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, 2005 through October 31, 2006
ITEM 1. REPORTS TO SHAREHOLDERS
Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1
under the Act (17 CFR 270.30e-1).
(INSERT FINANCIAL STATEMENTS HERE)
(GRAPHIC)
CALAMOS(R) CONVERTIBLE OPPORTUNITIES AND INCOME FUND (CHI)
ANNUAL REPORT OCTOBER 31, 2006
(CALAMOS INVESTMENTS(R) LOGO)
Managing Your Calamos Funds Investments
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confident about your Calamos investment choice.
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shareholder assistance is fast and easy.
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PERSONAL ASSISTANCE
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help answer questions or address issues concerning your
Calamos Fund.
YOUR FINANCIAL ADVISOR
We encourage you to talk to your financial advisor to
determine how CALAMOS INVESTMENTS can benefit your
investment portfolio based on your financial goals,
risk tolerance, time horizon and income needs.
Table of Contents
Letter to Shareholders ................................................... 1
Economic and Market Review ............................................... 3
Investment Team Interview ................................................ 4
Schedule of Investments .................................................. 8
Statement of Assets and Liabilities ...................................... 16
Statement of Operations .................................................. 17
Statements of Changes In Net Assets ...................................... 18
Notes to Financial Statements ............................................ 19
Financial Highlights ..................................................... 26
Report of Independent Registered Public Accounting Firm .................. 27
Tax Information .......................................................... 28
Trustee Approval of Management Agreement ................................. 29
Trustees & Officers ...................................................... 32
Other Information ........................................................ 34
About Closed-End Funds ................................................... 37
Leverage ................................................................. 38
Level Rate Distribution Policy and Automatic Dividend Reinvestment Plan .. 39
The Calamos Investments Advantage ........................................ 40
Calamos Closed-End Funds ................................................. 41
Letter to Shareholders
(PHOTO OF JOHN P. CALAMOS, SR.)
Dear Fellow Shareholders:
We are pleased to submit to you our annual report for the year ended October 31,
2006. As always, we value and look forward to the opportunity to communicate
with you.
At CALAMOS INVESTMENTS, we view our communication with you as vitally important,
so we encourage you to review this report carefully. Inside, you will find
investment team commentary, share price and NAV performance, fund sector
allocation, fund holdings and financial highlights regarding your Calamos
closed-end fund. We hope that you find this report both informative and relevant
to your investment needs, and we welcome your feedback.
For information about your fund throughout the year, we invite you to visit our
website at www.calamos.com. There, you can find the most up-to-date fund
information. To help you interpret the big picture, we also post monthly manager
commentaries, which provide our latest economic and market outlook.
It has been an exciting year for the CALAMOS INVESTMENTS closed-end funds. All
four funds delivered strong positive performance while continuing to provide a
stable monthly distribution to shareholders. Unlike many traditional
fixed-income closed-end funds, Convertible Opportunities and Income Fund (the
"Fund") can be thought of as a complement to the fixed-income portion of your
asset allocation. With its unique structure that combines convertible and
high-yield securities, the Fund is designed to be less susceptible to rising
interest rates. Our focus on risk management, our success at blending asset
classes, and our long history of research expertise in lower-rated securities
all aim to benefit the Fund and its investors over the long term. For the fiscal
year ending October 31, 2006, the portfolio returned 10.47% based on NAV while
the market price returned 12.81%.
At Calamos, one of our key tenets is to maximize risk-adjusted return. One way
to improve total return is to reduce expenses, and one way you can help us
reduce expenses is to sign up for e-delivery by visiting our website and
clicking on the "Go Paperless!" link. By doing so, you will be able to view
important shareholder communications online--including fund prospectuses,
shareholder reports and proxy statements--long before the printed publications
would have arrived by traditional mail.
We are firm believers in remaining positioned for the long term and have long
recognized the impossibility of predicting the exact timing of market shifts.
Accordingly, we continue to position our portfolios ahead of events and market
turns rather than trying to chase them. Based on our view that the economy is in
a period of mid-cycle slowdown, which we explain at greater length in the
"Economic and Market Review" that follows, we are emphasizing investments in
companies with quality characteristics--such as low debt, high return on
invested capital, capable management and well-planned business strategies.
Convertible Opportunities and Income Fund
Letter to Shareholders ANNUAL REPORT 1
Letter to Shareholders
If you have any questions regarding your investment, you can contact your
financial advisor or contact a Calamos Client Service Representative at
800.582.6959, Monday through Friday, 8:00 a.m. to 6:00 p.m. (Central time).
As always, we thank you for your continued trust and the opportunity to help you
achieve your financial goals.
Sincerely,
/s/ John P. Calamos, Sr.
-------------------------------------
JOHN P. CALAMOS, SR.
Chairman, CEO and Co-CIO
Calamos Advisors LLC
This report is presented for informational purposes and should not be considered
investment advice.
Convertible Opportunities and Income Fund
2 ANNUAL REPORT Letter to Shareholders
Economic and Market Review
For the latest market and economic outlook, please visit our website at
www.calamos.com and select the "Individual Investors" button.
Mid-cycle slowdowns are typically characterized by a number of factors, most of
which are present today:
- An end to Fed rate hikes
- Moderation of energy prices
- Slowing in the housing market
- Increasing market volatility
- Moderation of consumer spending
- Declining commodity prices
Historically, mid-cycle slowdowns have been accompanied by a shift in market
leadership from cyclical investments to growth-oriented investments. Across the
Calamos Funds, we are favoring companies we believe have good prospects for
sustainable growth and reduced sensitivity to the economy. Our investment
discipline and outlook have led us to a number of traditional large-cap growth
companies trading at prices we believe are very attractive relative to the broad
market and historical values.
During the 12-month period ended October 31, 2006, market participants found
themselves distracted by crosscurrents of economic data. In the United States,
declines in gross domestic product growth, sliding home prices and
rising--though modest-- inflation troubled investors. Yet, there was better news
as well. The Fed paused its rate tightening in August, improving sentiment
somewhat. And despite OPEC's decision to reduce oil supplies, gasoline prices
dropped. Furthermore, corporate earnings and balance sheets remained strong.
Broadly, stocks advanced in the U.S. market, with the S&P 500 Index(1) rising
16.34% for the 12-month period. This solid return was achieved at a pace that
was far from consistent. After a slow summer, a substantial portion of the S&P
500 Index's performance was earned during the final three months of the period.
And, not all stocks were equally rewarded, as growth-oriented stocks trailed
value and cyclical issues.
International stocks performed with even greater strength and the MSCI EAFE(R)
Index(2) gained 28.04% for the 12-month period. Meanwhile, convertible
securities and high-yield issues participated in the rise of the equity markets.
The Value Line Convertible Index(3) returned 10.43% for the 12-month period and
the CS High Yield Index(4) returned 10.29% for the 12-month period.
We believe the U.S. economy--while remaining fundamentally strong--is in the
midst of a mid-cycle slowdown. The current environment draws parallels to other
mid-cycle slowdowns, including those of the mid-1960s, mid-1980s, and mid-1990s.
In each of these periods, the Fed initiated an interest rate tightening campaign
that caused a slowdown, first in the investment markets and then in the economy
as reflected by waning gross domestic product (GDP) growth. Although no one can
predict where a change in the economy will occur, each of these past economic
slowdowns was followed by a solid upswing in the markets driven by securities in
traditional, stable-growth companies. Accordingly, we believe that the current
mid-cycle slowdown can bring considerable opportunity for long-term investors
such as ourselves.
Although we do believe the U.S. economy is in the middle of a slowdown, we do
not believe a recession is imminent. With three consecutive pauses, we believe
the Fed is near or at the end of its tightening phase, and this could serve as a
catalyst for stronger growth going forward. Even though gross domestic product
growth has declined from the levels achieved during the economic expansion, we
believe growth remains respectable and is consistent with what we expect in a
period of mid-cycle slowdown. Moreover, our constructive outlook is supported by
the current strength in corporate balance sheets and earnings. And, with
corporations having cash to spend, we believe that corporate spending will
provide the fuel for economic growth. While gasoline prices remain high, they
have dropped considerably; this decline, along with increases to wages, could
spur increased consumer spending, which we believe will remain helpful for the
economy.
As always, we are firm believers in remaining positioned for the long term and
we have long recognized the impossibility of predicting the exact timing of
market shifts. And, as always, we continue to position our portfolios ahead of
events and market turns rather than trying to chase them. Based on our view that
the economy is in a period of mid-cycle slowdown, we're emphasizing investments
in companies with higher-quality characteristics such as low debt, high return
on invested capital, capable management and well-planned business strategies.
This report is presented for informational purposes and should not be considered
investment advice.
Convertible Opportunities and Income Fund
Economic and Market Review ANNUAL REPORT 3
Investment Team Interview
In the following interview, the Calamos Investment Team, led by Co-Chief
Investment Officers, John P. Calamos, Sr. and Nick P. Calamos, discusses the
Fund's market environment, performance and positioning during the 12-month
period ended October 31, 2006.
AVERAGE ANNUAL TOTAL RETURN*
COMMON SHARES - INCEPTION 06/26/02
SINCE
1 YEAR INCEPTION **
------ ------------
On Share Price 12.81% 19.33%
On NAV 10.47 15.61
* 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.
DISTRIBUTION HISTORY
(LATEST 12 MONTHS)
DATE PAID PER SHARE
--------- ---------
October $0.1500
September 0.1500
August 0.1500
July 0.1500
June 0.1500
May 0.1500
April 0.1500
March 0.1500
February 0.1500
January 0.4440
December 0.1500
November 0.1500
Monthly distributions are from net investment income, short-term capital gains
and/or long-term capital gains. For more details please go to the Tax Center
located at www.calamos.com.
Q. HOW DID THE FUND PERFORM OVER THE REPORTING PERIOD?
A. As you know, Calamos Convertible Opportunities and Income Fund (CHI) 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 typically holds (high-yield corporate and convertible securities) have
different characteristics than traditional bonds, providing an attractive
complement to a standard fixed-income allocation. As a result of its allocation,
the NAV of the Fund typically performs well in periods marked by economic
expansion, as convertible and high-yield bonds tend to be economically sensitive
compared with high-quality bonds, which are often more sensitive to changes in
interest rates. This distinction was especially clear during the first calendar
quarter of 2006, when traditional bonds experienced 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.
Based on performance results, the Fund's investment strategy proved its
effectiveness these past 12 months. The Fund finished strong for the annual
period ended October 31, 2006. Its underlying portfolio (as represented by net
asset value or NAV) returned 10.47% during the 12-month period, while the Fund's
market price returned 12.81%. This compares with a return of 10.29% for the CS
High Yield Index. In addition, the Fund has maintained a stable distribution of
at least $0.1500 per share since June 2003.
SINCE INCEPTION NAV AND MARKET PRICE HISTORY
(PERFORMANCE GRAPH)
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
6/26/2002 14.325 15.000
6/27/2002 14.325 15.020
6/28/2002 14.300 15.030
7/1/2002 14.300 15.050
7/2/2002 14.290 15.010
7/3/2002 14.280 15.050
7/5/2002 14.300 15.040
7/8/2002 14.310 15.050
7/9/2002 14.310 15.050
7/10/2002 14.280 15.000
7/11/2002 14.290 15.000
7/12/2002 14.310 15.000
7/15/2002 14.330 15.000
7/16/2002 14.370 15.000
7/17/2002 14.300 15.040
7/18/2002 14.220 15.040
7/19/2002 14.160 15.000
7/22/2002 14.120 15.030
7/23/2002 13.990 15.000
7/24/2002 13.950 15.010
7/25/2002 13.910 15.010
7/26/2002 13.870 15.000
7/29/2002 13.930 15.010
7/30/2002 13.970 15.000
7/31/2002 13.970 15.000
8/1/2002 13.930 15.010
8/2/2002 13.890 15.000
8/5/2002 13.820 14.750
8/6/2002 13.810 14.710
8/7/2002 13.840 14.600
8/8/2002 13.880 14.610
8/9/2002 13.860 14.700
8/12/2002 13.860 14.950
8/13/2002 13.790 14.950
8/14/2002 13.820 15.000
8/15/2002 13.790 14.820
8/16/2002 13.770 14.920
8/19/2002 13.850 14.950
8/20/2002 13.880 14.930
8/21/2002 14.020 14.900
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
8/22/2002 14.160 14.810
8/23/2002 14.110 14.850
8/26/2002 14.260 14.950
8/27/2002 14.240 14.910
8/28/2002 14.220 15.000
8/29/2002 14.240 15.110
8/30/2002 14.260 15.120
9/3/2002 14.190 14.950
9/4/2002 14.260 15.180
9/5/2002 14.170 15.100
9/6/2002 14.240 15.230
9/9/2002 14.290 15.050
9/10/2002 14.310 15.050
9/11/2002 14.370 15.140
9/12/2002 14.330 15.150
9/13/2002 14.160 15.200
9/16/2002 14.070 15.200
9/17/2002 14.030 15.040
9/18/2002 13.980 15.050
9/19/2002 13.680 15.100
9/20/2002 13.660 15.010
9/23/2002 13.510 14.900
9/24/2002 13.370 14.650
9/25/2002 13.440 14.980
9/26/2002 13.500 14.850
9/27/2002 13.420 14.690
9/30/2002 13.390 14.260
10/1/2002 13.450 14.450
10/2/2002 13.400 14.550
10/3/2002 13.340 14.560
10/4/2002 13.250 14.510
10/7/2002 13.170 14.420
10/8/2002 13.040 14.400
10/9/2002 12.780 14.110
10/10/2002 12.840 13.240
10/11/2002 13.010 14.150
10/14/2002 13.010 14.170
10/15/2002 13.250 14.360
10/16/2002 12.980 14.000
10/17/2002 13.040 13.900
10/18/2002 13.020 14.300
10/21/2002 13.090 14.100
10/22/2002 13.120 13.900
10/23/2002 13.180 14.230
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
10/24/2002 13.350 14.100
10/25/2002 13.370 14.000
10/28/2002 13.390 14.030
10/29/2002 13.330 13.890
10/30/2002 13.440 14.010
10/31/2002 13.560 14.200
11/1/2002 13.660 14.140
11/4/2002 13.800 14.250
11/5/2002 13.840 14.500
11/6/2002 14.030 14.660
11/7/2002 13.980 14.630
11/8/2002 13.940 14.930
11/11/2002 13.820 14.900
11/12/2002 13.830 14.880
11/13/2002 13.870 15.000
11/14/2002 13.980 14.900
11/15/2002 14.050 15.180
11/18/2002 14.090 14.940
11/19/2002 14.090 15.090
11/20/2002 14.230 15.020
11/21/2002 14.480 15.300
11/22/2002 14.590 15.300
11/25/2002 14.740 15.400
11/26/2002 14.700 15.420
11/27/2002 14.850 15.750
11/29/2002 14.850 15.790
11/30/2002 14.850 15.790
12/2/2002 15.000 15.700
12/3/2002 14.870 15.820
12/4/2002 14.780 15.550
12/5/2002 14.760 15.780
12/6/2002 14.790 15.720
12/9/2002 14.580 15.600
12/10/2002 14.570 15.600
12/11/2002 14.670 15.430
12/12/2002 14.700 15.630
12/13/2002 14.730 15.690
12/16/2002 14.790 15.650
12/17/2002 14.800 15.750
12/18/2002 14.770 15.750
12/19/2002 14.770 15.880
12/20/2002 14.800 15.800
12/23/2002 14.830 15.710
12/24/2002 14.820 15.800
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
12/26/2002 14.820 15.890
12/27/2002 14.630 16.000
12/30/2002 14.640 15.960
12/31/2002 14.680 16.030
1/2/2003 14.820 16.000
1/3/2003 14.890 16.230
1/6/2003 15.070 16.380
1/7/2003 15.150 16.450
1/8/2003 15.180 16.210
1/9/2003 15.290 16.190
1/10/2003 15.380 16.300
1/13/2003 15.430 16.210
1/14/2003 15.480 16.420
1/15/2003 15.430 16.290
1/16/2003 15.450 16.260
1/17/2003 15.370 16.080
1/21/2003 15.310 16.370
1/22/2003 15.270 16.380
1/23/2003 15.340 16.500
1/24/2003 15.310 16.430
1/27/2003 15.220 16.420
1/28/2003 15.250 16.560
1/29/2003 15.240 16.800
1/30/2003 15.210 16.600
1/31/2003 15.250 16.640
2/3/2003 15.270 16.600
2/4/2003 15.240 16.530
2/5/2003 15.210 16.320
2/6/2003 15.170 16.530
2/7/2003 15.160 16.600
2/10/2003 15.180 16.610
2/11/2003 15.210 16.470
2/12/2003 15.200 16.470
2/13/2003 15.060 16.350
2/14/2003 15.080 16.530
2/18/2003 15.150 16.670
2/19/2003 15.180 16.360
2/20/2003 15.220 16.480
2/21/2003 15.240 16.410
2/24/2003 15.230 16.380
2/25/2003 15.190 16.120
2/26/2003 15.210 16.390
2/27/2003 15.280 16.510
2/28/2003 15.390 16.410
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
3/3/2003 15.410 16.350
3/4/2003 15.330 16.420
3/5/2003 15.370 16.460
3/6/2003 15.320 16.450
3/7/2003 15.320 16.490
3/10/2003 15.310 16.390
3/11/2003 15.290 16.250
3/12/2003 15.350 16.420
3/13/2003 15.410 16.430
3/14/2003 15.320 16.220
3/17/2003 15.440 16.200
3/18/2003 15.530 16.310
3/19/2003 15.540 15.870
3/20/2003 15.550 15.950
3/21/2003 15.660 16.100
3/24/2003 15.580 15.800
3/25/2003 15.660 15.740
3/26/2003 15.710 15.960
3/27/2003 15.710 16.250
3/28/2003 15.750 16.410
3/31/2003 15.780 16.110
4/1/2003 15.820 16.340
4/2/2003 15.990 16.550
4/3/2003 16.010 16.620
4/4/2003 16.070 16.710
4/7/2003 16.140 16.730
4/8/2003 16.100 16.750
4/9/2003 16.060 16.760
4/10/2003 16.080 16.690
4/11/2003 16.070 16.850
4/14/2003 16.150 16.850
4/15/2003 16.060 16.890
4/16/2003 16.110 16.630
4/17/2003 16.220 16.600
4/21/2003 16.270 16.630
4/22/2003 16.420 16.680
4/23/2003 16.580 16.700
4/24/2003 16.620 16.730
4/25/2003 16.640 16.780
4/28/2003 16.730 16.720
4/29/2003 16.820 16.770
4/30/2003 16.940 16.830
5/1/2003 16.950 16.890
5/2/2003 17.060 17.040
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
5/5/2003 17.110 17.280
5/6/2003 17.140 17.290
5/7/2003 17.130 17.200
5/8/2003 17.080 17.210
5/9/2003 17.140 17.250
5/12/2003 17.230 17.440
5/13/2003 17.260 17.350
5/14/2003 17.250 17.430
5/15/2003 17.270 17.380
5/16/2003 17.290 17.580
5/19/2003 17.120 17.200
5/20/2003 17.080 17.350
5/21/2003 17.030 17.340
5/22/2003 17.080 17.360
5/23/2003 17.070 17.240
5/27/2003 17.160 17.310
5/28/2003 17.170 17.520
5/29/2003 17.280 17.610
5/30/2003 17.360 17.850
6/2/2003 17.440 18.200
6/3/2003 17.420 18.140
6/4/2003 17.500 18.180
6/5/2003 17.580 18.230
6/6/2003 17.600 18.300
6/9/2003 17.590 18.480
6/10/2003 17.630 18.700
6/11/2003 17.700 19.120
6/12/2003 17.730 18.990
6/13/2003 17.560 18.370
6/16/2003 17.650 18.640
6/17/2003 17.720 18.930
6/18/2003 17.730 19.000
6/19/2003 17.680 18.980
6/20/2003 17.650 19.000
6/23/2003 17.590 18.400
6/24/2003 17.570 17.900
6/25/2003 17.590 18.150
6/26/2003 17.600 18.350
6/27/2003 17.540 18.250
6/30/2003 17.550 18.430
7/1/2003 17.540 18.400
7/2/2003 17.600 18.550
7/3/2003 17.610 18.750
7/7/2003 17.640 18.750
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
7/8/2003 17.680 18.700
7/9/2003 17.690 18.700
7/10/2003 17.640 18.690
7/11/2003 17.670 18.980
7/14/2003 17.720 18.990
7/15/2003 17.720 18.860
7/16/2003 17.570 18.400
7/17/2003 17.510 18.300
7/18/2003 17.540 18.400
7/21/2003 17.520 18.000
7/22/2003 17.570 17.850
7/23/2003 17.570 18.050
7/24/2003 17.530 18.350
7/25/2003 17.570 18.550
7/28/2003 17.590 18.300
7/29/2003 17.530 17.860
7/30/2003 17.450 18.200
7/31/2003 17.430 18.390
8/1/2003 17.390 18.180
8/4/2003 17.410 17.960
8/5/2003 17.270 17.810
8/6/2003 17.200 17.750
8/7/2003 17.140 17.890
8/8/2003 17.110 18.170
8/11/2003 17.130 18.250
8/12/2003 17.170 18.470
8/13/2003 17.130 18.450
8/14/2003 16.970 18.250
8/15/2003 16.980 18.100
8/18/2003 17.000 18.000
8/19/2003 17.060 18.030
8/20/2003 17.120 18.360
8/21/2003 17.180 18.180
8/22/2003 17.180 18.190
8/25/2003 17.190 18.130
8/26/2003 17.240 17.860
8/27/2003 17.270 18.260
8/28/2003 17.330 18.410
8/29/2003 17.380 18.480
9/2/2003 17.490 18.450
9/3/2003 17.550 18.200
9/4/2003 17.590 18.490
9/5/2003 17.570 18.800
9/8/2003 17.560 18.900
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
9/9/2003 17.580 18.920
9/10/2003 17.540 18.900
9/11/2003 17.540 19.000
9/12/2003 17.610 19.000
9/15/2003 17.600 18.870
9/16/2003 17.470 18.640
9/17/2003 17.500 18.680
9/18/2003 17.560 18.830
9/19/2003 17.570 18.740
9/22/2003 17.550 18.780
9/23/2003 17.600 18.430
9/24/2003 17.560 18.560
9/25/2003 17.540 18.860
9/26/2003 17.540 18.770
9/29/2003 17.590 18.880
9/30/2003 17.600 18.980
10/1/2003 17.670 19.150
10/2/2003 17.680 19.200
10/3/2003 17.700 19.200
10/6/2003 17.800 19.160
10/7/2003 17.840 19.290
10/8/2003 17.860 19.330
10/9/2003 17.850 19.480
10/10/2003 17.900 19.460
10/13/2003 17.910 19.580
10/14/2003 17.930 19.640
10/15/2003 17.980 19.530
10/16/2003 17.900 19.650
10/17/2003 17.900 19.470
10/20/2003 17.920 19.660
10/21/2003 17.940 19.430
10/22/2003 17.910 19.460
10/23/2003 17.850 19.270
10/24/2003 17.880 19.400
10/27/2003 17.910 19.590
10/28/2003 17.980 19.700
10/29/2003 17.980 19.680
10/30/2003 18.010 19.580
10/31/2003 18.010 19.600
11/3/2003 18.020 19.830
11/4/2003 18.060 20.000
11/5/2003 18.050 20.000
11/6/2003 18.070 20.080
11/7/2003 18.100 20.120
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
11/10/2003 18.070 19.900
11/11/2003 18.060 19.940
11/12/2003 18.140 20.070
11/13/2003 18.040 19.940
11/14/2003 17.940 20.080
11/17/2003 17.900 19.940
11/18/2003 17.910 19.680
11/19/2003 17.900 19.430
11/20/2003 17.950 19.320
11/21/2003 17.970 19.410
11/24/2003 18.010 19.800
11/25/2003 18.090 20.100
11/26/2003 18.080 20.290
11/28/2003 18.120 20.390
12/1/2003 18.180 20.510
12/2/2003 18.240 20.570
12/3/2003 18.280 20.840
12/4/2003 18.300 20.460
12/5/2003 18.320 20.590
12/8/2003 18.270 20.770
12/9/2003 18.270 20.700
12/10/2003 17.700 19.930
12/11/2003 17.740 20.190
12/12/2003 17.720 19.930
12/15/2003 17.750 20.050
12/16/2003 17.790 19.960
12/17/2003 17.830 19.900
12/18/2003 17.870 20.000
12/19/2003 17.920 20.050
12/22/2003 18.000 20.260
12/23/2003 18.010 20.850
12/24/2003 18.070 21.260
12/26/2003 18.040 21.070
12/29/2003 17.920 20.760
12/30/2003 17.980 20.810
12/31/2003 18.010 21.000
1/2/2004 18.000 20.760
1/5/2004 18.190 20.790
1/6/2004 18.330 21.100
1/7/2004 18.350 20.840
1/8/2004 18.410 20.810
1/9/2004 18.470 20.690
1/12/2004 18.430 21.190
1/13/2004 18.420 21.230
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
1/14/2004 18.430 21.110
1/15/2004 18.430 21.040
1/16/2004 18.440 21.280
1/20/2004 18.510 21.650
1/21/2004 18.550 21.350
1/22/2004 18.590 21.450
1/23/2004 18.520 21.130
1/26/2004 18.550 21.020
1/27/2004 18.530 20.330
1/28/2004 18.370 20.400
1/29/2004 18.320 21.000
1/30/2004 18.290 21.310
2/2/2004 18.230 20.710
2/3/2004 18.210 20.840
2/4/2004 18.090 20.750
2/5/2004 18.030 20.690
2/6/2004 18.170 20.840
2/9/2004 18.220 21.240
2/10/2004 18.240 21.020
2/11/2004 18.210 20.700
2/12/2004 18.190 20.470
2/13/2004 18.170 20.350
2/17/2004 18.250 20.470
2/18/2004 18.250 20.720
2/19/2004 18.210 20.660
2/20/2004 18.120 20.440
2/23/2004 18.100 19.710
2/24/2004 18.060 19.220
2/25/2004 18.080 19.530
2/26/2004 18.090 19.710
2/27/2004 18.180 19.820
3/1/2004 18.280 20.050
3/2/2004 18.260 20.190
3/3/2004 18.240 20.020
3/4/2004 18.290 19.630
3/5/2004 18.390 19.720
3/8/2004 18.310 19.900
3/9/2004 18.300 19.940
3/10/2004 18.180 20.200
3/11/2004 17.950 20.020
3/12/2004 17.990 20.020
3/15/2004 17.910 19.740
3/16/2004 17.950 19.600
3/17/2004 18.010 19.650
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
3/18/2004 18.000 19.400
3/19/2004 17.980 19.450
3/22/2004 17.910 19.160
3/23/2004 17.890 19.150
3/24/2004 17.880 19.050
3/25/2004 17.910 19.570
3/26/2004 17.960 19.980
3/29/2004 18.060 20.170
3/30/2004 18.150 20.290
3/31/2004 18.220 20.350
4/1/2004 18.260 20.600
4/2/2004 18.220 20.680
4/5/2004 18.310 20.030
4/6/2004 18.360 19.980
4/7/2004 18.370 20.300
4/8/2004 18.350 20.380
4/12/2004 18.350 20.450
4/13/2004 18.090 19.870
4/14/2004 18.010 19.400
4/15/2004 18.010 19.380
4/16/2004 18.060 19.170
4/19/2004 18.070 19.080
4/20/2004 18.020 18.600
4/21/2004 18.050 18.220
4/22/2004 18.130 18.110
4/23/2004 18.110 18.470
4/26/2004 18.150 18.560
4/27/2004 18.160 18.770
4/28/2004 18.030 19.050
4/29/2004 17.940 19.350
4/30/2004 17.920 19.070
5/3/2004 17.910 18.430
5/4/2004 17.900 18.630
5/5/2004 17.900 18.320
5/6/2004 17.760 17.700
5/7/2004 17.540 17.280
5/10/2004 17.340 16.550
5/11/2004 17.340 17.390
5/12/2004 17.110 17.660
5/13/2004 17.030 17.860
5/14/2004 17.030 18.040
5/17/2004 16.970 17.810
5/18/2004 16.970 18.300
5/19/2004 17.050 18.450
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
5/20/2004 17.050 18.490
5/21/2004 17.050 18.630
5/24/2004 17.120 18.540
5/25/2004 17.200 18.760
5/26/2004 17.250 18.990
5/27/2004 17.290 19.110
5/28/2004 17.290 19.100
6/1/2004 17.310 19.010
6/2/2004 17.330 19.000
6/3/2004 17.290 18.990
6/4/2004 17.320 18.850
6/7/2004 17.460 18.900
6/8/2004 17.470 19.060
6/9/2004 17.410 19.010
6/10/2004 17.460 19.200
6/14/2004 17.200 19.040
6/15/2004 17.330 18.910
6/16/2004 17.310 18.850
6/17/2004 17.360 18.820
6/18/2004 17.390 18.990
6/21/2004 17.420 18.950
6/22/2004 17.450 19.090
6/23/2004 17.540 19.100
6/24/2004 17.570 19.130
6/25/2004 17.560 19.380
6/28/2004 17.510 19.680
6/29/2004 17.550 19.400
6/30/2004 17.590 19.690
7/1/2004 17.550 19.730
7/2/2004 17.560 19.880
7/6/2004 17.550 19.800
7/7/2004 17.610 19.830
7/8/2004 17.560 19.850
7/9/2004 17.610 19.950
7/12/2004 17.640 19.800
7/13/2004 17.510 19.780
7/14/2004 17.500 19.820
7/15/2004 17.530 19.800
7/16/2004 17.560 19.840
7/19/2004 17.520 19.680
7/20/2004 17.540 19.650
7/21/2004 17.490 19.450
7/22/2004 17.490 19.580
7/23/2004 17.440 19.570
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
7/26/2004 17.400 19.460
7/27/2004 17.390 19.540
7/28/2004 17.400 19.680
7/29/2004 17.450 19.570
7/30/2004 17.440 19.710
8/2/2004 17.470 19.800
8/3/2004 17.430 19.900
8/4/2004 17.390 19.590
8/5/2004 17.330 19.710
8/6/2004 17.330 19.630
8/9/2004 17.260 19.700
8/10/2004 17.340 19.730
8/11/2004 17.320 19.930
8/12/2004 17.120 19.650
8/13/2004 17.170 19.700
8/16/2004 17.210 19.660
8/17/2004 17.230 19.540
8/18/2004 17.270 19.620
8/19/2004 17.290 19.510
8/20/2004 17.320 19.720
8/23/2004 17.350 19.790
8/24/2004 17.350 19.820
8/25/2004 17.410 19.850
8/26/2004 17.400 19.920
8/27/2004 17.420 19.920
8/30/2004 17.440 19.970
8/31/2004 17.450 19.980
9/1/2004 17.480 20.070
9/2/2004 17.520 20.050
9/3/2004 17.540 20.130
9/7/2004 17.620 20.210
9/8/2004 17.620 20.290
9/9/2004 17.650 20.400
9/10/2004 17.710 20.570
9/13/2004 17.590 20.380
9/14/2004 17.610 20.090
9/15/2004 17.590 20.010
9/16/2004 17.620 20.370
9/17/2004 17.690 20.240
9/20/2004 17.670 20.360
9/21/2004 17.740 20.510
9/22/2004 17.710 20.470
9/23/2004 17.750 20.480
9/24/2004 17.760 20.400
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
9/27/2004 17.730 20.380
9/28/2004 17.760 20.370
9/29/2004 17.770 20.320
9/30/2004 17.820 20.230
10/1/2004 17.880 20.460
10/4/2004 17.920 20.680
10/5/2004 17.930 20.710
10/6/2004 17.980 20.860
10/7/2004 17.960 20.530
10/8/2004 17.930 20.620
10/11/2004 17.940 20.640
10/12/2004 17.910 20.550
10/13/2004 17.720 20.480
10/14/2004 17.700 20.200
10/15/2004 17.780 20.350
10/18/2004 17.780 20.170
10/19/2004 17.790 20.290
10/20/2004 17.770 20.170
10/21/2004 17.790 20.140
10/22/2004 17.800 20.310
10/25/2004 17.820 20.140
10/26/2004 17.890 20.060
10/27/2004 17.960 20.210
10/28/2004 17.980 20.400
10/29/2004 18.030 20.500
11/1/2004 18.060 20.680
11/2/2004 18.090 20.960
11/3/2004 18.200 21.020
11/4/2004 18.310 21.260
11/5/2004 18.370 20.840
11/8/2004 18.370 20.630
11/9/2004 18.370 20.940
11/10/2004 18.290 20.900
11/11/2004 18.290 21.000
11/12/2004 18.340 21.050
11/15/2004 18.360 21.290
11/16/2004 18.360 21.380
11/17/2004 18.380 21.440
11/18/2004 18.420 21.280
11/19/2004 18.370 21.350
11/22/2004 18.420 21.330
11/23/2004 18.470 21.330
11/24/2004 18.540 21.300
11/26/2004 18.550 21.439
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
11/29/2004 18.540 21.030
11/30/2004 18.480 20.980
12/1/2004 18.510 20.940
12/2/2004 18.490 20.750
12/3/2004 18.520 21.000
12/6/2004 18.530 20.930
12/7/2004 18.490 20.850
12/8/2004 18.480 20.900
12/9/2004 18.340 20.690
12/10/2004 18.360 20.640
12/13/2004 18.440 20.690
12/14/2004 18.500 20.370
12/15/2004 18.560 20.390
12/16/2004 18.560 20.660
12/17/2004 18.570 20.980
12/20/2004 18.580 21.310
12/21/2004 18.630 21.370
12/22/2004 18.650 21.470
12/23/2004 18.660 21.650
12/27/2004 18.660 21.900
12/28/2004 18.700 21.520
12/29/2004 18.730 21.500
12/30/2004 17.530 20.800
12/31/2004 17.540 20.690
1/3/2005 17.510 20.850
1/4/2005 17.460 20.840
1/5/2005 17.380 20.610
1/6/2005 17.350 20.360
1/7/2005 17.370 20.260
1/10/2005 17.380 20.400
1/11/2005 17.300 20.540
1/12/2005 17.320 20.440
1/13/2005 17.310 20.520
1/14/2005 17.330 20.360
1/18/2005 17.340 20.460
1/19/2005 17.310 20.530
1/20/2005 17.180 20.800
1/21/2005 17.180 20.620
1/24/2005 17.190 20.820
1/25/2005 17.210 20.750
1/26/2005 17.280 20.310
1/27/2005 17.300 20.360
1/28/2005 17.320 20.530
1/31/2005 17.410 20.570
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
2/1/2005 17.460 20.730
2/2/2005 17.480 20.920
2/3/2005 17.500 20.950
2/4/2005 17.570 20.900
2/7/2005 17.590 20.990
2/8/2005 17.610 21.030
2/9/2005 17.540 21.150
2/10/2005 17.440 20.600
2/11/2005 17.500 20.650
2/14/2005 17.550 20.600
2/15/2005 17.570 20.540
2/16/2005 17.630 20.430
2/17/2005 17.600 20.460
2/18/2005 17.600 20.000
2/22/2005 17.550 19.730
2/23/2005 17.560 20.050
2/24/2005 17.600 20.020
2/25/2005 17.690 20.090
2/28/2005 17.680 20.180
3/1/2005 17.680 20.290
3/2/2005 17.650 20.300
3/3/2005 17.650 20.261
3/4/2005 17.730 20.250
3/7/2005 17.780 20.360
3/8/2005 17.770 20.400
3/9/2005 17.660 20.080
3/10/2005 17.480 19.710
3/11/2005 17.480 19.490
3/14/2005 17.470 19.090
3/15/2005 17.450 18.840
3/16/2005 17.340 18.400
3/17/2005 17.290 18.850
3/18/2005 17.250 18.600
3/21/2005 17.160 18.300
3/22/2005 17.050 18.350
3/23/2005 16.910 17.850
3/24/2005 16.960 18.200
3/28/2005 16.950 17.880
3/29/2005 16.830 18.000
3/30/2005 16.820 18.250
3/31/2005 16.860 18.360
4/1/2005 16.820 18.090
4/4/2005 16.770 17.950
4/5/2005 16.840 18.050
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
4/6/2005 16.890 18.210
4/7/2005 16.930 18.130
4/8/2005 16.940 18.080
4/11/2005 16.860 18.119
4/12/2005 16.840 18.080
4/13/2005 16.630 17.910
4/14/2005 16.460 17.820
4/15/2005 16.290 17.660
4/18/2005 16.260 17.590
4/19/2005 16.350 17.900
4/20/2005 16.350 18.010
4/21/2005 16.410 18.370
4/22/2005 16.430 18.460
4/25/2005 16.440 18.610
4/26/2005 16.370 18.500
4/27/2005 16.300 18.640
4/28/2005 16.240 18.620
4/29/2005 16.230 18.510
5/2/2005 16.270 18.580
5/3/2005 16.260 18.650
5/4/2005 16.370 18.940
5/5/2005 16.310 19.010
5/6/2005 16.310 19.070
5/9/2005 16.340 19.030
5/10/2005 16.300 19.200
5/11/2005 16.100 18.900
5/12/2005 16.010 18.950
5/13/2005 15.910 18.910
5/16/2005 15.900 18.570
5/17/2005 15.870 18.380
5/18/2005 15.960 18.670
5/19/2005 16.070 18.840
5/20/2005 16.110 19.060
5/23/2005 16.210 19.100
5/24/2005 16.220 19.280
5/25/2005 16.290 19.230
5/26/2005 16.380 19.410
5/27/2005 16.460 19.600
5/31/2005 16.500 19.640
6/1/2005 16.590 19.530
6/2/2005 16.710 19.440
6/3/2005 16.700 19.550
6/6/2005 16.720 19.670
6/7/2005 16.730 19.580
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
6/8/2005 16.720 19.590
6/9/2005 16.720 19.660
6/10/2005 16.730 19.710
6/13/2005 16.600 19.380
6/14/2005 16.650 19.410
6/15/2005 16.700 19.450
6/16/2005 16.760 19.440
6/17/2005 16.780 19.560
6/20/2005 16.770 19.600
6/21/2005 16.780 19.530
6/22/2005 16.760 19.440
6/23/2005 16.690 19.320
6/24/2005 16.660 19.410
6/27/2005 16.670 19.370
6/28/2005 16.700 19.430
6/29/2005 16.710 19.420
6/30/2005 16.730 19.450
7/1/2005 16.750 19.680
7/5/2005 16.810 19.790
7/6/2005 16.770 19.890
7/7/2005 16.760 19.990
7/8/2005 16.850 20.110
7/11/2005 16.960 20.020
7/12/2005 17.080 20.030
7/13/2005 16.900 19.750
7/14/2005 16.900 19.800
7/15/2005 16.920 19.840
7/18/2005 16.920 19.850
7/19/2005 16.970 19.960
7/20/2005 17.020 19.950
7/21/2005 16.970 19.900
7/22/2005 17.060 19.900
7/25/2005 17.050 20.040
7/26/2005 17.100 19.970
7/27/2005 17.150 20.090
7/28/2005 17.190 20.200
7/29/2005 17.200 20.370
8/1/2005 17.200 20.400
8/2/2005 17.250 20.510
8/3/2005 17.260 20.620
8/4/2005 17.240 20.560
8/5/2005 17.170 20.410
8/8/2005 17.160 20.460
8/9/2005 17.170 20.650
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
8/10/2005 17.200 20.700
8/11/2005 17.110 20.450
8/12/2005 17.130 20.230
8/15/2005 17.130 20.190
8/16/2005 17.080 20.330
8/17/2005 17.040 20.200
8/18/2005 16.980 20.110
8/19/2005 17.030 20.120
8/22/2005 17.050 20.200
8/23/2005 17.050 20.110
8/24/2005 17.050 20.110
8/25/2005 17.090 19.980
8/26/2005 17.060 20.030
8/29/2005 17.090 20.140
8/30/2005 17.090 20.170
8/31/2005 17.140 20.170
9/1/2005 17.190 20.350
9/2/2005 17.190 20.430
9/6/2005 17.290 20.560
9/7/2005 17.330 20.640
9/8/2005 17.310 20.640
9/9/2005 17.390 20.620
9/12/2005 17.360 20.500
9/13/2005 17.220 20.240
9/14/2005 17.190 20.140
9/15/2005 17.170 20.120
9/16/2005 17.230 20.250
9/19/2005 17.230 20.440
9/20/2005 17.180 20.150
9/21/2005 17.110 20.300
9/22/2005 17.030 20.210
9/23/2005 17.040 20.000
9/26/2005 17.120 20.030
9/27/2005 17.110 19.860
9/28/2005 17.110 19.800
9/29/2005 17.170 19.970
9/30/2005 17.180 20.050
10/3/2005 17.210 20.040
10/4/2005 17.130 19.980
10/5/2005 16.960 19.920
10/6/2005 16.820 19.950
10/7/2005 16.860 19.980
10/10/2005 16.790 20.020
10/11/2005 16.730 19.970
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
10/12/2005 16.430 19.220
10/13/2005 16.310 18.800
10/14/2005 16.410 18.940
10/17/2005 16.480 19.120
10/18/2005 16.400 19.140
10/19/2005 16.450 19.230
10/20/2005 16.340 19.460
10/21/2005 16.410 19.600
10/24/2005 16.500 19.660
10/25/2005 16.540 19.840
10/26/2005 16.520 19.900
10/27/2005 16.430 19.830
10/28/2005 16.460 19.750
10/31/2005 16.590 19.520
11/1/2005 16.560 19.720
11/2/2005 16.620 19.960
11/3/2005 16.720 20.210
11/4/2005 16.660 20.310
11/7/2005 16.660 20.320
11/8/2005 16.650 20.250
11/9/2005 16.670 20.260
11/10/2005 16.620 20.260
11/11/2005 16.630 20.390
11/14/2005 16.450 20.250
11/15/2005 16.420 20.310
11/16/2005 16.430 19.860
11/17/2005 16.500 19.910
11/18/2005 16.520 20.030
11/21/2005 16.570 19.960
11/22/2005 16.620 19.980
11/23/2005 16.650 19.850
11/25/2005 16.650 19.900
11/28/2005 16.600 20.070
11/29/2005 16.600 20.190
11/30/2005 16.610 20.260
12/1/2005 16.690 20.300
12/2/2005 16.710 20.450
12/5/2005 16.690 20.560
12/6/2005 16.720 20.440
12/7/2005 16.650 20.180
12/8/2005 16.700 20.250
12/9/2005 16.720 20.470
12/12/2005 16.770 20.520
12/13/2005 16.670 20.510
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
12/14/2005 16.730 20.390
12/15/2005 16.680 20.200
12/16/2005 16.670 20.140
12/19/2005 16.600 19.930
12/20/2005 16.620 19.880
12/21/2005 16.640 20.090
12/22/2005 16.640 20.260
12/23/2005 16.630 20.260
12/27/2005 16.560 20.150
12/28/2005 16.180 20.020
12/29/2005 16.170 19.870
12/30/2005 16.150 19.810
1/3/2006 16.320 20.040
1/4/2006 16.440 20.340
1/5/2006 16.450 20.230
1/6/2006 16.570 20.300
1/9/2006 16.590 20.420
1/10/2006 16.610 20.210
1/11/2006 16.630 20.040
1/12/2006 16.610 20.130
1/13/2006 16.600 20.210
1/17/2006 16.600 20.390
1/18/2006 16.570 20.300
1/19/2006 16.730 20.360
1/20/2006 16.670 20.200
1/23/2006 16.720 20.290
1/24/2006 16.750 20.380
1/25/2006 16.720 20.420
1/26/2006 16.750 20.550
1/27/2006 16.790 20.470
1/30/2006 16.830 20.180
1/31/2006 16.870 20.310
2/1/2006 16.840 20.490
2/2/2006 16.780 20.580
2/3/2006 16.730 20.500
2/6/2006 16.770 20.610
2/7/2006 16.680 20.650
2/8/2006 16.720 20.710
2/9/2006 16.540 20.460
2/10/2006 16.520 20.580
2/13/2006 16.470 20.590
2/14/2006 16.520 20.500
2/15/2006 16.550 20.550
2/16/2006 16.620 20.610
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
2/17/2006 16.670 20.620
2/21/2006 16.690 20.730
2/22/2006 16.720 20.750
2/23/2006 16.700 20.770
2/24/2006 16.730 20.830
2/27/2006 16.750 20.910
2/28/2006 16.710 20.880
3/1/2006 16.760 20.870
3/2/2006 16.780 20.850
3/3/2006 16.760 20.760
3/6/2006 16.670 20.730
3/7/2006 16.560 20.870
3/8/2006 16.530 20.830
3/9/2006 16.360 20.580
3/10/2006 16.370 20.510
3/13/2006 16.430 20.750
3/14/2006 16.510 20.780
3/15/2006 16.580 20.800
3/16/2006 16.640 20.730
3/17/2006 16.620 20.780
3/20/2006 16.590 20.750
3/21/2006 16.550 20.810
3/22/2006 16.570 20.880
3/23/2006 16.560 20.780
3/24/2006 16.600 20.700
3/27/2006 16.610 20.670
3/28/2006 16.580 20.730
3/29/2006 16.630 20.810
3/30/2006 16.650 20.910
3/31/2006 16.620 20.740
4/3/2006 16.620 20.760
4/4/2006 16.680 20.900
4/5/2006 16.770 20.910
4/6/2006 16.740 20.900
4/7/2006 16.660 20.750
4/10/2006 16.630 20.740
4/11/2006 16.420 20.640
4/12/2006 16.420 20.600
4/13/2006 16.420 20.400
4/17/2006 16.430 20.050
4/18/2006 16.590 19.920
4/19/2006 16.690 20.060
4/20/2006 16.710 20.110
4/21/2006 16.740 20.190
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
4/24/2006 16.710 20.260
4/25/2006 16.690 20.060
4/26/2006 16.720 20.060
4/27/2006 16.730 20.100
4/28/2006 16.790 20.290
5/1/2006 16.780 20.140
5/2/2006 16.910 20.040
5/3/2006 16.870 20.060
5/4/2006 16.900 20.110
5/5/2006 16.970 20.170
5/8/2006 17.000 20.320
5/9/2006 16.860 20.070
5/10/2006 16.900 20.000
5/11/2006 16.850 19.950
5/12/2006 16.720 19.990
5/15/2006 16.660 19.890
5/16/2006 16.650 19.880
5/17/2006 16.490 19.730
5/18/2006 16.420 19.770
5/19/2006 16.450 19.660
5/22/2006 16.360 19.700
5/23/2006 16.380 19.740
5/24/2006 16.300 19.820
5/25/2006 16.380 19.810
5/26/2006 16.440 19.830
5/30/2006 16.370 19.800
5/31/2006 16.440 19.690
6/1/2006 16.490 19.930
6/2/2006 16.570 20.110
6/5/2006 16.430 20.080
6/6/2006 16.340 20.070
6/7/2006 16.290 19.890
6/8/2006 16.070 19.600
6/9/2006 16.070 19.690
6/12/2006 16.000 19.400
6/13/2006 15.860 18.930
6/14/2006 15.790 18.700
6/15/2006 15.930 19.070
6/16/2006 15.920 19.020
6/19/2006 15.820 19.150
6/20/2006 15.780 19.000
6/21/2006 15.800 19.120
6/22/2006 15.750 19.110
6/23/2006 15.770 19.150
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
6/26/2006 15.800 19.010
6/27/2006 15.770 18.940
6/28/2006 15.780 19.000
6/29/2006 15.980 19.100
6/30/2006 16.130 19.240
7/3/2006 16.170 19.330
7/5/2006 16.120 19.410
7/6/2006 16.120 19.550
7/7/2006 16.090 19.480
7/10/2006 16.100 19.600
7/11/2006 15.980 19.460
7/12/2006 15.940 19.600
7/13/2006 15.860 19.540
7/14/2006 15.820 19.350
7/17/2006 15.760 19.220
7/18/2006 15.740 19.400
7/19/2006 15.880 19.490
7/20/2006 15.910 19.590
7/21/2006 15.840 19.570
7/24/2006 15.920 19.720
7/25/2006 15.950 19.810
7/26/2006 16.000 19.880
7/27/2006 15.990 19.810
7/28/2006 16.060 19.900
7/31/2006 16.080 19.820
8/1/2006 16.060 20.030
8/2/2006 16.140 19.980
8/3/2006 16.160 20.050
8/4/2006 16.210 20.200
8/7/2006 16.190 20.260
8/8/2006 16.200 20.350
8/9/2006 16.040 20.230
8/10/2006 15.990 20.150
8/11/2006 15.970 20.240
8/14/2006 15.990 20.210
8/15/2006 16.090 20.200
8/16/2006 16.150 20.230
8/17/2006 16.150 20.350
8/18/2006 16.150 20.410
8/21/2006 16.130 20.340
8/22/2006 16.110 20.280
8/23/2006 16.110 20.320
8/24/2006 16.110 20.270
8/25/2006 16.110 20.340
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
8/28/2006 16.150 20.220
8/29/2006 16.170 20.270
8/30/2006 16.190 20.320
8/31/2006 16.220 20.340
9/1/2006 16.270 20.120
9/5/2006 16.300 19.950
9/6/2006 16.240 19.970
9/7/2006 16.060 19.730
9/8/2006 16.040 19.660
9/11/2006 16.020 19.650
9/12/2006 16.080 19.610
9/13/2006 16.140 19.600
9/14/2006 16.120 19.520
9/15/2006 16.100 19.470
9/18/2006 16.120 19.450
9/19/2006 16.080 19.410
9/20/2006 16.120 19.640
9/21/2006 16.150 19.710
9/22/2006 16.120 19.700
9/25/2006 16.190 19.700
9/26/2006 16.240 19.650
9/27/2006 16.250 19.700
9/28/2006 16.260 19.620
9/29/2006 16.260 19.660
10/2/2006 16.230 19.590
10/3/2006 16.220 19.400
10/4/2006 16.310 19.400
10/5/2006 16.320 19.340
10/6/2006 16.310 19.240
10/9/2006 16.320 19.420
10/10/2006 16.180 19.270
10/11/2006 16.170 19.270
10/12/2006 16.230 19.320
10/13/2006 16.290 19.290
10/16/2006 16.330 19.290
10/17/2006 16.310 19.300
10/18/2006 16.310 19.230
10/19/2006 16.300 19.260
10/20/2006 16.290 19.400
10/23/2006 16.300 19.380
10/24/2006 16.330 19.440
10/25/2006 16.380 19.540
10/26/2006 16.430 19.690
10/27/2006 16.390 19.690
CONVERTIBLE OPPORTUNITIES AND
INCOME FUND
-----------------------------
Date NAV Market
---------- ------ ------
10/30/2006 16.410 19.690
10/31/2006 16.420 19.730
Q. WHAT MAJOR DEVELOPMENTS OCCURRED WITH THE ECONOMY AND MARKET THIS PAST YEAR,
AND HOW DID THESE FACTORS AFFECT THE FUND?
A. Rising short-term interest rates were the big story through the first half of
2006,
Convertible Opportunities and Income Fund
4 ANNUAL REPORT Investment Team Interview
Investment Team Interview
though they had little impact on the Fund's cost of leverage. Many closed-end
funds use leverage 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 in
the form of preferred shares, a majority of the cost of leverage was locked in
for longer periods earlier in the interest rate cycle, when rates were lower.
Because the cost of leverage was locked in at longer-term fixed rates, the
portfolio was not significantly affected by the rising short-term interest rates
that marked 2005 and the first half of 2006.
10-YEAR TREASURY FOR THE PERIOD ENDED OCTOBER 31, 2006
(PERFORMANCE GRAPH)
10 YEAR TREASURY
Date Market
---------- ------
10/31/2005 4.57%
11/05 4.49%
12/05 4.39%
1/06 4.53%
2/06 4.55%
3/06 4.86%
4/06 5.07%
5/06 5.12%
6/06 5.15%
7/06 4.99%
8/06 4.74%
9/06 4.64%
10/06 4.61%
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 fiscal period to
5.15% in June 2006 before falling off in the third calendar quarter. Rising
long-term interest rates tend to negatively affect high-quality fixed-income
securities. The Fund's portfolio combines high-yield corporate bonds and
convertible bonds that tend to be more economically sensitive and much less
interest-rate sensitive. This was demonstrated over the period as the portfolio
benefited from continued economic growth and a general rise in the equity
market.
Mixed economic data stirred up investor apprehension at the start of the third
calendar quarter of 2006. This anxiety spurred a continuation of the saw-toothed
markets of the second quarter, when stocks would rise for a few days or weeks,
only to retreat again. By the end of September, however, the landscape had
significantly changed. Markets gained a degree of traction, and major stock
indexes around the globe posted solid gains for the quarter. Convertible and
high-yield securities participated in the equity market upside during the
period, earning respectable returns as well.
Despite media reports of decreased consumer spending, a downward revision of
gross domestic product (GDP) growth and higher year-over-year inflation, there
was considerable good news in the third quarter. The Fed's decision in August to
pause its rate increases served to alleviate recession fears, and investors
became cautiously hopeful of economic expansion. Corporate earnings remained
robust. The release of strong consumer confidence data, in part a reaction to
the continuing slide of gasoline prices, encouraged investors as well. In fact,
energy prices continued to drop through October, despite
Convertible Opportunities and Income Fund
Investment Team Interview ANNUAL REPORT 5
Investment Team Interview
FUND ASSET ALLOCATION
(PIE CHART)
Short-Term Investments 1.3%
High Yield/Corporate Bonds 54.8%
Convertible Securities 42.2%
Common Stocks 1.7%
Fund asset allocation are based on total investment (excluding security lending
collateral) and may vary over time.
SECTOR ALLOCATION
Consumer Discretionary 24.1%
Financials 18.2
Energy 12.1
Consumer Staples 10.3
Information Technology 8.7
Industrials 7.2
Health Care 5.6
Utilities 4.6
Materials 4.2
Telecommunication Services 2.3
Sector allocations are based on net assets and may vary over time.
QUALITY ALLOCATION
Weighted Average Credit Quality BB +
AAA 1.5%
AA 1.5
A 6.9
BBB 17.0
BB 24.1
B 34.2
CCC or below 3.4
Not rated 11.4
Data is based on portfolio holdings. Credit quality shown reflects the higher of
the ratings of Standard & Poor's Corporation or Moody's Investors Service, Inc.
Ratings are relative, subjective and not absolute standards of quality. Excludes
equity securities and cash.
OPEC's announcement that it would cut production. These positive events
contributed to a robust market with the S&P 500 rising 3.26% in October alone.
Our analysis indicates that the economy is in the midst of a mid-cycle slowdown
much like those of 1965, 1985-86 and 1995. However, we don't believe the risk of
inflation or recession is high at this time. One significant change that
occurred in past mid-cycle slowdowns was a shift from a pro-cyclical market to a
more growth-oriented market. The portfolio's emphasis on higher-quality
sustainable growth names and reduction in the cyclical sectors positions it well
for a rotation in market leadership to stable growth.
Q. WHAT WORKED WELL FOR THE FUND OVER THE PERIOD?
A. Both of the Fund's main asset classes (high-yield corporates and convertible
bonds) posted positive returns for the fiscal year. The portfolio benefited from
our focus on more equity-sensitive convertible securities--which performed
well--reflecting the positive returns in their underlying equities. The
portfolio's convertible holdings got an added boost as valuations in the
convertible market continued to improve over the period. At the end of the
period, the Fund's allocation was 42% in convertibles and 55% in high-yield
corporate bonds.
From a sector standpoint, all of the portfolio's sector allocations delivered
positive performance, with several of the sectors providing double-digit
returns. Relative to the CS High Yield Index, security selection in financials
and utilities racked up the biggest gains. Selection among larger-cap securities
also proved advantageous.
Q. WHAT HAMPERED THE FUND'S PERFORMANCE?
A. Relative to the benchmark, an underweight position and security selection
within the materials sector, while still positive, detracted from performance,
as did security selection in the consumer discretionary sector. In addition, the
portfolio's higher credit quality relative to the index held back performance,
as low-quality issues performed well. From a long-term, risk/reward perspective,
however, we maintain that our rigorous credit research will benefit clients over
the full course of a market cycle.
Q. THE FUND USES SWAP AGREEMENTS TO LIMIT THE INTEREST-RATE RISK OF LEVERAGE.
WHAT WILL YOU DO AS THESE SWAPS ROLL OFF?
A. In order to avoid a significant impact on the portfolio, the maturities of
the swap agreements have been staggered over a two-year time period. While we
will continue to actively evaluate the opportunity to use swaps, given the
current economic environment and the low likelihood of near-term interest rate
increases, it does not appear to be advantageous to lock in rates by entering
into new swap agreements. See the section titled "Leverage" to learn how the
Fund uses leverage and swap agreements to enhance total return and manage
interest-rate risk.
Q. WHAT IS YOUR OUTLOOK IN THE COMING YEAR AND HOW ARE YOU POSITIONING THE
PORTFOLIO ACCORDINGLY?
A. We believe convertible bonds continue to offer an attractive risk/reward
balance for
Convertible Opportunities and Income Fund
6 ANNUAL REPORT Investment Team Interview
Investment Team Interview
investors. Although the convertible valuation gap has narrowed significantly
this past year, we believe room for valuation improvement remains, which should
continue to benefit investors. Convertible new issuance was stronger for the
third quarter than it has been for much of the year, but redemptions remained
fairly high. However, now that interest rates have moved away from historic
lows, it is possible that companies seeking access to capital could be more
inclined to consider convertible debt rather than alternatives such as straight
high-yield bonds, particularly if the equity market can maintain its upward
pace. We are focusing on equity-sensitive issues so that we can continue to
participate in any upward movement of the stock market, of these, we're favoring
higher-quality, sustainable-growth issues. At the same time, we have reduced our
weightings in cyclicals such as energy, industrials and materials; we believe
cyclical businesses that owe their growth to volatile commodity prices or to
recovery-level growth in the GDP pose higher risk today than more stable growth
issues.
The fundamentals of the high-yield market remain solid, and we believe the
market looks fairly priced: defaults are low, corporate balance sheets are sound
and companies have sufficient cash on hand to service their debts. As high-yield
issues are typically more economically sensitive than interest-rate sensitive,
these securities should benefit from continued economic growth. While remaining
attuned to top-down concerns, we emphasize an issue-by-issue approach in our
high-yield portfolios. We look for companies with good return on invested
capital and stable or improving credit position; we also favor companies that
may benefit from equity issuance or M&A activity. As in many of our other
strategies, we have a bias toward sustainable growth companies over those with
cyclical vulnerabilities. We are avoiding distressed issues, instead positioning
our portfolios with a bias toward securities in the higher quality tiers of the
high-yield universe. Given that the performance of high-yield bonds is equity
sensitive, our research seeks to determine the financial strength and prospects
of issuing companies-- as well as catalysts for upside.
Q. ANY FINAL THOUGHTS FOR INVESTORS?
A. We are firm believers in remaining positioned for the long term and have long
recognized the impossibility of predicting the exact timing of market shifts.
Accordingly, we continue to attempt to position our portfolios ahead of events
and market turns, rather than trying to chase them. Based on our economic
outlook, we continue to emphasize investments in companies with quality
hallmarks--such as strong balance sheets, capable management and well-planned
business strategies. We have found many opportunities to invest in these
companies at what we believe are very attractive prices. We thank you for your
continued support and look forward to helping you attain your financial goals.
(1) The S&P 500 Index is an unmanaged index generally considered representative
of the U.S. stock market. Source: Lipper Analytical Services.
(2) The MSCI EAFE(R) Index measures developed market equity performance
(excluding the U.S. and Canada). Source: Lipper Analytical Services.
(3) The Value Line Convertible Index is an equally- weighted index of the
larger convertibles, representing 90% of the U.S. convertible securities
market. Source: Russell/Mellon Analytical Services LLC.
(4) The CS High Yield Index is an unmanaged index of high yield debt
securities. Source: Russell/Mellon Analytical Services LLC.
Convertible Opportunities and Income Fund
Investment Team Interview ANNUAL REPORT 7
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- ---------------
CORPORATE BONDS (80.8%)
CONSUMER DISCRETIONARY (27.9%)
$ 2,391,000 Asbury Automotive Group, Inc.@
9.000%, 06/15/12 $ 2,486,640
7,940,000 Aztar Corp.@
7.875%, 06/15/14 8,585,125
12,436,000 Beazer Homes USA, Inc.
8.375%, 04/15/12 12,777,990
4,783,000 DEX Media, Inc.@
8.000%, 11/15/13 4,860,724
5,261,000 DIRECTV Financing Company, Inc.
8.375%, 03/15/13 5,484,592
EchoStar DBS Corp.
5,046,000 7.125%, 02/01/16* 4,957,695
765,000 6.625%, 10/01/14 740,138
7,624,000 GBP EMI Group, PLC
9.750%, 05/20/08 15,375,020
6,696,000 Expedia, Inc.*@
7.456%, 08/15/18 7,001,063
5,740,000 Ford Motor Company@
8.625%, 11/01/10 5,719,060
5,261,000 GameStop Corp.@
8.000%, 10/01/12 5,484,592
1,435,000 General Motors Acceptance Corporation
6.875%, 09/15/11 1,446,326
General Motors Corp.
8,609,000 7.200%, 01/15/11 8,070,937
1,435,000 7.125%, 07/15/13@ 1,291,500
Goodyear Tire & Rubber Company
8,131,000 7.000%, 03/15/28 6,616,601
3,826,000 7.857%, 08/15/11@ 3,720,785
2,870,000 Group 1 Automotive, Inc.
8.250%, 08/15/13 2,966,863
3,826,000 Hasbro, Inc.
6.600%, 07/15/28 3,840,883
4,735,000 IMAX Corp.@
9.625%, 12/01/10 4,427,225
13,392,000 Isle of Capri Casinos, Inc.
9.000%, 03/15/12 14,095,080
3,645,000 Jarden Corp.@
9.750%, 05/01/12 3,872,813
2,652,000 Kellwood Company@
7.625%, 10/15/17 2,453,100
3,826,000 Landry's Restaurants, Inc.
7.500%, 12/15/14 3,672,960
5,500,000 Linens `n Things, Inc.@++
10.999%, 01/15/14 5,417,500
16,740,000 MGM Mirage
8.375%, 02/01/11 17,472,375
7,461,000 NCL Holding, ASA
10.625%, 07/15/14 7,311,780
4,305,000 Oxford Industries, Inc.
8.875%, 06/01/11 4,439,531
PRINCIPAL
AMOUNT VALUE
----------- ---------------
$ 4,783,000 Phillips-Van Heusen Corp.@
8.125%, 05/01/13 $ 5,010,193
1,913,000 Reader's Digest Association, Inc.@
6.500%, 03/01/11 1,855,610
1,913,000 Rent-A-Center, Inc.
7.500%, 05/01/10 1,917,783
2,726,000 RH Donnelley Financial Corp.*
10.875%, 12/15/12 2,995,193
2,870,000 Royal Caribbean Cruises, Ltd.
7.500%, 10/15/27 2,813,306
765,000 Station Casinos, Inc.
6.875%, 03/01/16 705,713
7,653,000 Time Warner, Inc.
7.625%, 04/15/31 8,653,898
12,149,000 Vail Resorts, Inc.
6.750%, 02/15/14 11,906,020
4,783,000 Warnaco Group, Inc.
8.875%, 06/15/13 5,022,150
Warner Music Group
7,605,000 7.375%, 04/15/14 7,471,912
957,000 GBP 8.125%, 04/15/14 1,871,162
765,000 Wynn Las Vegas, LLC@
6.625%, 12/01/14 753,525
---------------
215,565,363
---------------
CONSUMER STAPLES (10.6%)
957,000 Alimentation Couche-Tard Inc.
7.500%, 12/15/13 985,710
2,822,000 Central Garden & Pet Company
9.125%, 02/01/13 2,963,100
4,783,000 Chattem, Inc.
7.000%, 03/01/14 4,675,383
3,826,000 Chiquita Brands International, Inc.@
8.875%, 12/01/15 3,505,573
5,931,000 Del Monte Foods Company
8.625%, 12/15/12 6,264,619
11,957,000 Dole Food Company, Inc.@
8.875%, 03/15/11 11,463,774
11,479,000 Jean Coutu Group, Inc.
8.500%, 08/01/14 11,321,164
3,348,000 NBTY, Inc.
7.125%, 10/01/15 3,272,670
4,783,000 Pilgrim's Pride Corp.@
9.250%, 11/15/13 4,962,362
5,740,000 Pinnacle Foods Holding@
8.250%, 12/01/13 5,783,050
5,357,000 Playtex Products, Inc.
8.000%, 03/01/11 5,611,457
Reynolds American, Inc.*
5,261,000 7.300%, 07/15/15 5,492,831
2,870,000 7.625%, 06/01/16 3,061,650
9,566,000 Smithfield Foods, Inc.
7.750%, 05/15/13 9,924,725
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
8 ANNUAL REPORT Schedule of Investments
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- ---------------
$ 2,870,000 SUPERVALU, Inc.
7.500%, 11/15/14 $ 2,933,622
---------------
82,221,690
---------------
ENERGY (11.6%)
6,648,000 Arch Western Finance, LLC
6.750%, 07/01/13 6,448,560
8,609,000 Chesapeake Energy Corp.
7.500%, 06/15/14 8,856,509
6,218,000 Comstock Resources, Inc.
6.875%, 03/01/12 5,914,872
641,000 Energy Partners, Ltd.
8.750%, 08/01/10 669,845
2,870,000 Forest Oil Corp.
8.000%, 12/15/11 2,984,800
4,465,000 Giant Industries, Inc.
11.000%, 05/15/12 4,844,525
2,391,000 Hanover Compressor Company
9.000%, 06/01/14 2,558,370
5,357,000 Petrohawk Energy Corp.
7.125%, 04/01/12 5,169,505
10,809,000 Petroleo Brasileiro, SA
8.375%, 12/10/18 12,727,597
Premcor Refining Group, Inc.
6,122,000 9.500%, 02/01/13 6,652,386
2,607,000 7.500%, 06/15/15 2,732,089
2,870,000 Range Resources Corp.@
7.375%, 07/15/13 2,913,050
3,348,000 Superior Energy Services, Inc.*@
6.875%, 06/01/14 3,339,630
6,696,000 Swift Energy Company@
9.375%, 05/01/12 7,081,020
4,783,000 Whiting Petroleum Corp.@
7.250%, 05/01/13 4,747,128
Williams Companies, Inc.
9,566,000 7.750%, 06/15/31 9,829,065
1,913,000 7.500%, 01/15/31 1,951,260
---------------
89,420,211
---------------
FINANCIALS (3.1%)
E*TRADE Financial, Corp.
6,313,000 7.375%, 09/15/13 6,518,172
4,305,000 7.875%, 12/01/15@ 4,574,063
1,148,000 8.000%, 06/15/11 1,196,790
7,174,000 Leucadia National Corp.
7.000%, 08/15/13 7,254,707
1,626,000 Omega Healthcare Investors, Inc.
7.000%, 04/01/14 1,636,163
2,404,000 Senior Housing Properties Trust@
7.875%, 04/15/15 2,494,150
---------------
23,674,045
---------------
PRINCIPAL
AMOUNT VALUE
----------- ---------------
HEALTH CARE (5.5%)
$ 3,922,000 Ameripath, Inc.@
10.500%, 04/01/13 $ 4,235,760
3,826,000 Angiotech Pharmaceuticals, Inc.*
7.750%, 04/01/14 3,653,830
8,083,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 8,317,367
1,626,000 Bio-Rad Laboratories, Inc.
7.500%, 08/15/13 1,682,910
1,913,000 Biovail Corp.
7.875%, 04/01/10 1,927,347
717,000 DaVita, Inc.
7.250%, 03/15/15 717,000
574,000 Omnicare, Inc.@
6.875%, 12/15/15 565,390
3,348,000 Psychiatric Solutions, Inc.
7.750%, 07/15/15 3,331,260
8,131,000 Tenet Healthcare Corp.@
9.250%, 02/01/15 7,754,941
4,305,000 Valeant Pharmaceuticals International
7.000%, 12/15/11 4,154,325
6,218,000 Vanguard Health Systems, Inc.@
9.000%, 10/01/14 6,047,005
---------------
42,387,135
---------------
INDUSTRIALS (6.1%)
2,391,000 Armor Holdings, Inc.
8.250%, 08/15/13 2,486,640
957,000 FTI Consulting, Inc.@
7.625%, 06/15/13 983,318
2,870,000 Gardner Denver, Inc.
8.000%, 05/01/13 3,006,325
2,870,000 GATX Corp.@
8.875%, 06/01/09 3,107,274
6,218,000 General Cable Corp.
9.500%, 11/15/10 6,653,260
1,223,000 Global Cash Access, Inc.
8.750%, 03/15/12 1,297,909
3,731,000 Greenbrier Companies, Inc.
8.375%, 05/15/15 3,796,292
1,531,000 H&E Equipment Service, Inc.*
8.375%, 07/15/16 1,588,413
1,913,000 IKON Office Solutions, Inc.
7.750%, 09/15/15 1,972,781
JLG Industries, Inc.@
4,305,000 8.250%, 05/01/08 4,477,200
957,000 8.375%, 06/15/12 1,014,420
1,057,000 Orbital Sciences Corp.@
9.000%, 07/15/11 1,127,026
1,435,000 Sequa Corp.
8.875%, 04/01/08 1,495,988
6,696,000 Terex Corp.@
7.375%, 01/15/14 6,829,920
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
Schedule of Investments ANNUAL REPORT 9
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 1,913,000 Trinity Industries, Inc.
6.500%, 03/15/14 $ 1,886,696
3,324,000 WESCO International, Inc.
7.500%, 10/15/17 3,373,860
1,913,000 Williams Scotsman International,
Inc.@
8.500%, 10/01/15 1,984,737
--------------
47,082,059
--------------
INFORMATION TECHNOLOGY (5.8%)
5,580,000 Advanced Micro Devices, Inc.
7.750%, 11/01/12 5,691,600
670,000 Anixter International, Inc.
5.950%, 03/01/15 633,150
670,000 Avago Technologies*@
11.875%, 12/01/15 740,350
3,826,000 Celestica, Inc.@
7.875%, 07/01/11 3,883,390
4,783,000 Flextronics International, Ltd.@
6.500%, 05/15/13 4,777,021
4,783,000 Freescale Semiconductor, Inc.
7.125%, 07/15/14 5,129,815
359,000 Sanmina-SCI Corp.
8.125%, 03/01/16 354,961
6,553,000 SunGard Data Systems, Inc.@
9.125%, 08/15/13 6,831,503
Xerox Corp.@
9,088,000 8.000%, 02/01/27 9,326,560
6,696,000 7.625%, 06/15/13 7,030,800
--------------
44,399,150
--------------
MATERIALS (5.9%)
957,000 Agrium, Inc.
7.125%, 05/23/36 1,023,859
957,000 Crown Holdings, Inc.@
7.750%, 11/15/15 986,906
4,783,000 Equistar Chemicals, LP
10.625%, 05/01/11 5,141,725
765,000 Gibraltar Industries, Inc.
8.000%, 12/01/15 761,175
Ineos Group Holdings, PLC*
4,592,000 EUR 7.875%, 02/15/16 5,633,664
957,000 8.500%, 02/15/16@ 925,897
7,131,000 IPSCO, Inc.
8.750%, 06/01/13 7,630,170
3,826,000 Neenah Paper, Inc.
7.375%, 11/15/14 3,653,830
7,653,000 Sealed Air Corp.*
6.875%, 07/15/33 7,726,913
1,913,000 Texas Industries, Inc.
7.250%, 07/15/13 1,913,000
Union Carbide Corp.
3,826,000 7.500%, 06/01/25 4,129,165
2,965,000 7.875%, 04/01/23 3,164,521
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 3,061,000 Westlake Chemical Corp.
6.625%, 01/15/16 $ 2,946,212
--------------
45,637,037
--------------
TELECOMMUNICATION SERVICES (3.3%)
574,000 Citizens Communications Company@
9.000%, 08/15/31 626,378
1,913,000 iPCS, Inc.
11.500%, 05/01/12 2,147,342
1,511,000 Leap Wireless International,
Inc.*
9.375%, 11/01/14 1,548,775
3,587,000 CAD Rogers Communications, Inc.
7.250%, 12/15/11 3,446,165
4,305,000 CAD Rogers Wireless, Inc.
7.625%, 12/15/11 4,222,998
9,566,000 Sprint Nextel Corporation
7.375%, 08/01/15 9,888,690
3,826,000 Syniverse Technologies, Inc.
7.750%, 08/15/13 3,692,090
--------------
25,572,438
--------------
UTILITIES (1.0%)
1,196,000 Edison International
7.730%, 06/15/09 1,249,820
957,000 NRG Energy, Inc.
7.250%, 02/01/14 970,158
5,740,000 TXU Corp.
6.500%, 11/15/24 5,539,370
--------------
7,759,348
--------------
TOTAL CORPORATE BONDS
(Cost $609,468,558) 623,718,476
==============
CONVERTIBLE BONDS (19.5%)
CONSUMER DISCRETIONARY (4.1%)
5,500,000 EchoStar Communications Corp.
5.750%, 05/15/08 5,575,625
5,500,000 GBP Punch Taverns Redwood Jersey Co., Ltd.
5.000%, 12/14/10 11,844,549
United Auto Group, Inc.
3,040,000 3.500%, 04/01/26 3,484,600
1,960,000 3.500%, 04/01/26* 2,246,650
7,500,000 Walt Disney Company@
2.125%, 04/15/23 8,559,375
--------------
31,710,799
--------------
CONSUMER STAPLES (0.6%)
3,500,000 Church & Dwight Co., Inc.
5.250%, 08/15/33 4,895,625
--------------
ENERGY (1.3%)
7,500,000 Helix Energy Solutions Group*
3.250%, 12/15/25 9,778,125
--------------
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
10 ANNUAL REPORT Schedule of Investments
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- --------------
FINANCIALS (0.8%)
$ 2,750,000 Deutsche Bank Luxembourg, SA
(USA Interactive)*++&
5.689%, 05/01/12 $ 3,318,700
2,500,000 Travelers Property Casualty Corp.
4.500%, 04/15/32 2,600,000
--------------
5,918,700
--------------
HEALTH CARE (1.7%)
5,000,000 Health Management Associates, Inc.
1.500%, 08/01/23 5,081,250
1,270,000 Valeant Pharmaceuticals International
3.000%, 08/16/10 1,217,612
6,500,000 Wyeth@++
5.109%, 01/15/24 7,118,800
--------------
13,417,662
--------------
INDUSTRIALS (3.2%)
9,500,000 GATX Corp.
7.500%, 02/01/07 12,171,875
5,500,000 Lockheed Martin Corp.@++
5.155%, 08/15/33 7,010,300
5,000,000 Quanta Services, Inc.*
3.750%, 04/30/26 5,456,250
--------------
24,638,425
--------------
INFORMATION TECHNOLOGY (6.7%)
5,500,000 DST Systems, Inc.
4.125%, 08/15/23 7,603,750
5,600,000 Electronic Data Systems Corp.
3.875%, 07/15/23 5,754,000
9,000,000 Intel Corp.@
2.950%, 12/15/35 8,212,500
6,500,000 LSI Logic Corp.@
4.000%, 05/15/10 6,963,125
Mentor Graphics Corp.
5,000,000 6.250%, 03/01/26* 6,337,500
2,500,000 6.250%, 03/01/26@ 3,137,500
14,000,000 Vishay Intertechnology, Inc.
3.625%, 08/01/23 13,965,000
--------------
51,973,375
--------------
UTILITIES (1.1%)
2,950,000 GBP Scottish & Southern Energy, PLC
3.750%, 10/29/09 8,316,319
--------------
TOTAL CONVERTIBLE BONDS
(Cost $138,479,045) 150,649,030
==============
SYNTHETIC CONVERTIBLE SECURITIES (4.3%)
CORPORATE BONDS (3.7%)
CONSUMER DISCRETIONARY
(1.3%)
109,000 Asbury Automotive Group, Inc.@
9.000%, 06/15/12 113,360
360,000 Aztar Corp.@
7.875%, 06/15/14 389,250
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 564,000 Beazer Homes USA, Inc.
8.375%, 04/15/12 $ 579,510
217,000 DEX Media, Inc.@
8.000%, 11/15/13 220,526
239,000 DIRECTV Financing Company, Inc.
8.375%, 03/15/13 249,157
EchoStar DBS Corp.
229,000 7.125%, 02/01/16* 224,992
35,000 6.625%, 10/01/14 33,863
346,000 GBP EMI Group, PLC
9.750%, 05/20/08 697,765
304,000 Expedia, Inc.*@
7.456%, 08/15/18 317,850
260,000 Ford Motor Company@
8.625%, 11/01/10 259,052
239,000 GameStop Corp.@
8.000%, 10/01/12 249,157
65,000 General Motors Acceptance
Corporation
6.875%, 09/15/11 65,513
General Motors Corp.
391,000 7.200%, 01/15/11 366,562
65,000 7.125%, 07/15/13@ 58,500
Goodyear Tire & Rubber Company
369,000 7.000%, 03/15/28 300,274
174,000 7.857%, 08/15/11@ 169,215
130,000 Group 1 Automotive, Inc.
8.250%, 08/15/13 134,388
174,000 Hasbro, Inc.
6.600%, 07/15/28 174,677
215,000 IMAX Corp.@
9.625%, 12/01/10 201,025
608,000 Isle of Capri Casinos, Inc.
9.000%, 03/15/12 639,920
165,000 Jarden Corp.@
9.750%, 05/01/12 175,313
120,000 Kellwood Company@
7.625%, 10/15/17 111,000
174,000 Landry's Restaurants, Inc.
7.500%, 12/15/14 167,040
250,000 Linens 'n Things, Inc.@++
10.999%, 01/15/14 246,250
760,000 MGM Mirage
8.375%, 02/01/11 793,250
339,000 NCL Holding, ASA
10.625%, 07/15/14 332,220
195,000 Oxford Industries, Inc.
8.875%, 06/01/11 201,094
217,000 Phillips-Van Heusen Corp.@
8.125%, 05/01/13 227,307
87,000 Readers Digest Association, Inc.@
6.500%, 03/01/11 84,390
87,000 Rent-A-Center, Inc.
7.500%, 05/01/10 87,218
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
Schedule of Investments ANNUAL REPORT 11
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 124,000 RH Donnelley Financial Corp.*
10.875%, 12/15/12 $ 136,245
130,000 Royal Caribbean Cruises, Ltd.
7.500%, 10/15/27 127,432
35,000 Station Casinos, Inc.
6.875%, 03/01/16 32,288
347,000 Time Warner, Inc.
7.625%, 04/15/31 392,382
551,000 Vail Resorts, Inc.
6.750%, 02/15/14 539,980
217,000 Warnaco Group, Inc.
8.875%, 06/15/13 227,850
Warner Music Group
345,000 7.375%, 04/15/14 338,962
43,000 GBP 8.125%, 04/15/14 84,075
35,000 Wynn Las Vegas, LLC@
6.625%, 12/01/14 34,475
--------------
9,783,327
--------------
CONSUMER STAPLES (0.5%)
43,000 Alimentation Couche-Tard Inc.
7.500%, 12/15/13 44,290
128,000 Central Garden & Pet Company
9.125%, 02/01/13 134,400
217,000 Chattem, Inc.
7.000%, 03/01/14 212,118
174,000 Chiquita Brands International, Inc.@
8.875%, 12/01/15 159,428
269,000 Del Monte Foods Company
8.625%, 12/15/12 284,131
543,000 Dole Food Company, Inc.@
8.875%, 03/15/11 520,601
521,000 Jean Coutu Group, Inc.
8.500%, 08/01/14 513,836
152,000 NBTY, Inc.
7.125%, 10/01/15 148,580
217,000 Pilgrim's Pride Corp.@
9.250%, 11/15/13 225,137
260,000 Pinnacle Foods Holding@
8.250%, 12/01/13 261,950
243,000 Playtex Products, Inc.
8.000%, 03/01/11 254,542
Reynolds American, Inc.*
239,000 7.300%, 07/15/15 249,532
130,000 7.625%, 06/01/16 138,681
434,000 Smithfield Foods, Inc.
7.750%, 05/15/13 450,275
130,000 SUPERVALU, Inc.
7.500%, 11/15/14 132,882
--------------
3,730,383
--------------
ENERGY (0.5%)
302,000 Arch Western Finance, LLC
6.750%, 07/01/13 292,940
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 391,000 Chesapeake Energy Corp.
7.500%, 06/15/14 $ 402,241
282,000 Comstock Resources, Inc.
6.875%, 03/01/12 268,253
29,000 Energy Partners, Ltd.
8.750%, 08/01/10 30,305
130,000 Forest Oil Corp.
8.000%, 12/15/11 135,200
203,000 Giant Industries, Inc.
11.000%, 05/15/12 220,255
109,000 Hanover Compressor Company
9.000%, 06/01/14 116,630
243,000 Petrohawk Energy Corp.
7.125%, 04/01/12 234,495
491,000 Petroleo Brasileiro, SA
8.375%, 12/10/18 578,152
Premcor Refining Group, Inc.
278,000 9.500%, 02/01/13 302,085
118,000 7.500%, 06/15/15 123,662
130,000 Range Resources Corp.@
7.375%, 07/15/13 131,950
152,000 Superior Energy Services, Inc.*@
6.875%, 06/01/14 151,620
304,000 Swift Energy Company@
9.375%, 05/01/12 321,480
217,000 Whiting Petroleum Corp.@
7.250%, 05/01/13 215,373
Williams Companies, Inc.
434,000 7.750%, 06/15/31 445,935
87,000 7.500%, 01/15/31 88,740
--------------
4,059,316
--------------
FINANCIALS (0.1%)
E*TRADE Financial, Corp.
287,000 7.375%, 09/15/13 296,327
195,000 7.875%, 12/01/15@ 207,188
52,000 8.000%, 06/15/11 54,210
326,000 Leucadia National Corp.
7.000%, 08/15/13 329,667
74,000 Omega Healthcare Investors, Inc.
7.000%, 04/01/14 74,463
109,000 Senior Housing Properties Trust@
7.875%, 04/15/15 113,088
--------------
1,074,943
--------------
HEALTH CARE (0.2%)
178,000 Ameripath, Inc.@
10.500%, 04/01/13 192,240
174,000 Angiotech Pharmaceuticals, Inc.*
7.750%, 04/01/14 166,170
367,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 377,641
74,000 Bio-Rad Laboratories, Inc.
7.500%, 08/15/13 76,590
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
12 ANNUAL REPORT Schedule of Investments
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- --------------
$ 87,000 Biovail Corp.
7.875%, 04/01/10 $ 87,652
33,000 DaVita, Inc.
7.250%, 03/15/15 33,000
26,000 Omnicare, Inc.@
6.875%, 12/15/15 25,610
152,000 Psychiatric Solutions, Inc.
7.750%, 07/15/15 151,240
369,000 Tenet Healthcare Corp.@
9.250%, 02/01/15 351,934
195,000 Valeant Pharmaceuticals International
7.000%, 12/15/11 188,175
282,000 Vanguard Health Systems, Inc.@
9.000%, 10/01/14 274,245
--------------
1,924,497
--------------
INDUSTRIALS (0.3%)
109,000 Armor Holdings, Inc.
8.250%, 08/15/13 113,360
43,000 FTI Consulting, Inc.@
7.625%, 06/15/13 44,183
130,000 Gardner Denver, Inc.
8.000%, 05/01/13 136,175
130,000 GATX Corp.@
8.875%, 06/01/09 140,748
282,000 General Cable Corp.
9.500%, 11/15/10 301,740
55,000 Global Cash Access, Inc.
8.750%, 03/15/12 58,369
169,000 Greenbrier Companies, Inc.
8.375%, 05/15/15 171,957
69,000 H&E Equipment Service, Inc.*
8.375%, 07/15/16 71,587
87,000 IKON Office Solutions, Inc.
7.750%, 09/15/15 89,719
JLG Industries, Inc.@
195,000 8.250%, 05/01/08 202,800
43,000 8.375%, 06/15/12 45,580
48,000 Orbital Sciences Corp.@
9.000%, 07/15/11 51,180
65,000 Sequa Corp.
8.875%, 04/01/08 67,762
304,000 Terex Corp.@
7.375%, 01/15/14 310,080
87,000 Trinity Industries, Inc.
6.500%, 03/15/14 85,804
151,000 WESCO International, Inc.
7.500%, 10/15/17 153,265
87,000 Williams Scotsman International, Inc.@
8.500%, 10/01/15 90,262
--------------
2,134,571
--------------
PRINCIPAL
AMOUNT VALUE
----------- --------------
INFORMATION TECHNOLOGY (0.3%)
$ 253,000 Advanced Micro Devices, Inc.
7.750%, 11/01/12 $ 258,060
30,000 Anixter International, Inc.
5.950%, 03/01/15 28,350
30,000 Avago Technologies*@
11.875%, 12/01/15 33,150
174,000 Celestica, Inc.@
7.875%, 07/01/11 176,610
217,000 Flextronics International, Ltd.@
6.500%, 05/15/13 216,729
217,000 Freescale Semiconductor, Inc.
7.125%, 07/15/14 232,735
16,000 Sanmina-SCI Corp.
8.125%, 03/01/16 15,820
297,000 SunGard Data Systems, Inc.@
9.125%, 08/15/13 309,622
Xerox Corp.@
412,000 8.000%, 02/01/27 422,815
304,000 7.625%, 06/15/13 319,200
--------------
2,013,091
--------------
MATERIALS (0.3%)
43,000 Agrium, Inc.
7.125%, 05/23/36 46,004
43,000 Crown Holdings, Inc.@
7.750%, 11/15/15 44,344
217,000 Equistar Chemicals, LP
10.625%, 05/01/11 233,275
35,000 Gibraltar Industries, Inc.
8.000%, 12/01/15 34,825
Ineos Group Holdings, PLC*
208,000 EUR 7.875%, 02/15/16 255,183
43,000 8.500%, 02/15/16@ 41,603
324,000 IPSCO, Inc.
8.750%, 06/01/13 346,680
174,000 Neenah Paper, Inc.
7.375%, 11/15/14 166,170
347,000 Sealed Air Corp.*
6.875%, 07/15/33 350,351
87,000 Texas Industries, Inc.
7.250%, 07/15/13 87,000
Union Carbide Corp.
174,000 7.500%, 06/01/25 187,787
135,000 7.875%, 04/01/23 144,084
139,000 Westlake Chemical Corp.
6.625%, 01/15/16 133,788
--------------
2,071,094
--------------
TELECOMMUNICATION SERVICES (0.2%)
26,000 Citizens Communications Company@
9.000%, 08/15/31 28,373
87,000 iPCS, Inc.
11.500%, 05/01/12 97,657
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
Schedule of Investments ANNUAL REPORT 13
Schedule of Investments
OCTOBER 31, 2006
PRINCIPAL
AMOUNT VALUE
----------- ---------------
$ 69,000 Leap Wireless International, Inc.*
9.375%, 11/01/14 $ 70,725
163,000 CAD Rogers Communications, Inc.
7.250%, 12/15/11 156,600
195,000 CAD Rogers Wireless, Inc.
7.625%, 12/15/11 191,286
434,000 Sprint Nextel Corporation
7.375%, 08/01/15 448,640
174,000 Syniverse Technologies, Inc.
7.750%, 08/15/13 167,910
---------------
1,161,191
---------------
UTILITIES (0.0%)
54,000 Edison International
7.730%, 06/15/09 56,430
43,000 NRG Energy, Inc.
7.250%, 02/01/14 43,592
260,000 TXU Corp.
6.500%, 11/15/24 250,912
---------------
350,934
---------------
TOTAL CORPORATE BONDS 28,303,347
===============
NUMBER OF
CONTRACTS VALUE
----------- ---------------
OPTIONS (0.6%)
CONSUMER DISCRETIONARY (0.1%)
200 Garmin, Ltd.#
Call, 01/19/08, Strike $50.00 227,000
260 Office Depot, Inc.#
Call, 01/19/08, Strike $40.00 196,300
---------------
423,300
---------------
CONSUMER STAPLES (0.1%)
520 Kroger Company#
Call, 01/19/08, Strike $20.00 218,400
215 PepsiCo, Inc.#
Call, 01/19/08, Strike $60.00 154,800
---------------
373,200
---------------
FINANCIALS (0.1%)
15 Chicago Mercantile Exchange Holdings, Inc.#
Call, 01/19/08, Strike $420.00 190,725
60 Goldman Sachs Group, Inc.#
Call, 01/19/08, Strike $160.00 262,500
120 Lehman Brothers Holdings, Inc.#
Call, 01/19/08, Strike $75.00 150,000
145 Merrill Lynch & Company, Inc.#
Call, 01/19/08, Strike $70.00 316,825
190 State Street Corp.#
Call, 01/19/08, Strike $60.00 189,050
---------------
1,109,100
---------------
NUMBER OF
CONTRACTS VALUE
----------- ---------------
HEALTH CARE (0.0%)
75 Allergan, Inc.#
Call, 01/19/08, Strike $110.00 $ 138,375
---------------
INFORMATION TECHNOLOGY (0.3%)
70 Apple Computer, Inc.#
Call, 01/19/08, Strike $75.00 129,500
280 Hewlett-Packard Company#
Call, 01/19/08, Strike $30.00 319,200
320 Intuit, Inc.#
Call, 01/19/08, Strike $27.50 328,000
275 Motorola, Inc.#
Call, 01/19/08, Strike $22.50 104,500
Nokia Corp.#
1,900 Call, 01/19/08, Strike $20.00 479,750
1,900 Call, 01/19/08, Strike $17.50 750,500
200 NVIDIA Corp.#
Call, 01/19/08, Strike $30.00 202,000
---------------
2,313,450
---------------
MATERIALS (0.0%)
90 Phelps Dodge Corp.#
Call, 01/19/08, Strike $72.50 276,300
---------------
TELECOMMUNICATION SERVICES (0.0%)
190 America Movil, S.A. de C.V.#
Call, 01/19/08, Strike $40.00 165,300
110 NII Holdings, Inc.#
Call, 01/19/08, Strike $55.00 195,800
---------------
361,100
---------------
TOTAL OPTIONS 4,994,825
---------------
TOTAL SYNTHETIC
CONVERTIBLE SECURITIES
(Cost $31,484,168) 33,298,172
===============
NUMBER OF
SHARES VALUE
----------- ---------------
CONVERTIBLE PREFERRED STOCKS (38.4%)
CONSUMER DISCRETIONARY (2.7%)
610,000 Ford Motor Company Capital Trust II
6.500% 21,014,500
---------------
CONSUMER STAPLES (3.6%)
1,115,500 SUPERVALU, Inc.
7.250% 28,043,670
---------------
ENERGY (4.7%)
50,000 Chesapeake Energy Corp.
6.250% 13,690,000
210,000 Hess Corp.
7.000% 22,365,000
---------------
36,055,000
---------------
FINANCIALS (20.6%)
525,000 Citigroup, Inc.(Genworth Financial, Inc.)++&
5.020% 16,784,250
See accompanying Notes to Schedule of Investments.
Convertible Opportunities and Income Fund
14 ANNUAL REPORT Schedule of Investments
Schedule of Investments
OCTOBER 31, 2006
NUMBER OF
SHARES VALUE
----------- ---------------
16,000 Fortis Insurance, NV (Assurant, Inc.)*&
7.750% $ 21,812,800
240,000 Lazard, Ltd.
6.625% 8,800,800
850,000 Lehman Brothers Holdings, Inc.
(General Mills, Inc.)&
6.250% 23,375,000
190,000 Merrill Lynch & Co., Inc.
(Nuveen Investments, Inc.)&
6.750% 8,299,200
785,000 MetLife,Inc.
6.375% 23,251,700
650,000 National Australia Bank, Ltd.
7.875% 31,102,500
105,000 CHF Swiss Re
6.000% 8,726,044
310,000 Washington Mutual, Inc.
5.375% 16,755,500
---------------
158,907,794
---------------
HEALTH CARE (0.9%)
120,000 Schering-Plough Corp.
6.000% 6,607,200
---------------
INDUSTRIALS (1.2%)
2,500,000 GBP BAE Systems, PLC
7.750% 9,565,456
---------------
UTILITIES (4.7%)
410,000 AES Corp. Trust III
6.750% 19,823,500
350,000 CenterPoint Energy, Inc.
(Time Warner, Inc.)++&
2.000% 12,915,000
65,000 Southern Union Company
5.000% 3,623,750
---------------
36,362,250
---------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $253,581,741) 296,555,870
===============
COMMON STOCK (2.6%)
FINANCIALS (2.6%)
371,106 Chubb Corp.
(Cost $18,187,905) 19,724,284
===============
PRINCIPAL
AMOUNT VALUE
----------- ---------------
SHORT-TERM INVESTMENT (1.9%)
COMMERCIAL PAPER (1.9%)
$14,288,000 Citigroup, Inc.
5.230%, 11/01/06
(Cost $14,288,000) 14,288,000
---------------
NUMBER OF
SHARES VALUE
----------- ---------------
INVESTMENTS OF CASH COLLATERAL
FOR SECURITIES ON LOAN (17.7%)
136,928,000 Bank of New York
Institutional
Cash Reserve Fund
current rate 5.389%
(Cost $136,928,000) $ 136,928,000
---------------
TOTAL INVESTMENTS (165.2%)
(Cost $1,202,417,417) 1,275,161,832
===============
PAYABLE UPON RETURN OF SECURITIES ON LOAN (-17.7%) (136,928,000)
---------------
OTHER ASSETS, LESS LIABILITIES (2.3%) 18,233,552
---------------
PREFERRED SHARES AT REDEMPTION VALUE INCLUDING
DIVIDENDS PAYABLE (-49.8%) (384,473,258)
---------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS (100.0%) $ 771,994,126
===============
NOTES TO SCHEDULE OF INVESTMENTS
Note: Value for Securities denominated in foreign currencies are shown in U.S.
dollars.
* 144A securities are those that are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities are generally
issued to qualified institutional buyers ( "QIBs "), such as the Fund. Any
resale of these securities must generally be effected through a sale that
is exempt from registration (e.g. a sale to another QIB), or the security
must be registered for public sale. At October 31, 2006, the market value
of 144A securities that were not subject to mandatory issuer registration
obligations is $72,873,655 or 9.4% of net assets.
@ Security, or portion of security, is on loan.
# Non-income producing security.
++ Variable rate or step bond security. The interest rate shown is the rate in
effect at October 31, 2006.
& Securities exchangeable or convertible into securities of an entity
different than the issuer. Such entity is identified in the parenthetical.
FOREIGN CURRENCY ABBREVIATIONS
CAD Canadian Dollar
CHF Swiss Franc
EUR European Monetary Unit
GBP British Pound Sterling
See accompanying Notes to Financial Statements.
Convertible Opportunities and Income Fund
Schedule of Investments ANNUAL REPORT 15
Statement Of Assets And Liabilities
OCTOBER 31, 2006
----------------
ASSETS
Investments, at value* (cost $1,202,417,417) $1,275,161,832
Cash with custodian (interest bearing) 6,545,434
Foreign currency (cost $4,262,497) 4,262,785
Accrued interest and dividends receivables 17,737,662
Unrealized appreciation on interest rate swaps 7,212,534
Prepaid expenses 91,337
Other assets 51,145
--------------
Total assets 1,311,062,729
--------------
LIABILITIES
Payables:
Cash collateral for securities on loan 136,928,000
Investments purchased 16,920,406
Affiliates:
Investment advisory fees 536,911
Deferred compensation to Trustees 51,145
Financial accounting fees 11,044
Trustee fees and officer compensation 516
Accounts payable and accrued liabilities 147,323
--------------
Total liabilities 154,595,345
--------------
PREFERRED SHARES
$25,000 liquidation value per share applicable to 15,360
shares, including dividends payable 384,473,258
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 771,994,126
==============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, no par value, unlimited shares authorized
47,005,186 shares issued and outstanding $ 684,128,592
Undistributed net investment income (loss) (6,717,787)
Accumulated net realized gain (loss) on investments, foreign
currency transactions and interest rate swaps 14,595,822
Net unrealized appreciation (depreciation) on investments,
foreign currency translations and interest rate swaps 79,987,499
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 771,994,126
==============
Net asset value per common share based on 47,005,186 shares
issued and outstanding $ 16.42
==============
* Including securities on loan with a value of $131,677,235.
See accompanying Notes to Financial Statements.
Convertible Opportunities and Income Fund
16 ANNUAL REPORT Statement of Assets and Liabilities
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2006
---------------------------
INVESTMENT INCOME
Interest $ 63,715,234
Dividends 14,080,540
Securities lending income 277,607
------------
Total investment income 78,073,381
============
EXPENSES
Investment advisory fees 9,187,296
Financial accounting fees 129,876
Auction agent and rating agency fees 1,029,292
Accounting fees 98,938
Printing and mailing fees 88,880
Custodian fees 84,472
Audit and legal fees 71,329
Registration fees 44,183
Transfer agent fees 40,539
Trustees' fees and officer compensation 34,602
Other 40,984
------------
Total expenses 10,850,391
Less expense waived (2,871,030)
Less earnings credits (10,515)
============
Net expenses 7,968,846
============
NET INVESTMENT INCOME (LOSS) 70,104,535
============
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS, FOREIGN
CURRENCY AND INTEREST RATE SWAPS
NET REALIZED GAIN (LOSS) FROM:
Investments 30,399,800
Foreign currency transactions 160,531
Interest rate swaps 7,319,258
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 2,607,353
Foreign currency translations 16,799
Interest rate swaps (5,175,239)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS, FOREIGN CURRENCY AND INTEREST RATE SWAPS 35,328,502
============
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 105,433,037
============
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (16,629,373)
Capital gains (1,505,459)
------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ 87,298,205
============
See accompanying Notes to Financial Statements.
Convertible Opportunities and Income Fund
Statement of Operations ANNUAL REPORT 17
Statements of Changes in Net Assets
Year Ended October 31,
----------------------------
2006 2005
------------ -------------
OPERATIONS
Net investment income (loss) $ 70,104,535 $ 75,173,585
Net realized gain (loss) from investments, foreign
currency transactions and interest rate swaps 37,879,589 26,810,228
Change in net unrealized appreciation/depreciation
on investments, foreign currency translations and
interest rate swaps (2,551,087) (28,272,712)
Distributions to preferred shareholders from
Net investment income (16,629,373) (8,732,689)
Capital gains (1,505,459) (2,857,443)
------------ -------------
Net increase (decrease) in net assets applicable to
common shareholders resulting from operations 87,298,205 62,120,969
------------ -------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM
Net investment income (74,885,047) (74,800,128)
Capital gains (22,474,437) (54,850,485)
------------ -------------
Net decrease in net assets from distributions
to common shareholders (97,359,484) (129,650,613)
------------ -------------
CAPITAL STOCK TRANSACTIONS
Reinvestment of distributions resulting in the
issuance of common stock 17,552,931 23,753,632
------------ -------------
Net increase (decrease) in net assets from capital
stock transactions 17,552,931 23,753,632
------------ -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS APPLICABLE
TO COMMON SHAREHOLDERS 7,491,652 (43,776,012)
------------ -------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Beginning of year 764,502,474 808,278,486
------------ -------------
End of year $771,994,126 $ 764,502,474
============ =============
Undistributed net investment income (loss) $ (6,717,787) $ 537,009
See accompanying Notes to Financial Statements.
Convertible Opportunities and Income Fund
18 ANNUAL REPORT Statements of Changes in New Assets
Notes to Financial Statements
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. Calamos Advisors LLC ("Calamos Advisors") values the Fund's
portfolio securities in accordance with policies and procedures on the valuation
of securities adopted by the Board of Trustees and under the ultimate
supervision of the Board of Trustees.
Portfolio securities that are traded on U.S. securities exchanges, except option
securities, are valued at the last current reported sales price at the time as
of which the Fund determines its NAV. Securities traded in the over-the-counter
("OTC") market and quoted on The Nasdaq Stock Market are valued at the Nasdaq
Official Closing Price ("NOCP"), as determined by Nasdaq, or lacking a NOCP, the
last current reported sale price on Nasdaq at the time as of which the Fund
determines its NAV.
When a most recent last sale or closing price is not available, portfolio
securities, other than option securities, that are traded on a U.S. securities
exchange and other securities traded in the OTC market are valued at the mean
between the most recent bid and asked quotations in accordance with guidelines
adopted by the Board of Trustees. Each option security traded on a U.S.
securities exchange is valued at the mid-point of the consolidated bid/ask quote
for the option security, also in accordance with guidelines adopted by the Board
of Trustees. Each OTC option that is not traded through the Options Clearing
Corporation is valued by the counterparty to such option. If the pricing
committee determines that the valuation of a security in accordance with the
methods described above is not reflective of a fair value for such security, the
security, including any thinly-traded security, junk bond or synthetic
convertible instrument, is valued at a fair value by the pricing committee,
under the ultimate supervision of the Board of Trustees, following the
guidelines and/or procedures adopted by the Board of Trustees.
Trading in securities on European and Far Eastern securities exchanges and OTC
markets is typically completed at various times before the close of business on
each day on which the NYSE is open. Each security trading on these exchanges or
OTC markets is evaluated utilizing a systematic fair valuation model provided by
an independent pricing service approved by the Board of Trustees. The valuation
of each security that meets certain criteria in relation to the valuation model
is systematically adjusted to reflect the impact of movement in the U.S. market
after the foreign markets close. Securities that do not meet the criteria, or
that are principally traded in other foreign markets, are valued as of the last
current sale price at the time as of which the Fund determines its NAV, or when
reliable market prices or quotations are not readily available, at the mean
between the most recent bid and asked quotations as of the close of the
appropriate exchange or other designated time, in accordance with guidelines
adopted by the Board of Trustees. Trading of foreign securities may not take
place on every NYSE business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the NYSE is not open and on
which the Fund's NAV is not calculated. As stated above, if the market prices
are not readily available or are not reflective of a security's fair value, the
security is valued at a fair value by the pricing committee, under the ultimate
supervision of the Board of Trustees, following the guidelines and/or procedures
adopted by the Board of Trustees.
The Fund also may use fair value pricing, pursuant to Board of Trustees
guidelines and under the ultimate supervision of the Board of Trustees if the
value of a foreign security it holds is materially affected by events occurring
before their pricing time but after the close of the primary market or exchange
on which the security is traded. Those procedures may utilize valuations
furnished by pricing services approved by the Board of Trustees, which may be
based on market transactions for comparable securities and various relationships
between securities that are generally recognized by institutional traders, a
computerized matrix system, or appraisals derived from information concerning
the securities or similar securities received from recognized dealers in those
securities.
When fair value pricing of securities is employed, the prices of securities used
by the Fund to calculate its NAV may differ from market quotations or official
closing prices.
Convertible Opportunities and Income Fund
Notes to Financial Statements ANNUAL REPORT 19
Notes to Financial Statements
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.
FOREIGN CURRENCY TRANSLATION. Values of investments and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using a rate quoted by a major bank or dealer in the particular currency market,
as reported by a recognized quotation dissemination service.
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 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 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
the 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.
Convertible Opportunities and Income Fund
20 ANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements
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.
NEW ACCOUNTING PRONOUNCEMENTS. On July 13, 2006, the Financial Accounting
Standards Board (FASB) released FASB Interpretation No. 48 Accounting for
Uncertainty in Income Taxes (FIN 48). FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax positions taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax benefits of positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax expense in the current
year. Adoption of FIN 48 is required for fiscal years beginning after December
15, 2006 and is to be applied to all open tax years as of the effective date. At
this time, management is evaluating the implications of FIN 48 and its impact on
the financial statements has not yet been determined.
In addition, in September 2006, the Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statements and their
disclosures and its impact has not yet been determined.
NOTE 2 - INVESTMENT ADVISOR AND TRANSACTIONS WITH AFFILIATES OR CERTAIN OTHER
PARTIES
Pursuant to an investment advisory agreement with Calamos Advisors LLC, the Fund
pays an annual fee, payable monthly, equal to 0.80% based on the average weekly
managed assets. Calamos Advisors has contractually 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).
Pursuant to a financial accounting services agreement, 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, 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
monitoring trustee deferred compensation plan accruals and valuations. The Fund
pays its pro rata share of the financial accounting services fee payable to
Calamos Advisors based on the Fund's relative portion of combined assets.
The Fund reimburses 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.
Included in the statement of operations under the caption "Earnings credits" is
an expense offset of $10,515, arising from credits on cash balances maintained
on deposit.
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
Convertible Opportunities and Income Fund
Notes to Financial Statements ANNUAL REPORT 21
Notes to Financial Statements
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 in the value of the measuring shares. Deferred
compensation of $51,145 is included in "Other assets" on the Statement of Assets
and Liabilities at October 31, 2006. The Fund's obligation to make payments
under the Plan is a general obligation of the Fund and is included on the
Statement of Assets and Liabilities as a payable for "Deferred compensation to
Trustees" at October 31, 2006.
NOTE 3 - INVESTMENTS
Purchases and sales of investments, other than short-term investments for the
year ended October 31, 2006 were as follows:
Purchases $532,958,584
Proceeds from sales 529,691,904
The following information is presented on an income tax basis as of October 31,
2006. Differences between amounts for financial statements and Federal income
tax purposes are primarily due to timing differences.
The cost basis of investments for Federal income tax purposes at October 31,
2006 was as follows:
Cost basis of investments $1,213,318,145
--------------
Gross unrealized appreciation 79,148,600
Gross unrealized depreciation (17,304,913)
--------------
Net unrealized appreciation (depreciation) $ 61,843,687
==============
NOTE 4 - INCOME TAXES
For the year ended October 31, 2006, the Fund recorded the following permanent
reclassifications to reflect tax character. Results of operations and net assets
were not affected by these reclassifications.
Paid-in capital $ --
Undistributed net investment income (loss) 14,155,089
Accumulated net realized gain/(loss) on investments,
foreign currency transactions and interest rate swaps (14,155,089)
Distributions during the fiscal year ended October 31, 2006 and 2005 were
characterized for Federal income tax purposes as follows:
2006 2005
------------ ------------
DISTRIBUTIONS PAID FROM:
Ordinary income $100,262,231 $ 84,592,513
Long-term capital gains 15,105,921 56,322,944
As of October 31, 2006, the components of accumulated
earnings/(losses) on a tax basis were as follows:
Undistributed ordinary income $ 18,547,877
Undistributed capital gains 1,079,740
------------
Total undistributed earnings 19,627,617
Accumulated capital and other losses --
Net unrealized gains/(losses) 68,760,211
------------
Total accumulated earnings/(losses) 88,387,828
Other (522,294)
Paid-in capital 684,128,592
------------
Net assets applicable to common shareholders $771,994,126
------------
Convertible Opportunities and Income Fund
22 ANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements
NOTE 5 - COMMON STOCK
There are unlimited common shares of beneficial interest authorized and
47,005,186 shares outstanding at October 31, 2006. Calamos Advisors owned 82 of
the outstanding shares at October 31, 2006. Transactions in common shares were
as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2006 OCTOBER 31, 2005
---------------- ----------------
Beginning shares 46,079,867 44,833,669
Shares issued through reinvestment of distributions 925,319 1,246,198
---------- ----------
Ending shares 47,005,186 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 October 31, 2006.
NOTE 7 - SYNTHETIC CONVERTIBLE SECURITIES
The Fund may establish a "synthetic" convertible instrument by combining
separate securities that possess the economic characteristics similar to a
convertible security, i.e., fixed-income securities ("fixed-income component",
which may be a convertible or non-convertible security) and the right to acquire
equity securities ("convertible component"). The fixed-income component is
achieved by investing in 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.
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 3.50% to 5.36% for the year ended October 31, 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%.
Convertible Opportunities and Income Fund
Notes to Financial Statements ANNUAL REPORT 23
Notes to Financial Statements
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 only the holders of common stock, when the respective
classes vote alone.
NOTE 9 - INTEREST RATE TRANSACTIONS
The Fund may engage in swaps primarily to manage duration and yield curve risk,
or as alternatives to direct investments. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. The change in value of swaps, including accruals of
periodic amounts of interest to be paid or received on swaps, is reported as
unrealized gains or losses in the Statement of Operations. A realized gain or
loss is recorded upon payment or receipt of a periodic payment or termination of
the swap agreements. Swap agreements are stated at fair value. Notional
principal amounts are used to express the extent of involvement in these
transactions, but the amounts potentially subject to credit risk are much
smaller.
Premiums paid to or by the Fund are accrued daily and included in realized gain
(loss) when paid on swaps in the accompanying Statement of Operations. The
contracts are marked-to-market daily based on dealer-supplied valuations and
changes in value are recorded as unrealized appreciation (depreciation). Gains
or losses are realized upon early termination of the contract. Risks may exceed
amounts recognized in the Statement of Assets and Liabilities. These risks
include changes in the returns of the underlying instruments, failure of the
counterparties to perform under the contracts' terms and the possible lack of
liquidity with respect to the contracts.
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 additional to redeeming all or some of the Preferred Shares.
Details of the swap agreements outstanding as of October 31, 2006 were as
follows:
UNREALIZED
NOTIONAL FIXED RATE FLOATING RATE APPRECIATION
COUNTERPARTY TERMINATION DATE AMOUNT (000) (FUND PAYS) (FUND RECEIVES) (DEPRECIATION)
------------ ----------------- ------------ ----------- --------------- --------------
Merrill Lynch November 28, 2006 $60,000 2.82% 1 month LIBOR 116,204
Merrill Lynch July 3, 2007 65,000 2.33% 1 month LIBOR 1,434,290
Merrill Lynch November 28, 2007 60,000 3.26% 1 month LIBOR 1,231,905
Merrill Lynch July 3, 2008 70,000 2.69% 1 month LIBOR 2,810,746
Merrill Lynch November 28, 2008 60,000 3.60% 1 month LIBOR 1,619,389
----------
$7,212,534
==========
NOTE 10 - SECURITIES LENDING
During the year ended October 31, 2006, the Fund loaned certain of its
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
Convertible Opportunities and Income Fund
24 ANNUAL REPORT Notes to Financial Statements
Notes to Financial Statements
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 LLC
and the security lending agent will monitor the creditworthiness of the firms to
which the Fund lends securities. At October 31, 2006, the Fund had securities
valued at $131,677,235 that were on loan to broker-dealers and banks and
$136,928,000 in cash or cash equivalent collateral.
Convertible Opportunities and Income Fund
Notes to Financial Statements ANNUAL REPORT 25
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD WERE AS FOLLOWS:
June 26,
2002*
For the Year Ended October 31, through
------------------------------------------- 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) 1.50 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)
Distributions to preferred shareholders from:
Net investment income (common share
equivalent basis) (0.36) (0.19) (0.11) (0.06) (0.01)
Capital gains (common share equivalent basis) (0.03) (0.06) --(d) -- --
Total from investment operations 1.92 1.43 2.32 6.09 (0.39)
Less distributions to common shareholders from:
Net investment income (1.61) (1.65) (1.80) (1.64) (0.29)
Capital gains (0.48) (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 $ 16.42 $ 16.59 $ 18.03 $ 18.01 $ 13.56
Market value, end of period $ 19.73 $ 19.52 $ 20.50 $ 19.60 $ 14.20
Total investment return based on(e):
Net asset value 10.47% 6.69% 12.65% 46.48%
Market value 12.81% 10.40% 17.69% 52.22% (3.33)%
Ratios and supplemental data:
Net assets applicable to common shareholders,
end of period (000's omitted) $771,994 $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) 1.04% 1.06% 1.00% 0.86% 0.79%
Gross expenses prior to waiver of expenses
by the advisor and earnings credits(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 distributions(f) 2.18% 1.11% 0.65% 0.39% 0.23%
Net investment income (loss), net of preferred
share distributions(f) 6.99% 8.48% 9.91% 10.50%(b) 7.98%
Portfolio turnover rate 48% 76% 54% 42% 2%
Asset coverage per preferred share, at end
of period(h) $ 75,291 $ 74,795 $ 77,624 $121,907 $ 96,934
* 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 reclassified from net investment income (loss)
to net realized and unrealized 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 liabilities, by the total
number of common shares outstanding. The common share market price is the
price the market is willing to pay for shares of the Fund at a given time.
Common share market price is influenced by a range of factors, including
supply and demand and market conditions.
(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
26 Financial Highlights ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of CALAMOS Convertible Opportunities
and Income Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CALAMOS Convertible Opportunities and Income
Fund (the "Fund") as of October 31, 2006, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years then ended and the financial highlights for each of the
four years then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The Fund's financial highlights for the period ended October 31, 2002
were audited by other auditors whose report, dated December 16, 2002, expressed
an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2006, by correspondence with the Fund's
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of October 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years then ended, and
the financial highlights for each of the four years then ended, in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 19, 2006
Convertible Opportunities and Income Fund
Report of Independent Registered Public Accounting Firm ANNUAL REPORT 27
TAX INFORMATION (UNAUDITED)
We are providing this information as required by the Internal Revenue Code
(Code). The amounts shown may differ from those elsewhere in this report due to
differences between tax and financial reporting requirements. In January 2007,
shareholders will receive Form 1099-DIV which will include their share of
qualified dividends and capital gains distributed during the calendar year 2006.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
Under Section 852(b)(3)(C) of the Code, the Fund hereby designates $15,105,921
as capital gain dividends for the fiscal year ended October 31, 2006.
Under Section 854(b)(2) of the Code, the Fund hereby designates $3,204,414 or
the maximum amount allowable under the Code, as qualified dividends for the
fiscal year ended October 31, 2006.
Under Section 854(b)(2) of the Code, the Fund hereby designates 1.44% of the
ordinary income dividends as income qualifying for the corporate dividends
received deduction for the fiscal year ended October 31, 2006.
Convertible Opportunities and Income Fund
28 ANNUAL REPORT Tax Information
TRUSTEE APPROVAL OF MANAGEMENT AGREEMENT (UNAUDITED)
The Board of Trustees of the Fund oversees the Fund's management, and, as
required by law, determines annually whether to continue the Fund's management
agreement with Calamos Advisors under which Calamos Advisors serves as the
investment manager for the Fund.
In connection with their most recent consideration regarding the continuation of
that agreement, the Trustees received and reviewed information provided by
Calamos Advisors in response to detailed requests of the Independent Trustees
and their independent legal counsel and discussed with representatives of
Calamos Advisors the Fund's operations and the nature and quality of the
advisory and other services provided by Calamos Advisors to the Fund. The
Trustees also received and reviewed a memorandum from counsel to the Independent
Trustees regarding the Trustees' responsibilities in evaluating the management
agreement. In the course of their consideration of the agreement, the
Independent Trustees were advised by their counsel and, in addition to meeting
with management of Calamos Advisors, they met separately in executive session
with their counsel.
At a meeting on June 29, 2006, based on their evaluation of the information
referred to above and other information, the Trustees determined that the
overall arrangements between the Fund and Calamos Advisors were fair and
reasonable in light of the nature and quality of the services provided by
Calamos Advisors and its affiliates, the fees charged for those services and
other matters that the Trustees considered relevant in the exercise of their
business judgment. At that meeting the Trustees, including all of the
Independent Trustees, unanimously approved continuation of the management
agreement through August 1, 2007, subject to earlier termination as provided in
the agreement.
In considering the continuation of the management agreement, the Trustees
reviewed and analyzed various factors that they determined were relevant,
including the factors described below, none of which by itself was considered
the sole factor in the Trustees' determinations. However, the material factors
and conclusions that formed the basis for the Trustees' determination to approve
the continuation of the management agreement are discussed separately below.
NATURE, QUALITY AND EXTENT OF SERVICES
The Trustees reviewed the nature, extent and quality of Calamos Advisors'
services to the Fund, taking into account the Fund's investment objective and
strategy and the knowledge of the Trustees gained from their regular meetings
with management on at least a quarterly basis. In addition, the Trustees
reviewed Calamos Advisors' resources and key personnel, especially those who
provide investment management services to the Fund. The Trustees also considered
other services provided to the Fund by Calamos Advisors, such as managing the
execution of portfolio transactions and the selection of broker-dealers for
those transactions, monitoring adherence to the Fund's investment restrictions,
producing shareholder reports, providing support services for the Board and
Board committees, communicating with shareholders, overseeing the activities of
other service providers and monitoring compliance with various Fund policies and
procedures and with applicable securities laws and regulations.
The Trustees concluded that the nature and extent of the services provided by
Calamos Advisors to the Fund were appropriate and consistent with the terms of
the management agreement, that the quality of those services had been consistent
with or superior to quality norms in the industry and that the Fund was likely
to benefit from the continued provision of those services. They also concluded
that Calamos Advisors had sufficient personnel, with the appropriate education
and experience, to serve the Fund effectively and had demonstrated its
continuing ability to attract and retain well-qualified personnel.
PERFORMANCE
The Trustees considered the Fund's performance results over various time
periods. They reviewed information comparing the performance of the Fund with
the performance of comparable funds and peer groups identified by Lipper Inc.,
an independent provider of investment company data, and with the Fund's
benchmark. The Trustees heard from representatives of Calamos Advisors, who
provided additional information with regard to certain aspects of the Lipper
materials and answered questions from the Trustees. The Trustees also noted that
the Fund had three years of performance data, and thus did not have a long-term
performance record. The Trustees concluded that the Fund's operating history was
too short a period to allow for a meaningful performance comparison.
Convertible Opportunities and Income Fund
Trustee Approval of Management Agreement ANNUAL REPORT 29
Trustee Approval of Management Agreement (unaudited)
COSTS OF SERVICES AND PROFITS REALIZED BY CALAMOS ADVISORS
The Trustees examined information on the Fund's fees and expenses in comparison
to information for other comparable funds as provided by Lipper. The Trustees
noted that, although the Fund's contractual rate of management fees and actual
management fees after fee waivers for common shares were greater than the median
management fees of the Lipper peer group, the Fund's actual management fees
after fee waivers for common and preferred shares and overall expense ratio were
below those of its peer group.
The Trustees considered the methodology used by Calamos Advisors in determining
compensation payable to portfolio managers, the competitive environment for
investment management talent, and the competitive market for mutual funds in
different distribution channels.
The Trustees reviewed information on the profitability of Calamos Advisors in
serving as the Fund's investment manager and of Calamos Advisors and its
affiliates in all of their relationships with the Fund, as well as an
explanation of the methodology utilized in allocating various expenses among the
Fund and other business units. Data was provided to the Trustees with respect to
profitability, both on a pre-and post-marketing cost basis. The Trustees also
reviewed the annual report of Calamos Advisors' parent company and discussed its
corporate structure. The Trustees recognized that profitability comparisons
among fund managers are difficult because very little comparative information is
publicly available and profitability of any manager is affected by numerous
factors, including the organizational structure of the particular manager, the
types of funds and other accounts it manages, possible other lines of business,
the methodology for allocating expenses and the manager's capital structure and
cost of capital. However, based on the information available and taking those
factors into account, the Trustees concluded that the profitability of Calamos
Advisors regarding the Fund in relation to the services rendered was not
unreasonable.
The Trustees also reviewed Calamos Advisors' management fees for its
institutional separate accounts and for its subadvised funds (for which Calamos
Advisors provides portfolio management services only), as well as managed fees
for secondary accounts. Although in most instances its sub-advisory fees, and in
many instances its institutional separate accounts fees, for various investment
strategies are lower than the management fees charged to the Fund, the Trustees
noted that Calamos Advisors performs significant additional services for the
Fund that it does not provide to those other clients, including administrative
services, oversight of the Fund's other service providers, trustee support,
regulatory compliance and numerous other services. Finally, the Trustees
considered Calamos Advisors' financial condition, which they found to be sound.
The Trustees concluded that the management fees and other compensation payable
by the Fund to Calamos Advisors and its affiliates were reasonable in relation
to the nature and quality of the services to be provided, taking into account
the fees charged by other advisers for managing comparable mutual funds with
similar strategies and the fees Calamos Advisors charges to other clients. The
Trustees also concluded that the Fund's overall expense ratio was reasonable,
taking into account the quality of services provided by Calamos Advisors and the
Fund's investment performance.
ECONOMIES OF SCALE
In reviewing the Fund's fees and expenses, the Trustees examined the potential
benefits of economies of scale and whether any economies of scale should be
reflected in the Fund's fee structure. They noted that the Fund has had a
relatively stable asset base since commencement of operation and that there do
not appear to have been any significant economies of scale realized since that
time.
OTHER BENEFITS TO CALAMOS ADVISORS
The Trustees also considered benefits that accrue to Calamos Advisors and its
affiliates from their relationship with the Fund. The Trustees concluded that,
other than the services to be provided by Calamos Advisors and its affiliates
pursuant to their agreements with the Fund and the fees payable by the Fund
therefor, the Fund and Calamos Advisors may potentially benefit from their
relationship with each other in other ways. The Trustees considered Calamos
Advisors' use of commissions paid by the Fund on its portfolio brokerage
transactions to obtain proprietary research products and services benefiting the
Fund and/or other clients of Calamos Advisors. The Trustees concluded that
Calamos Advisors' use of "soft" commission dollars to obtain research products
and services was consistent with regulatory requirements and is beneficial to
the Fund. They concluded that, although Calamos Advisors derives or may derive
additional benefits through the use of soft dollars from the Fund's portfolio
transactions, the Fund also benefits from the receipt of research products and
services
Convertible Opportunities and Income Fund
30 ANNUAL REPORT Trustee Approval of Management Agreement
Trustee Approval of Management Agreement (unaudited)
acquired through commissions paid on the portfolio transactions of other clients
of Calamos Advisors. They also concluded that the Fund's success could attract
other business to Calamos Advisors or its other funds and that Calamos Advisors'
success could enhance its ability to serve the Fund.
After full consideration of the above factors as well as other factors that were
instructive in analyzing continuation of the management agreement for the
one-year period ending August 1, 2007, the Trustees, including all of the
Independent Trustees, concluded that the continuation of the management
agreement with Calamos Advisors was in the best interest of the Fund and its
shareholders.
Convertible Opportunities and Income Fund
Trustee Approval of Management Agreement ANNUAL REPORT 31
Trustees & Officers (unaudited)
The management of the Trust+, including general supervision of duties performed
for the Fund under the Investment Management Agreement, is the responsibility of
its board of trustees.
The following table sets forth, as of October 31, 2006 each trustee's
position(s) with the Trust, age, principal occupation during the past five
years, number of portfolios overseen, other directorships, and the date on which
the trustee first became a trustee of the Trust.
POSITION(S) HELD WITH TRUST NUMBER OF PORTFOLIOS
NAME AND AGE AT AND DATE FIRST ELECTED IN FUND COMPLEX@ PRINCIPAL OCCUPATION(S) DURING PAST
OCTOBER 31, 2006 OR APPOINTED TO OFFICE OVERSEEN BY TRUSTEE 5 YEARS AND OTHER DIRECTORSHIPS HELD
---------------- --------------------------- -------------------- ------------------------------------------------
TRUSTEES WHO ARE INTERESTED PERSONS OF TRUST:
John P. Calamos, Sr., 66* Trustee and President 15 Chairman, CEO, and Co-Chief Investment Officer,
(since 2002) Calamos Asset Management, Inc. ("CAM"), Calamos
Holdings LLC ("CHLLC") and Calamos Advisors LLC
and its predecessor ("Calamos Advisors"), and
President and Co-Chief Investment Officer,
Calamos Financial Services LLC and its
predecessor ("CFS"); Director, CAM
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF TRUST:
Joe F. Hanauer, 69 Trustee (since 2002) 15 Private investor; Director, MAF Bancorp (bank
holding company); Chairman and Director, Move,
Inc., (Internet provider of real estate
information and products); Director, Combined
Investments, L.P. (investment management)
Weston W. Marsh, 56 Trustee (since 2002) 15 Of Counsel, and formerly, Partner, Freeborn &
Peters (law firm)
John E. Neal, 56 Trustee (since 2002) 15 Private investor; Managing Director, Banc One
Capital Markets, Inc. (investment banking)
(2000-2004); Director, The Brickman Group, Ltd.
(landscaping company); Director, Equity
Residential (publicly-owned REIT); Director,
Ranir LLC (oral products company); Director, CBA
Commercial (commercial mortgage securitization
company); Partner, Private Perfumary LLC
(private label perfume company); Partner, Linden
LLC (health care private equity)
William R. Rybak, 55 Trustee (since 2002) 15 Private investor; formerly Executive Vice
President and Chief Financial Officer, Van
Kampen Investments, Inc. and subsidiaries
(investment manager); Director, Howe Barnes
Investments (investment services firm);
Director, Private Bancorp (bank holding company)
Stephen B. Timbers, 62 Trustee (since 2004); Lead 15 Private investor; formerly Vice Chairman,
Independent Trustee (since Northern Trust Corporation (bank holding
2005) company); President and Chief Executive Officer,
Northern Trust Investments, N.A. (investment
manager); formerly President, Northern Trust
Global Investments, a division of Northern Trust
Corporation and Executive Vice President, The
Northern Trust Corporation; Director Northern
Trust Securities, Inc.
David D. Tripple, 62 Trustee (since 2006) 15 Private investor; Trustee, Century Shares Trust
and Century Small Cap Select Fund**; Pioneer
Investment Management, a subsidiary of
UniCredito Italiano (investment advisor); prior
thereto, The Pioneer Group, Inc. (asset
management)
+ The Trust is defined as the CALAMOS Convertible Opportunities and Income
Fund.
* John P. Calamos is an "interested person" of the Trust as defined in the
Investment Company Act of 1940 (the "1940 Act") because he is an affiliate
of Calamos Advisors and Calamos Financial Services, LLC.
** Overseeing two portfolios in fund complex
@ The Fund Complex consists of CALAMOS Investment Trust, CALAMOS Advisors
Trust, CALAMOS Convertible Opportunities and Income Fund, CALAMOS
Convertible and High Income Fund, CALAMOS Strategic Total Return Fund and
CALAMOS Global Total Return Fund.
Convertible Opportunities and Income Fund
32 ANNUAL REPORT Trustees & Officers
Trustees & Officers (unaudited)
OFFICERS. Mr. John Calamos is president of the Trust. The preceding table gives
more information about Mr. John Calamos. The following table sets forth as of
October 31, 2006 each other officer's name, position with the Trust, age,
principal occupation during the past five years, other directorships, and the
date on which he or she first became and officer of the Trust. Each officer
serves until his or her successor is chosen and qualified or until his or her
resignation or removal by the board of trustees.
POSITION(S) HELD WITH TRUST PRINCIPAL OCCUPATION(S)
NAME AND AGE AT AND DATE FIRST ELECTED OR DURING PAST 5 YEARS
OCTOBER 31, 2006 APPOINTED TO OFFICE AND OTHER DIRECTORSHIPS HELD
---------------- --------------------------- ----------------------------
Nimish S. Bhatt, 43 Treasurer (since 2004) Senior Vice President and Director of Operations,
CAM, CHLLC, Calamos Advisors and CFS (since 2004);
Senior Vice President, Alternative Investments and
Tax Services, The BISYS Group, Inc., prior thereto
Nick P. Calamos, 45* Vice President (since 2002) Senior Executive Vice President and Co-Chief
Investment Officer, CAM, CHLLC, Calamos Advisors
and CFS
Patrick H. Dudasik, 51 Vice President (since 2002) Executive Vice President, Chief Financial Officer
and Treasurer, CAM and CHLLC (since 2004), Calamos
Advisors and CFS (since 2001); Administrative
Officer, CAM and CHLLC (2004-2005), Calamos
Advisors and CFS (2001-2005)
James S. Hamman, Jr., 37 Secretary (since 2002) Executive Vice President, Secretary and General
Counsel, CAM and CHLLC (since 2004), Calamos
Advisors and CFS (since 1998); Chief Compliance
Officer (2004-2005)
Mark Mickey, 55 Chief Compliance Officer Chief Compliance Officer, Calamos Funds (since
(since 2005) 2005) and Chief Compliance Officer, Calamos
Advisors (2005-2006); Director of Risk Assessment
and Internal Audit, Calamos Advisors (2003-2005);
President, Mark Mickey Consulting (2002-2003);
Executive Vice President and Head of Compliance,
ABN AMRO, Inc., prior thereto
* Mr. Nick Calamos resigned from the board of trustees effective June 28,
2006.
The mailing address of the Trustees and Officers is Calamos Funds; Attn:
Secretary, 2020 Calamos Court, Naperville, IL 60563-2787
PROXY VOTING POLICIES. A description of the CALAMOS Proxy Voting Policies and
Procedures is available by calling (800) 582-6959, by visiting its website at
www.calamos.com or by writing CALAMOS at: CALAMOS INVESTMENTS, Attn: Client
Services, 2020 Calamos Court, Naperville, IL 60563, and on the Securities and
Exchange Commission's website at www.sec.gov.
Convertible Opportunities and Income Fund
Trustees & Officers ANNUAL REPORT 33
Other Information (unaudited)
CHANGE IN DATE OF 2007 SHAREHOLDER MEETING. The 2007 annual meeting of
shareholders of the Fund is expected to be held on June 28, 2007, rather than in
March, as it was held in 2006. Any shareholder wishing to submit a proposal for
inclusion in the Fund's proxy materials for the 2007 annual meeting must do so
not later than February 9, 2007. Any shareholder wishing to submit a proposal in
the manner prescribed by Rule 14a-4(c)(1), and therefore outside of the process
prescribed by Rule 14a-8, under the Securities Exchange Act of 1934, must submit
written notice of such proposal to the Fund not later than April 23, 2007.
Convertible Opportunities and Income Fund
34 ANNUAL REPORT Other Information
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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
OPEN-END MUTUAL FUNDS VERSUS CLOSED-END FUNDS
OPEN-END FUND CLOSED-END FUND
------------- ---------------
Issues new shares on an ongoing basis Issues a fixed number of shares
Issues one class of shares Can issue senior securities such
as preferred stock and bonds
Sold at NAV plus any sales charge Price determined by the marketplace
Sold through the fund's distributor Traded in the secondary market
Fund redeems shares at NAV calculated Fund does not redeem shares
at the close of business day
Convertible Opportunities and Income Fund
About Closed-End Funds ANNUAL REPORT 37
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 invests 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 typically increases. To
protect against increases, 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 negatively impact a fund in two ways: increasing the cost
of leverage and decreasing the value of securities.
- 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.
Convertible Opportunities and Income Fund
38 ANNUAL 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 recharacterization
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.
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
Level Rate Distribution Policy and Automatic Dividend Reinvestment Plan
ANNUAL REPORT 39
The Calamos Investments Advantage
Calamos' history is one of performing well for our clients through nearly 30
years of advances and declines in the market. We use proprietary risk-management
strategies designed to control volatility, maintaining a balance between risk
and reward throughout a market cycle.
DISCIPLINED INVESTMENT PHILOSOPHY AND PROCESS
Calamos Investments has developed a proprietary research and monitoring process
that goes far beyond traditional security analysis. This process applies to each
of our investment strategies, with emphasis varying by strategy. When combined
with the company-specific research and industry insights of our investment team,
the result is nimble dynamic management of a portfolio that allows us to
anticipate and adapt to changing market conditions. In each of our investment
strategies, from the most conservative to the most aggressive, our goals include
maximizing return while controlling risk, protecting principal during volatile
markets, avoiding short-term market timing, and maintaining a vigilant long-term
outlook.
COMPREHENSIVE RISK MANAGEMENT
Our approach to risk management includes continual monitoring, adherence to our
discipline, and a focus on assuring a consistent risk profile during all phases
of the market cycle. Incorporating qualitative and quantitative factors as well
as a strong sell discipline, this risk-control policy seeks to help preserve
investors' capital over the long term.
PROVEN MANAGEMENT TEAM
The Calamos family of mutual funds benefit from our team's decades of experience
in the investment industry. We follow a one-team, one-process approach that
leverages the expertise of more than 50 investment professionals, led by John P.
Calamos, Sr. and Nick P. Calamos, whose investment industry experience dates
back to 1970 and 1983, respectively. Through the collective industry experience
and educational achievements of our research and portfolio staff, we can respond
to the challenges of the market with innovative and timely ideas.
SOUND PROPRIETARY RESEARCH
Over the years, we have invested significant time and resources in developing
and refining sophisticated analytical models that are the foundation of the
firm's research capabilities, which we apply in conjunction with our assessment
of broad themes. We believe evolving domestic policies, the growing global
economy, and new technologies present long-term investment opportunities for
those who can detect them.
Convertible Opportunities and Income Fund
40 ANNUAL REPORT The Calamos Investments Advantage
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 10/31/06
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND (CHI)
(PIE CHART)
Short-Term Investments 1.3%
High Yield/Corporate Bonds 54.8%
Convertible Securities 42.2%
Common Stocks 1.7%
FUND PROFILE
PROVIDING ENHANCED FIXED INCOME POTENTIAL
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.
FUND ASSET ALLOCATION AS OF 10/31/06
CALAMOS CONVERTIBLE AND HIGH INCOME FUND (CHY)
(PIE CHART)
Short-Term Investments 2.0%
High Yield/Corporate Bonds 58.4%
Convertible Securities 39.6%
FUND PROFILE
PROVIDING ENHANCED FIXED INCOME POTENTIAL
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.
FUND ASSET ALLOCATION AS OF 10/31/06
CALAMOS STRATEGIC TOTAL RETURN FUND (CSQ)
(PIE CHART)
Short-Term Investments 0.6%
High Yield/Corporate Bonds 27.4%
Convertible Securities 27.5%
Common Stock 44.5%
FUND PROFILE
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 below investment-grade (high-yield) fixed-income
securities.
FUND ASSET ALLOCATION AS OF 10/31/06
CALAMOS STRATEGIC TOTAL RETURN FUND (CGO)
(PIE CHART)
Short-Term Investments 0.3%
High Yield/Corporate Bonds 28.3%
Convertible Securities 17.2%
Common Stock 54.2%
FUND PROFILE
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 below investment-grade (high-yield)
fixed-income securities.
Convertible Opportunities and Income Fund
Calamos Closed-End Funds ANNUAL REPORT 41
(CALAMOS INVESTMNTS(R) LOGO)
Calamos Investments | 2020 Calamos Court | Naperville, IL 60563-1463 |
800.582.6959 | www.calamos.com
A description of the Calamos Proxy Voting Policies and Procedures and the Fund's
proxy voting record for the 12 month period ended June 30, 2006 are 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 or by visiting the SEC
website at http://www.sec.gov.
The Funds file a complete list of their portfolio holdings with the SEC for the
first and third quarters each fiscal year on Form N-Q. The Forms N-Q are
available free of charge, upon request, by calling or writing Calamos
Investments at the phone number or address provided above or by visiting the SEC
website at http://www.sec.gov. You may also review or, for a fee, copy the forms
at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling 800.732.0330.
On April 27, 2006, the Fund submitted a CEO annual certification to the NYSE on
which the Fund's chief executive officer certified that he was not aware, as of
that date, of any violation by the Fund of the NYSE's corporate governance
listing standards. In addition, the Fund's report to the SEC on Form N-CSR
contains certifications by the fund's principal executive officer and principal
financial officer as required by Rule 30a-2(a) under the 1940 Act, relating to,
among other things, the quality of the Fund's disclosure controls and procedures
and internal control over financial reporting.
FOR 24 HOUR SHAREHOLDER ASSISTANCE
800.432.8224
TO OBTAIN INFORMATION
800.582.6959
VISIT OUR WEB SITE
www.calamos.com
INVESTMENT ADVISOR
Calamos Advisors LLC
2020 Calamos Court
Naperville, IL 60563-2787
FUND ACCOUNTING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02111
CUSTODIAN AND TRANSFER AGENT
The Bank of New York
P.O. Box 11258
Church Street Station
New York, NY 10286
800.524.4458
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche LLP
Chicago, IL
LEGAL COUNSEL
Bell, Boyd & Lloyd LLC
Chicago, IL
(C) 2006 Calamos Holdings LLC. All Rights Reserved.
Calamos(R), CALAMOS INVESTMENTS(R), Strategies for Serious Money(R)
and the Calamos(R) logo are registered trademarks of Calamos Holdings LLC.
CHIANR 1790 2006
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or person performing similar
functions.
(b) Not applicable.
(c) The registrant has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The registrant has not granted a waiver or an implicit waiver from its Code
of Ethics during the period covered by the shareholder report presented in Item
1 hereto.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached as an Exhibit hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that, for the period covered
by the shareholder report presented in Item 1 hereto, it has four audit
committee financial experts serving on its audit committee, each of whom is an
independent Trustee for purpose of this N-CSR item: John E. Neal, Stephen B.
Timbers, David D. Tripple and William Rybak. Under applicable securities laws, a
person who is determined to be an audit committee financial expert will not be
deemed an "expert" for any purpose, including without limitation for the
purposes of Section 11 of the Securities Act of 1933, as a result of being
designated or identified as an audit committee financial expert. The designation
or identification of a person as an audit committee financial expert does not
impose on such person any duties, obligation, or liabilities that are greater
than the duties, obligations and liabilities imposed on such person as a member
of audit committee and Board of Trustees in the absence of such designation or
identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
a) Audit Fee - $34,717 and $22,779 are the aggregate fees billed in each of the
last two fiscal years for professional services rendered by the principal
accountant to the registrant for the audit of the registrant; annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Audit-Related Fees - $27,192 and $27,704 are the aggregate fees billed in
each of the last two fiscal years for assurance and related services rendered by
the principal accountant to the registrant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item 4.
(c) Tax Fees - $4,850 and $3,876 are the aggregate fees billed in each of the
last two fiscal years for professional services rendered by the principal
accountant to the registrant for tax compliance, tax advice, tax planning and
tax return preparation.
There were no fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant to the investment
adviser for tax compliance, tax advice and tax planning that were required to be
pre-approved by the audit committee as described in paragraph (e)(1) of this
Item 4.
(d) All Other Fees - $35,542 and $0 are the aggregate fees billed in each of the
last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraph (a)-
(c) of this Item 4.
There were no fees billed in each of the last two fiscal years for products
and services provided by the principal accountant to the investment adviser,
other than the services reported in paragraphs (a)-
(c) of this Item 4, that were required to be pre-approved by the audit committee
as described in paragraph (e)(1) of this Item 4.
(e) (1) Registrant's audit committee meets with the principal accountants and
management to review and pre-approve all audit services to be provided by the
principal accountants.
The audit committee shall pre-approve all non-audit services to be provided
by the principal accountants to the registrant, including the fees and other
compensation to be paid to the principal accountants; provided that the
pre-approval of non-audit services is waived if (i) the services were not
recognized by management at the time of the engagement as non-audit services,
(ii) the aggregate fees for all non-audit services provided to the registrant
are less than 5% of the total fees paid by the registrant to its principal
accountants during the fiscal year in which the non-audit services are provided,
and (iii) such services are promptly brought to the attention of the audit
committee by management and the audit committee approves them prior to the
completion of the audit.
The audit committee shall pre-approve all non-audit services to be provided
by the principal accountants to the investment adviser or any entity
controlling, controlled by or under common control with the adviser that
provides ongoing services to the registrant if the engagement relates directly
to the operations or financial reporting of the registrant, including the fees
and other compensation to be paid to the principal accountants; provided that
pre-approval of non-audit services to the adviser or an affiliate of the adviser
is not required if (i) the services were not recognized by management at the
time of the engagement as non-audit services, (ii) the aggregate fees for all
non-audit services provided to the adviser and all entities controlling,
controlled by or under common control with the adviser are less than 5% of the
total fees for non-audit services requiring pre-approval under paragraph (e)(1)
of this Item 4 paid by the registrant, the adviser or its affiliates to the
registrant's principal accountants during the fiscal year in which the non-audit
services are provided, and (iii) such services are promptly brought to the
attention of the audit committee by management and the audit committee approves
them prior to the completion of the audit.
(2) 100% of the services provided to the registrant described in paragraphs
(b)-(d) of this Item 4 were pre-approved by the audit committee pursuant to
paragraphs (e)(1) of this Item 4. There were no services provided to the
investment adviser or any entity controlling, controlled by or under common
control with the adviser described in paragraphs (b)-(d) of this Item 4 that
were required pre-approved by the audit committee.
(f) No disclosures are required by this Item 4(f).
(g) $40,392 and $3,876 are the aggregate non-audit fees billed in each of the
last two fiscal years for services rendered by the principal accountant to the
registrant. $31,256 and $0 are the aggregate non-audit fees billed in each of
the last two fiscal years for services rendered by the principal accountant to
the investment adviser or any entity controlling, controlled by or under common
control with the adviser. All of the aggregate fees billed by the principal
accountant
for non-audit services to the registrant's investment adviser relate to services
that began prior to the adoption of rules requiring audit committee
pre-approval. However, the registrant's audit committee did approve such
non-audit services.
(h) No disclosures are required by this Item 4(h).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee. The members
of the registrant's audit committee are John E. Neal, Joe F. Hanauer, Weston W.
Marsh, William R. Rybak, David D. Tripple and Stephen B. Timbers.
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.
The registrant has delegated the voting of proxies relating to its voting
securities to its investment adviser, Calamos Advisors LLC ("Calamos"). A
description of Proxy Voting Policies and Procedures of ("Calamos") are included
as an Exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) As of October 31, 2006, the registrant is lead by a team of investment
professionals, including the following individuals who are responsible for the
day-to-day management of the registrant's portfolio ("portfolio managers"):
POSITIONS HELD WITH
NAME THE REGISTRANT PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
--------------------- --------------------- ----------------------------------------------
*John P. Calamos, Sr. Trustee and President Chairman, CEO and Co-Chief Investment Officer,
(since 2002) Calamos Asset Management, Inc. ("CAM"),
Calamos Holdings LLC ("CHLLC") and Calamos
Advisors LLC and its predecessor ("Calamos
Advisors"), and President and Co-Chief
Investment Officer, Calamos Financial Services
LLC and its predecessor ("CFS"); Director, CAM
**Nick P. Calamos Vice President Senior Executive Vice President and Co-Chief
(since 2002) Investment Officer, CAM, CHLLC, Calamos
Advisors and CFS
* John P. Calamos is an "interested person" of the registrant as defined in
the Investment Company Act of 1940.
** Nick Calamos resigned from the board of trustees effective June 28, 2006.
(a)(2) The portfolio managers also have responsibility for the day-to-day
management of accounts other than the registrant. Information regarding these
other accounts is set forth below.
NUMBER OF OTHER ACCOUNTS MANAGED AND ASSETS BY ACCOUNT TYPE AS OF OCTOBER 31,
2006
Registered Other Pooled
Investment Companies Investment Vehicles Other Accounts
------------------------- ---------------------- -------------------------
Accounts Assets Accounts Assets Accounts Assets
-------- -------------- -------- ----------- -------- --------------
John P. Calamos, Sr. 18 34,272,794,840 3 157,150,982 24,128 10,943,683,684
Nick P. Calamos 18 34,272,794,840 3 157,150,982 24,128 10,943,683,684
NUMBER OF ACCOUNTS AND ASSETS FOR WHICH ADVISORY FEE IS PERFORMANCE BASED AS OF
OCTOBER 31, 2006
Registered Other Pooled
Investment Companies Investment Vehicles Other Accounts
------------------------- ---------------------- -------------------------
Accounts Assets Accounts Assets Accounts Assets
-------- -------------- -------- ----------- -------- --------------
John P. Calamos, Sr. 1 298,575,715 2 95,215,600 1 9,326,764
Nick P. Calamos 1 298,575,715 2 95,215,600 1 9,326,764
The registrant's portfolio managers are responsible for managing the registrant
and other accounts, including separate accounts and unregistered funds.
Other than potential conflicts between investment strategies, the side-by-side
management of both the registrant and other accounts may raise potential
conflicts of interest due to the interest held by Calamos in an account and
certain trading practices used by the portfolio managers (e.g., cross trades
between the registrant and another account and allocation of aggregated
trades). Calamos has developed policies and procedures reasonably designed to
mitigate those conflicts. For example, Calamos will only place cross-trades in
securities held by the registrant in accordance with the rules promulgated under
the Investment Company Act of 1940 and has adopted policies designed to
ensure the fair allocation of securities purchased on an aggregated basis.
The portfolio managers advise certain accounts under a performance fee
arrangement. A performance fee arrangement may create an incentive for a
portfolio manager to make investments that are riskier or more speculative than
would be the case in the absence of performance fees. A performance fee
arrangement may result in increased compensation to the portfolio managers from
such accounts due to unrealized appreciation as well as realized gains in the
client's account.
(a)(3) The portfolio managers have each entered into employment agreements that
provide for compensation in the form of a minimum annual base salary, a maximum
discretionary target bonus and participation in various benefits programs. The
amounts paid to portfolio managers and the criteria utilized to determine the
amounts are benchmarked against industry specific data provided by third party
analytical agencies. The discretionary target bonus is set at a percentage of
base salary. Portfolio performance, as measured by risk-adjusted portfolio
performance over a rolling three-year period, is utilized to determine the
discretionary target bonus. The portfolio managers are also eligible to receive
annual equity awards under a long term incentive compensation program.
(a)(4) As of October 31, 2006, the end of the registrant's most recently
completed fiscal year, the dollar range of securities beneficially owned by each
portfolio manager in the registrant is shown below:
PORTFOLIO MANAGER REGISTRANT
-------------------- -----------------
John P. Calamos, Sr. $50,0001-$100,000
Nick P. Calamos $100,001-$500,000
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
(C) TOTAL NUMBER OF
SHARES (OR UNITS) (D) MAXIMUM NUMBER (OR
(A) TOTAL (B) AVERAGE PURCHASED AS PART APPROXIMATE DOLLAR VALUE)
NUMBER OF PRICE PAID OF PUBLICLY OF SHARES (OR UNITS) THAT
SHARES (OR PER SHARE ANNOUNCED PLANS OR MAY YET BE PURCHASED UNDER
PERIOD UNITS) PURCHASED (OR UNIT) PROGRAMS THE PLANS OR PROGRAMS
--------------------------- ---------------- ----------- ------------------- --------------------------
May 1 to May 31 N/A N/A N/A N/A
June 1 to June 30 N/A N/A N/A N/A
July 1 to July 31 N/A N/A N/A N/A
August 1 to August 31 N/A N/A N/A N/A
September 1 to September 30 N/A N/A N/A N/A
October 1 to October 31 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 registrant's second fiscal half-year 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
(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: December 26, 2006
By: /s/ Patrick H. Dudasik
---------------------------------
Name: Patrick H. Dudasik
Title: Principal Financial Officer
Date: December 26, 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: December 26, 2006
By: /s/ Patrick H. Dudasik
---------------------------------
Name: Patrick H. Dudasik
Title: Principal Financial Officer
Date: December 26, 2006