Lyon Homes, Inc.
10.750%, 04/01/13 44,220
79,000 Wynn Las Vegas, LLC@
6.625%, 12/01/14 77,223
---------------
18,338,669
---------------
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 19
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
CONSUMER STAPLES (0.7%)
$ 175,000 Central Garden & Pet Company
9.125%, 02/01/13 $ 186,813
481,000 Chattem, Inc.
7.000%, 03/01/14 483,405
393,000 Chiquita Brands International, Inc.
7.500%, 11/01/14 341,910
494,000 Del Monte Foods Company
8.625%, 12/15/12 521,170
Dole Food Company, Inc.
506,000 8.875%, 03/15/11 495,880
390,000 8.625%, 05/01/09 387,075
197,000 Gold Kist, Inc.@
10.250%, 03/15/14 209,313
1,179,000 Jean Coutu Group, Inc.@
8.500%, 08/01/14 1,111,207
393,000 NBTY, Inc.*
7.125%, 10/01/15 373,350
349,000 Pinnacle Foods Holding@
8.250%, 12/01/13 351,617
559,000 Playtex Products, Inc.
8.000%, 03/01/11 592,540
568,000 R.J. Reynolds Tobacco Holdings, Inc.
7.300%, 07/15/15 579,360
481,000 Revlon, Inc.@
9.500%, 04/01/11 473,785
175,000 Smithfield Foods, Inc.
7.750%, 05/15/13 177,188
450,000 Spectrum Brands, Inc.@
8.500%, 10/01/13 399,375
267,000 WH Intermediate Holdings, Ltd.
9.500%, 04/01/11 287,025
---------------
6,971,013
---------------
ENERGY (1.0%)
786,000 Arch Western Finance, LLC@
6.750%, 07/01/13 782,070
Chesapeake Energy Corp.@
349,000 6.875%, 01/15/16 345,510
175,000 7.750%, 01/15/15 181,563
345,000 Comstock Resources, Inc.
6.875%, 03/01/12 338,962
Convertible and High Income Fund
20 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 79,000 Energy Partners, Ltd.
8.750%, 08/01/10 $ 81,173
437,000 Forest Oil Corp.@
8.000%, 12/15/11 467,044
Giant Industries, Inc.
524,000 8.000%, 05/15/14 541,030
175,000 11.000%, 05/15/12 192,938
992,000 Houston Exploration Company
7.000%, 06/15/13 972,160
603,000 KCS Energy, Inc.
7.125%, 04/01/12 610,537
239,000 Lone Star Technologies, Inc.
9.000%, 06/01/11 250,353
404,000 Paramount Resources, Ltd.
8.500%, 01/31/13 422,180
Petroleo Brasileiro, SA@
655,000 8.375%, 12/10/18 736,875
437,000 9.125%, 07/02/13 508,012
1,529,000 Premcor Refining Group, Inc.
7.500%, 06/15/15 1,608,321
262,000 Swift Energy Company@
7.625%, 07/15/11 263,965
568,000 Whiting Petroleum Corp.
7.250%, 05/01/12 570,840
607,000 Williams Companies, Inc.@
7.750%, 06/15/31 636,591
---------------
9,510,124
---------------
FINANCIALS (0.5%)
E*TRADE Financial Corporation
664,000 7.375%, 09/15/13 678,940
472,000 7.875%, 12/01/15 497,960
122,000 8.000%, 06/15/11 126,575
Host Marriott Corp.@
961,000 7.125%, 11/01/13 980,220
183,000 9.250%, 10/01/07 191,235
1,048,000 Leucadia National Corp.
7.000%, 08/15/13 1,045,380
83,000 Omega Healthcare Investors, Inc.
7.000%, 04/01/14 81,755
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 21
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
Senior Housing Properties Trust
$ 437,000 8.625%, 01/15/12 $ 480,700
309,000 7.875%, 04/15/15 321,360
---------------
4,404,125
---------------
HEALTH CARE (0.6%)
1,422,000 Ameripath, Inc.@
10.500%, 04/01/13 1,517,985
308,000 Angiotech Pharmaceuticals, Inc.*@
7.750%, 04/01/14 311,080
1,276,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 1,225,058
175,000 Bio-Rad Laboratories, Inc.
7.500%, 08/15/13 180,250
197,000 Biovail Corp.@
7.875%, 04/01/10 199,955
79,000 DaVita, Inc.
7.250%, 03/15/15 79,395
61,000 Omnicare, Inc.@
6.875%, 12/15/15 60,619
380,000 Psychiatric Solutions, Inc.
7.750%, 07/15/15 391,400
882,000 Tenet Healthcare Corp.*@
9.250%, 02/01/15 901,845
467,000 Valeant Pharmaceuticals International
7.000%, 12/15/11 464,665
612,000 Vanguard Health Systems, Inc.@
9.000%, 10/01/14 634,950
---------------
5,967,202
---------------
INDUSTRIALS (1.1%)
240,000 Accuride Corp.
8.500%, 02/01/15 238,200
524,000 American Airlines, Inc.
7.250%, 02/05/09 527,930
218,000 Armor Holdings, Inc.@
8.250%, 08/15/13 233,805
BE Aerospace, Inc.
262,000 8.875%, 05/01/11@ 275,100
175,000 8.500%, 10/01/10 187,688
1,398,000 CNH Global, NV
9.250%, 08/01/11 1,492,365
Convertible and High Income Fund
22 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 131,000 Columbus McKinnon Corp.@
8.875%, 11/01/13 $ 137,550
1,442,000 Esterline Technologies Corp.@
7.750%, 06/15/13 1,488,865
306,000 Gardner Denver, Inc.
8.000%, 05/01/13 322,830
131,000 GATX Corp.
8.875%, 06/01/09 141,362
513,000 General Cable Corp.@
9.500%, 11/15/10 556,605
306,000 Greenbrier Companies, Inc.
8.375%, 05/15/15 321,682
79,000 Hexcel Corporation
6.750%, 02/01/15 78,013
57,000 Interline Brands, Inc.
11.500%, 05/15/11 63,555
JLG Industries, Inc.
664,000 8.250%, 05/01/08 700,520
306,000 8.375%, 06/15/12@ 325,890
380,000 Manitowoc Company, Inc.
10.500%, 08/01/12 416,100
738,000 Mobile Mini, Inc.
9.500%, 07/01/13 808,110
437,000 Monitronics International, Inc.@
11.750%, 09/01/10 435,907
210,000 Orbital Sciences Corp.
9.000%, 07/15/11 225,225
Sequa Corp.
612,000 8.875%, 04/01/08 641,070
175,000 9.000%, 08/01/09 189,000
Terex Corp.
240,000 9.250%, 07/15/11@ 256,800
166,000 7.375%, 01/15/14 168,905
197,000 Trinity Industries, Inc.
6.500%, 03/15/14 190,597
175,000 Wesco Distribution, Inc.*
7.500%, 10/15/17 179,375
Williams Scotsman International, Inc.
175,000 8.500%, 10/01/15 180,688
44,000 8.500%, 10/01/15* 45,430
---------------
10,829,167
---------------
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 23
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
INFORMATION TECHNOLOGY (0.6%)
$ 566,000 Advanced Micro Devices, Inc.
7.750%, 11/01/12 $ 594,300
239,000 Arrow Electronics, Inc.
6.875%, 06/01/18 240,540
79,000 Avago Technologies*@
11.875%, 12/01/15 87,295
Celestica, Inc.@
743,000 7.625%, 07/01/13 746,715
349,000 7.875%, 07/01/11 356,853
175,000 Flextronics International, Ltd.@
6.500%, 05/15/13 173,250
437,000 Freescale Semiconductor, Inc.
7.125%, 07/15/14 450,110
175,000 GBP Iron Mountain, Inc.*
7.250%, 04/15/14 316,728
37,000 Sanmina-SCI Corporation
8.125%, 03/01/16 37,740
751,000 SunGard Data Systems, Inc.*@
9.125%, 08/15/13 805,448
612,000 Telcordia Technologies*
10.000%, 03/15/13 563,040
1,791,000 Xerox Corp.
7.625%, 06/15/13 1,858,162
---------------
6,230,181
---------------
MATERIALS (0.9%)
Aleris International, Inc.
454,000 10.375%, 10/15/10 500,535
337,000 9.000%, 11/15/14@ 353,850
437,000 Ball Corp.@
6.875%, 12/15/12 443,555
87,000 Crown Holdings, Inc.*
7.750%, 11/15/15 89,828
1,662,000 Equistar Chemicals, LP@
10.625%, 05/01/11 1,819,890
1,123,000 Freeport-McMoRan Copper & Gold, Inc.
10.125%, 02/01/10 1,210,032
79,000 Gibraltar Industries, Inc.*
8.000%, 12/01/15 80,778
Ineos Group Holdings, PLC*
524,000 EUR 7.875%, 02/15/16 636,288
87,000 8.500%, 02/15/16@ 83,085
Convertible and High Income Fund
24 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 524,000 IPSCO, Inc.
8.750%, 06/01/13 $ 571,160
786,000 Neenah Paper, Inc.@
7.375%, 11/15/14 738,840
131,000 P.H. Glatfetler Company*
7.125%, 05/01/16 131,000
262,000 Polyone Corp.@
10.625%, 05/15/10 284,270
437,000 Sealed Air Corp.*
6.875%, 07/15/33 430,597
175,000 Texas Industries, Inc.
7.250%, 07/15/13 180,250
Union Carbide Corp.
424,000 7.875%, 04/01/23 448,481
284,000 7.500%, 06/01/25 297,017
323,000 Westlake Chemical Corporation
6.625%, 01/15/16 312,502
---------------
8,611,958
---------------
TELECOMMUNICATION SERVICES (0.2%)
524,000 AT&T Corp.
9.750%, 11/15/31 622,770
61,000 Citizens Communications Company
9.000%, 08/15/31 65,728
612,000 Sprint Nextel Corporation
7.375%, 08/01/15 639,370
240,000 Stratos Global Corp.*@
9.875%, 02/15/13 242,100
393,000 Syniverse Technologies, Inc.
7.750%, 08/15/13 393,982
---------------
1,963,950
---------------
UTILITIES (0.4%)
437,000 Centerpoint Energy, Inc.@
6.850%, 06/01/15 454,191
Edison International
524,000 9.875%, 04/15/11@ 593,430
349,000 10.000%, 08/15/08 377,356
87,000 NRG Energy, Inc.@
7.375%, 02/01/16 87,979
437,000 Public Service Enterprise Group, Inc.
8.625%, 02/15/08 455,573
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 25
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
---------------- ---------------
$ 1,101,000 Teco Energy, Inc.
7.500%, 06/15/10 $ 1,158,802
612,000 TXU Corp.@
6.500%, 11/15/24 560,250
---------------
3,687,581
---------------
TOTAL CORPORATE BONDS 76,513,970
---------------
NUMBER OF
CONTRACTS VALUE
-------------- ---------------
OPTIONS (1.4%)
CONSUMER DISCRETIONARY (0.2%)
600 eBay, Inc.#
Call, 01/20/07, Strike 42.50 90,000
130 Garmin, Ltd.#
Call, 01/19/08, Strike 85.00 185,900
150 Lowe's Companies, Inc.#
Call, 01/19/08, Strike 70.00 103,500
310 Office Depot, Inc.#
Call, 01/19/08, Strike 40.00 229,400
215 Tiffany & Co.#
Call, 01/19/08, Strike 40.00 81,700
2,900 YUM! Brands, Inc.#
Call, 01/20/07, Strike 50.00 1,609,500
---------------
2,300,000
---------------
CONSUMER STAPLES (0.1%)
640 Kroger Company#
Call, 01/19/08, Strike 20.00 192,000
260 PepsiCo, Inc.#
Call, 01/19/08, Strike 60.00 135,200
---------------
327,200
---------------
ENERGY (0.1%)
95 Anadarko Petroleum Corp.#
Call, 01/19/08, Strike 95.00 234,650
130 BJ Services Company#
Call, 01/19/08, Strike 40.00 95,550
125 Devon Energy (Chevron) Corp.#
Call, 01/19/08, Strike 65.00 124,375
100 Diamond Offshore Drilling, Inc.#
Call, 01/19/08, Strike 85.00 220,000
Convertible and High Income Fund
26 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
----------- ---------------
210 Nabors Industries Ltd.#
Call, 01/19/08, Strike 37.50 $ 163,800
85 Petroleo Brasileiro, SA#
Call, 01/19/08, Strike 90.00 203,575
140 Schlumberger, Ltd.#
Call, 01/19/08, Strike 65.00 221,200
90 Sunoco, Inc.#
Call, 01/19/08, Strike 75.00 175,950
200 Weatherford International, Ltd.#
Call, 01/19/08, Strike 45.00 308,000
--------------
1,747,100
--------------
FINANCIALS (0.2%)
235 Aon Corp.#
Call, 01/19/08, Strike 35.00 251,450
600 Charles Schwab Corp.#
Call, 01/19/08, Strike 15.00 291,000
20 Chicago Mercantile Exchange Holdings, Inc.#
Call, 01/19/08, Strike 420.00 223,600
175 CIT Group, Inc.#
Call, 01/19/08, Strike 50.00 176,750
280 E*TRADE Financial Corporation#
Call, 01/19/08, Strike 25.00 140,000
70 Goldman Sachs Group, Inc.#
Call, 01/19/08, Strike 160.00 177,100
90 Legg Mason, Inc.#
Call, 01/20/07, Strike 120.00 104,850
70 Lehman Brothers Holdings, Inc.#
Call, 01/19/08, Strike 150.00 175,000
175 Merrill Lynch & Company, Inc.#
Call, 01/19/08, Strike 70.00 241,500
130 Prudential Financial, Inc.#
Call, 01/19/08, Strike 75.00 160,550
230 State Street Corp.#
Call, 01/19/08, Strike 60.00 276,000
--------------
2,217,800
--------------
HEALTH CARE (0.1%)
200 Aetna, Inc.#
Call, 01/19/08, Strike 50.00 66,000
90 Allergan, Inc.#
Call, 01/19/08, Strike 110.00 116,100
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 27
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
---------- ---------------
240 Amerisource Bergen Corp.#
Call, 01/19/08, Strike 47.50 $ 112,800
100 Express Scripts, Inc.#
Call, 01/19/08, Strike 90.00 98,000
215 Teva Pharmaceutical Industries, Ltd.#
Call, 01/19/08, Strike 45.00 99,975
1,600 UnitedHealth Group, Inc.#
Call, 01/19/08, Strike 70.00 400,000
---------------
892,875
---------------
INDUSTRIALS (0.1%)
130 Burlington Northern Santa Fe Corp.#
Call, 01/19/08, Strike 80.00 177,450
---------------
INFORMATION TECHNOLOGY (0.4%)
225 Agilent Technologies, Inc.#
Call, 01/19/08, Strike 35.00 196,875
85 Apple Computer, Inc.#
Call, 01/19/08, Strike 75.00 130,900
500 Electronic Data Systems Corp.#
Call, 01/19/08, Strike 25.00 277,500
335 Hewlett-Packard Company#
Call, 01/19/08, Strike 30.00 250,245
195 Intuit, Inc.#
Call, 01/19/08, Strike 55.00 169,650
120 Marvell Technology Group, Ltd.#
Call, 01/19/08, Strike 65.00 130,800
330 Motorola, Inc.#
Call, 01/19/08, Strike 22.50 105,600
230 National Semiconductor Corp.#
Call, 01/19/08, Strike 25.00 212,750
Nokia Corp.#
2,200 Call, 01/19/08, Strike 20.00 1,144,000
2,200 Call, 01/19/08, Strike 17.50 1,518,000
230 NVIDIA Corp.#
Call, 01/19/08, Strike 30.00 154,100
310 Paychex, Inc.#
Call, 01/19/08, Strike 40.00 192,200
90 Sandisk Corp.#
Call, 01/19/08, Strike 65.00 157,500
---------------
4,640,120
---------------
Convertible and High Income Fund
28 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
--------- --------------
MATERIALS (0.1%)
250 Goldcorp, Inc.#
Call, 01/19/08, Strike 27.50 $ 317,500
343 Harmony Gold Mining Co, Ltd.#
Call, 01/19/08, Strike 15.00 185,220
110 Phelps Dodge Corp.#
Call, 01/19/08, Strike 72.50 233,200
--------------
735,920
--------------
TELECOMMUNICATION SERVICES (0.1%)
230 America Movil S.A. de C.V.#
Call, 01/19/08, Strike 30.00 257,600
130 NII Holdings, Inc.#
Call, 01/19/08, Strike 55.00 204,750
--------------
462,350
--------------
TOTAL OPTIONS 13,500,815
--------------
TOTAL SYNTHETIC CONVERTIBLE
SECURITIES
(Cost $88,861,683) 90,014,785
==============
NUMBER OF
SHARES VALUE
---------- --------------
CONVERTIBLE PREFERRED STOCKS (28.0%)
CONSUMER DISCRETIONARY (3.1%)
1,067,300 Ford Motor Company Capital Trust II
6.500% 29,777,670
--------------
CONSUMER STAPLES (3.0%)
1,190,000 Albertson's, Inc.
7.250% 29,393,000
--------------
ENERGY (3.0%)
125,000 Amerada Hess Corp.
7.000% 15,076,250
102,700 Chesapeake Energy Corp.*
5.000% 14,211,113
--------------
29,287,363
--------------
FINANCIALS (16.3%)
635,000 Chubb Corp.
7.000% 22,967,950
19,000,000 Fortis Insurance, N.V. (Assurant, Inc.)* [ ]
7.750% 24,937,500
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 29
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
SHARES VALUE
--------- ---------------
215,000 Hartford Financial Services Group, Inc.
7.000% $ 17,537,550
350,000 Lazard, Ltd.
6.625% 13,835,500
775,000 Lehman Brothers Holdings, Inc. (General Mills, Inc.)[ ]
6.250% 20,157,750
230,000 Merrill Lynch & Co., Inc. (Nuveen Investments, Inc.)[ ]
6.750% 9,913,690
500,000 MetLife, Inc.
6.375% 14,010,000
570,000 National Australia Bank, Ltd.
7.875% 26,704,500
150,000 Washington Mutual, Inc.
5.375% 8,362,500
---------------
158,426,940
---------------
HEALTH CARE (1.1%)
200,000 Schering-Plough Corp.
6.000% 10,236,000
---------------
INDUSTRIALS (1.1%)
3,000,000 GBP BAE Systems, PLC
7.750% 11,082,238
---------------
UTILITIES (0.4%)
80,000 Southern Union Company
5.000% 4,101,600
---------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $260,885,346) 272,304,811
===============
PRINCIPAL
AMOUNT VALUE
--------- ---------------
SHORT-TERM INVESTMENT (1.5%)
$ 14,616,000 Citigroup, Inc.
4.770%, 05/01/06
(Cost $14,616,000) 14,616,000
===============
Convertible and High Income Fund
30 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
SHARES VALUE
--------- ---------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES ON LOAN (18.4%)
178,847,951 Bank of New York Institutional
Cash Reserve Fund
current rate 4.894%
(Cost $178,847,951) $ 178,847,951
---------------
TOTAL INVESTMENTS (159.1%)
(Cost $1,499,642,289) 1,543,841,911
===============
PAYABLE UPON RETURN OF SECURITIES
ON LOAN (-18.4%) (178,847,951)
---------------
OTHER ASSETS, LESS LIABILITIES (3.7%) 35,613,177
---------------
PREFERRED SHARES AT REDEMPTION VALUE INCLUDING
DIVIDENDS PAYABLE (-44.4%) (430,430,751)
---------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS (100.0%) $ 970,176,386
===============
NOTES TO SCHEDULE OF INVESTMENTS
Note: Value for Securities denominated in foreign currencies are shown in U.S.
dollars. The principal amount for such securities is shown in the respective
foreign currency. The date shown on options represents the expiration date of
the option contract. The option contract may be exercised at any date on or
before the date shown.
* Securities issued and sold pursuant to Rule 144A transaction are excepted
from the registration requirement of the Securities Act of 1933, as
amended. These securities may only be sold to qualified institutional
buyers ("QIBs"), such as the Fund. Any resale of these securities must
generally be effected through a sale that is registered under the Act or
otherwise exempted or excepted from such registration requirements. At
April 30, 2006, the market value of 144A securities that could not be
exchanged to the registered form is $120,297,556 or 12.4% of net assets.
@ Security, or portion of security, is on loan.
# Non-income producing security.
++ Variable rate security. The interest rate shown is the rate in effect at
April 30, 2006.
[ ] Securities exchangeable or convertible into securities of an entity
different than the issuer. Such entity is identified in the paranthetical.
FOREIGN CURRENCY ABBREVIATIONS
CAD Canadian Dollar
EUR European Monetary Unit
GBP British Pound Sterling
Convertible and High Income Fund
Schedule of Investments SEMIANNUAL REPORT 31
See accompanying Notes to Financial Statements.
Statement of Assets and Liabilities
APRIL 30, 2006 (UNAUDITED)
ASSETS
Investments, at value* (cost $1,499,642,289) $ 1,543,841,911
Cash with custodian (interest bearing) 2,081,052
Restricted cash for open options (interest bearing) 151,000
Receivable for investments sold 5,133,318
Accrued interest and dividends receivables 24,868,445
Unrealized appreciation on interest rate swaps 10,388,428
Prepaid expenses 39,151
Other assets 26,801
---------------
Total assets 1,586,530,106
---------------
LIABILITIES
Payable upon return of securities loaned 178,847,951
Payable for investments purchased 6,103,419
Payable to investment advisor 800,572
Payable to financial accountant 12,919
Payable for deferred compensation to Trustees 26,801
Other accounts payable and accrued liabilities 131,307
---------------
Total liabilities 185,922,969
---------------
PREFERRED SHARES
$25,000 liquidation value per share applicable to 17,200 shares,
including dividends payable 430,430,751
---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 970,176,386
---------------
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, no par value, unlimited shares authorized 62,339,786 shares
issued and outstanding $ 889,132,532
Undistributed net investment income (loss) (3,875,579)
Accumulated net realized gain (loss) on investments, foreign currency transactions
and interest rate swaps 30,253,797
Net unrealized appreciation (depreciation) on investments, foreign currency
translations and interest rate swaps 54,665,636
---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 970,176,386
---------------
Net asset value per common share based on 62,339,786 shares issued
and outstanding $ 15.56
---------------
* Includes $174,814,583 of securities loaned.
Convertible and High Income Fund
32 SEMIANNUAL REPORT Statement of Assets and Liabilities
See accompanying Notes to Financial Statements.
Statement of Operations
SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
INVESTMENT INCOME
Interest $ 39,894,394
Dividends 7,480,576
Securities lending income 297,745
---------------
Total investment income 47,672,715
---------------
EXPENSES
Investment advisory fees 5,492,163
Financial accounting fees 77,623
Auction agent and rating agency fees 561,053
Accounting fees 95,848
Printing and mailing fees 60,033
Audit and legal fees 34,520
Custodian fees 33,171
Registration fees 29,910
Transfer agent fees 16,656
Trustees' fees and officer compensation 17,279
Other 17,944
---------------
Total expenses 6,436,200
Less investment advisory fees waived (686,520)
---------------
Net expenses 5,749,680
---------------
NET INVESTMENT INCOME (LOSS) 41,923,035
===============
REALIZED AND UNREALIZED GAIN(LOSS) FROM INVESTMENTS, FOREIGN CURRENCY
AND INTEREST RATE SWAPS
NET REALIZED GAIN (LOSS) FROM:
Investments 31,707,727
Foreign currency transactions 247,021
Interest rate swaps 2,384,414
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 5,982,199
Foreign currency translations 85,855
Interest rate swaps (22,488)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS,
FOREIGN CURRENCY AND INTEREST RATE SWAPS 40,384,728
===============
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 82,307,763
===============
DIVIDENDS TO PREFERRED SHAREHOLDERS FROM
Net investment income (7,598,434)
Capital gains (1,453,494)
---------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS $ 73,255,835
===============
Convertible and High Income Fund
Statement of Operations SEMIANNUAL REPORT 33
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
Six Months Ended
April 30, 2006 Year Ended
(unaudited) October 31, 2005
--------------- ----------------
OPERATIONS
Net investment income (loss) $ 41,923,035 $ 91,532,896
Net realized gain (loss) from investments, foreign currency
transactions and interest rate swaps 34,339,162 28,593,705
Change in net unrealized appreciation/depreciation on investments,
foreign currency translations and interest rate swaps 6,045,566 (34,128,164)
Distributions to preferred shareholders from
Net investment income (7,598,434) (12,501,709)
Capital gains (1,453,494) --
------------- -------------
Net increase (decrease) in net assets applicable to common
shareholders resulting from operations 73,255,835 73,496,728
------------- -------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM
Net investment income (37,838,118) (82,338,867)
Capital gains (13,263,090) (7,532,898)
------------- -------------
Net decrease in net assets from distributions to common shareholders (51,101,208) (89,871,765)
CAPITAL STOCK TRANSACTIONS
Reinvestment of distributions resulting in the issuance of common
stock 7,286,067 12,074,203
------------- -------------
Net increase (decrease) in net assets from capital stock
transactions 7,286,067 12,074,203
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS 29,440,694 (4,300,834)
------------- -------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Beginning of period 940,735,692 945,036,526
------------- -------------
End of period $ 970,176,386 $ 940,735,692
============= =============
Undistributed net investment income (loss) $ (3,875,579) $ (362,062)
Convertible and High Income Fund
34 SEMIANNUAL REPORT Statements of Changes in Net Assets
See accompanying Notes to Financial Statements.
Notes to Financial Statements (Unaudited)
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 objective 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
convertible and non-convertible income 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).
PORTFOLIO VALUATION. In computing the Fund's net asset value, portfolio
securities that are traded on a securities exchange in the United States, except
for option securities, are valued at the last reported sale price as of the time
of valuation, or lacking any current reported sale at the time of valuation, at
the mean between the most recent bid and asked quotations. Each option security
traded on a securities exchange in the United States is valued at the last
current reported sale price as of the time of valuation if the last current
reported sale price falls within the consolidated bid/ask quote for the option
security. If the last current reported sale price as of the time of valuation
does not fall within the consolidated bid/ask quote for the option security, the
security is valued at the mid-point of the consolidated bid/ask quote for the
option security. Each security traded in the over-the-counter market and quoted
on the NASDAQ National Market System, is valued at the NASDAQ Official Closing
Price ("NOCP"), as determined by NASDAQ, or lacking an NOCP, the last current
reported sale price as of the time of valuation by NASDAQ, or lacking any
current reported sale on NASDAQ at the time of valuation, at the mean between
the most recent bid and asked quotations. Each over-the-counter option that is
not traded through the Options Clearing Corporation is valued by the
counterparty, or if the counterparty's price is not readily available then by
using the Black-Scholes method. Each other security traded over-the-counter is
valued at the mean between the most recent bid and asked quotations. Short-term
securities with maturities of 60 days or less are valued at amortized cost,
which approximates market value.
When market quotations are not readily available or when the valuation methods
mentioned above are not reflective of a fair value of the security, the security
is
Convertible and High Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 35
Notes to Financial Statements (Unaudited)
valued at a fair value following procedures and/or guidelines approved by the
Board of Trustees, which may include utilizing a systematic fair valuation model
provided by an independent pricing system. The Fund may also use fair value
pricing, if the value of a security it holds is, pursuant to Board of Trustees'
guidelines, 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 traded. These 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 is employed, the value of the portfolio security used to calculate the
Fund's net asset value may differ from quoted or official closing prices.
Securities that are principally traded in a foreign market are valued at the
last current sale price at the time of valuation or lacking any current or
reported sale, at the time of valuation, at the mean between the most recent bid
and asked quotations as of the close of the appropriate exchange or other
designated time. Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets is normally completed at various times
before the close of business on each day on which the New York Stock Exchange
("NYSE") is open. Trading of these 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 net
asset value is not calculated. As stated above, if the market prices are not
readily available or are not reflective of the fair value of the security, the
security will be priced at a fair value following procedures approved by the
Board of Trustees. In light of the judgment involved in fair value decisions,
there can be no assurance that a fair value assigned to a particular security is
accurate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Short-term investment
transactions are recorded on a trade date basis. Long-term investment
transactions are recorded on a trade date plus one basis, except for fiscal
quarter ends, which are recorded on trade date. Net realized gains and losses
from investment transactions are reported on an identified cost basis. Interest
income is recognized using the accrual method and includes accretion of original
issue and market discount and amortization of premium. Dividend income is
recognized on the ex-dividend date, except that certain dividends from foreign
securities are recorded as soon as the information becomes available.
Convertible and High Income Fund
36 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
FOREIGN CURRENCY TRANSLATION. Except for securities of foreign issuers valued by
a pricing service, values of investments and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars using a rate
quoted by any major bank or dealer in the particular currency market, as
reported by a recognized quotation dissemination service.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign currency gains or losses arise from disposition of
foreign currency, the difference in the foreign exchange rates between the trade
and settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
ex-date or accrual date and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes (due to the changes in the exchange rate) in the value of foreign
currency and other assets and liabilities denominated in foreign currencies held
at period end.
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 market value should the counterparty not perform under the contract.
Put and call options purchased are accounted for in the same manner as portfolio
securities. The cost of securities acquired through the exercise of purchased
call options is increased by premiums paid. The proceeds from securities sold
through the exercise of purchased put options are decreased by the premiums
paid.
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
value of the option written. Premiums received from writing options that expire
unexercised are treated by the Fund on the expiration date as realized gains
from written options. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or, if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a written call
option is exercised, the premium is added to the proceeds from the sale of the
underlying security or currency in determining whether the Fund has realized a
gain or loss. If a written put option
Convertible and High Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 37
Notes to Financial Statements (Unaudited)
is exercised, the premium reduces the cost basis of the securities purchased by
the Fund. 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.
USE OF ESTIMATES. The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
INCOME TAXES. No provision has been made for U.S. income taxes because the
Fund's policy is to continue to qualify as a regulated investment company under
Internal Revenue Code of 1986, as amended (the "Code") and distribute to
shareholders substantially all of its taxable income and net realized gains.
Dividends and distributions paid to shareholders are recorded on the ex-dividend
date. The amount of dividends and distributions from net investment income and
net realized capital gains is determined in accordance with federal income tax
regulations, which may differ from U.S. generally accepted accounting
principles. To the extent these "book/tax" differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment. These differences are primarily due to differing treatments
for foreign currency transactions, contingent payment debt instruments and
methods of amortizing and accreting fixed income securities. Financial records
are not adjusted for temporary differences.
INDEMNIFICATIONS. Under the Fund's organizational documents, its officers and
trustees are indemnified against certain liabilities incurred by them by reason
of having been an officer or trustee of the Fund. In addition, in the normal
course of business, the Fund enters into contracts that provide general
indemnifications to other parties. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, the Fund has not had prior
claims or losses pursuant to these contracts and expects the risk of loss to be
remote.
NOTE 2 - INVESTMENT ADVISOR AND TRANSACTIONS WITH AFFILIATES OR CERTAIN OTHER
PARTIES
Pursuant to an investment advisory agreement with Calamos Advisors LLC
("Calamos Advisors"), the Fund pays an annual fee, payable monthly, equal to
0.80% based on the average weekly managed assets. Calamos Advisors has
Convertible and High Income Fund
38 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
contractually agreed to waive a portion of its management fee at the annual rate
of 0.10% of the average weekly managed assets of the Fund for the first five
full years of the Fund's operation (through May 31, 2008) and to waive a
declining amount for an additional three years (0.07% of the average weekly
managed assets in 2009, 0.05% in 2010, and 0.03% in 2011).
Calamos Advisors receives a fee payable monthly at the annual rate of 0.0175% on
the first $1 billion of combined assets; 0.0150% on the next $1 billion of
combined assets; and 0.0110% on combined assets above $2 billion for financial
accounting services (for purposes of this calculation "combined assets" means
the total of the average daily net assets of Calamos Investment Trust and
Calamos Advisors Trust and the average weekly managed assets of Calamos
Convertible and High Income Fund, Calamos Convertible Opportunities and Income
Fund, Calamos Strategic Total Return Fund and Calamos Global Total Return Fund).
Financial accounting services include, but are not limited to, the following:
managing expenses and expense payment processing; monitoring the calculation of
expense accrual amounts; calculating, tracking, and reporting tax adjustments on
all assets and liabilities and monitoring trustee deferred compensation plan
accruals and valuations. The Fund will pay its pro rata share of the financial
accounting service fee payable to Calamos Advisors based on the Fund's relative
portion of combined assets.
Effective August 1, 2005, the Fund began reimbursing the advisor for a portion
of compensation paid to the Fund's Chief Compliance Officer. This compensation
is reported as part of "Trustees' fees and officer compensation" expenses on the
Statement of Operations.
Certain officers and trustees of the Fund are also officers and directors of
Calamos Financial Services LLC ("CFS") and Calamos Advisors. All officers and
affiliated Trustees serve without direct compensation from the Fund, except for
the Chief Compliance Officer as described above.
The Fund has adopted a deferred compensation plan (the "Plan"). Under the Plan,
a trustee who is not an "interested person" (as defined in the 1940 Act) of CFS
or Calamos Advisors and has elected to participate in the Plan (a "participating
trustee") may defer receipt of all or a portion of his compensation from the
Fund. The deferred compensation payable to the participating trustee is credited
to the trustee's deferral account as of the business day such compensation would
have been paid to the participating trustee. The value of the account increases
with contributions to the account or with increases in the value of the
measuring shares, and the value of the account decreases with withdrawals from
the account or with declines
Convertible and High Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 39
Notes to Financial Statements (Unaudited)
in the value of the measuring shares. Deferred compensation of $26,801 is
included in "Other assets" on the Statement of Assets and Liabilities at April
30, 2006. The Fund's obligation to make payments under the Plan is a general
obligation of the Fund and is included in "Payable for deferred compensation to
Trustees" on the Statement of Assets and Liabilities at April 30, 2006.
NOTE 3 - INVESTMENTS
Purchases and sales of investments, other than short-term obligations, for the
six months ended April 30, 2006 were as follows:
Purchases $ 230,473,987
Proceeds from sales 245,588,696
The cost basis of investments for Federal income tax purposes at April 30, 2006
was as follows:
Cost basis of investments $ 1,509,475,601
---------------
Gross unrealized appreciation 68,430,109
Gross unrealized depreciation (34,063,799)
---------------
Net unrealized appreciation (depreciation) $ 34,366,310
===============
NOTE 4 - INCOME TAXES
Distributions during the fiscal year ended October 31, 2005 were characterized
for Federal income tax purposes as follows:
DISTRIBUTIONS PAID FROM:
Ordinary income $ 94,726,155
Long-Term capital gains 7,532,898
Convertible and High Income Fund
40 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
As of October 31, 2005, the components of accumulated earnings on a tax basis
were as follows:
Undistributed ordinary income $ 11,346,482
Undistributed capital gains 4,913,401
---------------
Total undistributed earnings 16,259,883
Accumulated capital and other losses --
Net unrealized gains 42,945,702
---------------
Total accumulated earnings 59,205,585
Other (316,358)
Paid-in capital 881,846,465
---------------
Net assets applicable to common shareholders $ 940,735,692
---------------
For the tax year ended October 31, 2005, the Fund utilized capital losses of
$5,148,747. As of October 31, 2005, the Fund had no capital loss carryforwards.
NOTE 5 - COMMON STOCK
There are unlimited common shares of beneficial interest authorized and
62,339,786 shares outstanding at April 30, 2006. Calamos Advisors owned 17,200
of the outstanding shares at April 30, 2006. Transactions in common shares were
as follows:
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
-------------- ----------------
Beginning shares 61,867,557 61,091,942
Shares sold -- --
Shares issued through reinvestment of distributions 472,229 775,615
------------- ------------
Ending shares 62,339,786 61,867,557
============= ============
NOTE 6 - FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. A forward foreign currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Risks associated with such contracts include, among other things, movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to
Convertible and High Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 41
Notes to Financial Statements (Unaudited)
perform. The net unrealized gain, if any, represents the credit risk to the Fund
on a forward foreign currency contract. The contracts are valued daily at
forward exchange rates, and an unrealized gain or loss is recorded. The Fund
realizes a gain or loss when a position is closed or upon settlement of the
contracts. There were no open forward foreign currency contracts at April 30,
2006.
NOTE 7 - SYNTHETIC CONVERTIBLE SECURITIES
The Fund may establish a "synthetic" convertible instrument by combining
separate securities that possess the economic characteristics similar to a
convertible security, i.e., fixed-income securities ("fixed-income component")
and the right to acquire equity securities ("convertible component"). The
fixed-income component is achieved by investing in non-convertible, fixed income
securities such as bonds, preferred stocks and money market instruments. The
convertible component is achieved by investing in warrants or options to buy
common stock at a certain exercise price, or options on a stock index. In
establishing a synthetic instrument, the Fund may pool a basket of fixed-income
securities and a basket of warrants or options that produce the economic
characteristics similar to a convertible security. Within each basket of
fixed-income securities and warrants or options, different companies may issue
the fixed-income and convertible components, which may be purchased separately
and at different times.
The Fund may purchase synthetic convertible instruments created by other
parties, typically investment banks, including convertible structured notes.
Convertible structured notes are fixed-income debentures linked to equity.
Convertible structured notes have the attributes of a convertible security;
however, the investment bank that issued the convertible note assumes the credit
risk associated with the investment, rather than the issuer of the underlying
common stock into which the note is convertible. Purchasing synthetic
convertible securities may offer more flexibility than purchasing a convertible
security. Different companies may issue the fixed-income and convertible
components, which may be purchased separately and at different times.
NOTE 8 - PREFERRED SHARES
There are unlimited shares of Auction Rate Cumulative Preferred Shares
("Preferred Shares") authorized. The Preferred Shares have rights as determined
by the Board of Trustees. The 17,200 shares of Preferred Shares outstanding
consist of six series, 3,000 shares of M, 3,000 shares of TU, 3,000 shares of W,
3,000 shares of TH, 3,000 shares
Convertible and High Income Fund
42 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
of F, and 2,200 shares of A. The Preferred Shares have a liquidation value of
$25,000 per share plus any accumulated but unpaid dividends, whether or not
declared.
Dividends on the Preferred Shares are cumulative at a rate typically reset every
seven or twenty-eight days based on the results of an auction. Dividend rates
ranged from 3.60% to 5.00% for the six months ended April 30, 2006. Under the
1940 Act, the Fund may not declare dividends or make other distributions on
shares of common stock or purchase any such shares if, at the time of the
declaration, distribution or purchase, asset coverage with respect to the
outstanding Preferred Shares would be less than 200%.
The Preferred Shares are redeemable at the Fund's option, in whole or in part,
on any dividend payment date at $25,000 per share plus any accumulated but
unpaid dividends. The Preferred Shares are also subject to mandatory redemption
at $25,000 per share plus any accumulated but unpaid dividends, whether or not
declared, if certain requirements relating to the composition of the assets and
liabilities of the Fund as set forth in the Statement of Preferences are not
satisfied.
The holders of Preferred Shares have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class except on matters affecting only the holders
of Preferred Shares or the holders of common shares.
NOTE 9 - INTEREST RATE TRANSACTIONS
The Fund may enter into interest rate swap or cap transactions to attempt to
protect itself from increasing dividend or interest expense on its leverage
resulting from increasing short-term interest rates. A decline in interest rates
may result in a decline in the value of the swap or cap, which may result in a
decline in the Fund's net asset value. In addition, if the counterparty to an
interest rate swap or cap defaults, the Fund would not be able to use the
anticipated receipts under the swap or cap to offset the dividend or interest
payments on the Fund's leverage. At the time an interest rate swap or cap
reaches its scheduled termination, there is a risk that the Fund would not be
able to obtain a replacement transaction or that the terms of the replacement
would not be as favorable as on the expiring transaction. In addition, if the
Fund is required to terminate any swap or cap early due to the Fund failing to
maintain a required 200% asset coverage of the liquidation value of the
outstanding Preferred Shares or the Fund loses its credit rating on its
Preferred Shares, then the Fund could be required to make a termination payment,
in addition to redeeming all or some of the Preferred Shares. Net unrealized
gains
Convertible and High Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 43
Notes to Financial Statements (Unaudited)
are reported as an asset and net unrealized losses are reported as a liability
on the Statement of Assets and Liabilities. The change in the value of the
swaps, including periodic amounts of interest to be paid or received on swaps is
reported as unrealized gains or losses in the Statement of Operations. A
realized gain or loss is recorded upon payment or termination of swap
agreements. Details of the swap agreements outstanding as April 30, 2006 were as
follows:
UNREALIZED
TERMINATION NOTIONAL FIXED RATE FLOATING RATE APPRECIATION
COUNTERPARTY DATE AMOUNT (000) (FUND PAYS) (FUND RECEIVES) (DEPRECIATION)
------------ ---------------- ------------- ----------- --------------- --------------
Citibank NA October 27, 2006 $ 100,000 2.80% 1month LIBOR $ 1,163,990
Citibank NA October 27, 2007 200,000 3.27% 1month LIBOR 5,595,198
Citibank NA October 27, 2008 100,000 3.65% 1month LIBOR 3,629,240
--------------
$ 10,388,428
==============
NOTE 10 - SECURITIES LENDING
During the six months ended April 30, 2006, the Fund loaned certain of their
securities to broker-dealers and banks. Any such loan must be continuously
secured by collateral in cash or cash equivalents maintained on a current basis
in an amount at least equal to the market value of the securities loaned by the
Fund. The Fund continues to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives an additional
return that may be in the form of a fixed fee or a percentage of the collateral.
The Fund may pay reasonable fees to persons unaffiliated with the Fund for
services in arranging these loans. The Fund has the right to call the loan and
obtain the securities loaned at any time on notice of not more than five
business days. The Fund does not have the right to vote the securities during
the existence of the loan but could call the loan in an attempt to permit voting
of the securities in certain circumstances. Upon return of the securities
loaned, the cash or cash equivalent collateral will be returned to the borrower.
In the event of bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or recovering the
loaned securities and losses, including (a) possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c) the expenses of
enforcing its rights. In an effort to reduce these risks, Calamos Advisors and
the security lending agent will monitor the creditworthiness of the firms to
which the Fund lends securities. At April 30, 2006, the Fund had securities
valued at $174,814,583 that were on loan to broker-dealers and banks and
$178,847,951 in cash or cash equivalent collateral.
Convertible and High Income Fund
44 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
NOTE 11 - SUBSEQUENT EVENT
The Fund completed a secondary public offering on June 20, 2006. The Fund issued
3,900,000 common shares of beneficial interest ("common shares") at a public
offering price of $16.10 per share, totaling approximately $62.8 million. The
Fund has granted the underwriters the right to purchase up to an additional
570,000 common shares at the public offering price, less the sales load, within
30 days of June 15, 2006 to cover over-allotments.
Convertible and High Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 45
Financial Highlights
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD WERE AS FOLLOWS:
Six Months
Ended May 28, 2003*
April 30, For the Year Ended through
(unaudited) October 31, October 31,
-----------------------------------------------
2006 2005 2004 2003
----------- -------- --------- ------------
Net asset value, beginning of period $ 15.21 $ 15.47 $ 14.80 $ 14.32(a)
Income from investment operations:
Net investment income (loss) 0.68 1.49 1.60 0.44
Net realized and unrealized gain (loss) from
investments, foreign currency and interest rate
swaps 0.63 (0.09) 0.63 0.46
Dividends to preferred shareholders from:
Net investment income (common share equivalent basis) (0.12) (0.20) (0.10) (0.02)
Capital gains (common share equivalent basis) (0.02) --
Total from investment operations 1.17 1.20 2.13 0.88
Less dividends to common shareholders from:
Net investment income (0.61) (1.34) (1.46) (0.37)
Capital gains (0.21) (0.12) -- --
Capital charge resulting from issuance of common
and preferred shares -- -- -- (0.03)
Net asset value, end of period $ 15.56 $ 15.21 $ 15.47 $ 14.80
Market value, end of period $ 16.02 $ 15.52 $ 16.74 $ 16.00
Total investment return based on (b):
Net asset value 7.88% 7.99% 14.91% 5.92%
Market value 8.85% 1.83% 15.02% 9.36%
Ratios and supplemental data:
Net assets applicable to common shareholders,
end of period (000's omitted) $970,176 $940,736 $ 945,037 $ 891,152
Preferred shares, at redemption value ($25,000
per share liquidation preference) (000's omitted) $430,000 $430,000 $ 430,000 $ 430,000
Ratios to average net assets applicable to common
shareholders:
Net expenses (c)(d) 1.21% 1.23% 1.25% 1.11%
Gross expenses prior to waiver of expenses by
the advisor (c)(d) 1.36% 1.38% 1.40% 1.24%
Net investment income (loss) (c)(d) 8.86% 9.55% 10.56% 7.85%
Preferred share dividends (c) 1.61% 1.30% 0.65% 0.34%
Net investment income (loss), net of preferred
share dividends (c) 7.25% 8.25% 9.91% 7.51%
Portfolio turnover rate 17% 55% 27% 20%
Asset coverage per preferred share, at end of $ 81,431 $ 79,708 $ 79,952 $ 76,811
period (e)
* Commencement of operations.
(a) Net of sales load of $0.675 on initial shares issued and beginning net
asset value of $14.325.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of the period reported. Dividends and distributions are assumed, for
purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Total return is not annualized
for periods less than one year. Brokerage commissions are not reflected.
NAV per share is determined by dividing the value of the Fund's portfolio
securities, cash and other assets, less all liabilities, by the total
number of common shares outstanding. The common share market price is the
price the market is willing to pay for shares of the Fund at a given time.
Common share market price is influenced by a range of factors, including
supply and demand and market conditions.
(c) Annualized for periods less than one year.
(d) Does not reflect the effect of dividend payments to Preferred
Shareholders.
(e) Calculated by subtracting the Fund's total liabilities (not including
Preferred Shares) from the Fund's total assets and dividing this by the
number of Preferred Shares outstanding.
Convertible and High Income Fund
46 SEMIANNUAL REPORT Financial Highlights
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees and Shareholders of
CALAMOS Convertible and High Income Fund
We have reviewed the accompanying statement of assets and liabilities, including
the schedule of investments, of CALAMOS Convertible and High Income Fund (the
"Fund") as of April 30, 2006, and the related statements of operations and
changes in net assets and the financial highlights for the semi-annual period
then ended. These interim financial statements and financial highlights are the
responsibility of the Fund's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such interim financial statements and financial highlights for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of changes in
net assets for the year ended October 31, 2005 and the financial highlights for
each of the two years then ended October 31, 2005 and for the period from May
28, 2003 (commencement of operations) through October 31, 2003; and in our
report dated December 16, 2005, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
/s/ (DELOITTE & TOUCHE LLP)
---------------------------
Chicago, Illinois
June 21, 2006
Convertible and High Income Fund
Report of Independent Registered Public Accounting Firm SEMIANNUAL REPORT 47
Other Information (Unaudited)
RESULTS OF SHAREHOLDER MEETING. The Annual Meeting of Shareholders of the Fund
was held on March 30, 2006 where shareholders voted on the elections of
trustees. With regard to the election, each trustee standing for election was
elected by the shareholders as follows:
# OF COMMON
TRUSTEES AND PREFERRED SHARES
-------- ------------------------
FOR WITHHELD
---------- --------
Joe F. Hanauer 60,209,710 477,803
John E. Neal 60,267,281 420,232
David D. Tripple 60,296,559 390,954
The other trustees of the Fund whose terms did not expire in 2006 are John P.
Calamos, Sr., Nick P. Calamos, Weston W. Marsh, William R. Rybak, and Stephen B.
Timbers.
Convertible and High Income Fund
48 SEMIANNUAL REPORT Other Information
About Closed-End Funds
WHAT IS A CLOSED-END FUND?
A closed-end fund is a publicly traded investment company that raises its
initial investment capital through the issuance of a fixed number of shares to
investors in a public offering. Shares of a closed-end fund are listed on a
stock exchange or traded in the over-the-counter market. Like all investment
companies, a closed-end fund is professionally managed and offers investors a
unique investment solution based on its investment objective approved by the
fund's Board of Directors.
ADVANTAGES OF CLOSED-END FUND INVESTING
- DEFINED ASSET POOL ALLOWS EFFICIENT PORTFOLIO MANAGEMENT--Although
closed-end fund shares trade actively on a securities exchange, this
doesn't affect the closed-end fund manager because there are no new
investors buying into or selling out of the fund's portfolio.
- MORE FLEXIBILITY IN THE TIMING AND PRICE OF TRADES--Investors can purchase
and sell shares of closed-end funds throughout the trading day, just like
the shares of other publicly traded securities.
- LOWER EXPENSE RATIOS--The expense ratios of closed-end funds are
oftentimes less than those of mutual funds. Over time, a lower expense
ratio could enhance investment performance.
- CLOSED-END STRUCTURE MAKES SENSE FOR LESS-LIQUID ASSET CLASSES--A closed-
end structure makes sense for investors considering less liquid asset
classes, such as high-yield bonds or micro-cap stocks.
- ABILITY TO PUT LEVERAGE TO WORK--Closed-end funds may issue senior
securities (such as preferred stock or debentures) or borrow money to
"leverage" their investment positions.
- NO MINIMUM INVESTMENT REQUIREMENTS
Convertible and High Income Fund
About Closed-End Funds SEMIANNUAL REPORT 49
Leverage
USING LEVERAGE TO ENHANCE TOTAL RETURN
Closed-end funds can use leverage which, utilizes borrowed money to increase the
return on invested capital. The Fund will invest the borrowed assets into
securities, which we believe will provide a greater total return to investors
than the cost of the borrowing.
HIGHLIGHTS ON LEVERAGE
- Leveraging the portfolio allows the investment team to potentially enhance
the income and total returns of the Fund.
- In a rising-rate environment, the cost of leverage often increases;
however, the investment team has locked in the cost of leverage for a
longer term. In leveraged closed-end funds that invest in interest-rate
sensitive securities (high-quality traditional fixed income), rising
rates can hurt a fund in two ways: first, the cost of leverage increases;
second, the value of securities drops.
- This portfolio does not have notable sensitivity to rising interest rates.
Much of the cost of leverage has been locked in, and the portfolio seeks
to invest in securities that should be more economically sensitive and
less interest rate sensitive.
MANAGING THE INTEREST RATE RISK OF LEVERAGE
In general, leverage can expose a closed-end fund to the risk of fluctuations in
short-term interest rates. As we discussed in the Investment Team Interview,
Calamos Investments has taken steps to mitigate some of this risk to our
shareholders. Specifically, we hedged the Fund's preferred shares (used these
shares as principal) to enter into interest rate swap agreements. In its
simplest form, an interest rate swap involves two parties agreeing to exchange
or "swap" one set of cash flows for another set. In essence, the agreement
allows a party that desires to avoid a variable rate (Calamos) to pay a fixed
rate to a party that desires variability.
THE DEALER MARKET FOR INTEREST RATE SWAPS
[FLOW CHART]
Under these agreements, the Fund pays a potentially higher rate for borrowing
initially, but that rate is fixed for a period of three to five years, thereby
potentially reducing the interest costs that the Fund would otherwise pay over
the period based on a floating or variable rate. To learn more about the use of
leverage and interest rate swaps, visit our special report titled "Using
Leverage and Interest Rate Swaps in Today's Market" at
www.calamos.com/closedend.aspx.
Convertible and High Income Fund
50 SEMIANNUAL REPORT Leverage
Level Rate Distribution Policy
USING A LEVEL RATE DISTRIBUTION POLICY TO PROMOTE
DEPENDABLE INCOME AND TOTAL RETURN
The goal of the level rate distribution policy is to provide investors a
predictable, though not assured, level of cash flow, which can either serve as a
stable income stream or, through reinvestment, contribute significantly to
long-term total return.
We understand the importance that investors place on the stability of dividends
and their ability to contribute to long-term total return, which is why we have
instituted a level rate distribution policy for the Fund. Under the policy,
monthly distributions paid may include net investment income, net realized
short-term capital gains and, if necessary, return of capital. In addition, a
limited number of distributions per calendar year may include net realized
long-term capital gains. There is no guarantee that the Fund will realize
capital gains in any given year. Distributions are subject to
re-characterization for tax purposes after the end of the fiscal year. All
shareholders with taxable accounts will receive written notification regarding
the components and tax treatment for distributions via Form 1099-DIV.
Distributions from the Fund are generally subject to Federal income taxes. For
purposes of maintaining the level rate distribution policy, the Fund may realize
short-term capital gains on securities that, if sold at a later date, would have
resulted in long-term capital gains. Maintenance of a level rate distribution
policy may increase transaction and tax costs associated with the Fund.
Convertible and High Income Fund
Level Rate Distribution Policy SEMIANNUAL REPORT 51
Automatic Dividend Reinvestment Plan
MAXIMIZING INVESTMENT WITH AN AUTOMATIC DIVIDEND REINVESTMENT PLAN
The Automatic Dividend Reinvestment Plan offers a simple, cost-efficient and
convenient way to reinvest your dividends and capital gains distributions in
additional shares of the Fund, allowing you to increase your investment in the
Fund.
BENEFITS
- COMPOUNDED GROWTH: By automatically reinvesting with the Plan, you gain
the potential to allow your dividends and capital gains to compound over
time.
- POTENTIAL FOR LOWER COMMISSION COSTS: Additional shares are purchased in
large blocks, with brokerage commissions shared among all plan
participants. There is no cost to enroll in the Plan.
- CONVENIENCE: After enrollment, the Plan is automatic and includes detailed
statements for participants. Participants can terminate their enrollment
at any time.
For additional information about the Plan, please contact the Plan Agent, The
Bank of New York, at 800-432-8224 or visit us on the web at
www.calamos.com/chy.aspx. If you wish to participate in the Plan and your shares
are held in your own name, simply call the Plan Agent. If your shares are not
held in your name, please contact your brokerage firm, bank, or other nominee to
request that they participate in the Plan on your behalf. If your brokerage
firm, bank, or other nominee is unable to participate on your behalf, you may
request that your shares be re-registered in your own name.
We're pleased to provide our shareholders with the additional benefit of the
Fund's Dividend Reinvestment Plan and hope that it may serve your financial
plan.
Convertible and High Income Fund
52 SEMIANNUAL REPORT Automatic Dividend Reinvestment Plan
Calamos Closed-End Funds
INTELLIGENT ASSET ALLOCATION IN FOUR DISTINCT CLOSED-END FUNDS
Depending on which Calamos closed-end fund you currently own, you may want to
consider one or more of our other closed-end strategies to help further
diversify your investment portfolio.
Seek the advice of your financial advisor, who can help you determine your
financial goals, risk tolerance, time horizon and income needs. To learn more,
you can also visit our website at www.calamos.com.
FUND ASSET ALLOCATION AS OF 4/30/06 FUND PROFILE
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND (CHI)
[PIE CHART]
CONVERTIBLE SECURITIES 46.3%
HIGH YIELD/CORPORATE BONDS 53.5%
SHORT-TERM INVESTMENTS 0.2%
PROVIDING ENHANCED FIXED INCOME
OBJECTIVE: The Fund seeks total return through a combination of capital
appreciation and current income by investing in a diversified portfolio of
convertible securities and below investment-grade (high-yield) fixed-income
securities.
CALAMOS CONVERTIBLE AND HIGH INCOME FUND (CHY)
[PIE CHART]
CONVERTIBLE SECURITIES 40.3%
HIGH YIELD/CORPORATE BONDS 58.5%
SHORT-TERM INVESTMENTS 1.2%
PROVIDING ENHANCED FIXED INCOME
OBJECTIVE: The Fund seeks total return through a combination of capital
appreciation and current income by investing in a diversified portfolio of
convertible securities and below investment-grade (high-yield) fixed-income
securities.
CALAMOS STRATEGIC TOTAL RETURN FUND (CSQ)
[PIE CHART]
COMMON STOCK 42.3%
CONVERTIBLE SECURITIES 30.8%
HIGH YIELD/CORPORATE BONDS 25.7%
SHORT-TERM INVESTMENTS 1.2%
PROVIDING DEFENSIVE EQUITY
OBJECTIVE: The Fund seeks total return through a combination of capital
appreciation and current income by investing in a diversified portfolio of
equity, convertible and high-yield securities.
CALAMOS GLOBAL TOTAL RETURN FUND (CGO)
[PIE CHART]
COMMON STOCK 54.0%
CONVERTIBLE SECURITIES 17.4%
HIGH YIELD/CORPORATE BONDS 28.3%
SHORT-TERM INVESTMENTS 0.3%
PROVIDING DEFENSIVE GLOBAL EQUITY
OBJECTIVE: The Fund seeks total return through a combination of capital
appreciation and current income by investing in a diversified portfolio of
global equity, global convertible and high-yield securities.
Convertible and High Income Fund
Calamos Closed-End Funds SEMIANNUAL REPORT 53
[CALAMOS INVESTMENTS LOGO]
CALAMOS INVESTMENTS | 2020 CALAMOS COURT | NAPERVILLE, IL 60563-2787
800.582.6959 | www.calamos.com
A description of the Calamos Proxy Voting Policies and Procedures is available
free of charge upon request by calling (800) 582-6959, by visiting the Calamos
website at www.calamos.com, by writing Calamos at: Calamos Investments, Attn:
Client Services, 2020 Calamos Court, Naperville, IL 60563 and by visiting the
SEC's Web site at www.sec.gov. The Fund's proxy voting record for the twelve
month period ended June 30, 2005, is also available free of charge upon request
by calling or writing Calamos Investments and by visiting the SEC Web site at
www.sec.gov.
The Fund files a complete list of its portfolio holdings with the SEC for the
first and third quarters each fiscal year on Form N-Q. The Form N-Q is available
free of charge, upon request, by calling or writing Calamos Investments or by
visiting the SEC website. You may also review or, for a fee, copy the forms at
the SEC's Public Reference Room in Washington, D.C. (202) 942-8090.
FOR 24 HOUR SHAREHOLDER ASSISTANCE
800.432.8224
TO OBTAIN INFORMATION
800.582.6959
VISIT OUR WEB SITE
www.calamos.com
INVESTMENT ADVISOR
Calamos Advisors LLC
2020 Calamos Court
Naperville, IL 60563-2787
FUND ACCOUNTING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02111
CUSTODIAN AND TRANSFER AGENT
The Bank of New York
P.O. Box 11258
Church Street Station
New York, NY 10286
800.524.4458
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche LLP
Chicago, IL
LEGAL COUNSEL
Bell, Boyd & Lloyd LLC
Chicago, IL
(C) 2006 Calamos Holdings LLC. All Rights Reserved.
Calamos(R), CALAMOS INVESTMENTS(R), Strategies for Serious Money(R)
and the Calamos(R) logo are registered trademarks of Calamos Holdings LLC.
CHYSAN 1791 2006
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Included in the Report to Shareholders in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
(C) TOTAL
(A) NUMBER OF (D) MAXIMUM
TOTAL SHARES (OR NUMBER (OR
NUMBER (B) UNITS) APPROXIMATE
OF AVERAGE PURCHASED AS DOLLAR VALUE) OF
SHARES PRICE PART OF SHARES (OR UNITS)
(OR PAID PER PUBLICLY THAT MAY YET BE
UNITS) SHARE ANNOUNCED PURCHASED UNDER
PURCHAS (OR PLANS OR THE PLANS OR
PERIOD ED UNIT) PROGRAMS PROGRAMS
------------------------- ------- -------- ------------ -----------------
November 1 to November 30 N/A N/A N/A N/A
December 1 to December 31 N/A N/A N/A N/A
January 1 to January 31 N/A N/A N/A N/A
February 1 to February 28 N/A N/A N/A N/A
March 1 to March 31 N/A N/A N/A N/A
April 1 to April 30 N/A N/A N/A N/A
Total N/A N/A N/A N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No material changes.
ITEM 11. 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-CSR 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 second fiscal quarter of the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics -- Not Applicable
(a)(2)(i) Certification of Principal Executive Officer.
(a)(2)(ii) 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 and High Income Fund
By: /s/ John P. Calamos, Sr.
-----------------------------
Name: John P. Calamos, Sr.
Title: Principal Executive Officer
Date: June 29, 2006
By: /s/ Patrick H. Dudasik
-------------------------------
Name: Patrick H. Dudasik
Title: Principal Financial Officer
Date: June 29, 2006
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 and High Income Fund
By: /s/ John P. Calamos, Sr.
----------------------------
Name: John P. Calamos, Sr.
Title: Principal Executive Officer
Date: June 29, 2006
By: /s/ Patrick H. Dudasik
-----------------------------
Name: Patrick H. Dudasik
Title: Principal Financial Officer
Date: June 29, 2006