================================================================================
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: 811-21080
EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER: Calamos Convertible
Opportunities and 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
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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 OPPORTUNITIES AND INCOME FUND (CHI)
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 .................................... 30
Statement of Operations ................................................ 31
Statements of Changes In Net Assets .................................... 32
Notes to Financial Statements .......................................... 33
Financial Highlights ................................................... 44
Report of Independent Registered
Public Accounting Firm .............................................. 46
Other Information ...................................................... 47
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 OPPORTUNITIES AND INCOME
FUND (CHI). 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 8.87% based on the closing market price of $20.29 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 Opportunities and 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 4.49%. 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 $0.860 per share in
monthly distributions to shareholders, comprised of earned income. In
addition,the Fund paid short- and long-term capital gains distributions totaling
$0.3340 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 Opportunities and 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/chi.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, SR.
-----------------------------
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 Opportunities and 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 46.3%
HIGH YIELD/CORPORATE BONDS 53.5%
SHORT-TERM INVESTMENTS 0.2%
Fund asset allocations are based on total investment (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 7.63% during the six-month period, and the Fund's market
price returned 10.55% during the same period.
TORAL RETURN* AS OF APRIL 30,2006
COMMON SHARES-INCEPTION 6/26/02 6 MONTHS 1 YEAR SINCE INCEPTION**
On Share Price 10.55% 22.29% 21.48%
On NAV 7.63 15.41 17.04
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 ongoingmarket 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 Opportunities and 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, 99% of the leverage for CHI 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 highquality 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.
Furthermore, the portfolio continues to provide an attractive yield for
shareholders: CHI's monthly distribution equated to a 8.87% annualized
distribution rate based on the market price as of April 30, 2006.
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%
Convertible Opportunities and 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.
SECTOR ALLOCATION
Consumer Discretionary 24.7%
Financials 15.6
Energy 12.5
Consumer Staples 10.6
Information Technology 9.4
Industrials 9.4
Materials 5.6
Utilities 5.3
Health Care 5.1
Telecommunication Services 1.8
Sector allocations are based on total investments (excluding security lending
collateral and short-term investments) and may vary over time.
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.
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 sixmonth 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
Convertible Opportunities and Income Fund
6 SEMIANNUAL REPORT investment Team Interview
Investment Team Interview
in the marketplace. Through extensive fundamental analysis, we are focusing on
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 Opportunities and Income Fund
Investment Team Interview SEMIANNUAL REPORT 7
SCHEDULE OF INVESTMENTS
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
----------- --------------
CORPORATE BONDS (77. 8%)
CONSUMER DISCRETIONARY (27.3%)
$ 2,160,000 Asbury Automotive Group, Inc.
9.000%, 06/15/12 $ 2,241,000
7,172,000 Aztar Corp.@
7.875%, 06/15/14 7,799,550
11,233,000 Beazer Homes USA, Inc.
8.375%, 04/15/12 11,752,526
4,320,000 DEX Media, Inc.
8.000%, 11/15/13 4,455,000
3,052,000 DIRECTV Financing Company, Inc.
8.375%, 03/15/13 3,277,085
4,558,000 EchoStar Communications Corp.*
7.125%, 02/01/16 4,472,537
691,000 EchoStar DBS Corporation
6.625%, 10/01/14 667,679
6,886,000 GBP EMI Group, PLC
9.750%, 05/20/08 13,513,804
5,184,000 Ford Motor Company
8.625%, 11/01/10 4,907,885
Goodyear Tire & Rubber Company
7,344,000 7.000%, 03/15/28 6,315,840
3,456,000 7.857%, 08/15/11@ 3,421,440
4,752,000 GSC Holdings Corp.*@
8.000%, 10/01/12 4,781,700
3,456,000 Hasbro, Inc.
6.600%, 07/15/28 3,229,217
6,891,000 Hovnanian Enterprises, Inc.@
7.750%, 05/15/13 6,865,159
4,277,000 IMAX Corp.@
9.625%, 12/01/10 4,587,082
4,320,000 Intrawest Corp.
7.500%, 10/15/13 4,395,600
12,097,000 Isle of Capri Casinos, Inc.
9.000%, 03/15/12 12,898,426
3,292,000 Jarden Corp.
9.750%, 05/01/12 3,440,140
2,395,000 Kellwood Company@
7.625%, 10/15/17 2,217,775
3,456,000 Landry's Restaurants, Inc.
7.500%, 12/15/14 3,335,040
Convertible Opportunities and 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
----------- --------------
$ 4,968,000 Linens `n Things, Inc.*@++
10.702%, 01/15/14 $ 5,054,940
15,121,000 Mandalay Resort Group
10.250%, 08/01/07 15,914,852
6,740,000 NCL Holding, ASA
10.625%, 07/15/14 6,841,100
3,888,000 Oxford Industries, Inc.
8.875%, 06/01/11 4,033,800
4,320,000 Phillips-Van Heusen Corp.
8.125%, 05/01/13 4,568,400
1,728,000 Reader's Digest Association, Inc.
6.500%, 03/01/11 1,693,440
1,728,000 Rent-A-Center, Inc.
7.500%, 05/01/10 1,730,160
2,463,000 RH Donnelley Financial Corp.*
10.875%, 12/15/12 2,746,245
3,240,000 CAD Rogers Cable, Inc.
7.250%, 12/15/11 3,060,475
3,888,000 CAD Rogers Wireless, Inc.
7.625%, 12/15/11 3,712,213
2,592,000 Royal Caribbean Cruises, Ltd.
7.500%, 10/15/27 2,659,146
13,393,000 Russell Corp.
9.250%, 05/01/10 14,062,650
6,912,000 Time Warner@
7.625%, 04/15/31 7,504,186
10,973,000 Vail Resorts, Inc.
6.750%, 02/15/14 10,657,526
4,320,000 Warnaco Group, Inc.
8.875%, 06/15/13 4,568,400
Warner Music Group
6,869,000 7.375%, 04/15/14 6,800,310
864,000 GBP 8.125%, 04/15/14 1,642,508
7,344,000 WCI Communities, Inc.@
7.875%, 10/01/13 7,031,880
346,000 William Lyon Homes, Inc.
10.750%, 04/01/13 347,730
691,000 Wynn Las Vegas, LLC@
6.625%, 12/01/14 675,453
--------------
213,879,899
--------------
Convertible Opportunities and 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 (10.3%)
$ 2,549,000 Central Garden & Pet Company
9.125%, 02/01/13 $ 2,721,058
4,320,000 Chattem, Inc.
7.000%, 03/01/14 4,341,600
3,759,000 Chiquita Brands International, Inc.@
7.500%, 11/01/14 3,270,330
5,357,000 Del Monte Foods Company
8.625%, 12/15/12 5,651,635
Dole Food Company, Inc.
7,776,000 7.250%, 06/15/10 7,309,440
3,456,000 8.625%, 05/01/09 3,430,080
10,369,000 Jean Coutu Group, Inc.@
8.500%, 08/01/14 9,772,782
3,024,000 NBTY, Inc.*
7.125%, 10/01/15 2,872,800
4,320,000 Pilgrim's Pride Corp.@
9.250%, 11/15/13 4,384,800
5,184,000 Pinnacle Foods Holding@
8.250%, 12/01/13 5,222,880
4,839,000 Playtex Products, Inc.
8.000%, 03/01/11 5,129,340
4,752,000 R.J. Reynolds Tobacco Holdings, Inc.@
7.300%, 07/15/15 4,847,040
Revlon Consumer Products Corp.
864,000 11.020%, 07/11/06 885,600
864,000 10.910%, 08/14/06 885,600
864,000 10.690%, 06/06/06 885,600
432,000 10.720%, 05/09/06 442,800
3,586,000 Revlon, Inc.@
9.500%, 04/01/11 3,532,210
8,640,000 Smithfield Foods, Inc.
7.750%, 05/15/13 8,748,000
4,450,000 Spectrum Brands, Inc.@
8.500%, 10/01/13 3,949,375
1,728,000 WH Intermediate Holdings, Ltd.
9.500%, 04/01/11 1,857,600
-----------
80,140,570
-----------
ENERGY (9.7%)
6,005,000 Arch Western Finance, LLC
6.750%, 07/01/13 5,974,975
Convertible Opportunities and 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
----------- --------------
$ 8,187,000 Chesapeake Energy Corp.
6.875%, 01/15/16 $ 8,105,130
5,616,000 Comstock Resources, Inc.
6.875%, 03/01/12 5,517,720
648,000 Energy Partners, Ltd.
8.750%, 08/01/10 665,820
2,592,000 Forest Oil Corp.@
8.000%, 12/15/11 2,770,200
4,033,000 Giant Industries, Inc.
11.000%, 05/15/12 4,446,383
4,839,000 KCS Energy, Inc.
7.125%, 04/01/12 4,899,487
9,764,000 Petroleo Brasileiro, SA
8.375%, 12/10/18 10,984,500
Premcor Refining Group, Inc.
5,530,000 9.500%, 02/01/13 6,092,948
2,355,000 7.500%, 06/15/15 2,477,173
2,592,000 Range Resources Corp.
7.375%, 07/15/13 2,666,520
6,048,000 Swift Energy Company@
9.375%, 05/01/12 6,456,240
4,320,000 Whiting Petroleum Corp.
7.250%, 05/01/13 4,320,000
Williams Companies, Inc.
8,640,000 7.750%, 06/15/31 9,061,200
1,728,000 7.500%, 01/15/31 1,771,200
--------------
76,209,496
--------------
FINANCIALS (2.7%)
E*TRADE Financial Corporation
5,703,000 7.375%, 09/15/13 5,831,317
3,888,000 7.875%, 12/01/15@ 4,101,840
1,037,000 8.000%, 06/15/11 1,075,888
6,480,000 Leucadia National Corp.
7.000%, 08/15/13 6,463,800
1,469,000 Omega Healthcare Investors, Inc.
7.000%, 04/01/14 1,446,965
2,171,000 Senior Housing Properties Trust
7.875%, 04/15/15 2,257,840
--------------
21,177,650
--------------
HEALTH CARE (4.9%)
3,543,000 Ameripath, Inc.@
10.500%, 04/01/13 3,782,152
Convertible Opportunities and 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
------------ --------------
$ 2,566,000 Angiotech Pharmaceuticals, Inc.*
7.750%, 04/01/14 $ 2,591,660
7,301,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 7,009,522
1,469,000 Bio-Rad Laboratories, Inc.
7.500%, 08/15/13 1,513,070
1,728,000 Biovail Corp.
7.875%, 04/01/10 1,753,920
648,000 DaVita, Inc.@
7.250%, 03/15/15 651,240
518,000 Omnicare, Inc.@
6.875%, 12/15/15 514,763
3,024,000 Psychiatric Solutions, Inc.
7.750%, 07/15/15 3,114,720
7,344,000 Tenet Healthcare Corp.*
9.250%, 02/01/15 7,509,240
3,888,000 Valeant Pharmaceuticals International
7.000%, 12/15/11 3,868,560
5,616,000 Vanguard Health Systems, Inc.@
9.000%, 10/01/14 5,826,600
--------------
38,135,447
--------------
INDUSTRIALS (7.2%)
2,722,000 Accuride Corp.
8.500%, 02/01/15 2,701,585
2,160,000 Armor Holdings, Inc.@
8.250%, 08/15/13 2,316,600
1,296,000 Columbus McKinnon Corp.
8.875%, 11/01/13 1,360,800
3,456,000 Commercial Vehicle Group, Inc.
8.000%, 07/01/13 3,473,280
2,592,000 Gardner Denver, Inc.
8.000%, 05/01/13 2,734,560
2,592,000 GATX Corp.
8.875%, 06/01/09 2,797,025
5,616,000 General Cable Corp.
9.500%, 11/15/10 6,093,360
1,104,000 Global Cash Access, Inc.
8.750%, 03/15/12 1,188,180
3,370,000 Greenbrier Companies, Inc.
8.375%, 05/15/15 3,542,712
Convertible Opportunities and 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
------------ --------------
$ 648,000 Hexcel Corporation
6.750%, 02/01/15 $ 639,900
4,320,000 Hutchison Whampoa, Ltd.*@
6.250%, 01/24/14 4,364,505
JLG Industries, Inc.
3,888,000 8.250%, 05/01/08 4,101,840
864,000 8.375%, 06/15/12@ 920,160
2,938,000 Monitronics International, Inc.
11.750%, 09/01/10 2,930,655
955,000 Orbital Sciences Corp.
9.000%, 07/15/11 1,024,237
1,296,000 Sequa Corp.
8.875%, 04/01/08 1,357,560
6,048,000 Terex Corp.
7.375%, 01/15/14 6,153,840
1,728,000 Trinity Industries, Inc.
6.500%, 03/15/14 1,671,840
2,316,000 United Agri Products, Inc.
8.250%, 12/15/11 2,431,800
3,003,000 Wesco Distribution, Inc.*@
7.500%, 10/15/17 3,078,075
Williams Scotsman International, Inc.
1,296,000 8.500%, 10/01/15 1,338,120
432,000 8.500%, 10/01/15* 446,040
--------------
56,666,674
--------------
INFORMATION TECHNOLOGY (5.7%)
5,040,000 Advanced Micro Devices, Inc.
7.750%, 11/01/12 5,292,000
605,000 Avago Technologies*
11.875%, 12/01/15 668,525
3,456,000 Celestica, Inc.@
7.875%, 07/01/11 3,533,760
4,320,000 Flextronics International, Ltd.@
6.500%, 05/15/13 4,276,800
4,320,000 Freescale Semiconductor, Inc.
7.125%, 07/15/14 4,449,600
324,000 Sanmina-SCI Corporation
8.125%, 03/01/16 330,480
5,919,000 SunGard Data Systems, Inc.*@
9.125%, 08/15/13 6,348,128
5,184,000 Telcordia Technologies*
10.000%, 03/15/13 4,769,280
Convertible Opportunities and Income Fund 13
Schedule of Investments SEMIANNUAL REPORT
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
------------ --------------
Xerox Corp.
$ 8,208,000 8.000%, 02/01/27@ $ 8,495,280
6,048,000 7.625%, 06/15/13 6,274,800
--------------
44,438,653
--------------
MATERIALS (6.9%)
Aleris International, Inc.
2,938,000 10.375%, 10/15/10 3,239,145
2,672,000 9.000%, 11/15/14@ 2,805,600
864,000 Crown Holdings, Inc.*
7.750%, 11/15/15 892,080
4,320,000 Equistar Chemicals, LP
10.625%, 05/01/11 4,730,400
7,405,000 Freeport-McMoRan Copper & Gold, Inc.
10.125%, 02/01/10 7,978,887
691,000 Gibraltar Industries, Inc.*
8.000%, 12/01/15 706,548
Ineos Group Holdings, PLC*
4,147,000 EUR 7.875%, 02/15/16 5,035,662
864,000 8.500%, 02/15/16@ 825,120
6,441,000 IPSCO, Inc.
8.750%, 06/01/13 7,020,690
3,456,000 Neenah Paper, Inc.
7.375%, 11/15/14 3,248,640
6,912,000 Sealed Air Corp.*
6.875%, 07/15/33 6,810,718
1,728,000 Texas Industries, Inc.
7.250%, 07/15/13 1,779,840
Union Carbide Corp.
3,456,000 7.500%, 06/01/25 3,614,402
2,679,000 7.875%, 04/01/23@ 2,833,683
2,765,000 Westlake Chemical Corporation@
6.625%, 01/15/16 2,675,138
--------------
54,196,553
--------------
TELECOMMUNICATION SERVICES (2.2%)
518,000 Citizens Communications Company
9.000%, 08/15/31 558,145
1,728,000 IPCS Escrow Company
11.500%, 05/01/12 1,965,600
8,640,000 Sprint Nextel Corporation
7.375%, 08/01/15 9,026,407
1,944,000 Stratos Global Corp.*@
9.875%, 02/15/13 1,961,010
Convertible Opportunities and 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
------------ --------------
$ 3,456,000 Syniverse Technologies, Inc.
7.750%, 08/15/13 $ 3,464,640
--------------
16,975,802
--------------
UTILITIES (0.9%)
1,080,000 Edison International
7.730%, 06/15/09 1,111,050
864,000 NRG Energy, Inc.
7.250%, 02/01/14 870,480
5,184,000 TXU Corp.
6.500%, 11/15/24 4,745,651
--------------
6,727,181
--------------
TOTAL CORPORATE BONDS
(Cost $598,235,189) 608,547,925
==============
CONVERTIBLE BONDS (16.0%)
CONSUMER DISCRETIONARY (1.8%)
3,150,000 GBP Punch Taverns Redwood Jersey Co. Ltd.
5.000%, 12/14/10 6,155,602
7,500,000 Walt Disney Company@
2.125%, 04/15/23 8,006,250
--------------
14,161,852
--------------
ENERGY (1.4%)
7,500,000 Helix Energy Solutions Group*
3.250%, 12/15/25 10,846,875
FINANCIALS (0.8%)
2,750,000 Deutsche Bank Luxembourg S.A. (USA Interactive)*++[ ]
5.349%, 05/01/12 3,286,250
2,500,000 Travelers Property Casualty Corp.++
4.500%, 04/15/32 2,466,000
--------------
5,752,250
--------------
HEALTH CARE (0.9%)
6,500,000 Wyeth++
4.239%, 01/15/24 6,919,900
--------------
INDUSTRIALS (4.0%)
7,000,000 Allied Waste Industries, Inc.@
4.250%, 04/15/34 6,877,500
9,500,000 GATX Corp.
7.500%, 02/01/07 13,478,125
5,500,000 Lockheed Martin Corp.@++
4.499%, 08/15/33 6,402,550
Convertible Opportunities and Income Fund 15
Schedule of Investments SEMIANNUAL REPORT
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
------------ --------------
$ 3,000,000 Quanta Services, Inc.
4.500%, 10/01/23 $ 4,721,250
--------------
31,479,425
--------------
INFORMATION TECHNOLOGY (6.2%)
6,500,000 ASML Holding, NV
5.750%, 10/15/06 7,607,600
1,000,000 Conexant Systems, Inc.*@
4.000%, 03/01/26 1,047,500
5,500,000 DST Systems, Inc.
4.125%, 08/15/23 7,486,875
5,600,000 Electronic Data Systems Corp.
3.875%, 07/15/23 5,845,000
6,500,000 LSI Logic Corp.
4.000%, 05/15/10 6,979,375
5,000,000 Mentor Graphics Corp.*@
6.250%, 03/01/26 5,512,500
2,000,000 Openwave Systems, Inc.@
2.750%, 09/09/08 2,365,000
11,500,000 Vishay Intertechnology, Inc.
3.625%, 08/01/23 11,931,250
--------------
48,775,100
--------------
UTILITIES (0.9%)
2,950,000 GBP Scottish and Southern Energy, PLC
3.750%, 10/29/09 6,923,769
--------------
TOTAL CONVERTIBLE BONDS
(Cost $112,915,720) 124,859,171
==============
SYNTHETIC CONVERTIBLE SECURITIES (14.4%)
CORPORATE BONDS (12.2%)
CONSUMER DISCRETIONARY (4.3%)
340,000 Asbury Automotive Group, Inc.
9.000%, 06/15/12 352,750
1,128,000 Aztar Corp.@
7.875%, 06/15/14 1,226,700
1,767,000 Beazer Homes USA, Inc.
8.375%, 04/15/12 1,848,724
680,000 DEX Media, Inc.
8.000%, 11/15/13 701,250
480,000 DIRECTV Financing Company, Inc.
8.375%, 03/15/13 515,400
717,000 EchoStar Communications Corp.*
7.125%, 02/01/16 703,556
Convertible Opportunities and 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
------------ --------------
$ 109,000 EchoStar DBS Corporation
6.625%, 10/01/14 $ 105,321
1,084,000 GBP EMI Group, PLC
9.750%, 05/20/08 2,127,355
816,000 Ford Motor Company
8.625%, 11/01/10 772,537
Goodyear Tire & Rubber Company
1,156,000 7.000%, 03/15/28 994,160
544,000 7.857%, 08/15/11@ 538,560
748,000 GSC Holdings Corp.@*
8.000%, 10/01/12 752,675
544,000 Hasbro, Inc.
6.600%, 07/15/28 508,303
1,084,000 Hovnanian Enterprises, Inc.@
7.750%, 05/15/13 1,079,935
673,000 IMAX Corp.@
9.625%, 12/01/10 721,792
680,000 Intrawest Corp.
7.500%, 10/15/13 691,900
1,903,000 Isle of Capri Casinos, Inc.
9.000%, 03/15/12 2,029,074
518,000 Jarden Corp.
9.750%, 05/01/12 541,310
377,000 Kellwood Company@
7.625%, 10/15/17 349,103
544,000 Landry's Restaurants, Inc.
7.500%, 12/15/14 524,960
782,000 Linens `n Things, Inc.@*++
10.702%, 01/15/14 795,685
2,379,000 Mandalay Resort Group
10.250%, 08/01/07 2,503,897
1,060,000 NCL Holding, ASA
10.625%, 07/15/14 1,075,900
612,000 Oxford Industries, Inc.
8.875%, 06/01/11 634,950
680,000 Phillips-Van Heusen Corp.
8.125%, 05/01/13 719,100
272,000 Reader's Digest Association, Inc.
6.500%, 03/01/11 266,560
272,000 Rent-A-Center, Inc.
7.500%, 05/01/10 272,340
Convertible Opportunities and 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
------------ --------------
$ 387,000 RH Donnelley Financial Corp.*
10.875%, 12/15/12 $ 431,505
510,000 CAD Rogers Cable, Inc.
7.250%, 12/15/11 481,741
612,000 CAD Rogers Wireless, Inc.
7.625%, 12/15/11 584,330
408,000 Royal Caribbean Cruises, Ltd.
7.500%, 10/15/27 418,569
2,107,000 Russell Corp.
9.250%, 05/01/10 2,212,350
1,088,000 Time Warner@
7.625%, 04/15/31 1,181,214
1,727,000 Vail Resorts, Inc.
6.750%, 02/15/14 1,677,349
680,000 Warnaco Group, Inc.
8.875%, 06/15/13 719,100
Warner Music Group
1,081,000 7.375%, 04/15/14 1,070,190
136,000 GBP 8.125%, 04/15/14 258,543
1,156,000 WCI Communities, Inc.@
7.875%, 10/01/13 1,106,870
54,000 William Lyon Homes, Inc.
10.750%, 04/01/13 54,270
109,000 Wynn Las Vegas, LLC@
6.625%, 12/01/14 106,548
--------------
33,656,376
--------------
CONSUMER STAPLES (1.6%)
401,000 Central Garden & Pet Company
9.125%, 02/01/13 428,068
680,000 Chattem, Inc.
7.000%, 03/01/14 683,400
591,000 Chiquita Brands International, Inc.@
7.500%, 11/01/14 514,170
843,000 Del Monte Foods Company
8.625%, 12/15/12 889,365
Dole Food Company, Inc.
1,224,000 7.250%, 06/15/10 1,150,560
544,000 8.625%, 05/01/09 539,920
1,631,000 Jean Coutu Group, Inc.@
8.500%, 08/01/14 1,537,217
476,000 NBTY, Inc.*
7.125%, 10/01/15 452,200
Convertible Opportunities and 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
----------- -------------
$ 680,000 Pilgrim's Pride Corp.@
9.250%, 11/15/13 $ 690,200
816,000 Pinnacle Foods Holding@
8.250%, 12/01/13 822,120
761,000 Playtex Products, Inc.
8.000%, 03/01/11 806,660
748,000 R.J. Reynolds Tobacco Holdings, Inc.@
7.300%, 07/15/15 762,960
Revlon Consumer Products Corp.
136,000 11.020%, 07/11/06 139,400
136,000 10.910%, 08/14/06 139,400
136,000 10.690%, 06/06/06 139,400
68,000 10.720%, 05/09/06 69,700
564,000 Revlon, Inc.@
9.500%, 04/01/11 555,540
1,360,000 Smithfield Foods, Inc.
7.750%, 05/15/13 1,377,000
700,000 Spectrum Brands, Inc.@
8.500%, 10/01/13 621,250
272,000 WH Intermediate Holdings, Ltd.
9.500%, 04/01/11 292,400
-------------
12,610,930
-------------
ENERGY (1.5%)
945,000 Arch Western Finance, LLC
6.750%, 07/01/13 940,275
1,288,000 Chesapeake Energy Corp.
6.875%, 01/15/16 1,275,120
884,000 Comstock Resources, Inc.
6.875%, 03/01/12 868,530
102,000 Energy Partners, Ltd.
8.750%, 08/01/10 104,805
408,000 Forest Oil Corp.@
8.000%, 12/15/11 436,050
635,000 Giant Industries, Inc.
11.000%, 05/15/12 700,088
761,000 KCS Energy, Inc.
7.125%, 04/01/12 770,512
1,536,000 Petroleo Brasileiro, SA
8.375%, 12/10/18 1,728,000
Premcor Refining Group, Inc.
870,000 9.500%, 02/01/13 958,565
370,000 7.500%, 06/15/15 389,195
Convertible Opportunities and 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
----------- --------------
$ 408,000 Range Resources Corp.
7.375%, 07/15/13 $ 419,730
952,000 Swift Energy Company@
9.375%, 05/01/12 1,016,260
680,000 Whiting Petroleum Corp.
7.250%, 05/01/13 680,000
Williams Companies, Inc.
1,360,000 7.750%, 06/15/31 1,426,300
272,000 7.500%, 01/15/31 278,800
--------------
11,992,230
--------------
FINANCIALS (0.4%)
E*TRADE Financial Corporation
897,000 7.375%, 09/15/13 917,182
612,000 7.875%, 12/01/15@ 645,660
163,000 8.000%, 06/15/11 169,113
1,020,000 Leucadia National Corp.
7.000%, 08/15/13 1,017,450
231,000 Omega Healthcare Investors, Inc.
7.000%, 04/01/14 227,535
342,000 Senior Housing Properties Trust
7.875%, 04/15/15 355,680
--------------
3,332,620
--------------
HEALTH CARE (0.8%)
557,000 Ameripath, Inc.@
10.500%, 04/01/13 594,597
404,000 Angiotech Pharmaceuticals, Inc.*
7.750%, 04/01/14 408,040
1,149,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 1,103,128
231,000 Bio-Rad Laboratories, Inc.
7.500%, 08/15/13 237,930
272,000 Biovail Corp.
7.875%, 04/01/10 276,080
102,000 DaVita, Inc.@
7.250%, 03/15/15 102,510
82,000 Omnicare, Inc.@
6.875%, 12/15/15 81,488
476,000 Psychiatric Solutions, Inc.
7.750%, 07/15/15 490,280
1,156,000 Tenet Healthcare Corp.*
9.250%, 02/01/15 1,182,010
Convertible Opportunities and 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
----------- ------------
$ 612,000 Valeant Pharmaceuticals International
7.000%, 12/15/11 $ 608,940
884,000 Vanguard Health Systems, Inc.@
9.000%, 10/01/14 917,150
------------
6,002,153
------------
INDUSTRIALS (1.2%)
428,000 Accuride Corp.
8.500%, 02/01/15 424,790
340,000 Armor Holdings, Inc.@
8.250%, 08/15/13 364,650
204,000 Columbus McKinnon Corp.
8.875%, 11/01/13 214,200
544,000 Commercial Vehicle Group, Inc.
8.000%, 07/01/13 546,720
408,000 Gardner Denver, Inc.
8.000%, 05/01/13 430,440
408,000 GATX Corp.
8.875%, 06/01/09 440,272
884,000 General Cable Corp.
9.500%, 11/15/10 959,140
174,000 Global Cash Access, Inc.
8.750%, 03/15/12 187,268
530,000 Greenbrier Companies, Inc.
8.375%, 05/15/15 557,163
102,000 Hexcel Corporation
6.750%, 02/01/15 100,725
680,000 Hutchison Whampoa, Ltd.*@
6.250%, 01/24/14 687,005
JLG Industries, Inc.
612,000 8.250%, 05/01/08 645,660
136,000 8.375%, 06/15/12@ 144,840
462,000 Monitronics International, Inc.
11.750%, 09/01/10 460,845
150,000 Orbital Sciences Corp.
9.000%, 07/15/11 160,875
204,000 Sequa Corp.
8.875%, 04/01/08 213,690
952,000 Terex Corp.
7.375%, 01/15/14 968,660
272,000 Trinity Industries, Inc.
6.500%, 03/15/14 263,160
Convertible Opportunities and 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
----------- ------------
$ 364,000 United Agri Products, Inc.
8.250%, 12/15/11 $ 382,200
472,000 Wesco Distribution, Inc.*@
7.500%, 10/15/17 483,800
Williams Scotsman International, Inc.
204,000 8.500%, 10/01/15 210,630
68,000 8.500%, 10/01/15* 70,210
------------
8,916,943
------------
INFORMATION TECHNOLOGY (0.9%)
793,000 Advanced Micro Devices, Inc.
7.750%, 11/01/12 832,650
95,000 Avago Technologies*
11.875%, 12/01/15 104,975
544,000 Celestica, Inc.@
7.875%, 07/01/11 556,240
680,000 Flextronics International, Ltd.@
6.500%, 05/15/13 673,200
680,000 Freescale Semiconductor, Inc.
7.125%, 07/15/14 700,400
51,000 Sanmina-SCI Corporation
8.125%, 03/01/16 52,020
931,000 SunGard Data Systems, Inc.*@
9.125%, 08/15/13 998,498
816,000 Telcordia Technologies*
10.000%, 03/15/13 750,720
Xerox Corp.
1,292,000 8.000%, 02/01/27@ 1,337,220
952,000 7.625%, 06/15/13 987,700
------------
6,993,623
------------
MATERIALS (1.1%)
Aleris International, Inc.
462,000 10.375%, 10/15/10 509,355
421,000 9.000%, 11/15/14@ 442,050
136,000 Crown Holdings, Inc.*
7.750%, 11/15/15 140,420
680,000 Equistar Chemicals, LP
10.625%, 05/01/11 744,600
1,165,000 Freeport-McMoRan Copper & Gold, Inc.
10.125%, 02/01/10 1,255,287
109,000 Gibraltar Industries, Inc.*
8.000%, 12/01/15 111,453
Convertible Opportunities and 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
------------ --------------
Ineos Group Holdings, PLC*
$ 653,000 EUR 7.875%, 02/15/16 $ 792,932
136,000 8.500%, 02/15/16@ 129,880
1,014,000 IPSCO, Inc.
8.750%, 06/01/13 1,105,260
544,000 Neenah Paper, Inc.
7.375%, 11/15/14 511,360
1,088,000 Sealed Air Corp.*
6.875%, 07/15/33 1,072,058
272,000 Texas Industries, Inc.
7.250%, 07/15/13 280,160
Union Carbide Corp.
544,000 7.500%, 06/01/25 568,934
421,000 7.875%, 04/01/23@ 445,308
435,000 Westlake Chemical Corporation@
6.625%, 01/15/16 420,862
--------------
8,529,919
--------------
TELECOMMUNICATION SERVICES (0.3%)
82,000 Citizens Communications Company
9.000%, 08/15/31 88,355
272,000 IPCS Escrow Company
11.500%, 05/01/12 309,400
1,360,000 Sprint Nextel Corporation
7.375%, 08/01/15 1,420,823
306,000 Stratos Global Corp.*@
9.875%, 02/15/13 308,678
544,000 Syniverse Technologies, Inc.
7.750%, 08/15/13 545,360
--------------
2,672,616
--------------
UTILITIES (0.1%)
170,000 Edison International
7.730%, 06/15/09 174,887
136,000 NRG Energy, Inc.
7.250%, 02/01/14 137,020
816,000 TXU Corp.
6.500%, 11/15/24 747,001
--------------
1,058,908
--------------
TOTAL CORPORATE BONDS 95,766,318
--------------
Convertible Opportunities and Income Fund
Schedule of Investments SEMIANNUAL REPORT 23
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
------------ --------------
OPTIONS (2.2%)
CONSUMER DISCRETIONARY (0.2%)
110 Garmin, Ltd.#
Call, 01/19/08, Strike 85.00 $ 157,300
125 Lowe's Companies, Inc.#
Call, 01/19/08, Strike 70.00 86,250
260 Office Depot, Inc.#
Call, 01/19/08, Strike 40.00 192,400
180 Tiffany & Co.#
Call, 01/19/08, Strike 40.00 68,400
2,500 YUM! Brands, Inc.#
Call, 01/20/07, Strike 50.00 1,387,500
--------------
1,891,850
--------------
CONSUMER STAPLES (0.1%)
520 Kroger Company#
Call, 01/19/08, Strike 20.00 156,000
215 PepsiCo, Inc.#
Call, 01/19/08, Strike 60.00 111,800
--------------
267,800
--------------
ENERGY (0.6%)
75 Anadarko Petroleum Corp.#
Call, 01/19/08, Strike 95.00 185,250
1,500 Apache Corp.#
Call, 01/20/07, Strike 60.00 2,265,000
105 BJ Services Company#
Call, 01/19/08, Strike 40.00 77,175
105 Devon Energy (Chevron) Corp.#
Call, 01/19/08, Strike 65.00 104,475
80 Diamond Offshore Drilling, Inc.#
Call, 01/19/08, Strike 85.00 176,000
180 Nabors Industries Ltd.#
Call, 01/19/08, Strike 37.50 140,400
70 Petroleo Brasileiro, SA#
Call, 01/19/08, Strike 90.00 167,650
120 Schlumberger, Ltd.#
Call, 01/19/08, Strike 65.00 189,600
80 Sunoco, Inc.#
Call, 01/19/08, Strike 75.00 156,400
800 Transocean, Inc.#
Call, 01/19/08, Strike 80.00 1,392,000
Convertible Opportunities and Income Fund
24 SEMIANNUAL REPORT Schedule of Investments
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
------------ --------------
170 Weatherford International, Ltd.#
Call, 01/19/08, Strike 45.00 $ 261,800
--------------
5,115,750
--------------
FINANCIALS (0.2%)
200 Aon Corp.#
Call, 01/19/08, Strike 35.00 214,000
500 Charles Schwab Corp.#
Call, 01/19/08, Strike 15.00 242,500
15 Chicago Mercantile Exchange Holdings, Inc.#
Call, 01/19/08, Strike 420.00 167,700
145 CIT Group, Inc.#
Call, 01/19/08, Strike 50.00 146,450
220 E*TRADE Financial Corporation#
Call, 01/19/08, Strike 25.00 110,000
60 Goldman Sachs Group, Inc.#
Call, 01/19/08, Strike 160.00 151,800
75 Legg Mason, Inc.#
Call, 01/20/07, Strike 120.00 87,375
60 Lehman Brothers Holdings, Inc.#
Call, 01/19/08, Strike 150.00 150,000
145 Merrill Lynch & Company, Inc.#
Call, 01/19/08, Strike 70.00 200,100
110 Prudential Financial, Inc.#
Call, 01/19/08, Strike 75.00 135,850
190 State Street Corp.#
Call, 01/19/08, Strike 60.00 228,000
--------------
1,833,775
--------------
HEALTH CARE (0.1%)
170 Aetna, Inc.#
Call, 01/19/08, Strike 50.00 56,100
75 Allergan, Inc.#
Call, 01/19/08, Strike 110.00 96,750
200 AmerisourceBergen Corp.#
Call, 01/19/08, Strike 47.50 94,000
80 Express Scripts, Inc.#
Call, 01/19/08, Strike 90.00 78,400
180 Teva Pharmaceutical Industries, Ltd.#
Call, 01/19/08, Strike 45.00 83,700
1,000 UnitedHealth Group, Inc.#
Call, 01/19/08, Strike 70.00 250,000
--------------
658,950
--------------
Convertible Opportunities and Income Fund
Schedule of Investments SEMIANNUAL REPORT 25
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
CONTRACTS VALUE
------------ --------------
INDUSTRIALS (0.1%)
110 Burlington Northern Santa Fe Corp.#
Call, 01/19/08, Strike 80.00 $ 150,150
--------------
INFORMATION TECHNOLOGY (0.7%)
185 Agilent Technologies, Inc.#
Call, 01/19/08, Strike 35.00 161,875
70 Apple Computer, Inc.#
Call, 01/19/08, Strike 75.00 107,800
420 Electronic Data Systems Corp.#
Call, 01/19/08, Strike 25.00 233,100
3,000 Emulex Corp.#
Call, 01/20/07, Strike 17.50 840,000
280 Hewlett-Packard Company#
Call, 01/19/08, Strike 30.00 209,160
160 Intuit, Inc.#
Call, 01/19/08, Strike 55.00 139,200
100 Marvell Technology Group, Ltd.#
Call, 01/19/08, Strike 65.00 109,000
275 Motorola, Inc.#
Call, 01/19/08, Strike 22.50 88,000
195 National Semiconductor Corp.#
Call, 01/19/08, Strike 25.00 180,375
Nokia Corp.#
1,900 Call, 01/19/08, Strike 20.00 988,000
1,900 Call, 01/19/08, Strike 17.50 1,311,000
200 NVIDIA Corp.#
Call, 01/19/08, Strike 30.00 134,000
260 Paychex, Inc.#
Call, 01/19/08, Strike 40.00 161,200
Sandisk Corp.#
900 Call, 01/20/07, Strike 60.00 1,179,000
80 Call, 01/19/08, STRIKE 65.00 140,000
--------------
5,981,710
--------------
MATERIALS (0.1%)
210 Goldcorp, Inc.#
Call, 01/19/08, Strike 27.50 266,700
286 Harmony Gold Mining Co, Ltd.#
Call, 01/19/08, Strike 15.00 154,440
90 Phelps Dodge Corp.#
Call, 01/19/08, Strike 72.50 190,800
--------------
611,940
--------------
Convertible Opportunities and 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
------------ --------------
TELECOMMUNICATION SERVICES (0.1%)
190 America Movil S.A. de C.V.#
Call, 01/19/08, Strike 30.00 $ 212,800
110 NII Holdings, Inc.#
Call, 01/19/08, Strike 55.00 173,250
--------------
386,050
--------------
TOTAL OPTIONS 16,897,975
--------------
TOTAL SYNTHETIC CONVERTIBLE SECURITIES
(Cost $110,744,172) 112,664,293
==============
NUMBER OF
SHARES VALUE
------------ -----------
CONVERTIBLE PREFERRED STOCKS (36.8%)
CONSUMER DISCRETIONARY (2.2%)
610,000 Ford Motor Company Capital Trust II
6.500% 17,019,000
-----------
CONSUMER STAPLES (3.5%)
1,115,500 Albertson's, Inc.
7.250% 27,552,850
-----------
ENERGY (4.8%)
210,000 Amerada Hess Corp.
7.000% 25,328,100
91,100 Chesapeake Energy Corp.*
5.000% 12,605,962
-----------
37,934,062
-----------
FINANCIALS (18.5%)
530,000 Chubb Corp.
7.000% 19,170,100
16,000,000 Fortis Insurance, N.V. (Assurant, Inc.)* [ ]
7.750% 21,000,000
250,000 Hartford Financial Services Group, Inc.
7.000% 20,392,500
240,000 Lazard, Ltd.
6.625% 9,487,200
640,000 Lehman Brothers Holdings, Inc. (General Mills, Inc.) [ ]
6.250% 16,646,400
190,000 Merrill Lynch & Co., Inc. (Nuveen Investments, Inc.)[ ]
6.750% 8,189,570
Convertible Opportunities and Income Fund
Schedule of Investments SEMIANNUAL REPORT 27
See accompanying Notes to Schedule of Investments.
Schedule of Investments
APRIL 30, 2006 (UNAUDITED)
NUMBER OF
SHARES VALUE
------------ -------------
410,000 MetLife, Inc.
6.375% $ 11,488,200
650,000 National Australia Bank, Ltd.
7.875% 30,452,500
150,000 Washington Mutual, Inc.
5.375% 8,362,500
-----------
145,188,970
-----------
HEALTH CARE (0.8%)
120,000 Schering-Plough Corp.
6.000% 6,141,600
-----------
INDUSTRIALS (1.2%)
2,500,000GBP BAE Systems, PLC
7.750% 9,235,199
-----------
UTILITIES (5.8%)
410,000 AES Corp. Trust III
6.750% 18,802,600
CenterPoint Energy, Inc.
350,000 (Time Warner, Inc.)++[ ]
2.000% 11,945,500
65,000 Southern Union Company
5.000% 3,332,550
140,000 TXU Corp.
8.125% 11,162,200
-----------
45,242,850
-----------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $239,494,163) 288,314,531
===========
PRINCIPAL
AMOUNT VALUE
------------ -----------
SHORT-TERM INVESTMENT (0.2%)
$ 1,798,000 Citigroup, Inc.
4.770%, 05/01/06
(Cost $1,798,000) 1,798,000
-----------
Convertible Opportunities and Income Fund
28 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 (14.0%)
109,618,390 Bank of New York Institutional
Cash Reserve Fund
current rate 4.894%
(Cost $109,618,390) $ 109,618,390
---------------
TOTAL INVESTMENTS (159.2%)
(Cost $1,172,805,634) 1,245,802,310
===============
PAYABLE UPON RETURN OF SECURITIES ON LOAN (-14.0%) (109,618,390)
---------------
OTHER ASSETS, LESS LIABILITIES (3.9%) 30,771,786
---------------
PREFERRED SHARES AT REDEMPTION VALUE INCLUDING
DIVIDENDS PAYABLE (-49.1%) (384,505,797)
---------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS (100.0%) $ 782,449,909
===============
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 a 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 $103,979,612 or 13.3% 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 Opportunities and Income Fund
Schedule of Investments SEMIANNUAL REPORT 29
See accompanying Notes to Schedule of Investments.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2006 (UNAUDITED)
ASSETS
Investments, at value* (cost $1,172,805,634) $ 1,245,802,310
Cash with custodian (interest bearing) 1,546
Restricted cash for open options (interest bearing) 1,000
Accrued interest and dividends receivables 19,942,502
Unrealized appreciation on interest rate swaps 11,411,043
Prepaid expenses 60,534
Other assets 46,926
---------------
Total assets 1,277,265,861
---------------
LIABILITIES
Payable upon return of securities loaned 109,618,390
Payable to investment advisor 523,258
Payable to financial accountant 10,752
Payable for deferred compensation to Trustees 46,926
Other accounts payable and accrued liabilities 110,829
---------------
Total liabilities 110,310,155
---------------
PREFERRED SHARES
$25,000 liquidation value per share applicable to 15,360 shares,
including dividends payable 384,505,797
---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 782,449,909
===============
COMPOSITION OF NET ASSETS APPLICABLE
TO COMMON SHAREHOLDERS
Common stock, no par value, unlimited shares authorized 46,607,554 shares
issued and outstanding $ 676,740,630
Undistributed net investment income (loss) (11,020,692)
Accumulated net realized gain (loss) on investments, foreign currency transactions
and interest rate swaps 32,258,834
Net unrealized appreciation (depreciation) on investments, foreign currency
translations and interest rate swaps 84,471,137
---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 782,449,909
===============
Net asset value per common share based on 46,607,554 shares issued and outstanding $ 16.79
===============
* Includes $107,117,856 of securities loaned.
Convertible Opportunities and Income Fund
30 SEMIANNUAL REPORT Statement of Assets and Liabilities
See accompanying Notes to Schedule of Investments.
Statement of Operations
SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
INVESTMENT INCOME
Interest $ 31,957,048
Dividends 6,892,100
Securities lending income 163,820
------------
Total investment income 39,012,968
============
EXPENSES
Investment advisory fees 4,577,820
Financial accounting fees 64,706
Auction agent and rating agency fees 511,264
Accounting fees 77,279
Printing and mailing fees 46,003
Audit and legal fees 38,937
Custodian fees 37,918
Registration fees 22,468
Transfer agent fees 18,105
Trustees' fees and officer compensation 15,500
Other 17,612
------------
Total expenses 5,427,612
Less investment advisory fees waived (1,430,569)
============
Net expenses 3,997,043
============
NET INVESTMENT INCOME(LOSS) 35,015,925
============
REALIZED AND UNREALIZED GAIN(LOSS) FROM
INVESTMENTS, FOREIGN CURRENCY AND
INTEREST RATE SWAPS
NET REALIZED GAIN (LOSS) FROM:
Investments 29,880,830
Foreign currency transactions 1,354,442
Interest rate swaps 3,111,603
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 2,859,614
Foreign currency translations 49,667
Interest rate swaps (976,730)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS,
FOREIGN CURRENCY AND INTEREST RATE SWAPS 36,279,426
============
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 71,295,351
============
DIVIDENDS TO PREFERRED SHAREHOLDERS FROM
Net investment income (6,742,776)
Capital gains (1,505,459)
------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS $ 63,047,116
============
Convertible Opportunities and Income Fund
Statement of Operations SEMIANNUAL REPORT 31
See accompanying Notes to Schedule of Investments.
Statements of Changes in Net Assets
Six Months Ended
April 30, 2006 Year Ended
(unaudited) October 31, 2005
---------------- ----------------
OPERATIONS
Net investment income (loss) $ 35,015,925 $ 75,173,585
Net realized gain (loss) from investments, foreign currency
transactions and interest rate swaps 34,346,875 26,810,228
Change in net unrealized appreciation/depreciation on investments,
foreign currency translations and interest rate swaps 1,932,551 (28,272,712)
Distributions to preferred shareholders from
Net investment income (6,742,776) (8,732,689)
Capital gains (1,505,459) (2,857,443)
---------------------------------
Net increase (decrease) in net assets applicable to common
shareholders resulting from operations 63,047,116 62,120,969
---------------------------------
DISTRIBUTIONS TO COMMON
SHAREHOLDERS FROM
Net investment income (39,830,850) (74,800,128)
Capital gains (15,433,800) (54,850,485)
---------------------------------
Net decrease in net assets from distributions to common shareholders (55,264,650) (129,650,613)
CAPITAL STOCK TRANSACTIONS
Reinvestment of distributions resulting in the issuance of common
stock 10,164,969 23,753,632
---------------------------------
Net increase (decrease) in net assets from capital stock
transactions 10,164,969 23,753,632
---------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS 17,947,435 (43,776,012)
---------------------------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS
Beginning of period 764,502,474 808,278,486
---------------------------------
End of period $ 782,449,909 $ 764,502,474
=================================
Undistributed net investment income (loss) $ (11,020,692) $ 537,009
Convertible Opportunities and Income Fund
32 SEMIANNUAL REPORT Statements of Changes in Net Assets
See accompanying Notes to Schedule of Investments.
Notes to Financial Statements (Unaudited)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. CALAMOS Convertible Opportunities and Income Fund (the "Fund") was
organized as a Delaware statutory trust on April 17, 2002 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 June
26, 2002.
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 val-
Convertible Opportunities and Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 33
Notes to Financial Statements (Unaudited)
used 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 Opportunities and Income Fund
34 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 Opportunities and Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 35
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 contractually
Convertible Opportunities and Income Fund
36 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
agreed to waive a portion of its management fee at the annual rate of 0.25% of
the average weekly managed assets of the Fund for the first five full years of
the Fund's operation (through June 30, 2007) and to waive a declining amount for
an additional three years (0.18% of the average weekly managed assets in 2008,
0.11% in 2009, and 0.04% in 2010).
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 Opportunities and Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 37
Notes to Financial Statements (Unaudited)
in the value of the measuring shares. Deferred compensation of $46,926 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 $ 252,663,825
Proceeds from sales 240,180,392
The cost basis of investments for Federal income tax purposes at April 30, 2006
was as follows:
Cost basis of investments $ 1,183,306,048
---------------
Gross unrealized appreciation 85,972,232
Gross unrealized depreciation (23,475,970)
---------------
Net unrealized appreciation (depreciation) $ 62,496,262
===============
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 $84,592,513
Long-Term capital gains 56,322,944
Convertible Opportunities and Income Fund
38 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 $ 14,782,592
Undistributed capital gains 9,379,551
-------------
Total undistributed earnings 24,162,143
Accumulated capital and other losses --
Net unrealized gains 74,166,404
-------------
Total accumulated earnings 98,328,547
Other (401,734)
Paid-in capital 666,575,661
=============
Net assets applicable to common shareholders $ 764,502,474
=============
NOTE 5 - COMMON STOCK
There are unlimited common shares of beneficial interest authorized and
46,607,554 shares outstanding at April 30, 2006. Calamos Advisors owned 15,360
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 46,079,867 44,833,669
Shares sold -- --
Shares issued through reinvestment of distributions 527,687 1,246,198
-------------- ----------------
Ending shares 46,607,554 46,079,867
============== =================
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 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.
Convertible Opportunities and Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 39
Notes to Financial Statements (Unaudited)
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 15,360 shares of Preferred Shares outstanding
consist of seven series, 2,040 shares of M, 2,040 shares of TU, 2,040 shares of
W7, 2,400 shares of W28, 2,400 shares of TH7, 2,040 shares of TH28, and 2,400
shares of F. 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
Convertible Opportunities and Income Fund
40 SEMIANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements (Unaudited)
3.50% to 4.82% 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 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
Convertible Opportunities and Income Fund
Notes to Financial Statements SEMIANNUAL REPORT 41
Notes to Financial Statements (Unaudited)
recorded upon payment or termination of swap agreements. Details of the swap
agreements outstanding as April 30, 2006 were as follows:
NOTIONAL UNREALIZED
TERMINATION AMOUNT FIXED RATE FLOATING RATE APPRECIATION
COUNTERPARTY DATE (000) (FUND PAYS) (FUND RECEIVES) (DEPRECIATION)
------------- ----------------- ---------- ----------- --------------- --------------
Merrill Lynch July 3, 2006 $ 65,000 1.91% 1 month LIBOR $ 493,113
Merrill Lynch November 28, 2006 60,000 2.82% 1 month LIBOR 816,704
Merrill Lynch July 3, 2007 65,000 2.33% 1 month LIBOR 2,264,943
Merrill Lynch November 28, 2007 60,000 3.26% 1 month LIBOR 1,774,266
Merrill Lynch July 3, 2008 70,000 2.69% 1 month LIBOR 3,735,767
Merrill Lynch November 28, 2008 60,000 3.60% 1 month LIBOR 2,326,250
--------------
$ 11,411,043
--------------
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 $107,117,856 that were on loan to broker-dealers and banks and
$109,618,390 in cash or cash equivalent collateral.
Convertible Opportunities and Income Fund
42 SEMIANNUAL REPORT Notes to Financial Statements
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Financial Highlights
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD WERE AS FOLLOWS:
Six Months June 26,
Ended 2002*
April 30, For the Year Ended through
(unaudited) October 31, October 31,
---------------------------------------------------------------------
2006 2005 2004 2003 2002
---------------------------------------------------------------------
Net asset value, beginning of period $ 16.59 $ 18.03 $ 18.01 $ 13.56 $ 14.32(a)
---------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.76 1.65 1.91 1.77(b) 0.39(c)
---------------------------------------------------------------------
Net realized and unrealized gain (loss)
from investments, foreign currency
and interest rate swaps 0.81 0.03 0.52 4.38(b) (0.77)
---------------------------------------------------------------------
Dividends to preferred shareholders from:
Net investment income (common
share equivalent basis) (0.15) (0.19) (0.11) (0.06) (0.01)
---------------------------------------------------------------------
Capital gains (common share
equivalent basis) (0.03) (0.06) --(d) -- --
---------------------------------------------------------------------
Total from investment operations 1.39 1.43 2.32 6.09 (0.39)
---------------------------------------------------------------------
Less dividends to common shareholders from:
Net investment income (0.86) (1.65) (1.80) (1.64) (0.29)
---------------------------------------------------------------------
Capital gains (0.33) (1.22) (0.45) -- --
---------------------------------------------------------------------
Capital charge resulting from issuance
of common and preferred shares -- -- (0.05) --(d) (0.08)
---------------------------------------------------------------------
Net asset value, end of period $ 16.79 $ 16.59 $ 18.03 $ 18.01 $ 13.56
---------------------------------------------------------------------
Market value, end of period $ 20.29 $ 19.52 $ 20.50 $ 19.60 $ 14.20
---------------------------------------------------------------------
Total investment return based on (e):
Net asset value 7.63% 6.69% 12.65% 46.48% (3.33)%
---------------------------------------------------------------------
Market value 10.55% 10.40% 17.69% 52.22% (3.33)%
---------------------------------------------------------------------
Ratios and supplemental data:
Net assets applicable to common
shareholders, end of period
(000's omitted) $ 782,450 $ 764,502 $ 808,278 $ 790,764 $ 586,893
---------------------------------------------------------------------
Preferred shares, at redemption value
($25,000 per share liquidation
preference) (000's omitted) $ 384,000 $ 384,000 $ 384,000 $ 204,000 $ 204,000
---------------------------------------------------------------------
Ratios to average net assets applicable
to common shareholders:
Net expenses(f)(g) 1.05% 1.06% 1.00% 0.86% 0.79%
---------------------------------------------------------------------
Gross expenses prior to waiver of
expenses by the advisor (f)(g) 1.42% 1.43% 1.37% 1.18% 1.06%
---------------------------------------------------------------------
Net investment income (loss) (f)(g) 9.17% 9.59% 10.56% 10.89%(b) 8.21%
---------------------------------------------------------------------
Preferred share dividends(f) 1.77% 1.11% 0.65% 0.39% 0.23%
---------------------------------------------------------------------
Net investment income (loss), net of
preferred share dividends(f) 7.40% 8.48% 9.91% 10.50%(b) 7.98%
---------------------------------------------------------------------
Portfolio turnover rate 22% 76% 54% 42% 2%
---------------------------------------------------------------------
Asset coverage per preferred share,
at end of period (h) $ 75,974 $ 74,795 $ 77,624 $ 121,907 $ 96,934
---------------------------------------------------------------------
PLEASE REFER TO THE FOLLOWING PAGE FOR IMPORTANT NOTES
Convertible Opportunities and Income Fund
44 SEMIANNUAL REPORT Financial Highlights
Financial Highlights
* Commencement of operations.
(a) Net of sales load of $0.675 on initial shares issued and beginning net
asset value of $14.325.
(b) Interest rate swap payment reclassed from net investment income (loss)
to net realized and unreal- ized gain (loss) on investments, foreign
currency and interest rate swaps.
(c) Based on average shares method.
(d) Amount equated to less than $0.005 per common share.
(e) 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 liablities, 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.
(f) Annualized for periods less than one year.
(g) Does not reflect the effect of dividend payments to Preferred
Shareholders.
(h) 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 Opportunities and Income Fund
Financial Highlights SEMIANNUAL REPORT 45
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
CALAMOS Convertible Opportunities and Income Fund
We have reviewed the accompanying statement of assets and liabilities, including
the schedule of investments, of CALAMOS Convertible Opportunities and 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 three years then ended October 31, 2005; 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 Opportunities and Income Fund
46 SEMIANNUAL REPORT Report of Independent Registered Public Accounting Firm
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 44,162,640 432,773
John E. Neal 44,211,863 383,550
David D. Tripple 44,203,709 391,704
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 Opportunities and Income Fund
Other Information SEMIANNUAL REPORT 47
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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 Opportunities and 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 Opportunities and 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 Opportunities and 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/chi.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 Opportunities and 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 Opportunities and 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), CALAMOSINVESTMENTS(R), Strategies for Serious Money(R)
and the Calamos(R) logo are registered trademarks of Calamos Holdings LLC.
CHISAN 1790 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
NUMBER OF (d) MAXIMUM
(a) SHARES (OR NUMBER (OR
TOTAL (b) UNITS) APPROXIMATE
NUMBER AVERAGE PURCHASED AS DOLLAR VALUE) OF
OF PRICE PART OF SHARES (OR UNITS)
SHARES PAID PER PUBLICLY THAT MAY YET BE
(OR SHARE ANNOUNCED PURCHASED UNDER
UNITS) (OR PLANS OR THE PLANS OR
PERIOD PURCHASED 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 Opportunities and 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 Opportunities and 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