|
|
|
|
|
ASSETS
|
|
|
|
|
Investments in securities, at value (cost $1,067,677,004)
|
|
$
|
1,103,959,846
|
|
Receivables:
|
|
|
|
|
Accrued interest and dividends
|
|
|
15,413,044
|
|
Investments sold
|
|
|
19,700,184
|
|
Prepaid expenses
|
|
|
9,748
|
|
Other assets
|
|
|
176,699
|
|
|
|
Total assets
|
|
|
1,139,259,521
|
|
|
|
LIABILITIES
|
|
|
|
|
Unrealized depreciation on interest rate swaps
|
|
|
4,478,241
|
|
Payables:
|
|
|
|
|
Note payable
|
|
|
285,000,000
|
|
Investments purchased
|
|
|
7,983,689
|
|
Affiliates:
|
|
|
|
|
Investment advisory fees
|
|
|
766,322
|
|
Deferred compensation to trustees
|
|
|
158,519
|
|
Financial accounting fees
|
|
|
10,934
|
|
Trustees fees and officer compensation
|
|
|
3,814
|
|
Other accounts payable and accrued liabilities
|
|
|
120,771
|
|
|
|
Total liabilities
|
|
|
298,522,290
|
|
|
|
NET ASSETS
|
|
$
|
840,737,231
|
|
|
|
COMPOSITION OF NET ASSETS
|
|
|
|
|
Common stock, no par value, unlimited shares authorized 67,547,533 shares issued and outstanding
|
|
$
|
878,462,798
|
|
Undistributed net investment income (loss)
|
|
|
(25,507,907
|
)
|
Accumulated net realized gain (loss) on investments, foreign currency transactions and interest rate swaps
|
|
|
(44,022,436
|
)
|
Unrealized appreciation (depreciation) of investments, foreign currency translations and interest rate swaps
|
|
|
31,804,776
|
|
|
|
NET ASSETS
|
|
$
|
840,737,231
|
|
|
|
Net asset value per common shares based upon 67,547,533 shares issued and outstanding
|
|
$
|
12.45
|
|
|
|
|
|
|
|
|
18
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
See accompanying Notes to Financial Statements
|
Statement of Operations
Year Ended October 31,
2012
|
|
|
|
|
INVESTMENT INCOME
|
|
|
|
|
Interest
|
|
$
|
60,669,153
|
|
Dividends
|
|
|
6,773,021
|
|
Securities lending income
|
|
|
160,504
|
|
|
|
Total investment income
|
|
|
67,602,678
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
Investment advisory fees
|
|
|
8,901,657
|
|
Interest expense and related fees
|
|
|
3,321,735
|
|
Printing and mailing fees
|
|
|
147,156
|
|
Financial accounting fees
|
|
|
126,981
|
|
Registration fees
|
|
|
87,279
|
|
Accounting fees
|
|
|
84,730
|
|
Legal fees
|
|
|
64,757
|
|
Audit fees
|
|
|
62,090
|
|
Custodian fees
|
|
|
56,234
|
|
Trustees fees and officer compensation
|
|
|
49,688
|
|
Transfer agent fees
|
|
|
33,076
|
|
Other
|
|
|
64,952
|
|
|
|
Total expenses
|
|
|
13,000,335
|
|
|
|
NET INVESTMENT INCOME (LOSS)
|
|
|
54,602,343
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS)
|
|
|
|
|
Net realized gain (loss) from:
|
|
|
|
|
Investments, excluding purchased options
|
|
|
17,162,756
|
|
Purchased options
|
|
|
1,002,677
|
|
Foreign currency transactions
|
|
|
57,611
|
|
Interest rate swaps
|
|
|
(2,869,860
|
)
|
Change in net unrealized appreciation/(depreciation) on:
|
|
|
|
|
Investments, excluding purchased options
|
|
|
15,013,877
|
|
Purchased options
|
|
|
644,302
|
|
Foreign currency translations
|
|
|
801
|
|
Interest rate swaps
|
|
|
142,799
|
|
|
|
NET GAIN (LOSS)
|
|
|
31,154,963
|
|
|
|
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS
|
|
$
|
85,757,306
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
19
|
|
Statements of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED OCTOBER 31,
|
|
|
|
2012
|
|
|
2011
|
|
OPERATIONS
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
$
|
54,602,343
|
|
|
$
|
54,005,532
|
|
Net realized gain (loss)
|
|
|
15,353,184
|
|
|
|
(15,246,762
|
)
|
Change in unrealized appreciation/(depreciation)
|
|
|
15,801,779
|
|
|
|
(768,842
|
)
|
|
|
Net increase (decrease) in net assets applicable to shareholders resulting from operations
|
|
|
85,757,306
|
|
|
|
37,989,928
|
|
|
|
|
|
|
DISTRIBUTIONS FROM
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(76,707,494
|
)
|
|
|
(53,873,854
|
)
|
Return of capital
|
|
|
|
|
|
|
(20,219,093
|
)
|
|
|
Net decrease in net assets from distributions
|
|
|
(76,707,494
|
)
|
|
|
(74,092,947
|
)
|
|
|
|
|
|
CAPITAL STOCK TRANSACTIONS
|
|
|
|
|
|
|
|
|
Proceeds from shares sold
|
|
|
1,995,482
|
|
|
|
55,180,658
|
|
Offering costs on shares
|
|
|
(113,053
|
)
|
|
|
(307,087
|
)
|
Reinvestment of distributions resulting in the issuance of stock
|
|
|
2,465,836
|
|
|
|
7,214,238
|
|
|
|
Net increase (decrease) in net assets from capital stock transactions
|
|
|
4,348,265
|
|
|
|
62,087,809
|
|
|
|
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
|
|
13,398,077
|
|
|
|
25,984,790
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
827,339,154
|
|
|
$
|
801,354,364
|
|
|
|
End of year
|
|
|
840,737,231
|
|
|
|
827,339,154
|
|
|
|
Undistributed net investment income (loss)
|
|
$
|
(25,507,907
|
)
|
|
$
|
(17,559,788
|
)
|
|
|
|
|
|
20
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
See accompanying Notes to Financial Statements
|
Statement of Cash Flows
Year Ended October 31,
2012
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net increase/(decrease) in net assets from operations
|
|
$
|
85,757,306
|
|
Adjustments to reconcile net increase/(decrease) in net assets from operations to net cash provided by operating
activities:
|
|
|
|
|
Purchase of investment securities
|
|
|
(625,694,467
|
)
|
Net proceeds from disposition of short term investments
|
|
|
13,641,196
|
|
Proceeds from disposition of investment securities
|
|
|
633,154,189
|
|
Amortization and accretion of fixed-income securities
|
|
|
(1,360,084
|
)
|
Net realized gains/losses from investments, excluding purchased options
|
|
|
(17,162,756
|
)
|
Net realized gains/losses from purchased options
|
|
|
(1,002,677
|
)
|
Change in unrealized appreciation or depreciation on investments, excluding purchased options
|
|
|
(15,013,877
|
)
|
Change in unrealized appreciation or depreciation on purchased options
|
|
|
(644,302
|
)
|
Change in unrealized appreciation or depreciation on interest rate swaps
|
|
|
(142,799
|
)
|
Net change in assets and liabilities:
|
|
|
|
|
(Increase)/decrease in assets:
|
|
|
|
|
Accrued interest and dividends receivable
|
|
|
820,587
|
|
Prepaid expenses
|
|
|
13,249
|
|
Other assets
|
|
|
(24,172
|
)
|
Increase/(decrease) in liabilities:
|
|
|
|
|
Payables to affiliates
|
|
|
44,659
|
|
Other accounts payable and accrued liabilities
|
|
|
(26,823
|
)
|
|
|
Net cash provided by/(used in) operating activities
|
|
$
|
72,359,229
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from shares sold
|
|
|
1,995,482
|
|
Offering costs related to shares sold
|
|
|
(113,053
|
)
|
Distributions to shareholders
|
|
|
(74,241,658
|
)
|
|
|
Net cash provided by/(used in) financing activities
|
|
$
|
(72,359,229
|
)
|
|
|
Cash at beginning of year
|
|
$
|
|
|
|
|
Cash at end of year
|
|
$
|
|
|
|
|
Supplemental disclosure
|
|
|
|
|
Cash paid for interest and related fees
|
|
$
|
3,333,332
|
|
|
|
Non-cash financing activities not included herein consists of reinvestment of dividends and distributions:
|
|
$
|
2,465,836
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
21
|
|
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 Funds 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 convertibles and non-convertible income securities. Managed assets means the Funds total assets (including any assets attributable to any leverage
that may be outstanding) minus total liabilities (other than debt representing financial leverage).
Fund Valuation.
The valuation of
the Funds investments is in accordance with policies and procedures adopted by and under the ultimate supervision of the board of trustees.
Fund
securities that are traded on U.S. securities exchanges, except option securities, are valued at the last current reported sales price at the time a Fund determines its net asset value (NAV). Securities traded in the over-the-counter
market and quoted on The NASDAQ Stock Market are valued at the NASDAQ Official Closing Price, as determined by NASDAQ, or lacking a NASDAQ Official Closing Price, the last current reported sale price on NASDAQ at the time the Fund determines its
NAV.
When a last sale or closing price is not available, equity securities, other than option securities, that are traded on a U.S. securities exchange
and other equity securities traded in the over-the-counter market are valued at the mean between the most recent bid and asked quotations in accordance with guidelines adopted by the board of trustees. Each option security traded on a U.S.
securities exchange is valued at the mid-point of the consolidated bid/ask quote for the option security, also in accordance with guidelines adopted by the board of trustees. Each over-the-counter option that is not traded through the Options
Clearing Corporation is valued based on a quotation provided by the counterparty to such option under the ultimate supervision of the board of trustees.
Fixed income securities, certain convertible preferred securities, and non-exchange traded derivatives are normally valued by independent pricing services or by
dealers or brokers who make markets in such securities. Valuations of such fixed income securities, certain convertible preferred securities, and non-exchange traded derivatives consider yield or price of equivalent securities of comparable quality,
coupon rate, maturity, type of issue, trading characteristics and other market data and do not rely exclusively upon exchange or over-the-counter prices.
Trading on European and Far Eastern exchanges and over-the-counter markets is typically completed at various times before the close of business on each day on which
the New York Stock Exchange (NYSE) is open. Each security trading on these exchanges or over-the-counter markets may be valued utilizing a systematic fair valuation model provided by an independent pricing service approved by the board
of trustees. The valuation of each security that meets certain criteria in relation to the valuation model is systematically adjusted to reflect the impact of movement in the U.S. market after the foreign markets close. Securities that do not meet
the criteria, or that are principally traded in other foreign markets, are valued as of the last reported sale price at the time the Fund determines its NAV, or when reliable market prices or quotations are not readily available, at the mean between
the most recent bid and asked quotations as of the close of the appropriate exchange or other designated time. Trading of foreign securities may not take place on every NYSE business day. In addition, trading may take place in various foreign
markets on Saturdays or on other days when the NYSE is not open and on which the Funds NAV is not calculated.
If the pricing committee determines
that the valuation of a security in accordance with the methods described above is not reflective of a fair value for such security, the security is valued at a fair value by the pricing committee, under the ultimate supervision of the board of
trustees, following the guidelines and/or procedures adopted by the board of trustees.
The Fund also may use fair value pricing, pursuant to guidelines
adopted by the board of trustees and under the ultimate supervision of the board of trustees, if trading in the security is halted or if the value of a security it holds is materially affected by events occurring before the Funds pricing time
but after the close of the primary market or exchange on which the security is listed. Those procedures may utilize valuations furnished by pricing services approved by the board of trustees, which may be based on market transactions for comparable
securities and various relationships between securities that are generally recognized by institutional traders, a computerized matrix system, or appraisals derived from information concerning the securities or similar securities received from
recognized dealers in those securities.
|
|
|
|
|
22
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Notes to Financial Statements
When fair value pricing of securities is employed, the prices of securities used by a
Fund to calculate its NAV may differ from market quotations or official closing prices. In light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security is accurate.
Investment Transactions.
Investment transactions are recorded on a trade date basis. 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 after the ex-dividend date.
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.
Allocation of Expenses Among Funds.
Expenses directly attributable to the Fund are charged to the Fund; certain other common expenses of Calamos
Advisors Trust, Calamos Investment Trust, Calamos Convertible Opportunities and Income Fund, Calamos Convertible and High Income Fund, Calamos Strategic Total Return Fund, Calamos Global Total Return Fund and Calamos Global Dynamic Income Fund are
allocated proportionately among each fund to which the expenses relate in relation to the net assets of each fund or on another reasonable basis.
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.
Other Assets.
Other assets include amounts of deferred
compensation to trustees and certain recoverable legal expenses under an insurance policy.
Income Taxes.
No provision has been made
for U.S. income taxes because the Funds policy is to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended, and distribute to shareholders substantially all of the Funds 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 for fixed income securities. The financial statements are not adjusted for temporary differences.
The Fund recognized no liability for uncertain tax positions. A reconciliation is not provided as the beginning and ending amounts of unrecognized benefits are
zero, with no interim additions, reductions or settlements. Tax years 2008 2011 remain subject to examination by the U.S. and the State of Illinois tax jurisdictions.
Indemnifications.
Under the Funds organizational documents, the Fund is obligated to indemnify its officers and trustees 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 may enter into contracts that provide general indemnifications to other parties. The Funds 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. Currently, the Funds management expects the risk of material loss in connection to a potential claim to be remote.
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
23
|
|
Notes to
Financial Statements
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.
Pursuant to a financial accounting services agreement, during the year the Fund paid Calamos Advisors a fee for financial accounting services 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 purposes of this calculation combined assets means
the sum of the total average daily net assets of Calamos Investment Trust, Calamos Advisors Trust and the total average weekly managed assets of Calamos Convertible and High Income Fund, Calamos Strategic Total Return Fund, Calamos Convertible
Opportunities and Income Fund, Calamos Global Total Return Fund and Calamos Global Dynamic Income 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 its relative portion of combined assets used in calculating the fee.
The Fund reimburses Calamos
Advisors for a portion of compensation paid to the Funds Chief Compliance Officer. This compensation is reported as part of Trustees fees and officer compensation expense on the Statement of Operations.
A trustee and certain officers of the Fund are also officers and directors of Calamos Advisors. Such trustee and officers 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
(as defined in the 1940 Act) 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 trustees deferral account as of the business day such compensation would have been paid to the participating trustee. The value of amounts deferred for a participating trustee is determined by reference to the change in value
of Class I shares of one or more funds of Calamos Investment Trust designated by the participant. 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. Deferred compensation of $158,519 is included in Other assets on the Statement of Assets and Liabilities at October 31, 2012.
The Funds obligation to make payments under the Plan is a general obligation of the Fund and is included in Payable for deferred compensation to trustees on the Statement of Assets and Liabilities at October 31, 2012.
Note 3 Investments
The cost of purchases
and proceeds from sale of long-term investments for the year ended October 31, 2012 were as follows:
|
|
|
|
|
Cost of purchases
|
|
$
|
600,293,035
|
|
Proceeds from sales
|
|
|
607,458,805
|
|
The following information is presented on a federal income tax basis as of October 31, 2012. Differences between the cost basis
under U.S. generally accepted accounting principles and federal income tax purposes are primarily due to temporary differences.
The cost basis of
investments for federal income tax purposes at October 31, 2012 was as follows:
|
|
|
|
|
Cost basis of Investments
|
|
$
|
1,100,101,384
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
|
45,646,113
|
|
Gross unrealized depreciation
|
|
|
(41,787,651
|
)
|
|
|
|
|
|
Net unrealized appreciation (depreciation)
|
|
$
|
3,858,462
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Notes to Financial Statements
Note 4 Income Taxes
For the fiscal year ended October 31, 2012, the Fund recorded the following permanent reclassifications to reflect tax character. The results of operations and
net assets were not affected by these reclassifications.
|
|
|
|
|
Paid-in capital
|
|
$
|
(16,182,388
|
)
|
Undistributed net investment income/(loss)
|
|
|
14,157,032
|
|
Accumulated net realized gain/(loss) on investments
|
|
|
2,025,356
|
|
The Fund intends to make monthly distributions from its income available for distribution, which consists of the Funds
dividends and interest income after payment of Fund expenses, and net realized gains on stock investments. At least annually, the Fund intends to distribute all or substantially all of its net realized capital gains, if any. Distributions are
recorded on the ex-dividend date. The Fund distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax
basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in-capital. For tax purposes, distributions from
short-term capital gains are considered to be from ordinary income. Distributions in any year may include a return of capital component.
Distributions
were characterized for federal income tax purposes as follows:
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED
OCTOBER 31, 2012
|
|
|
YEAR ENDED
OCTOBER 31, 2011
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
76,707,494
|
|
|
$
|
53,873,854
|
|
Return of capital
|
|
|
|
|
|
|
20,219,093
|
|
As of October 31, 2012, the components of accumulated earnings/(loss) on a tax basis were as follows:
|
|
|
|
|
Undistributed ordinary income
|
|
$
|
|
|
Undistributed capital gains
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings
|
|
|
|
|
Accumulated capital and other losses
|
|
|
(36,969,556
|
)
|
Net unrealized gains/(losses)
|
|
|
(619,604
|
)
|
|
|
|
|
|
Total accumulated earnings/(losses)
|
|
|
(37,589,160
|
)
|
Other
|
|
|
(136,407
|
)
|
Paid-in capital
|
|
|
878,462,798
|
|
|
|
|
|
|
Net assets applicable to common shareholders
|
|
$
|
840,737,231
|
|
The Regulated Investment Company Modernization Act of 2010 (the Act) modernized various tax rules for regulated
investment companies, and was effective for taxable years beginning after the enactment date of December 22, 2010. One significant change is to the treatment of capital loss carryforwards. Now, any capital losses recognized will retain their
character as either short-term or long-term capital losses, will be utilized before the pre-Act capital loss carryforwards, and will be carried forward indefinitely, until applied in offsetting future capital gains.
As of October 31, 2012, the Fund had pre-Act capital loss carryforwards which, if not used, will expire as follows:
|
|
|
|
|
2017
|
|
$
|
(28,386,323
|
)
|
2018
|
|
|
(2,183,566
|
)
|
2019
|
|
|
(6,399,667
|
)
|
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
25
|
|
Notes to
Financial Statements
Note 5 Common Shares
There are unlimited common
shares of beneficial interest authorized and 67,547,533 shares outstanding at October 31, 2012. Calamos Advisors owned 18,722 of the outstanding shares at October 31, 2012. Transactions in common shares were as follows:
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED
OCTOBER 31, 2012
|
|
|
YEAR ENDED
OCTOBER 31, 2011
|
|
Beginning shares
|
|
|
67,188,511
|
|
|
|
62,431,622
|
|
Shares sold
|
|
|
159,957
|
|
|
|
4,196,583
|
|
Shares issued through reinvestment of distributions
|
|
|
199,065
|
|
|
|
560,306
|
|
|
|
|
|
|
Ending shares
|
|
|
67,547,533
|
|
|
|
67,188,511
|
|
|
|
|
|
|
Notice is hereby given in accordance with Section 23(c) of the 1940 Act that the Fund may from time to time purchase its shares
of common stock in the open market.
The Fund also may offer and sell common shares from time to time at an offering price equal to or in excess of the
net asset value per share of the Funds common shares at the time such common shares are initially sold. Transactions for the fiscal year had net proceeds received in excess of net asset value of $18,981.
Note 6 Derivative Instruments
Foreign Currency
Risk.
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 foreign exchange rates. 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, 2012.
Equity Risk.
The Fund
engaged in option transactions and in doing so achieves similar objectives to what it would achieve through the sale or purchase of individual securities. A call option, upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller of the option the obligation to sell, the underlying security, index or other instrument at the exercise price. A put option gives the purchaser of the option, upon payment of a premium, the right to sell, and the seller the
obligation to buy, the underlying security, index, or other instrument at the exercise price.
To seek to offset some of the risk of a potential decline
in value of certain long positions, the Fund may also purchase put options on individual securities, broad-based securities indexes or certain exchange traded funds (ETFs). The Fund may also seek to generate income from option premiums
by writing (selling) options on a portion of the equity securities (including securities that are convertible into equity securities) in the Funds portfolio, on broad-based securities indexes, or certain ETFs.
When a Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When a Fund writes an option, it receives a premium
and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, the Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost basis of the purchase. The difference between the premium and the amount received or paid on a
closing purchase or sale transaction is also treated as a realized gain or loss. 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. Gain or loss on written options and purchased options is presented separately as net realized gain or loss on written options and net realized gain or loss on purchased options, respectively.
As of October 31, 2012, the Fund had outstanding purchased options and/or written options as listed on the Schedule of Investments.
Interest Rate Risk.
The Fund engages in interest rate swaps primarily to hedge the interest rate risk on the Funds borrowings (see Note 7
Borrowings). An interest rate swap is a contract that involves the exchange of one type of interest rate for another type of
|
|
|
|
|
26
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Notes to Financial Statements
interest rate. If interest rates rise, resulting in a diminution in the value of the Funds portfolio, the Fund would receive payments under the swap that would offset, in whole or in part,
such diminution in value; if interest rates fall, the Fund would likely lose money on the swap transaction. 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 change in net unrealized appreciation/depreciation on interest rate swaps in the Statement of Operations. A realized gain or
loss is recorded in net realized gain (loss) on interest rate swaps in the Statement of Operations 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. In connection with these contracts, securities may be identified as collateral in accordance with the
terms of the respective swap contracts in the event of default or bankruptcy of the Fund.
Premiums paid to or by a 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 upon third party vendor 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, counterpartys creditworthiness, and the possible lack of liquidity with respect to the contracts.
As of October 31, 2012, the Fund had outstanding interest rate swap agreements as listed on the Schedule of Investments.
As of October 31, 2012, the Fund had outstanding derivative contracts which are reflected on the Statement of Assets and Liabilities as follows:
|
|
|
|
|
ASSET
DERIVATIVES
|
|
|
FAIR VALUE
|
Options purchased
1
|
|
$7,412,776
|
|
|
|
|
LIABILITY
DERIVATIVES
|
Interest rate swaps
2
|
|
$4,478,241
|
(1)
|
Generally, the balance sheet location for Options purchased is Investment in securities.
|
(2)
|
Generally, the balance sheet location for Interest rate swaps is Unrealized appreciation (depreciation) on swaps.
|
For the twelve months ended October 31, 2012, the volume of derivative activity for the Fund is reflected below*
|
|
|
|
|
|
|
DERIVATIVE
TYPE
|
|
Options purchased
|
|
|
9,950
|
|
Interest rate swaps
|
|
|
$95,000,000
|
|
*
|
Activity during the period is measured by opened number of contracts for options purchased and opened amount for swap contracts (measured in notional).
|
Note 7 Borrowings
The Fund, with the approval of its
board of trustees, including its independent trustees, has entered into a financing package that includes a Committed Facility Agreement (the Agreement) with BNP Paribas Prime Brokerage, Inc. (BNP) that allows the Fund to
borrow up to $300,000,000, and a Lending Agreement, as defined below. Borrowings under the Agreement are secured by assets of the Fund that are held with the Funds custodian in a separate account (the pledged collateral). Interest
is charged at the quarterly LIBOR (London Inter-bank Offered Rate) plus .65% on the amount borrowed and .55% on the undrawn balance. For the year ended October 31, 2012, the average borrowings under the Agreement and the average interest rate
were $285,000,000 and 1.13%, respectively. As of October 31, 2012, the amount of such outstanding borrowings was $285,000,000. The interest rate applicable to the borrowings on October 31, 2012 was 0.96%.
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
27
|
|
Notes to
Financial Statements
The Lending Agreement is a separate side-agreement between the Fund and BNP pursuant to which BNP may borrow a portion of the pledged collateral (the Lent
Securities) in an amount not to exceed the outstanding borrowings owed by the Fund to BNP under the Agreement. The Lending Agreement is intended to permit the Fund to significantly reduce the cost of its borrowings under the Agreement. BNP may
re-register the Lent Securities in its own name or in another name other than the Fund, and may pledge, re-pledge, sell, lend or otherwise transfer or use the Lent Securities with all attendant rights of ownership. (It is the Funds
understanding that BNP will perform due diligence to determine the creditworthiness of any party that borrows Lent Securities from BNP.) The Fund may designate any security within the pledged collateral as ineligible to be a Lent Security, provided
there are eligible securities within the pledged collateral in an amount equal to the outstanding borrowing owed by the Fund. During the period in which the Lent Securities are outstanding, BNP must remit payment to the Fund equal to the amount of
all dividends, interest or other distributions earned or made by the Lent Securities.
Under the terms of the Lending Agreement, the Lent Securities are
marked to market daily, and if the value of the Lent Securities exceeds the value of the then-outstanding borrowings owed by the Fund to BNP under the Agreement (the Current Borrowings), BNP must, on that day, either (1) return Lent
Securities to the Funds custodian in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings; or (2) post cash collateral with the Funds custodian equal to the difference between
the value of the Lent Securities and the value of the Current Borrowings. If BNP fails to perform either of these actions as required, the Fund will recall securities, as discussed below, in an amount sufficient to cause the value of the outstanding
Lent Securities to equal the Current Borrowings. The Fund can recall any of the Lent Securities and BNP shall, to the extent commercially possible, return such security or equivalent security to the Funds custodian no later than three business
days after such request. If the Fund recalls a Lent Security pursuant to the Lending Agreement, and BNP fails to return the Lent Securities or equivalent securities in a timely fashion, BNP shall remain liable to the Funds custodian for the
ultimate delivery of such Lent Securities, or equivalent securities, and for any buy-in costs that the executing broker for the sales transaction may impose with respect to the failure to deliver. The Fund shall also have the right to apply and
set-off an amount equal to one hundred percent (100%) of the then-current fair market value of such Lent Securities against the Current Borrowings.
Note 8 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 purchased 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 purchased 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 also 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.
Note 9 Fair Value Measurements
Various inputs are used to determine the value of the Funds investments. These inputs are categorized into three broad levels as follows:
|
|
|
Level 1 Prices are determined using inputs from unadjusted quoted prices from active markets (including securities actively traded on a securities
exchange) for identical assets.
|
|
|
|
Level 2 Prices are determined using significant observable market inputs other than unadjusted quoted prices, including quoted prices of similar
securities, fair value adjustments to quoted foreign securities, interest rates, credit risk, prepayment speeds, and other relevant data.
|
|
|
|
|
|
28
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Notes to Financial Statements
|
|
|
Level 3 Prices reflect unobservable market inputs (including the Funds own judgments about assumptions market participants would use in determining
fair value) when observable inputs are unavailable.
|
Debt securities are valued based upon evaluated prices received from an
independent pricing service or from a dealer or broker who makes markets in such securities. Pricing services utilize various observable market data and as such, debt securities are generally categorized as Level 2. The levels are not necessarily an
indication of the risk or liquidity of the Funds investments. Transfers between the levels for investment securities or other financial instruments are measured at the end of the reporting period.
The following is a summary of the inputs used in valuing the Funds holdings at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LEVEL 1
|
|
|
LEVEL 2
|
|
|
LEVEL 3
|
|
|
TOTAL
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds
|
|
$
|
|
|
|
$
|
660,541,436
|
|
|
$
|
|
|
|
$
|
660,541,436
|
|
Convertible Bonds
|
|
|
|
|
|
|
231,527,742
|
|
|
|
|
|
|
|
231,527,742
|
|
U.S. Government and Agency Securities
|
|
|
|
|
|
|
5,193,951
|
|
|
|
|
|
|
|
5,193,951
|
|
Sovereign Bonds
|
|
|
|
|
|
|
12,041,013
|
|
|
|
|
|
|
|
12,041,013
|
|
Synthetic Convertible Securities (Corporate Bonds)
|
|
|
|
|
|
|
40,936,395
|
|
|
|
|
|
|
|
40,936,395
|
|
Synthetic Convertible Securities (U.S. Government and Agency Securities)
|
|
|
|
|
|
|
321,928
|
|
|
|
|
|
|
|
321,928
|
|
Synthetic Convertible Securities (Sovereign Bonds)
|
|
|
|
|
|
|
748,484
|
|
|
|
|
|
|
|
748,484
|
|
Synthetic Convertible Securities (Purchased Options)
|
|
|
7,412,776
|
|
|
|
|
|
|
|
|
|
|
|
7,412,776
|
|
Convertible Preferred Stocks
|
|
|
59,833,479
|
|
|
|
57,251,969
|
|
|
|
|
|
|
|
117,085,448
|
|
Common Stocks
|
|
|
2,086,899
|
|
|
|
|
|
|
|
|
|
|
|
2,086,899
|
|
Short Term Investment
|
|
|
26,063,774
|
|
|
|
|
|
|
|
|
|
|
|
26,063,774
|
|
|
|
|
|
|
Total
|
|
$
|
95,396,928
|
|
|
$
|
1,008,562,918
|
|
|
$
|
|
|
|
$
|
1,103,959,846
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
|
|
|
$
|
4,478,241
|
|
|
$
|
|
|
|
$
|
4,478,241
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
4,478,241
|
|
|
$
|
|
|
|
$
|
4,478,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
29
|
|
Financial Highlights
Selected data for a share outstanding throughout each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended October 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net asset value, beginning of period
|
|
|
$12.31
|
|
|
|
$12.84
|
|
|
|
$11.83
|
|
|
|
$8.26
|
|
|
|
$16.38
|
|
|
|
Income from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)**
|
|
|
0.81
|
|
|
|
0.83
|
|
|
|
0.91
|
|
|
|
0.84
|
|
|
|
1.16
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
0.47
|
|
|
|
(0.23
|
)
|
|
|
1.22
|
|
|
|
3.88
|
|
|
|
(7.31
|
)
|
|
|
Distributions to preferred shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (common share equivalent basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
(0.13
|
)
|
|
|
Net realized gains (common share equivalent basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.12
|
)
|
|
|
Total from investment operations
|
|
|
1.28
|
|
|
|
0.60
|
|
|
|
2.13
|
|
|
|
4.71
|
|
|
|
(6.40
|
)
|
|
|
Less distributions to common shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(1.14
|
)
|
|
|
(0.84
|
)
|
|
|
(1.00
|
)
|
|
|
(0.94
|
)
|
|
|
(1.41
|
)
|
|
|
Net realized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
(0.31
|
)
|
|
|
Return of capital
|
|
|
|
|
|
|
(0.30
|
)
|
|
|
(0.14
|
)
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
Total distributions
|
|
|
(1.14
|
)
|
|
|
(1.14
|
)
|
|
|
(1.14
|
)
|
|
|
(1.14
|
)
|
|
|
(1.72
|
)
|
|
|
Capital charge resulting from issuance of common and preferred shares and related offering costs(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums from shares sold in at the market offerings
|
|
|
|
(a)
|
|
|
0.01
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
$12.45
|
|
|
|
$12.31
|
|
|
|
$12.84
|
|
|
|
$11.83
|
|
|
|
$8.26
|
|
|
|
Market value, end of period
|
|
|
$12.51
|
|
|
|
$12.09
|
|
|
|
$13.09
|
|
|
|
$11.40
|
|
|
|
$9.10
|
|
|
|
Total investment return based on:(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value
|
|
|
11.05%
|
|
|
|
4.92%
|
|
|
|
19.12%
|
|
|
|
62.00%
|
|
|
|
(42.58%
|
)
|
|
|
Market value
|
|
|
13.62%
|
|
|
|
1.08%
|
|
|
|
26.02%
|
|
|
|
41.70%
|
|
|
|
(38.69%
|
)
|
|
|
Net assets, end of period (000)
|
|
|
$840,737
|
|
|
|
$827,339
|
|
|
|
$801,354
|
|
|
|
$651,707
|
|
|
|
$409,035
|
|
|
|
Preferred shares, at redemption value ($25,000 per share liquidation preference) (000s omitted)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$104,000
|
|
|
|
Ratios to average net assets applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses(c)
|
|
|
1.57%
|
|
|
|
1.55%
|
|
|
|
1.67%
|
|
|
|
2.87%
|
|
|
|
1.92%
|
|
|
|
Gross expenses prior to expense reductions and earnings credits(c)
|
|
|
1.57%
|
|
|
|
1.55%
|
|
|
|
1.71%
|
|
|
|
2.98%
|
|
|
|
2.16%
|
|
|
|
Net expenses, excluding interest expense
|
|
|
1.17%
|
|
|
|
1.19%
|
|
|
|
1.19%
|
|
|
|
2.36%
|
|
|
|
1.30%
|
|
|
|
Net investment income (loss)(c)
|
|
|
6.60%
|
|
|
|
6.56%
|
|
|
|
7.48%
|
|
|
|
8.79%
|
|
|
|
8.38%
|
|
|
|
Preferred share distributions
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
0.10%
|
|
|
|
0.92%
|
|
|
|
Net investment income (loss), net of preferred share distributions from net investment income
|
|
|
6.60%
|
|
|
|
6.56%
|
|
|
|
7.48%
|
|
|
|
8.69%
|
|
|
|
7.46%
|
|
|
|
Portfolio turnover rate
|
|
|
56%
|
|
|
|
44%
|
|
|
|
37%
|
|
|
|
30%
|
|
|
|
53%
|
|
|
|
Average commission rate paid
|
|
|
$0.0230
|
|
|
|
$0.0222
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Asset coverage per preferred share, at end of period(d)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$123,350
|
|
|
|
Asset coverage per $1,000 of loan outstanding(e)
|
|
|
$3,950
|
|
|
|
$3,903
|
|
|
|
$5,152
|
|
|
|
$4,377
|
|
|
|
$3,745
|
|
|
|
**
|
Net investment income allocated based on average shares method.
|
(a)
|
Amount equated to less than $0.005 per common share.
|
(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 Funds 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 Funds portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the
market is willing to pay for shares of the Fund at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions.
|
(c)
|
Does not reflect the effect of dividend payments to Preferred Shareholders.
|
(d)
|
Calculated by subtracting the Funds total liabilities (not including Preferred Shares) from the Funds total assets and dividing this by the number of Preferred Shares
outstanding.
|
(e)
|
Calculated by subtracting the Funds total liabilities (not including Note payable) and preferred shares from the Funds total assets and dividing this by the amount of
note payable outstanding, and by multiplying the result by 1,000.
|
|
|
|
|
|
30
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees 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, 2012, the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights
are the responsibility of the Funds 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 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 Funds 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, 2012, by correspondence with the Funds custodian and
brokers; where replies were not received from brokers, we performed other auditing procedures. 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, 2012, the results of its
operations and cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Chicago, Illinois
December 14, 2012
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
31
|
|
Trustee Appr
oval of Management Agreement
(Unaudited)
The Board of Trustees of the Fund oversees the management of the Fund, and, as required by law, determines annually whether to continue the Funds management
agreement with Calamos Advisors under which Calamos Advisors serves as the investment manager and administrator for the Fund. The Independent Trustees, who comprise more than 80% of the Board, have never been affiliated with Calamos
Advisors.
In connection with their most recent consideration regarding the continuation of the management agreement, the Trustees received and reviewed
a substantial amount of information provided by Calamos Advisors in response to detailed requests of the Independent Trustees and their independent legal counsel. 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 held on June 28, 2012, 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, extent 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, approved the continuation of the management agreement through July 31, 2013, subject to
possible earlier termination as provided in the agreement.
In connection with its consideration of the management agreement, the Board considered, among
other things: (i) the nature, quality and extent of the Advisers services, (ii) the investment performance of the Fund as well as performance information for comparable funds and other comparable clients of the Advisor,
(iii) the fees and other expenses paid by the Fund as well as expense information for comparable funds and for other comparable clients of the Adviser, (iv) the profitability of the Adviser and its affiliates from their relationship with
the Fund, (v) the extent to which economies of scale may apply, and (vi) other benefits to the Adviser from its relationship with the Fund. In the Boards deliberations, no single factor was responsible for the Boards decision
to approve continuation of the management agreements.
Nature, Extent and Quality of Services.
The Boards consideration of the
nature, extent and quality of the Advisers services to the Fund took into account the knowledge gained from the Boards meetings with the Adviser throughout the prior year. In addition, the Board considered: the Advisers long-term
history of managing the Fund; the consistency of investment approach; the background and experience of the Advisers investment personnel responsible for managing the Fund; the Advisers performance as administrator of the Fund, including,
among other things, in the areas of brokerage selection, trade execution, compliance and shareholder communications; and frequent favorable recognition of the Adviser in the media and in industry publications. The Board also reviewed the
Advisers resources and key personnel involved in providing investment management services to the Fund, including the time that investment personnel devote to the Fund and the investment results produced by the Advisers in-house research.
The Board noted the personal investments that the Advisers key investment personnel have made in the Fund, which further aligns the interests of the Adviser and its personnel with those of the Funds shareholders. In addition, the Board
considered compliance reports about the Adviser from the Funds Chief Compliance Officer. The Board concluded that the nature, extent and quality of the services provided by the Adviser to the Fund were appropriate and consistent with the
management agreements and that the Fund was likely to continue to benefit from services provided under its management agreement with the Adviser.
Investment Performance of the Fund.
The Board considered the Funds investment performance over various time periods, including how the Fund
performed compared to the median performance of a group of comparable funds (the Funds Universe Median) selected by Lipper, Inc., an independent data service provider. The performance periods considered by the Board ended on
March 31, 2012. Where available, the Board considered one-, three-, five- and ten-year performance.
The Board considered the Funds net asset
value performance, noting that the Fund outperformed its Universe Median during the three- and five-year periods. The Fund performed at the Universe Median for the one-year period.
For the reasons noted above, the Board concluded that continuation of the management agreement for the Fund was in the best interest of the Fund and its shareholders.
Costs of Services Provided and Profits Realized by the Adviser.
Using information provided by Lipper, the Board evaluated the Funds actual
management fee rate compared to the median management fee rate for other mutual funds similar in size, character and
|
|
|
|
|
32
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Trustee Approval of Management Agreement
(Unaudited)
investment strategy (the Funds Expense Group), and the Funds total expense ratio compared to the median total expense ratio of the Funds Expense Group.
The Board considered that the Funds management fee rate is equal to the median of the Funds Expense Group. The Board also noted that the Funds
total expense ratio, which reflects the total fees paid by an investor, is equal to the median of the Funds Expense Group. The Board, in its consideration of expenses, also took into account its review of the Funds performance.
The Board also reviewed the Advisers management fee rates for its institutional separate accounts and for its sub-advised funds (for which the
Adviser provides portfolio management services only). The Board took into account the Advisers assertion that although, generally, the rates of fees paid by institutional clients were lower than the rates of fees paid by the Fund, the
differences reflected the Advisers greater level of responsibilities and significantly broader scope of services regarding the Fund, and the more extensive regulatory obligations and risks associated with managing the Fund.
The Board also considered the Advisers costs in serving as the Funds investment adviser and manager, including costs associated with technology,
infrastructure and compliance necessary to manage the Fund. The Board reviewed the Advisers methodology for allocating costs among the Advisers lines of business. The Board also considered information regarding the structure of the
Advisers compensation program for portfolio managers, analysts and certain other employees and the relationship of such compensation to the attraction and retention of quality personnel. Finally, the Board reviewed information on the
profitability of the Adviser in serving as the Funds investment manager and of the Adviser 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 the Advisers other business units. Data was provided to the Board with respect to profitability, both on a pre- and post-marketing cost basis. The Board also reviewed the annual report of the Advisers parent company
and discussed its corporate structure.
After its review of all the matters addressed, including those outlined above, the Board concluded that the rate
of management fee paid by the Fund to the Adviser, in light of the nature and quality of the services provided, was reasonable and in the best interests of the Funds shareholders.
Economies of Scale and Fee Levels Reflecting Those Economies.
In reviewing the Funds fees and expenses, the Trustees examined the potential benefits of economies of scale and whether any
economies of scale should be reflected in the Funds fee structure. They noted that the Fund is a closed-end fund, and has therefore had a relatively stable asset base since commencement of operations, and that there do not appear to have been
any significant economies of scale realized since that time.
Other Benefits Derived from the Relationship with the Fund.
The Board
also considered other benefits that accrue to the Adviser and its affiliates from their relationship with the Fund. The Board concluded that, other than the services to be provided by the Adviser and its affiliates pursuant to their agreements with
the Fund and the fees payable by the Fund therefore, the Fund and the Adviser may potentially benefit from their relationship with each other in other ways. The Board also considered the Advisers use of a portion of the commissions paid by the
Fund on their portfolio brokerage transactions to obtain research products and services benefiting the Fund and/or other clients of the Adviser and concluded, based on reports from the Funds Chief Compliance Officer, that the Advisers
use of soft commission dollars to obtain research products and services was consistent with regulatory requirements.
After full
consideration of the above factors as well as other factors that were instructive in their consideration, the Trustees, including all of the Independent Trustees, concluded that the continuation of the management agreement with the Adviser was in
the best interest of the Fund and its shareholders.
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
33
|
|
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 February 2013, shareholders will receive Form 1099-DIV which will include their share of qualified dividends and capital gains distributed during the calendar year 2012. 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 $3,458,144 or the maximum amount allowable under the Code, as qualified dividends for the fiscal year ended October 31, 2012.
Under Section 854(b)(2) of the Code, the Fund hereby designates 5.41% of the ordinary income dividends as income qualifying for the corporate dividends
received deduction for the fiscal year ended October 31, 2012.
|
|
|
|
|
34
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Trustees and Officers
(Unaudited)
Officers.
The preceding table gives information about John P. Calamos, Sr., who is president of the Fund. The following table sets forth each other officers name, age at October 31,
2012, position with the Fund and date first appointed to that position, and principal occupation(s) during the past five years. 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
|
|
POSITION(S) WITH FUND
|
|
PRINCIPAL OCCUPATION(S)
DURING PAST 5 YEARS
|
Nimish S. Bhatt, 49
|
|
Vice President and Chief Financial Officer (since 2007)
|
|
Senior Vice President since 2004, Chief Financial Officer (since May 2011), Head of Fund Administration (since November 2011), CAM, CILLC,
Calamos Advisors, CWM and CFS; prior thereto Director of Operations (since 2004); Director, Calamos Global Funds PLC (since 2007); Member, board of directors of NICSA (a not-for-profit industry trade organization) (since June
2006)
|
|
|
|
|
|
James J. Boyne, 46
|
|
Vice President (since 2008) and Assistant Secretary (since 2010)
|
|
Executive Vice President and Chief Operating Officer, CAM, CILLC, CWM, Calamos Advisors and CFS (since 2011); prior thereto President of
Distribution and Operations (since 2008); Senior Vice President, General Counsel and Secretary, CAM, CILLC, CWM, Calamos Advisors (since 2008); Chief Operating Officer - Distribution, CFS (since 2008); prior thereto, Chief Operating Officer, General
Counsel and Executive Managing Director of McDonnell Investment Management, LLC (2001-2008)
|
|
|
|
|
|
J. Christopher Jackson, 61
|
|
Vice President and Secretary (since 2010)
|
|
Senior Vice President, General Counsel and Secretary, CAM, CHLLC, Calamos Advisors and CFS (since 2010); Director, U.S. Head of Retail Legal and Co-Global Head of Retail Legal of
Deutsche Bank AG (2006-2010); prior thereto, Director, Senior Vice President, General Counsel and Assistant Secretary of Hansberger Global Investors, Inc. (1996-2006)
|
|
|
|
|
|
Mark J. Mickey, 61
|
|
Chief Compliance Officer (since 2005)
|
|
Chief Compliance Officer, Calamos Funds (since 2005) and Chief Compliance Officer, Calamos Advisors (2005-2006)
|
|
|
|
|
|
Curtis Holloway, 45
|
|
Treasure (since 2010), Prior thereto Assistant
Treasurer since 2007
|
|
Treasurer of Calamos Investment Trust, Calamos Advisors Trust, CHI, CHY, CSQ, CGO and CHW (since June 2010); prior thereto Assistant Treasurer (since 2007)
|
|
|
|
|
|
Gary Black, 52
|
|
Vice President
(since Sept 2012)
|
|
EVP, Global Co-Chief Investment Officer and Chief Investment Officer of Alternative Investments (since August 2012), CAM, CILLC, Calamos Advisors, CWM and CFS, prior thereto CEO, Chief
Investment Officer and Founding Member of Black Capital (since 2009); prior thereto, CEO of Janus Capital Group (since 2006)
|
The address of each officer is 2020 Calamos Court, Naperville, Illinois 60563.
Results of Annual Meeting
The Fund held its annual meeting
of shareholders on June 27, 2012. The purpose of the annual meeting was to elect two Trustees to the Funds board of trustees for a three-year term, or until the trustees successor is duly elected and qualified, and to conduct any other
lawful business of the Fund. Mr. John E. Neal and Mr. Donald D. Tapple were nominated for reelection as Trustees, and were elected as such by a plurality vote as follows:
|
|
|
|
|
|
|
TRUSTEE NOMINEE
|
|
VOTES FOR
|
|
VOTES WITHHELD
|
|
BROKER NON-
VOTES AND ABSTENTIONS
|
John E. Neal
|
|
57,715,884
|
|
1,462,559
|
|
0
|
|
|
|
|
|
|
|
Donald D. Tapple
|
|
57,746,339
|
|
1,432,104
|
|
0
|
Messrs. Calamos, Marsh, Rybak and Timbers terms of office as Trustees continued after the meeting.
|
|
|
|
|
36
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
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 funds Board of Directors.
Potential 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 doesnt
affect the closed-end fund manager because there are no new investors buying into or selling out of the funds 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 shares 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
|
|
Generally issues a fixed number of shares
|
Issues common equity shares
|
|
Can issue common equity securities and senior securities such as preferred shares and bonds
|
Sold at NAV plus any sales charge
|
|
Price determined by the marketplace
|
Sold through the funds distributor
|
|
Traded in the secondary market
|
Fund redeems shares at NAV calculated at the close of business day
|
|
Fund does not redeem shares
|
|
|
|
|
|
|
|
|
|
|
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
37
|
|
Level Rate Distribution Policy
Using a Level Rate Distribution Policy to Promote Dependable Income and Total Return
The goal of the
level rate distribution policy is to provide investors a predictable, though not assured, level of cash flow, which can either serve as a stable income stream or, through reinvestment, contribute significantly to long-term total return.
We understand the importance that investors place on the stability of dividends and their ability to contribute to long-term total return, which is why we have
instituted a level rate distribution policy for the Fund. Under the policy, monthly distributions paid may include net investment income, net realized short-term capital gains and, if necessary, return of capital. In addition, a limited number of
distributions per calendar year may include net realized long-term capital gains. There is no guarantee that the Fund will realize capital gains in any given year. Distributions are subject to re-characterization for tax purposes after the end of
the fiscal year. All shareholders with taxable accounts will receive written notification regarding the components and tax treatment for distributions via Form 1099-DIV.
Distributions from the Fund are generally subject to Federal income taxes. For purposes of maintaining the level rate distribution policy, the Fund may realize short-term capital gains on securities that, if sold
at a later date, would have resulted in long-term capital gains. Maintenance of a level rate distribution policy may increase transaction and tax costs associated with the Fund.
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.
Potential 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.
|
Pursuant to the Plan, unless a shareholder is ineligible or elects otherwise, all dividend and capital gains on common shares
distributions are automatically reinvested by Computershare, as agent for shareholders in administering the Plan (Plan Agent), in additional common shares of the Fund. Shareholders who elect not to participate in the Plan will receive
all dividends and distributions payable in cash paid by check mailed directly to the shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee) by Plan Agent, as dividend paying agent. Shareholders may
elect not to participate in the Plan and to receive all dividends and distributions in cash by sending written instructions to Plan Agent, as dividend paying agent, at: Dividend Reinvestment Department, P.O. Box 358016, Pittsburgh, PA 15252.
Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by giving notice in writing to the Plan Agent; such termination will be effective with respect to a particular dividend or distribution if
notice is received prior to the record date for the applicable distribution.
The shares are acquired by the Plan Agent for the participants
account either (i) through receipt of additional common shares from the Fund (newly issued shares) or (ii) by purchase of outstanding common shares on the
|
|
|
|
|
38
|
|
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
|
|
|
Automatic Dividend Reinvestment Plan
open market (open-market purchases) on the NASDAQ or elsewhere. If, on the payment date, the net asset value per share of the common shares is equal to or less than the market price
per common share plus estimated brokerage commissions (a market premium), the Plan Agent will receive newly issued shares from the Fund for each participants account. The number of newly issued common shares to be credited to the
participants account will be determined by dividing the dollar amount of the dividend or distribution by the greater of (i) the net asset value per common share on the payment date, or (ii) 95% of the market price per common share on
the payment date.
If, on the payment date, the net asset value per common share exceeds the market price plus estimated brokerage commissions (a
market discount), the Plan Agent has a limited period of time to invest the dividend or distribution amount in shares acquired in open-market purchases. The weighted average price (including brokerage commissions) of all common shares
purchased by the Plan Agent as Plan Agent will be the price per common share allocable to each participant. If, the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount
shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will invest the uninvested portion of the dividend or distribution amount in newly issued shares at the close of business on the last
purchase date.
The automatic reinvestment of dividends and distributions will not relieve participants of any federal, state or local income tax that
may be payable (or required to be withheld) on such dividends even though no cash is received by participants.
There are no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or distributions payable either in shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agents
open-market purchases in connection with the reinvestment of dividends or distributions. If a participant elects to have the Plan Agent sell part or all of his or her common shares and remit the proceeds, such participant will be charged his or her
pro rata share of brokerage commissions on the shares sold, plus a $15 transaction fee. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the
participants.
A participant may request the sale of all of the common shares held by the Plan Agent in his or her Plan account in order to terminate
participation in the Plan. If such participant elects in advance of such termination to have the Plan Agent sell part or all of his shares, the Plan Agent is authorized to deduct from the proceeds a $15.00 fee plus the brokerage commissions incurred
for the transaction. A participant may re-enroll in the Plan in limited circumstances.
The terms and conditions of the Plan may be amended by the Plan
Agent or the Fund at any time upon notice are required by the Plan.
This discussion of the Plan is only summary, and is qualified in its entirety to the
Terms and Conditions of the Dividend Reinvestment Plan filed as part of the Funds registration statement.
For additional information about the
Plan, please contact the Plan Agent, Computershare, at 866.226.8016. 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.
Were pleased to provide our shareholders with the additional benefit of the Funds Dividend Reinvestment Plan and hope that it may
serve your financial plan.
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CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND ANNUAL REPORT
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MANAGING YOUR CALAMOS FUNDS INVESTMENTS
Calamos Investments offers several convenient means to monitor, manage and feel confident about your Calamos investment choice.
PERSONAL ASSISTANCE:
800.582.6959
Dial this toll-free number to speak with a knowledgeable Client Services Representative who can 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 the Calamos Funds can benefit your investment portfolio based on your financial goals, risk tolerance, time horizon and income needs.
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STAY CONNECTED
calamos.com
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Visit our Web site for timely fund performance, detailed fund profiles, fund news and insightful market
commentary.
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A description of the Calamos Proxy Voting Policies and Procedures and the Funds proxy voting record for the
12-month period ended June 30, 2012, are available free of charge upon request by calling 800.582.6959, by visiting the Calamos Web site at calamos.com, by writing Calamos at: Calamos Investments, Attn: Client Services, 2020 Calamos Court,
Naperville, IL 60563. The Funds proxy voting record is also available free of charge by visiting the SEC Web site at sec.gov.
The Fund files its
complete list of 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 Web site at sec.gov. You may also review or, for a fee, copy the forms at the SECs 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 June 20, 2012, the Fund submitted a CEO annual certification to the NYSE on which the Funds chief executive officer
certified that he was not aware, as of that date, of any violation by the Fund of the NYSEs corporate governance listing standards. In addition, the Funds report to the SEC on Form N-CSR contains certifications by the funds
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 Funds disclosure controls and procedures and internal control over financial
reporting.
FOR 24-HOUR AUTOMATED
SHAREHOLDER ASSISTANCE: 866.226.8016
TO OBTAIN INFORMATION ABOUT YOUR INVESTMENTS: 800.582.6959
VISIT OUR WEB SITE:
calamos.com
INVESTMENT ADVISER:
Calamos Advisors LLC
2020 Calamos Court
Naperville, IL 60563-2787
CUSTODIAN AND FUND ACCOUNTING AGENT:
State
Street Bank and Trust Company
225 Franklin Street
Boston, MA 02111
TRANSFER AGENT:
Computershare
P.O. Box 358016
Pittsburgh, PA 15252
866.226.8016
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
Deloitte & Touche LLP
Chicago, IL
LEGAL COUNSEL:
K&L Gates LLP
Chicago, IL
2020 Calamos Court
Naperville,
IL 60563-2787
800.582.6959
calamos.com
©
2012 Calamos
Holdings LLC. All Rights Reserved.
Calamos
®
and Calamos Investments
®
are registered
trademarks of Calamos Holdings LLC.
CHIANR 1790 2012