UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER: 811-21319
EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER: Calamos Convertible and High
Income Fund
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES: 1111 East Warrenville Road, Naperville,
Illinois 60563
NAME AND ADDRESS OF AGENT FOR SERVICE: James S. Hamman, Jr., Secretary,
Calamos Advisors, LLC
1111 East Warrenville Road
Naperville, Illinois
60563-1493
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 245-7200
DATE OF FISCAL YEAR END: October 31, 2004
DATE OF REPORTING PERIOD: November 1, 2003 through October 31, 2004
Item 1. Reports to Stockholders
CALAMOS CONVERTIBLE
AND HIGH INCOME FUND
ANNUAL REPORT OCTOBER 31, 2004
[CALAMOS INVESTMENTS LOGO]
Strategies for Serious Money(TM)
PRESIDENT'S LETTER
--------------------------------------------------------------------------------
PRESIDENT PHOTO
--------------------------------------------------------------------------------
Dear Shareholder:
We are proud to bring you the 2004 annual report for the CALAMOS
Convertible and High Income Fund (CHY) covering the fiscal year ended October
31, 2004.
For those of you who are new to CHY or to CALAMOS Investments this year,
we welcome you as an investor. For those of you who have included CHY in your
portfolio for an extended period, I thank you for your continued confidence in
our investment products. In CHY, as in all of our funds, we strive to maintain
an appropriate balance between risk and reward that seeks to provide you with
outstanding long-term performance.
Investing in a diversified portfolio of convertible securities and high
yield bonds, CHY seeks total return through a combination of capital
appreciation and current income. We have continued to focus on a selection of
names that have the potential to appreciate due to credit-quality upgrades, or
ongoing merger and acquisition activity. Believing that the economy is in the
middle part of the economic cycle, the portfolio is focused on companies that we
believe can grow steadily. We are generally avoiding the lowest quality bonds in
favor of higher-rated securities, and steering clear of interest-rate sensitive
convertibles, preferring those with more equity-like characteristics. To help
offset some of the effects of raising short-term interest rates on the Fund's
yield, the Fund has continued to maintain interest-rate swap positions in
connection with its leverage.
Moreover, the Fund paid a consistent dividend throughout the fiscal year.
Remember that you can use these distributions to your advantage by reinvesting
them through the Fund's dividend reinvestment plan and accumulate additional
shares of the Fund. Through this plan, when the Fund's market price is at a
discount to NAV, your distributions are used to purchase shares at this lower
price, and even when the Fund is at premium to its NAV, your dividends
automatically purchase shares at NAV or 95% of the market price, whichever is
greater.
At CALAMOS Investments, we remain committed to helping you achieve your
long-term financial goals. Thank you for choosing the CALAMOS Convertible and
High Income Fund.
Sincerely,
/s/ John P. Calamos
John P. Calamos, Sr.
Chairman,
Chief Executive Officer and
Chief Investment Officer
Strategies for Serious Money (R) 1
CONVERTIBLE AND HIGH INCOME FUND
PERFORMANCE
NAV/MARKET PRICE
INCEPTION THROUGH OCTOBER 31, 2004
LINE GRAPH
Average Annual Total Return(+)
-------------------------------
1 SINCE
YEAR INCEPTION
-------------------------------
Common Shares -- Inception 5/27/03
On Market Price 15.02% 17.40%
On NAV 14.91% 14.74%
-----------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. You can purchase or sell
common shares daily. Like any other stock, market price will fluctuate with
the market. Upon sale, your shares may have a market price that is above or
below net asset value and may be worth more or less than your original
investment. Due to ongoing market volatility, performance is subject to
substantial short-term fluctuations.
+ Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of income and capital gains
distributions.
2 Strategies for Serious Money (R)
CONVERTIBLE AND HIGH INCOME FUND
PORTFOLIO
FUND SECTOR ALLOCATION
[LINE GRAPH]
Consumer Discretionary 22.6%
Materials 15.8%
Industrials 14.9%
Consumer Staples 9.1%
Energy 8.3%
Utilities 7.2%
Financials 6.3%
Information Technology 6.3%
Health Care 6.1%
Telecommunications Services 3.4%
Sector allocations are based on total investments (excluding security lending
collateral and short-term investments) and may vary over time.
FUND ASSET ALLOCATION
[PIE CHART]
Corporate bonds 71.4%
Convertible Securities 28.3%
Short-term investments .3%
Strategies for Serious Money (R) 3
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
CORPORATE BONDS (101.8%)
CONSUMER DISCRETIONARY (21.7%)
$ 2,546,000 Asbury Automotive Group,
Inc.(c)
9.000%, 06/15/12 $ 2,699,168
8,488,000 Beazer Homes USA, Inc.(c)
8.375%, 04/15/12 9,400,405
5,263,000 Blockbuster, Inc.(a)(c)
9.000%, 09/01/12 5,420,405
4,244,000 Broder Bros. Co.(c)
11.250%, 10/15/10 4,307,634
5,517,000 CBD Media, LLC
8.625%, 06/01/11 5,806,820
Charter Communications, Inc.
5,942,000 10.000%, 04/01/09 4,990,915
4,244,000 9.625%, 11/15/09(c) 3,458,840
1,698,000 11.125%, 01/15/11(c) 1,425,976
4,244,000 DEX Media, Inc.(c)
8.000%, 11/15/13 4,562,274
11,129,000 GBP EMI Group, PLC
9.750%, 05/20/08 22,045,102
General Motors Corp.
6,705,000 8.250%, 07/15/23 7,001,944
679,000 7.125%, 07/15/13(c) 705,667
7,894,000 Hasbro, Inc.(c)
6.600%, 07/15/28 7,814,857
5,347,000 Houghton Mifflin Company(c)
9.875%, 02/01/13 5,828,676
3,395,000 Inn of the Mountain Gods
12.000%, 11/15/10 3,955,385
4,244,000 Interpublic Group of
Companies, Inc.(c)
7.250%, 08/15/11 4,678,465
2,546,000 Intrawest Corp.(a)
7.500%, 10/15/13 2,737,364
2,546,000 Jarden Corp.
9.750%, 05/01/12 2,775,560
J.C. Penney Company, Inc.
1,698,000 9.000%, 08/01/12 2,088,036
1,273,000 7.650%, 08/15/16 1,451,440
4,202,000 Kellwood Company
7.625%, 10/15/17 4,657,159
3,183,000 La Quinta Corp.(c)
8.875%, 03/15/11 3,612,684
2,546,000 Mandalay Resort Group(c)
7.625%, 07/15/13 2,756,462
11,459,000 Mediacom Communications
Corp.(c)
9.500%, 01/15/13 11,286,853
10,040,000 Oxford Industries, Inc.
8.875%, 06/01/11 10,892,911
4,244,000 Perry Ellis International,
Inc.
8.875%, 09/15/13 4,562,274
849,000 Pinnacle Entertainment,
Inc.(c)
8.250%, 03/15/12 880,625
6,790,000 Rent-A-Center, Inc.
7.500%, 05/01/10 7,070,463
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 10,101,000 Royal Caribbean Cruises,
Ltd.(c)
7.500%, 10/15/27 $ 10,883,463
4,244,000 Russell Corp.
9.250%, 05/01/10 4,583,494
8,064,000 Spanish Broadcasting System,
Inc.
9.625%, 11/01/09 8,496,970
7,300,000 Vail Resorts, Inc.
6.750%, 02/15/14 7,536,876
5,942,000 Warnaco Group, Inc.
8.875%, 06/15/13 6,669,408
Warner Music Group(a)
1,698,000 GBP 8.125%, 04/15/14 3,188,258
1,698,000 7.375%, 04/15/14(c) 1,752,762
6,281,000 EUR Waterford Wedgewood, PLC(a)
9.875%, 12/01/10 6,911,219
5,517,000 WCI Communities, Inc.(c)
7.875%, 10/01/13 5,903,370
--------------
204,800,184
--------------
CONSUMER STAPLES (8.8%)
1,698,000 Central Garden & Pet Company
9.125%, 02/01/13 1,892,813
4,668,000 Chattem, Inc.
7.000%, 03/01/14 4,820,095
3,820,000 Chiquita Brands International,
Inc.(a)
7.500%, 11/01/14 3,934,165
4,800,000 Del Monte Foods Company(c)
8.625%, 12/15/12 5,435,928
5,093,000 DIMON, Inc.(c)
7.750%, 06/01/13 5,092,771
Dole Food Company, Inc.
11,544,000 8.875%, 03/15/11(c) 12,842,270
3,786,000 8.625%, 05/01/09 4,211,509
2,971,000 Gold Kist, Inc.
10.250%, 03/15/14 3,342,131
2,971,000 Herbalife International, Inc.
9.500%, 04/01/11 3,267,861
424,000 Hines Nurseries, Inc.
10.250%, 10/01/11 456,227
11,459,000 Jean Coutu Group, Inc.(a)(c)
8.500%, 08/01/14 11,745,203
3,395,000 Pinnacle Foods Holding(a)
8.250%, 12/01/13 3,225,422
5,432,000 Playtex Products, Inc.(c)
8.000%, 03/01/11 5,961,937
9,337,000 Rayovac Corp.(c)
8.500%, 10/01/13 10,293,763
2,546,000 Semins Vegetable Seeds
10.250%, 10/01/13 2,864,684
1,698,000 Smithfield Foods, Inc.
7.750%, 05/15/13 1,884,325
1,698,000 Standard Commercial Corp.(c)
8.000%, 04/15/12 1,757,006
--------------
83,028,110
--------------
4 See accompanying Notes to Schedule of Investments.
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
(@hx ENERGY (9.8%)
Chesapeake Energy Corp.(c)
$ 3,395,000 6.875%, 01/15/16 $ 3,649,819
1,698,000 7.750%, 01/15/15 1,892,813
4,244,000 Forest Oil Corp.(c)
8.000%, 12/15/11 4,859,352
9,252,000 General Maritime Corp.(c)
10.000%, 03/15/13 10,697,471
Giant Industries, Inc.(c)
5,093,000 8.000%, 05/15/14 5,334,677
1,899,000 11.000%, 05/15/12 2,245,278
9,634,000 Houston Exploration Company
7.000%, 06/15/13 10,284,108
3,904,000 KCS Energy, Inc.
7.125%, 04/01/12 4,099,681
2,321,000 Lone Star Technologies, Inc.
9.000%, 06/01/11 2,495,564
Overseas Shipholding Group,
Inc.
2,546,000 7.500%, 02/15/24 2,597,313
857,000 8.750%, 12/01/13 991,234
5,220,000 Paramount Resources, Ltd.
7.875%, 11/01/10 5,768,200
Petrobras International
Finance Company(c)
6,366,000 8.375%, 12/10/18 6,429,623
4,244,000 9.125%, 07/02/13 4,647,153
16,552,000 Premcor Refining Group, Inc.
7.500%, 06/15/15 18,206,656
2,546,000 Swift Energy Company
7.625%, 07/15/11 2,775,560
5,517,000 Whiting Petroleum Corp.
7.250%, 05/01/12 5,820,613
--------------
92,795,115
--------------
FINANCIALS (5.3%)
4,074,000 Fairfax Financial Holdings,
Ltd.(c)
7.750%, 04/26/12 3,972,361
1,273,000 GATX Corp.
8.875%, 06/01/09 1,480,022
Host Marriott Corp.(c)
9,337,000 7.125%, 11/01/13 10,130,370
1,782,000 9.250%, 10/01/07 2,014,191
10,186,000 Leucadia National Corp.(c)
7.000%, 08/15/13 10,440,180
11,034,000 LNR Property Corp.
7.625%, 07/15/13 12,358,457
Senior Housing Properties
Trust
4,541,000 7.875%, 04/15/15 5,017,865
4,244,000 8.625%, 01/15/12 4,806,302
--------------
50,219,748
--------------
HEALTH CARE (7.1%)
9,209,000 Alpharma, Inc.(a)
8.625%, 05/01/11 9,623,851
13,814,000 Ameripath, Inc.(c)
10.500%, 04/01/13 13,606,929
11,034,000 Ardent Health Services, Inc.
10.000%, 08/15/13 11,337,781
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 12,392,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 $ 13,312,780
2,546,000 Beverly Enterprises, Inc.(a)
7.875%, 06/15/14 2,740,547
3,607,000 Psychiatric Solutions, Inc.
10.625%, 06/15/13 4,157,505
5,517,000 Quintiles Transnational Corp.
10.000%, 10/01/13 6,041,299
5,942,000 Vanguard Health Systems,
Inc.(a)(c)
9.000%, 10/01/14 6,238,644
--------------
67,059,336
--------------
INDUSTRIALS (16.4%)
5,093,000 American Airlines, Inc.(a)
7.250%, 02/05/09 4,710,813
2,122,000 Armor Holdings, Inc.
8.250%, 08/15/13 2,344,797
891,000 EUR Aspropulsion Capital BV(a)
9.625%, 10/01/13 1,235,728
1,698,000 BE Aerospace, Inc.
8.500%, 10/01/10 1,867,349
2,546,000 Casella Waste Systems, Inc.
9.750%, 02/01/13 2,813,756
CNH Global, NV
12,308,000 9.250%, 08/01/11(a) 14,092,121
2,122,000 9.250%, 08/01/11 2,429,676
14,005,000 Esterline Technologies
Corp.(c)
7.750%, 06/15/13 15,160,542
FIMEP, SA
6,790,000 8.500%, 02/15/25 7,825,891
849,000 EUR 11.000%, 02/15/13 1,303,749
3,370,000 General Cable Corp.(c)
9.500%, 11/15/10 3,824,628
5,517,000 Hutchison Whampoa
International, Ltd.(a)
6.250%, 01/24/14 5,740,377
7,215,000 Jacuzzi Brands, Inc.
9.625%, 07/01/10 8,152,677
JLG Industries, Inc.
6,451,000 8.250%, 05/01/08 6,934,656
2,971,000 8.375%, 06/15/12(c) 3,134,176
6,408,000 Laidlaw Global Securities,
Inc.
10.750%, 06/15/11 7,401,706
4,244,000 Manitowoc Company, Inc.(c)
10.500%, 08/01/12 4,928,317
11,034,000 Mobile Mini, Inc.
9.500%, 07/01/13 12,634,316
4,244,000 Monitronics International,
Inc.(a)
11.750%, 09/01/10 4,652,458
2,037,000 Orbital Sciences Corp.
9.000%, 07/15/11 2,301,932
Sequa Corp.
5,942,000 8.875%, 04/01/08 6,520,869
1,698,000 9.000%, 08/01/09(c) 1,905,545
1,990,000 Shaw Group, Inc.(c)
10.750%, 03/15/10 2,134,731
See accompanying Notes to Schedule of Investments. 5
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 7,215,000 SPX Corp.(c)
6.250%, 06/15/11 $ 7,395,128
Terex Corp.
5,942,000 9.250%, 07/15/11 6,684,262
5,199,000 7.375%, 01/15/14 5,588,785
11,883,000 United Rentals, Inc.(c)
7.000%, 02/15/14 11,021,605
--------------
154,740,590
--------------
INFORMATION TECHNOLOGY (6.8%)
5,517,000 Advanced Micro Devices,
Inc.(a)
7.750%, 11/01/12 5,558,547
2,326,000 Arrow Electronics, Inc.(c)
6.875%, 06/01/18 2,516,099
3,395,000 Celestica, Inc.
7.875%, 07/01/11 3,649,819
1,698,000 Flextronics International,
Ltd.
6.500%, 05/15/13 1,790,958
4,244,000 Freescale Semiconductor,
Inc.(a)
7.125%, 07/15/14 4,519,834
Iron Mountain, Inc.
1,698,000 GBP 7.250%, 04/15/14(a) 2,993,852
1,698,000 6.625%, 01/01/16 1,697,590
6,833,000 Lucent Technologies, Inc.(c)
7.250%, 07/15/06 7,276,933
6,154,000 Motorola, Inc.(c)
7.500%, 05/15/25 7,178,619
4,244,000 Sanmina-Sci Corp.
10.375%, 01/15/10 4,997,281
3,395,000 Stratus Technologies, Inc.(c)
10.375%, 12/01/08 2,902,879
17,400,000 Xerox Corp.(c)
7.625%, 06/15/13 19,227,332
--------------
64,309,743
--------------
MATERIALS (19.0%)
7,639,000 Arch Western Finance, LLC(c)
6.750%, 07/01/13 8,154,799
4,244,000 Ball Corp.
6.875%, 12/15/12 4,647,153
5,093,000 Bowater, Inc.(c)
6.500%, 06/15/13 5,131,399
7,639,000 Buckeye Technologies, Inc.
8.500%, 10/01/13 8,479,463
16,144,000 Equistar Chemicals, LP(c)
10.625%, 05/01/11 18,727,137
10,907,000 Freeport-McMoRan Copper &
Gold, Inc.(c)
10.125%, 02/01/10 12,297,662
12,732,000 Georgia-Pacific Corp.(c)
8.000%, 01/15/14 14,705,376
2,546,000 Graham Packaging Holdings
Company(a)(c)
9.875%, 10/15/14 2,711,900
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 11,196,000 EUR HeidelbergCement Finance(a)
7.375%, 07/15/10 $ 15,970,012
IMC Global, Inc.
2,546,000 10.875%, 08/01/13 3,227,543
1,698,000 10.875%, 06/01/08(c) 2,071,060
2,716,000 IMCO Recycling, Inc.
10.375%, 10/15/10 3,042,082
5,093,000 IPSCO, Inc.
8.750%, 06/01/13 5,907,614
5,305,000 Ispat Inland ULC(c)
9.750%, 04/01/14 6,472,063
2,546,000 Massey Energy Company(c)
6.950%, 03/01/07 2,667,339
2,546,000 Phelps Dodge Corp.
9.500%, 06/01/31 3,794,086
11,034,000 Polyone Corp.(c)
10.625%, 05/15/10 12,303,285
Pope & Talbot, Inc.
5,093,000 8.375%, 06/01/13 5,372,873
2,037,000 8.375%, 06/01/13 2,149,149
4,244,000 Sealed Air Corp.(a)
6.875%, 07/15/33 4,556,587
1,698,000 Stone Container Corp.
8.375%, 07/01/12 1,884,325
Steel Dynamics, Inc.
3,973,000 9.500%, 03/15/09(c) 4,415,229
1,698,000 9.500%, 03/15/09 1,886,447
19,819,000 Texas Industries, Inc.
10.250%, 06/15/11 22,891,368
Union Carbide Corp.(c)
2,971,000 7.875%, 04/01/23 3,045,053
2,122,000 6.700%, 04/01/09 2,217,477
1,061,000 7.500%, 06/01/25 1,066,299
--------------
179,794,780
--------------
TELECOMMUNICATION SERVICES (1.3%)
5,093,000 AT&T Corp.(c)
8.750%, 11/15/31 5,920,346
5,942,000 Nextel Communications, Inc.
7.375%, 08/01/15 6,624,846
--------------
12,545,192
--------------
UTILITIES (5.6%)
7,639,000 AES Corp.(c)
8.500%, 11/01/07 7,887,429
23,766,000 Calpine Corp.(c)
8.500%, 02/15/11 13,725,017
4,244,000 Centerpoint Energy, Inc.(c)
6.850%, 06/01/15 4,697,177
Edison Mission Energy(c)
5,093,000 9.875%, 04/15/11 6,047,665
3,395,000 10.000%, 08/15/08 3,980,849
6 See accompanying Notes to Schedule of Investments.
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 4,244,000 Public Service Enterprise
Group, Inc.(c)
8.625%, 02/15/08 $ 4,710,813
10,695,000 Teco Energy, Inc.(c)
7.500%, 06/15/10 11,817,775
--------------
52,866,725
--------------
TOTAL CORPORATE BONDS
(Cost $902,117,016) 962,159,523
==============
CONVERTIBLE BONDS (0.5%)
TELECOMMUNICATION SERVICES (0.5%)
Liberty Media Corp. (Sprint
PCS Group)
4,142,000 3.750%, 02/15/30 2,832,093
1,974,000 4.000%, 11/15/29(c) 1,470,630
--------------
4,302,723
--------------
TOTAL CONVERTIBLE BONDS
(Cost $3,373,839) 4,302,723
==============
SYNTHETIC CONVERTIBLE SECURITIES (21.3%)
CORPORATE BONDS (18.1%)
CONSUMER DISCRETIONARY (3.9%)
454,000 Asbury Automotive Group,
Inc.(c)
9.000%, 06/15/12 480,831
1,512,000 Beazer Homes USA, Inc.(c)
8.375%, 04/15/12 1,674,594
937,000 Blockbuster, Inc.(a)(c)
9.000%, 09/01/12 965,594
756,000 Broder Bros. Co.(c)
11.250%, 10/15/10 767,365
983,000 CBD Media, LLC
8.625%, 06/01/11 1,034,430
Charter Communications, Inc.
1,058,000 10.000%, 04/01/09 889,085
756,000 9.625%, 11/15/09(c) 616,160
302,000 11.125%, 01/15/11(c) 254,024
756,000 DEX Media, Inc.(c)
8.000%, 11/15/13 812,726
1,982,000 GBP EMI Group, PLC
9.750%, 05/20/08 3,927,128
General Motors Corp.
1,195,000 8.250%, 07/15/23 1,247,331
121,000 7.125%, 07/15/13(c) 125,708
1,406,000 Hasbro, Inc.(c)
6.600%, 07/15/28 1,392,143
953,000 Houghton Mifflin Company(c)
9.875%, 02/01/13 1,038,324
605,000 Inn of the Mountain Gods
12.000%, 11/15/10 704,615
756,000 Interpublic Group of
Companies, Inc.(c)
7.250%, 08/15/11 833,425
454,000 Intrawest Corp.(a)
7.500%, 10/15/13 487,636
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 454,000 Jarden Corp.
9.750%, 05/01/12 $ 494,440
J.C. Penney Company, Inc.
302,000 9.000%, 08/01/12 371,964
227,000 7.650%, 08/15/16 258,560
748,000 Kellwood Company
7.625%, 10/15/17 829,629
567,000 La Quinta Corp.(c)
8.875%, 03/15/11 643,566
454,000 Mandalay Resort Group(c)
7.625%, 07/15/13 491,038
2,041,000 Mediacom Communications
Corp.(c)
9.500%, 01/15/13 2,010,647
1,788,000 Oxford Industries, Inc.
8.875%, 06/01/11 1,940,469
756,000 Perry Ellis International,
Inc.
8.875%, 09/15/13 812,726
151,000 Pinnacle Entertainment,
Inc.(c)
8.250%, 03/15/12 156,875
1,210,000 Rent-A-Center, Inc.
7.500%, 05/01/10 1,259,537
1,799,000 Royal Caribbean Cruises,
Ltd.(c)
7.500%, 10/15/27 1,938,787
756,000 Russell Corp.
9.250%, 05/01/10 816,506
1,436,000 Spanish Broadcasting System,
Inc.
9.625%, 11/01/09 1,513,655
1,300,000 Vail Resorts, Inc.
6.750%, 02/15/14 1,342,624
1,058,000 Warnaco Group, Inc.
8.875%, 06/15/13 1,188,092
Warner Music Group(a)
302,000 GBP 8.125%, 04/15/14 567,958
302,000 7.375%, 04/15/14(c) 312,238
1,119,000 EUR Waterford Wedgewood, PLC(a)
9.875%, 12/01/10 1,231,169
983,000 WCI Communities, Inc.(c)
7.875%, 10/01/13 1,051,630
--------------
36,483,229
--------------
CONSUMER STAPLES (1.6%)
302,000 Central Garden & Pet Company
9.125%, 02/01/13 337,187
832,000 Chattem, Inc.
7.000%, 03/01/14 858,655
680,000 Chiquita Brands International,
Inc.(a)
7.500%, 11/01/14 700,835
855,000 Del Monte Foods Company(c)
8.625%, 12/15/12 968,360
907,000 DIMON, Inc.(c)
7.750%, 06/01/13 907,229
Dole Food Company, Inc.
2,056,000 8.875%, 03/15/11(c) 2,287,730
674,000 8.625%, 05/01/09 750,241
See accompanying Notes to Schedule of Investments. 7
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 529,000 Gold Kist, Inc.
10.250%, 03/15/14 $ 595,369
529,000 Herbalife International, Inc.
9.500%, 04/01/11 582,139
76,000 Hines Nurseries, Inc.
10.250%, 10/01/11 81,273
2,041,000 Jean Coutu Group, Inc.(a)(c)
8.500%, 08/01/14 2,092,297
605,000 Pinnacle Foods Holding(a)
8.250%, 12/01/13 574,578
968,000 Playtex Products, Inc.(c)
8.000%, 03/01/11 1,062,063
1,663,000 Rayovac Corp.(c)
8.500%, 10/01/13 1,833,737
454,000 Semins Vegetable Seeds
10.250%, 10/01/13 510,316
302,000 Smithfield Foods, Inc.
7.750%, 05/15/13 335,675
302,000 Standard Commercial Corp.(c)
8.000%, 04/15/12 312,994
--------------
14,790,678
--------------
ENERGY (1.7%)
Chesapeake Energy Corp.(c)
605,000 6.875%, 01/15/16 650,181
302,000 7.750%, 01/15/15 337,187
756,000 Forest Oil Corp.(c)
8.000%, 12/15/11 865,648
1,648,000 General Maritime Corp.(c)
10.000%, 03/15/13 1,905,654
Giant Industries, Inc.(c)
907,000 8.000%, 05/15/14 950,323
338,000 11.000%, 05/15/12 399,975
1,716,000 Houston Exploration Company
7.000%, 06/15/13 1,832,017
696,000 KCS Energy, Inc.
7.125%, 04/01/12 730,319
414,000 Lone Star Technologies, Inc.
9.000%, 06/01/11 444,561
Overseas Shipholding Group,
Inc.
454,000 7.500%, 02/15/24 462,687
153,000 8.750%, 12/01/13 176,579
930,000 Paramount Resources, Ltd.
7.875%, 11/01/10 1,027,550
Petrobras International
Finance Company(c)
1,134,000 8.375%, 12/10/18 1,145,377
756,000 9.125%, 07/02/13 827,847
2,948,000 Premcor Refining Group, Inc.
7.500%, 06/15/15 3,243,344
454,000 Swift Energy Company
7.625%, 07/15/11 494,440
983,000 Whiting Petroleum Corp.
7.250%, 05/01/12 1,036,887
--------------
16,530,576
--------------
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
FINANCIALS (0.9%)
$ 726,000 Fairfax Financial Holdings,
Ltd.(c)
7.750%, 04/26/12 $ 707,639
227,000 GATX Corp.
8.875%, 06/01/09 263,652
Host Marriott Corp.(c)
1,663,000 7.125%, 11/01/13 1,804,630
318,000 9.250%, 10/01/07 358,809
1,814,000 Leucadia National Corp.(c)
7.000%, 08/15/13 1,859,820
1,966,000 LNR Property Corp.
7.625%, 07/15/13 2,201,543
Senior Housing Properties
Trust
809,000 7.875%, 04/15/15 893,885
756,000 8.625%, 01/15/12 856,198
--------------
8,946,176
--------------
HEALTH CARE (1.3%)
1,641,000 Alpharma, Inc.(a)
8.625%, 05/01/11 1,714,399
2,461,000 Ameripath, Inc.(c)
10.500%, 04/01/13 2,423,946
1,966,000 Ardent Health Services, Inc.
10.000%, 08/15/13 2,019,719
2,208,000 Bausch & Lomb, Inc.
7.125%, 08/01/28 2,371,547
454,000 Beverly Enterprises, Inc.(a)
7.875%, 06/15/14 488,203
643,000 Psychiatric Solutions, Inc.
10.625%, 06/15/13 740,620
983,000 Quintiles Transnational Corp.
10.000%, 10/01/13 1,076,201
1,058,000 Vanguard Health Systems,
Inc.(a)(c)
9.000%, 10/01/14 1,111,356
--------------
11,945,991
--------------
INDUSTRIALS (2.9%)
907,000 American Airlines, Inc.(a)
7.250%, 02/05/09 839,187
378,000 Armor Holdings, Inc.
8.250%, 08/15/13 417,703
159,000 EUR Aspropulsion Capital BV(a)
9.625%, 10/01/13 220,133
302,000 BE Aerospace, Inc.
8.500%, 10/01/10 332,651
454,000 Casella Waste Systems, Inc.
9.750%, 02/01/13 501,244
CNH Global, NV
2,192,000 9.250%, 08/01/11(a) 2,510,379
378,000 9.250%, 08/01/11 432,824
2,495,000 Esterline Technologies
Corp.(c)
7.750%, 06/15/13 2,700,708
FIMEP, SA
1,210,000 8.500%, 02/15/25 1,394,109
151,000 EUR 11.000%, 02/15/13 232,251
600,000 General Cable Corp.(c)
9.500%, 11/15/10 681,322
8 See accompanying Notes to Schedule of Investments.
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 983,000 Hutchison Whampoa
International, Ltd.(a)
6.250%, 01/24/14 $ 1,022,594
1,285,000 Jacuzzi Brands, Inc.
9.625%, 07/01/10 1,452,323
JLG Industries, Inc.
1,149,000 8.250%, 05/01/08 1,235,344
529,000 8.375%, 06/15/12(c) 558,324
1,142,000 Laidlaw Global Securities,
Inc.
10.750%, 06/15/11 1,318,544
756,000 Manitowoc Company, Inc.(c)
10.500%, 08/01/12 877,933
1,966,000 Mobile Mini, Inc.
9.500%, 07/01/13 2,250,684
756,000 Monitronics International,
Inc.(a)
11.750%, 09/01/10 828,792
363,000 Orbital Sciences Corp.
9.000%, 07/15/11 410,068
Sequa Corp.
1,058,000 8.875%, 04/01/08 1,161,631
302,000 9.000%, 08/01/09(c) 339,455
355,000 Shaw Group, Inc.(c)
10.750%, 03/15/10 380,282
1,285,000 SPX Corp.(c)
6.250%, 06/15/11 1,317,372
Terex Corp.
1,058,000 9.250%, 07/15/11 1,190,738
926,000 7.375%, 01/15/14 995,590
2,117,000 United Rentals, Inc.(c)
7.000%, 02/15/14 1,963,395
--------------
27,565,580
--------------
INFORMATION TECHNOLOGY (1.2%)
983,000 Advanced Micro Devices,
Inc.(a)
7.750%, 11/01/12 990,203
414,000 Arrow Electronics, Inc.(c)
6.875%, 06/01/18 448,219
605,000 Celestica, Inc.
7.875%, 07/01/11 650,181
302,000 Flextronics International,
Ltd.
6.500%, 05/15/13 319,042
756,000 Freescale Semiconductor,
Inc.(a)
7.125%, 07/15/14 805,166
Iron Mountain, Inc.
302,000 GBP 7.250%, 04/15/14(a) 533,327
302,000 6.625%, 01/01/16 302,410
1,217,000 Lucent Technologies, Inc.(c)
7.250%, 07/15/06 1,296,317
1,096,000 Motorola, Inc.(c)
7.500%, 05/15/25 1,278,803
756,000 Sanmina-Sci Corp.
10.375%, 01/15/10 890,219
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
$ 605,000 Stratus Technologies, Inc.(c)
10.375%, 12/01/08 $ 517,121
3,100,000 Xerox Corp.(c)
7.625%, 06/15/13 3,425,168
--------------
11,456,176
--------------
MATERIALS (3.4%)
1,361,000 Arch Western Finance, LLC(c)
6.750%, 07/01/13 1,452,701
756,000 Ball Corp.
6.875%, 12/15/12 827,847
907,000 Bowater, Inc.(c)
6.500%, 06/15/13 914,111
1,361,000 Buckeye Technologies, Inc.
8.500%, 10/01/13 1,510,537
2,876,000 Equistar Chemicals, LP(c)
10.625%, 05/01/11 3,336,063
1,943,000 Freeport-McMoRan Copper &
Gold, Inc.(c)
10.125%, 02/01/10 2,190,713
2,268,000 Georgia-Pacific Corp.(c)
8.000%, 01/15/14 2,619,624
454,000 Graham Packaging Holdings
Company(a)(c)
9.875%, 10/15/14 483,100
1,994,000 EUR HeidelbergCement Finance(a)
7.375%, 07/15/10 2,844,907
IMC Global, Inc.
454,000 10.875%, 08/01/13 574,957
302,000 10.875%, 06/01/08(c) 368,940
484,000 IMCO Recycling, Inc.
10.375%, 10/15/10 541,918
907,000 IPSCO, Inc.
8.750%, 06/01/13 1,052,386
945,000 Ispat Inland ULC(c)
9.750%, 04/01/14 1,152,937
454,000 Massey Energy Company(c)
6.950%, 03/01/07 475,161
454,000 Phelps Dodge Corp.
9.500%, 06/01/31 675,881
1,966,000 Polyone Corp.(c)
10.625%, 05/15/10 2,191,715
Pope & Talbot, Inc.
907,000 8.375%, 06/01/13 957,127
363,000 8.375%, 06/01/13 382,851
756,000 Sealed Air Corp.(a)
6.875%, 07/15/33 811,713
302,000 Stone Container Corp.
8.375%, 07/01/12 335,675
Steel Dynamics, Inc.
708,000 9.500%, 03/15/09(c) 786,532
302,000 9.500%, 03/15/09 336,053
3,531,000 Texas Industries, Inc.
10.250%, 06/15/11 4,077,882
See accompanying Notes to Schedule of Investments. 9
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
Union Carbide Corp.(c)
$ 529,000 7.875%, 04/01/23 $ 542,447
378,000 6.700%, 04/01/09 395,023
189,000 7.500%, 06/01/25 189,951
--------------
32,028,752
--------------
TELECOMMUNICATION SERVICES (0.2%)
907,000 AT&T Corp.(c)
8.750%, 11/15/31 1,054,654
1,058,000 Nextel Communications, Inc.
7.375%, 08/01/15 1,180,154
--------------
2,234,808
--------------
UTILITIES (1.0%)
1,361,000 AES Corp.(c)
8.500%, 11/01/07 1,405,071
4,234,000 Calpine Corp.(c)
8.500%, 02/15/11 2,444,983
756,000 Centerpoint Energy, Inc.(c)
6.850%, 06/01/15 836,758
Edison Mission Energy(c)
907,000 9.875%, 04/15/11 1,077,335
605,000 10.000%, 08/15/08 709,151
756,000 Public Service Enterprise
Group, Inc.(c)
8.625%, 02/15/08 839,187
1,905,000 Teco Energy, Inc.(c)
7.500%, 06/15/10 2,105,225
--------------
9,417,710
--------------
TOTAL CORPORATE BONDS 171,399,676
--------------
NUMBER OF
CONTRACTS VALUE
-----------------------------------------------------------------
OPTIONS (3.2%)
CONSUMER DISCRETIONARY (1.7%)
2,200 Carnival Corp.(b)
Call, 01/21/06, Strike $45.00 1,936,000
1,000 eBay, Inc.(b)
Call, 01/20/07, Strike $95.00 2,390,000
3,100 Home Depot, Inc.(b)
Call, 01/20/07, Strike $40.00 2,170,000
International Game
Technology(b)
2,700 Call, 01/20/07, Strike $35.00 1,552,500
825 Call, 01/21/06, Strike $45.00 115,500
1,500 J.C. Penney Company, Inc.(b)
Call, 01/21/06, Strike $40.00 375,000
Nike, Inc.(b)
1,500 Call, 01/21/06, Strike $80.00 1,365,000
500 Call, 01/20/07, Strike $80.00 655,000
3,000 Starbucks Corp.(b)
Call, 01/21/06, Strike $45.00 3,540,000
2,600 YUM! Brands, Inc.(b)
Call, 01/20/07, Strike $40.00 2,288,000
--------------
16,387,000
--------------
NUMBER OF
CONTRACTS VALUE
-----------------------------------------------------------------
CONSUMER STAPLES (0.3%)
1,600 Avon Products, Inc. (b)
Call, 01/20/07, Strike $45.00 $ 608,000
1,400 Constellation Brands, Inc.(b)
Call, 01/20/07, Strike $35.00 1,379,000
2,000 Sara Lee Corp.(b)
Call, 01/20/07, Strike $22.50 540,000
4,000 Tyson Foods, Inc.(b)
Call, 01/21/06, Strike $17.50 310,000
--------------
2,837,000
--------------
ENERGY (0.3%)
2,700 Transocean, Inc.(b)
Call, 01/21/06, Strike $30.00 2,362,500
--------------
FINANCIALS (0.1%)
2,200 Allstate Corp.(b)
Call, 01/21/06, Strike $45.00 1,232,000
--------------
HEALTH CARE (0.3%)
900 Bausch & Lomb, Inc.(b)
Call, 01/21/06, Strike $65.00 535,500
1,200 Biogen Idec, Inc.(b)
Call, 01/21/06, Strike $70.00 546,000
1,250 UnitedHealth Group, Inc.(b)
Call, 01/21/06, Strike $65.00 1,675,000
--------------
2,756,500
--------------
INFORMATION TECHNOLOGY (0.5%)
5,000 Motorola, Inc.(b)
Call, 01/21/06, Strike $20.00 825,000
5,100 Nokia Corp.(b)
Call, 01/20/07, Strike $15.00 1,581,000
2,200 QUALCOMM, Inc.(b)
Call, 01/21/06, Strike $35.00 2,266,000
--------------
4,672,000
--------------
TOTAL OPTIONS 30,247,000
--------------
TOTAL SYNTHETIC CONVERTIBLE
SECURITIES
(Cost $188,203,232) 201,646,676
==============
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (18.5%)
CONSUMER DISCRETIONARY (4.9%)
810,000 Equity Securities Trust I
6.500% 16,637,400
590,000 Ford Motor Company Capital
Trust II
6.500% 29,494,100
--------------
46,131,500
--------------
CONSUMER STAPLES (2.3%)
890,000 Albertson's, Inc.
7.250% 21,840,600
--------------
10 See accompanying Notes to Schedule of Investments.
CONVERTIBLE AND HIGH INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2004
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------
FINANCIALS (2.6%)
130,000 Capital One Financial Corp.
6.250% $ 6,849,700
500,000 National Australia Bank, Ltd.
7.875% 17,900,000
--------------
24,749,700
--------------
INDUSTRIALS (1.8%)
225,000 Cummins, Inc.
7.000% 17,268,750
--------------
INFORMATION TECHNOLOGY (0.4%)
75,000 Pioneer-Standard Financial
Trust
6.750% 4,162,500
--------------
TELECOMMUNICATION SERVICES (2.9%)
532,000 ALLTEL Corp.
7.750% 26,972,400
--------------
UTILITIES (3.6%)
450,000 Ameren Corp.
9.750% 13,005,000
375,000 TXU Corp.
8.125% 20,722,500
--------------
33,727,500
--------------
TOTAL CONVERTIBLE PREFERRED
STOCKS
(Cost $165,090,009) 174,852,950
==============
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------
SHORT TERM INVESTMENTS (0.4%)
$ 3,413,000 Exxon Mobil Corporation
Commercial Paper
1.650%, 11/01/04 $ 3,413,000
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $3,413,000) 3,413,000
==============
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL FOR SECURITIES
ON LOAN (28.5%)
269,817,633 Bank of New York Institutional
Cash Reserve Fund(d)
current rate 1.865% 269,817,633
--------------
TOTAL INVESTMENT OF CASH
COLLATERAL FOR SECURITIES ON
LOAN
(Cost $269,817,633) 269,817,633
==============
TOTAL INVESTMENTS (171.0%)
(Cost $1,532,014,729) 1,616,192,505
==============
LIABILITIES, LESS OTHER ASSETS (-25.5%) (241,024,588)
PREFERRED SHARES AT REDEMPTION VALUE, INCLUDING
DIVIDENDS PAYABLE (-45.5%) (430,131,391)
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
(100.0%) $ 945,036,526
==============
NOTES TO SCHEDULE OF INVESTMENTS
Note: Market values for securities denominated in foreign currencies are shown
in U.S. dollars.
(a) 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, 2004, the market value of 144A
securities that cannot currently be exchanged to the registered form is
$149,258,334 or 15.8% of net assets applicable to common shareholders of the
Fund.
(b) Non-income producing security.
(c) Security, or portion of security, is on loan.
(d) Security is purchased with the cash collateral from securities loaned.
FOREIGN CURRENCY ABBREVIATIONS
EUR: European Monetary Unit
GBP: Great Britain Pound
See accompanying Notes to Financial Statements. 11
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
------------------------------------------------------------------------------
ASSETS
Investments, at value* (cost $1,532,014,729) $1,616,192,505
Cash with custodian (interest bearing) 1,537,344
Restricted cash for open options (interest bearing) 150,000
Receivable for investments sold 1,397,436
Accrued interest and dividends receivable 28,116,652
Prepaid expenses 63,375
Other assets 7,134
--------------
Total assets 1,647,464,446
--------------
LIABILITIES
Unrealized depreciation on interest rate swaps 1,479,534
Payable upon return of securities loaned 269,817,633
Payable to investment advisor 809,614
Payable to financial accountant 11,660
Payable for deferred compensation to Trustees 7,134
Other accounts payable and accrued liabilities 170,954
--------------
Total liabilities 272,296,529
--------------
PREFERRED SHARES
$25,000 liquidation value per share applicable to 17,200
shares, including dividends payable 430,131,391
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 945,036,526
==============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, no par value, unlimited shares authorized,
61,091,942 shares issued and outstanding $ 869,767,425
Undistributed net investment income (loss) 129,801
Accumulated net realized gain (loss) on investments and
foreign currency transactions and interest rate swaps (7,608,934)
Net unrealized appreciation (depreciation) on investments
and foreign currency translations and interest rate swaps 82,748,234
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 945,036,526
==============
Net asset value per common share based on 61,091,942 shares
issued and outstanding $ 15.47
==============
* Includes $266,168,171 of securities loaned.
12 See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
----------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 92,780,260
Dividends 13,758,948
Securities lending income 1,023,586
------------
Total investment income 107,562,794
------------
EXPENSES
Investment advisory fees 10,753,791
Financial accounting fees 88,675
Auction agent and rating agencies fees 1,117,238
Accounting fees 238,992
Printing and mailing fees 211,527
Custodian fees 95,156
Audit and legal fees 89,071
Registration fees 78,711
Transfer agent fees 27,212
Trustees' fees 14,207
Other 30,408
------------
Total expenses 12,744,988
------------
Less expenses waived (1,344,224)
------------
Net expenses 11,400,764
------------
NET INVESTMENT INCOME (LOSS) 96,162,030
------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS,
FOREIGN CURRENCY AND INTEREST RATE SWAPS
Net realized gain (loss) from:
Investments (587,135)
Foreign currency transactions 74,412
Interest rate swaps (8,021,388)
Change in net unrealized appreciation/depreciation on:
Investments 48,270,710
Foreign currency translations (417)
Interest rate swaps (917,010)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS,
FOREIGN CURRENCY AND INTEREST RATE SWAPS 38,819,172
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 134,981,202
------------
DIVIDENDS TO PREFERRED SHAREHOLDERS FROM
Net investment income (6,021,235)
------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS $128,959,967
============
See accompanying Notes to Financial Statements. 13
STATEMENT OF CHANGES
IN NET ASSETS
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
----------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income (loss) $ 96,162,030 $ 27,980,023
Net realized gain (loss) from investments, foreign currency
transactions and interest rate swaps (8,534,111) (5,406,515)
Change in net unrealized appreciation/depreciation on
investments, options, foreign currency translations and
interest rate swaps 47,353,283 35,394,951
Dividends to preferred shareholders from
Net investment income (6,021,235) (1,213,810)
------------ ------------
Net increase (decrease) in net assets applicable to common
shareholders resulting from operations 128,959,967 56,754,649
------------ ------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM
Net investment income (88,670,835) (21,968,817)
------------ ------------
CAPITAL STOCK TRANSACTIONS
Proceeds from initial offering -- 859,692,275
Offering costs on common shares -- (1,481,905)
Offering costs on preferred shares -- (4,704,000)
Reinvestment of dividends resulting in the issuance of
common stock 13,595,460 2,859,732
------------ ------------
Net increase (decrease) in net assets from capital stock
transactions 13,595,460 856,366,102
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS 53,884,592 891,151,934
------------ ------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Beginning of period* 891,151,934 --
End of period $945,036,526 $891,151,934
============ ============
Undistributed net investment income (loss) $ 129,801 $ 4,998,185
* The Fund commenced operations on May 30, 2003.
14 See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. CALAMOS Convertible and High Income Fund (the "Fund") was
organized as a Delaware statutory trust on March 12, 2003 and is registered
under the Investment Company Act of 1940 as a diversified, closed-end management
investment company. The Fund commenced operations on May 30, 2003.
The Fund's investment objective is to provide total return, through a
combination of capital appreciation and current income. The Fund currently seeks
to achieve its investment objective by investing in a diversified portfolio of
convertible securities and high yield bonds.
PORTFOLIO VALUATION. In computing the net asset value of the Fund, portfolio
securities, including options, that are traded on a national securities exchange
are valued at the last reported sales price. Securities quoted on the NASDAQ
National Market System are valued at the Nasdaq Official Closing Price ("NOCP"),
as determined by Nasdaq, or lacking an NOCP, the last current reported sale
price as of the time of valuation. Securities traded in the over-the counter
market and listed securities for which no sales were reported are valued at the
mean of the most recently quoted bid and asked prices. Short-term securities
with maturities of 60 days or less are valued at amortized cost, which
approximates market value.
When market quotations are not readily available or when the valuation methods
mentioned above are not reflective of the fair value of the security, the
security is valued at a fair value following procedures or guidelines approved
by the Board of Trustees or a committee approved by the Board of Trustees. The
Fund may also use fair value pricing, if the value of a security it holds is, in
the opinion of the valuation committee or pursuant to Board of Trustees'
guidelines, may be significantly affected by events occurring after the close of
the primary market or exchange on which the security is traded. These procedures
may utilize valuations furnished by pricing services approved by the Board of
Trustees or a committee thereof, which may be based on market transactions for
comparable securities and various relationships between securities that are
generally recognized by institutional traders, a computerized matrix system, or
appraisals derived from information concerning the securities or similar
securities received from recognized dealers in those securities. When fair value
pricing is employed, the value of the portfolio security used to calculate the
Fund's net asset value may differ from quoted or published prices.
Securities that are principally traded in a foreign market are valued as of the
close of the appropriate exchange or other designated time. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed at various times before the close of business on
each day on which the New York Stock Exchange ("NYSE") is open. Trading of these
securities may not take place on every NYSE business day. In addition, trading
may take place in various foreign markets on Saturdays or on other days when the
NYSE is not open and on which the Fund's net asset value is not calculated. As
stated above, if the market prices are not readily available or are not
reflective of the fair value of the security, the security will be valued at a
fair value following procedures approved by the Board of Trustees or a committee
approved by the Board of Trustees.
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 the spot market rate of exchange at the date of valuation. Purchases and
sales of investments and dividend and interest income are translated into U.S.
dollars using the spot market rate of exchange prevailing on the respective
dates of such transaction.
15
NOTES TO FINANCIAL STATEMENTS
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, currency gains or losses realized 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
Fund's books on the transaction 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 among others, 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
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 investments. 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 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 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. During the year ended October 31, 2004, the Fund did not write
any options.
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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.
NOTE 2 - INVESTMENT ADVISER AND TRANSACTIONS WITH AFFILIATES OR CERTAIN OTHER
PARTIES
Pursuant to an investment advisory agreement with Calamos Advisors LLC ("Calamos
Advisors"), the Fund pays an annual fee, payable monthly, equal to 0.80% based
on the average weekly managed assets. "Managed Assets" means the total assets of
the Fund (including any assets attributable to any leverage that may be
outstanding) minus the sum of total liabilities (other than debt representing
financial leverage). Calamos Advisors has contractually agreed to waive a
portion of its management fee at the annual rate of 0.10% of the average weekly
managed assets of the Fund for the first five full years of the Fund's operation
(through May 31, 2008) and to waive a declining amount for an additional three
years (0.07% of the average weekly managed assets in 2009, 0.05% in 2010, and
0.03% in 2011).
Calamos Advisors receives a fee payable monthly at the annual rate of 0.0175% on
the first $1 billion of combined assets; 0.0150% on the next $1 billion of
combined assets; and 0.0110% on combined assets above $2 billion for financial
accounting services (for purposes of this calculation combined assets means the
managed assets of Calamos Investment Trust, Calamos Advisors Trust, Calamos
Convertible and High Income Fund and Calamos Strategic Total Return Fund).
Effective November 1, 2004 the managed assets of Calamos Convertible
Opportunities and Income Fund will be included in combined assets. 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
16
NOTES TO FINANCIAL STATEMENTS
assets and monitoring trustee deferred compensation plan accruals and
valuations. The Funds will pay their pro rata share of the financial accounting
service fee payable to CALAMOS Advisors based on relative assets of each Fund.
As of November 1, 2004, State Street Bank & Trust Company ("SSB&T") will act as
the Fund Accounting Agent/Administrator for the Fund. The Fund will pay SSB&T a
fee payable monthly at the annual rate of 0.0175% on the first $1.5 billion of
the combined assets of the Calamos Convertible Opportunities and Income Fund,
Calamos Convertible and High Income Fund and Calamos Strategic Total Return
Fund; 0.0150% of the next $1.5 billion of combined assets (combined assets in
excess of $1.5 billion to $3 billion), 0.0125% of the next $1.5 billion of
combined assets (combined assets in excess of $3 billion to $4.5 billion),
0.0100% of the next $1.5 billion of combined assets (combined assets in excess
of $4.5 billion to $6 billion), 0.0075% of the next $1.5 billion of combined
assets (combined assets in excess of $6 billion to $7.5 billion) and 0.00375% of
combined assets in excess of $7.5 billion.
Certain officers and trustees of the Fund are also officers and directors of CFS
and Calamos Advisors. All officers and affiliated trustees serve without direct
compensation from the Fund. The Fund has adopted a deferred compensation plan
(the "Plan"). Under the Plan, a Trustee who is not an "interested person" of
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 trustee. The value of a trustee's deferred compensation
account at any time is equal to what would be the value if the amounts credited
to the account had instead been invested in shares of one or more of the funds
of the Calamos Investment Trust as designated by the trustee. Thus, the value of
the account increases with contributions to the account or with increases in the
value of the measuring shares, and the value of the account decreases with
withdrawals from the account or with declines in the value of the measuring
shares. If a participating trustee retires, the trustee may elect to receive
payments under the plan in a lump sum or in equal installments over a period of
five years. If a participating trustee dies, any amount payable under the Plan
will be paid to the trustee's beneficiaries. Deferred compensation investments
of $7,134 are included in "Other Assets" on the Statement of Assets and
Liabilities at October 31, 2004. The Fund's obligation to make payments under
the Plan is a general obligation of the Fund.
NOTE 3 - INVESTMENTS
Purchases and sales of investments other than short-term obligations for the
year ended October 31, 2004 were as follows:
Purchases $397,831,361
Proceeds from sales 353,798,295
The following information is presented on an income tax basis as of October 31,
2004. 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,
2004 was as follows:
Cost basis of investments $1,534,215,473
--------------
Gross unrealized appreciation 114,040,611
Gross unrealized depreciation (32,063,579)
--------------
Net unrealized appreciation (depreciation) $ 81,977,032
==============
NOTE 4 - INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and distribute to shareholders substantially all of its taxable
income and 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 accounting principles generally accepted in
the United States of America. To the extent
17
NOTES TO FINANCIAL STATEMENTS
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 on fixed income securities. Financial records are
not adjusted for temporary differences.
For the year ended October 31, 2004, 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 $ (74,680)
Undistributed net investment income (loss) (6,338,344)
Accumulated net realized gain (loss) on investments and
foreign currency transactions and interest rate swaps 6,413,024
As of October 31, 2004, the components of net assets on a tax basis were as
follows:
Undistributed ordinary income $ --
Undistributed capital gains --
------------
Total undistributed earnings --
Accumulated capital and other losses (5,148,747)
Unrealized gains/(losses) 80,625,688
------------
Total accumulated earnings/(losses) 75,476,941
Other (207,840)
Paid-in capital 869,767,425
============
$945,036,526
============
Distributions during the fiscal years ended October 31, 2004 and October 31,
2003 were characterized for income tax purposes as follows:
2004 2003*
------------------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM:
Ordinary Income $94,560,679 $23,182,627
Long-Term Capital Gain -- --
For the tax year ended October 31, 2004, the Fund utilized capital losses of
$339,098. As of October 31, 2004, the Fund had capital loss carryforwards of
$5,148,747 which, if not used, will expire in 2011.
NOTE 5 - COMMON STOCK
There are unlimited common shares of beneficial interest authorized and
61,091,942 shares outstanding at October 31, 2004. Calamos Advisors LLC owned
15,039 of the outstanding shares. Transactions in common shares were as follows:
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003*
-----------------------------------------------------------------------------------------------------
Beginning Shares 60,208,549 --
Shares Sold -- 60,013,451
Shares Issued Through Reinvestment of Distributions 883,393 195,098
---------- ----------
Ending Shares 61,091,942 60,208,549
---------- ----------
* The Fund commenced operations on May 30, 2003.
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 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
18
NOTES TO FINANCIAL STATEMENTS
forward exchange rates, and an unrealized gain or loss is recorded. The Fund
realizes a gain or loss upon settlement of the contracts. There were no open
forward foreign currency contracts at October 31, 2004.
NOTE 7 - SYNTHETIC CONVERTIBLE SECURITIES
The Fund may create a "synthetic" convertible security by combining separate
securities that possess the two principal characteristics of a true convertible
security, i.e., fixed-income securities ("fixed-income component") and the right
to acquire equity securities ("convertible component"). The fixed-income
component is achieved by investing in non-convertible, fixed-income securities
such as bonds, preferred stocks and money market instruments. The convertible
component is achieved by investing in warrants or options to buy common stock at
a certain exercise price, or options on a stock index. In creating a synthetic
security, the Fund may also 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 securities created by other parties, typically
investment banks, including convertible structured notes. Convertible structured
notes are fixed-income debentures linked to equity. Convertible structured notes
have the attributes of a convertible security; however, the investment bank that
issued the convertible note assumes the credit risk associated with the
investment, rather than the issuer of the underlying common stock into which the
note is convertible. Purchasing synthetic convertible securities may offer more
flexibility than purchasing a convertible security. Different companies may
issue the fixed-income and convertible components, which may be purchased
separately and at different times.
NOTE 8 - PREFERRED SHARES
There are unlimited shares of Auction Rate Cumulative Preferred Shares
("Preferred Shares") authorized. The Preferred Shares have rights as determined
by the Board of Trustees. The 17,200 shares of Preferred Shares outstanding
consist of six series, 3,000 shares of M, 3,000 shares of TU, 3,000 shares of W,
3,000 shares of TH, 3,000 shares of F and 2,200 shares of A. The Preferred
Shares have a liquidation value of $25,000 per share plus any accumulated but
unpaid dividends whether or not declared.
Dividends on the Preferred Shares are cumulative at a rate typically reset every
seven and twenty-eight days based on the results of an auction. Dividend rates
ranged from 1.25% to 2.34% for the year ended October 31, 2004. Under the
Investment Company Act of 1940, the Fund may not declare dividends or make other
distributions on shares of common stock or purchase any such shares if, at the
time of the declaration, distribution or purchase, asset coverage with respect
to the outstanding Preferred Shares would be less than 200%.
The Preferred Shares are redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $25,000 per share plus any accumulated but
unpaid dividends. The Preferred Shares are also subject to mandatory redemption
at $25,000 per share plus any accumulated but unpaid dividends, whether or not
declared, if certain requirements relating to the composition of the assets and
liabilities of the Fund as set forth in the Statement of Preferences are not
satisfied.
The holders of Preferred Shares have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class except on matters affecting only the holders
of Preferred Shares or the holders of common shares.
NOTE 9 - INTEREST RATE TRANSACTIONS
The Fund may enter into interest rate swap or cap transactions to attempt to
protect itself from increasing dividend or interest expense on its leverage
resulting from increasing short-term interest rates. A decline in interest rates
may result in a decline in the value of the swap or cap, which may result in a
decline in the net asset value of the Fund. In addition, if the counterparty to
an interest rate swap or cap defaults, the Fund would not be able to use the
anticipated receipts under the swap or cap to offset the dividend or interest
payments on the Fund's leverage. At the time an interest rate swap or cap
19
NOTES TO FINANCIAL STATEMENTS
reaches its scheduled termination, there is a risk that the Fund would not be
able to obtain a replacement transaction or that the terms of the replacement
would not be as favorable as on the expiring transaction. In addition, if the
Fund is required to terminate any swap or cap early due to the Fund failing to
maintain a required 200% asset coverage of the liquidation value of the
outstanding Preferred Shares or the Fund loses its credit rating on its
Preferred Shares, then the Fund could be required to make a termination payment,
in addition to redeeming all or some of the Preferred Shares. Details of the
swap agreements outstanding as of October 31, 2004 were as follows:
UNREALIZED
TERMINATION NOTIONAL FLOATING APPRECIATION
COUNTERPARTY DATE AMOUNT (000) FIXED RATE RATE (DEPRECIATION)
---------------------------------------------------------------------------------------------------------------------------------
Citibank NA October 27, 2006 $100,000 2.80% 1 month LIBOR $ 85,464
Citibank NA October 27, 2007 200,000 3.27% 1 month LIBOR (906,157)
Citibank NA October 27, 2008 100,000 3.65% 1 month LIBOR (658,841)
-----------
$(1,479,534)
===========
NOTE 10 - SECURITIES LENDING
During the year ended October 31, 2004, the Fund lent 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 would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned and would also receive 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 would have 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 would not have the right to vote the securities
during the existence of the loan but could call the loan in an attempt to permit
voting of the securities in certain circumstances. Upon return of the securities
loaned, the cash or cash equivalent collateral will be returned to the borrower.
In the event of bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or recovering the
loaned securities and losses, including (a) possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c) expenses of
enforcing its rights. In an effort to reduce these risks, the investment manager
and security lending agent will monitor the creditworthiness of the firms to
which the Fund lends securities. At October 31, 2004, the Fund had securities
valued at $266,168,171 that were on loan to broker-dealers and banks and
$271,744,233 in cash or cash equivalent collateral. The collateral represented
cash equivalents of $1,926,600, which may be sold or pledged only upon default
of the borrower.
20
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD WAS AS
FOLLOWS:
May 30, 2003*
For the Year Ended through
October 31, 2004 October 31, 2003
----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.80 $ 14.32(a)
-------- --------
Income from investment operations:
Net investment income (loss) 1.60 0.44
Net realized and unrealized gain (loss) from investments,
foreign currency and interest rate swaps 0.63 0.46
Dividends to preferred shareholders from:
Net investment income (common stock equivalent basis) (0.10) (0.02)
-------- --------
Total from investment operations 2.13 0.88
----------------------------------------------------------------------------------------------------------
Less dividends to common shareholders from:
Net investment income (1.46) (0.37)
Capital charge resulting from issuance of common and
preferred shares -- (0.03)
-------- --------
----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.47 $ 14.80
======== ========
Market value, end of period $ 16.74 $ 16.00
----------------------------------------------------------------------------------------------------------
Total investment return based on(b):
Net asset value 14.91% 5.92%
Market value 15.02% 9.36%
----------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data:
Net assets applicable common shareholders, end of period
(000's omitted) $945,037 $891,152
Preferred shares, at redemption value ($25,000 per share
liquidation preference) (000's omitted) $430,000 $430,000
Ratios to average net assets applicable to common
shareholders:
Net expenses(e) 1.25% 1.11%(c)
Gross expenses prior to waiver of expense by the advisor(e) 1.40% 1.24%(c)
Net investment income (loss)(e) 10.56% 7.85%(c)
Preferred share dividends 0.65% 0.34%(c)
Net investment income (loss), net of preferred share
dividends 9.91% 7.51%(c)
Portfolio turnover rate 27% 20%(c)
Asset coverage per preferred share, at end of period(d) $ 79,952 $ 76,811
----------------------------------------------------------------------------------------------------------
* Commencement of operations.
(a) Net of sales load of $0.675 on initial shares issued and beginning net asset
value of $14.325.
(b) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
the period reported. Dividends and distributions are assumed, for purposes
of this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Total return is not annualized for periods less
than one year. Brokerage commissions are not reflected.
(c) Annualized.
(d) 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.
(e) Does not reflect the effect of dividend payments to preferred shareholders.
21
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
CALAMOS Convertible and High Income Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of CALAMOS Convertible and High Income Fund (the
"Fund") as of October 31, 2004, and the related statement of operations for the
year then ended, and the statements of changes in net assets and the financial
highlights for the year then ended and for the period from May 30, 2003
(commencement of operations) through October 31, 2003. 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.
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 audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provides 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, 2004, and the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
year then ended and for the period from May 30, 2003 (commencement of
operations) through October 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Chicago, Illinois
December 21, 2004
22
TAX AND OTHER INFORMATION
(UNAUDITED)
TAX INFORMATION. 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 2005, shareholders will receive Form 1099-DIV which will include their
share of qualified dividends and capital gains distributed during the calendar
year 2004. 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 854(b)(2) of the Code, the Fund hereby designates $984,376, or the
maximum amount allowable under the Code, as qualified dividends for the fiscal
year ended October 31, 2004.
None of the ordinary income dividends paid during the fiscal year ended October
31, 2004 will qualify for the corporate dividend received deduction.
RESULTS OF SHAREHOLDER MEETING. The Annual Meeting of Shareholders of the Fund
was held on June 25, 2004 where shareholders voted on the election of trustees.
With regard to the election, each trustee standing for election was elected by
the shareholders as follows:
# OF COMMON
TRUSTEES AND PREFERRED SHARES
--------------------------------------------------------------------------------------
FOR
---------- WITHHELD
-------------------------------------------------------------------------- --------
Nick P. Calamos 58,152,790 354,556
# OF PREFERRED SHARES
----------------------
FOR WITHHELD
---------- --------
--------------------------------------------------------------------------
Stephen B. Timbers 16,059 36
The other trustees of the Fund whose terms did not expire in 2004 are John P.
Calamos, Sr., Joe F. Hanauer, John E. Neal, Weston W. Marsh, and William R.
Rybak.
23
TRUSTEES & OFFICERS
The management of the Fund, 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, 2004 each trustee's
position(s) with the Fund, 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 Fund.
POSITION(S) HELD WITH FUND NUMBER OF PORTFOLIOS IN
NAME AND AGE AT AND DATE FIRST ELECTED OR FUND COMPLEX(+)
OCTOBER 31, 2004 APPOINTED TO OFFICE OVERSEEN BY TRUSTEE
---------------------------------------------------------------------------------------
TRUSTEES WHO ARE INTERESTED PERSONS OF FUND:
John P. Calamos, Sr., 64* Trustee and President 12
(since 2003)
Nick P. Calamos, 42* Trustee and Vice President 12
(since 2003)
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF FUND:
Joe F. Hanauer, 67 Trustee (since 2003) 12
Weston W. Marsh, 54 Trustee (since 2003) 12
John E. Neal, 54 Trustee (since 2003) 12
William R. Rybak, 53 Trustee (since 2003) 12
Stephen B. Timbers, 60 Trustee (since 2004) 12
NAME AND AGE AT PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
OCTOBER 31, 2004 AND OTHER DIRECTORSHIPS HELD
------------------------------- ----------------------------------------------
TRUSTEES WHO ARE INTERESTED PERSONS OF FUND:
John P. Calamos, Sr., 64* President and CEO, Calamos Asset Management,
Inc. ("CAM"), Calamos Holdings LLC ("CHLLC"),
Calamos Advisors LLC and its predecessor
("Calamos Advisors"), and Calamos Financial
Services LLC and its predecessor ("CFS");
Director, CAM
Nick P. Calamos, 42* Senior Executive Vice President, CAM, CHLLC,
Calamos Advisors, and CFS; Director, CAM
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF FUND:
Joe F. Hanauer, 67 Private Investor; Director, MAF Bancorp
(banking), Chairman and Director,
Homestore.com, Inc., (Internet provider of
real estate information and products);
Director, Combined Investments, L.P.
(investment management)
Weston W. Marsh, 54 Partner, Freeborn & Peters (law firm)
John E. Neal, 54 Private Investor; Managing Director, Bank One
Capital Markets, Inc. (investment banking)
(June 2004); Executive Vice President and Head
of Real Estate Department, Bank One
(1998-2000); Director, The Brickman Group,
Ltd. (landscaping company)
William R. Rybak, 53 Private investor; formerly Executive Vice
President and CFO, Van Kampen Investments,
Inc. (investment management) prior thereto;
Director, Private Bancorp, Inc.
Stephen B. Timbers, 60 Private investor; formerly Vice Chairman,
Northern Trust Corporation (bank holding
company); President and Chief Executive
Officer, Northern Trust Global Investments,
N.A. (investment management); formerly
President, Northern Trust Global Investments,
a division of Northern Trust Corporation, and
Executive Vice President, The Northern Trust
Corporation; Trustee, Northern Mutual Fund
Complex** (registered investment companies)
* John P. Calamos and Nick P. Calamos are trustees who are "interested
persons" of the Fund as defined in the Investment Company Act of 1940 (the
"1940 Act") because of their position with Calamos.
** Overseeing 53 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 and CALAMOS Strategic Total Return Fund.
24
Officers. Messrs. John Calamos and Nick Calamos are president and vice
president of the Fund, respectively. The preceding table gives more information
about Messrs. John Calamos and Nick Calamos. The following table sets forth as
of October 31, 2004 each other officer's name, position with the Fund, age,
principal occupation during the past five years, other directorships, and the
date on which he or she first became an officer of the Fund. 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.
NAME AND AGE AT POSITION(S) HELD WITH FUND AND DATE FIRST
OCTOBER 31, 2004 ELECTED OR APPOINTED TO OFFICE
---------------- ---------------------------------------------
Nimish S. Bhatt, 41 Treasurer (since 2004)
Patrick H. Dudasik, 49 Vice President (since 2003)
James S. Hamman, Jr., 34 Secretary (since 2003)
Michael Ciotola, 36 Assistant Treasurer (since 2004)
Ian J. McPheron, 33 Assistant Secretary (since 2003)
NAME AND AGE AT PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
OCTOBER 31, 2004 AND OTHER DIRECTORSHIPS HELD
---------------- ------------------------------------------------------------
Nimish S. Bhatt, 41 Senior Vice President and Director of Operations, CAM,
CHLLC, Calamos Advisors and CFS (since 2004); Senior Vice
President, Alternative Investments and Tax Services of
BISYS, prior thereto
Patrick H. Dudasik, 49 Executive Vice President, Chief Financial Officer and
Administrative Officer, and Treasurer of CAM and CHLLC
(since 2004), Calamos Advisors and CFS (since 2001); Chief
Financial Officer, David Gomez and Assoc., Inc. (1998-2001);
and Chief Financial Officer, Scudder Kemper Investments,
Inc., prior thereto
James S. Hamman, Jr., 34 Executive Vice President, Secretary, and General Counsel,
CAM and CHLLC (since 2004), Calamos Advisors and CFS (since
1998)
Michael Ciotola, 36 Manager of Mutual Fund Operations, Calamos Advisors (since
2004); Director of Financial Services, BISYS Fund Services,
Inc. (2003-2004); Various positions within BISYS (prior
thereto)
Ian J. McPheron, 33 Associate Counsel, Calamos Advisors and CFS (since 2004);
Associate Counsel and Director of Compliance, Calamos
Advisors and CFS (2002-2004); Associate, Gardner, Carton &
Douglas (law firm) (2002); Vice President, Associate General
Counsel and Assistant Secretary, Van Kampen Investments,
Inc. (2000-2002); Associate, Wildman, Harrold, Allen & Dixon
(law firm) (1997-2000)
The mailing address of the Trustees and Officers is Calamos Funds; Attn:
Secretary, 1111 E. Warrenville Road, Naperville, IL 60563-1463
25
FOR 24 HOUR SHAREHOLDER ASSISTANCE
800.432.8224
TO OBTAIN INFORMATION
800.582.6959
VISIT OUR WEB-SITE
www.calamos.com
INVESTMENT ADVISER
CALAMOS ADVISORS LLC
1111 E. Warrenville Road
Naperville, IL 60563-1463
FUND ACCOUNTING AGENT/ADMINISTRATOR
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, New York 10286
800.524.4458
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Chicago, IL
LEGAL COUNSEL
Bell, Boyd & Lloyd LLC
Chicago, IL
A description of the CALAMOS Proxy Voting Policies and Procedures is available
free of charge upon request by calling (800) 582-6959, by visiting the CALAMOS
website at www.calamos.com, or by writing CALAMOS at: CALAMOS Investments, Attn:
Client Services, 1111 E. Warrenville Road, Naperville, IL 60563. The Fund's
proxy voting record for the twelve month period ended June 30, 2004, is also
available upon request by calling or writing CALAMOS Investments and by visiting
the SEC website at http://www.sec.gov.
The Fund files a complete list of its portfolio holdings with the SEC for the
first and third quarters each fiscal year on Form N-Q. The Form N-Q is available
free of charge, upon request, by calling or writing CALAMOS Investments or by
visiting the SEC website. You may also review or, for a fee, copy the forms at
the SEC's Public Reference Room in Washington, D.C. (202) 942-8090.
CALAMOS CONVERTIBLE AND HIGH INCOME FUND
This report, including the audited financial statements contained herein, is
submitted for general information for the shareholders of the Fund. The views
expressed in this report reflect those of CALAMOS ADVISORS LLC only through
October 31, 2004. The manager's views are subject to change at any time based on
market and other conditions.
[RECYCLED LOGO] 1791 10/04
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 two 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 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 - $31,000 and $30,500 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 - $17,500 and $17,917 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 - $13,675 and $6,079 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 - $5,250 and $7,500 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) $18,925 and $13,579 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. $75,500 and $58,000 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 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. PURCHASES OF EQUITY SECURITIES
REGISTRANT PURCHASES OF EQUITY SECURITIES
----------------------- --------------------- -------------------- --------------------- --------------------
PERIOD (A) TOTAL NUMBER OF (B)AVERAGE PRICE (C) TOTAL NUMBER OF (D) MAXIMUM NUMBER
SHARES (OR PAID PER SHARE (OR SHARES (OR UNITS) (OR APPROXIMATE
UNITS)PURCHASED UNIT) PURCHASED AS PART DOLLAR VALUE) OF
OF PUBLICLY SHARES (OR UNITS)
ANNOUNCED PLANS OR THAT MAY YET BE
PROGRAMS PURCHASED UNDER
THE PLANS OR
PROGRAMS
----------------------- --------------------- -------------------- --------------------- --------------------
MAY 1-MAY 30, 2004 5000* $14.00 N/A N/A
----------------------- --------------------- -------------------- --------------------- --------------------
* Shares acquired on the open market.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No material changes.
ITEM 10. 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 last fiscal half-year (the registrant's
second fiscal half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics
(a)(2)(i) Certification of Principal Executive Officer.
(a)(2)(ii) Certification of Principal Financial Officer.
(b) Description of Proxy Voting Policies and Procedures
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Calamos Convertible and High Income Fund
By: /s/ John P. Calamos, Sr.
-----------------------------------------------------------------------------
Name: John P. Calamos, Sr.
Title: Principal Executive Officer
Date:
By: /s/ Patrick H. Dudasik
-----------------------------------------------------------------------------
Name: Patrick H. Dudasik
Title: Principal Financial Officer
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
Calamos Convertible and High Income Fund
By: /s/ John P. Calamos, Sr.
-----------------------------------------------------------------------------
Name: John P. Calamos, Sr.
Title: Principal Executive Officer
Date:
By: /s/ Patrick H. Dudasik
-----------------------------------------------------------------------------
Name: Patrick H. Dudasik
Title: Principal Financial Officer
Date: