N-Q 1 d168761dnq.htm N-Q N-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

INVESTMENT COMPANY ACT FILE NUMBER: 811-21484

 

 

EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER:

   Calamos Dynamic Convertible and Income Fund

 

ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:   

2020 Calamos Court, Naperville

Illinois 60563-2787

NAME AND ADDRESS OF AGENT FOR SERVICE:   

John P. Calamos, Sr., Chairman,

CEO and Co-CIO

Calamos Advisors LLC,

2020 Calamos Court,

Naperville, Illinois

60563-2787

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 245-7200

DATE OF FISCAL YEAR END: October 31, 2016

DATE OF REPORTING PERIOD: January 31, 2016

 

 

 


ITEM 1. SCHEDULE OF INVESTMENTS JANUARY 31, 2016 (UNAUDITED)

 


Calamos Dynamic Convertible and Income Fund

 

SCHEDULE OF INVESTMENTS JANUARY 31, 2016 (UNAUDITED)

 

PRINCIPAL
AMOUNT
                VALUE  
     
  CORPORATE BONDS (27.0%)   
    Consumer Discretionary (5.6%)   
  7,300,000       

DISH DBS Corp.µ

6.750%, 06/01/21

  $ 7,441,438   
  4,500,000       

Golden Nugget Escrow, Inc.*

8.500%, 12/01/21

    4,426,875   
  6,038,000       

Goodyear Tire & Rubber Companyµ

8.750%, 08/15/20

    6,939,926   
  5,000,000       

MGM Resorts Internationalµ

6.750%, 10/01/20

    5,200,000   
  2,000,000       

Neiman Marcus Group Ltd., LLC*

8.000%, 10/15/21

    1,513,750   
     

 

 

 
        25,521,989   
     

 

 

 
    Consumer Staples (1.1%)   
  4,900,000       

Smithfield Foods, Inc.µ

6.625%, 08/15/22

    5,163,375   
     

 

 

 
    Energy (2.1%)   
  500,000       

Gulfport Energy Corp.µ

7.750%, 11/01/20

    443,750   
  6,000,000       

Oasis Petroleum, Inc.µ

7.250%, 02/01/19

    3,667,500   
  7,500,000       

SESI, LLCµ~

6.375%, 05/01/19

    5,457,675   
     

 

 

 
        9,568,925   
     

 

 

 
    Financials (2.3%)   
  3,927,000       

Ally Financial, Inc.µ

6.250%, 12/01/17

    4,076,717   
  6,000,000       

International Lease Finance Corp.µ

8.750%, 03/15/17

    6,322,500   
     

 

 

 
        10,399,217   
     

 

 

 
    Health Care (4.5%)   
  5,900,000       

Endo International, PLCµ*‡

7.750%, 01/15/22

    6,154,438   
  7,500,000       

Tenet Healthcare Corp.µ

6.750%, 02/01/20

    7,237,500   
  7,300,000       

VPII Escrow Corp.µ*

7.500%, 07/15/21

    7,249,812   
     

 

 

 
        20,641,750   
     

 

 

 
    Industrials (4.0%)   
  5,000,000       

Icahn Enterprises, LPµ

6.000%, 08/01/20

    4,718,750   
  2,084,000       

Michael Baker International, LLCµ*

8.250%, 10/15/18

    1,789,635   
  5,000,000       

United Continental Holdings, Inc.µ

6.375%, 06/01/18

    5,193,750   
  6,600,000       

United Rentals North America, Inc.µ

7.625%, 04/15/22

    6,802,125   
     

 

 

 
        18,504,260   
     

 

 

 
    Information Technology (0.5%)   
  2,178,000       

Alliance Data Systems Corp.*

6.375%, 04/01/20

    2,190,251   
     

 

 

 
PRINCIPAL
AMOUNT
                VALUE  
     
    Materials (1.6%)  
  3,000,000       

Constellium, NV*

8.000%, 01/15/23

  $ 2,630,625   
  5,000,000       

Trinseo Materials Operating, SCA*

6.750%, 05/01/22

    4,771,875   
     

 

 

 
        7,402,500   
     

 

 

 
    Telecommunication Services (3.0%)  
  4,800,000       

Frontier Communications Corp.µ

8.500%, 04/15/20

    4,779,000   
  8,400,000       

Intelsat, SA

7.750%, 06/01/21

    3,627,750   
  7,900,000       

Sprint Corp.µ

7.625%, 02/15/25

    5,386,812   
     

 

 

 
        13,793,562   
     

 

 

 
    Utilities (2.3%)  
  4,950,000       

Calpine Corp.µ*

7.875%, 01/15/23

    5,284,125   
  6,000,000       

NRG Energy, Inc.µ

7.875%, 05/15/21

    5,201,250   
     

 

 

 
        10,485,375   
     

 

 

 
   

TOTAL CORPORATE BONDS

(Cost $142,487,402)

    123,671,204   
     

 

 

 
  CONVERTIBLE BONDS (76.6%)   
    Consumer Discretionary (14.1%)  
  4,500,000       

CalAtlantic Group, Inc.µ~

1.250%, 08/01/32

    4,715,190   
  2,000,000       

Ctrip.com International, Ltd.*

1.000%, 07/01/20

    2,124,410   
  4,400,000       

Jarden Corp.µ

1.125%, 03/15/34

    5,161,442   
  2,830,000       

Lennar Corp.µ*

3.250%, 11/15/21

    5,114,192   
  6,150,000       

Liberty Interactive, LLC (Time Warner Cable, Inc., Time Warner, Inc.)µ§

0.750%, 03/30/43

    9,295,448   
  5,825,000       

Liberty Media Corp.µ

1.375%, 10/15/23

    5,525,158   
    Priceline Group, Inc. µ~^  
  8,550,000        0.900%, 09/15/21     8,222,620   
  6,370,000        0.350%, 06/15/20     7,022,161   
  2,500,000       

Restoration Hardware Holdings, Inc.µ*^

0.000%, 06/15/19

    2,138,238   
  14,450,000       

Tesla Motors, Inc.

1.250%, 03/01/21

    11,608,841   
  3,750,000       

Toll Brothers Finance Corp.µ^

0.500%, 09/15/32

    3,609,788   
     

 

 

 
        64,537,488   
     

 

 

 
    Energy (1.7%)  
  4,200,000       

Chesapeake Energy Corp.µ

2.500%, 05/15/37

    1,992,375   
  10,760,000       

Whiting Petroleum Corp.µ*~^

1.250%, 04/01/20

    5,811,906   
     

 

 

 
        7,804,281   
     

 

 

 
 

 

See accompanying Notes to Schedule of Investments


Calamos Dynamic Convertible and Income Fund

 

SCHEDULE OF INVESTMENTS JANUARY 31, 2016 (UNAUDITED)

 

PRINCIPAL
AMOUNT
                VALUE  
     
    Financials (8.0%)   
  5,300,000       

AmTrust Financial Services, Inc.

2.750%, 12/15/44

  $ 4,617,042   
    Ares Capital Corp.  
  6,100,000        5.750%, 02/01/16     6,104,056   
  4,250,000        4.375%, 01/15/19µ^     4,246,409   
  1,500,000       

Blackstone Mortgage Trust, Inc.

5.250%, 12/01/18

    1,490,370   
  2,000,000       

Colony Capital, Inc.

3.875%, 01/15/21

    1,765,490   
  4,200,000       

Colony Starwood Homes

3.000%, 07/01/19

    3,921,792   
  1,350,000       

Extra Space Storage, LP*

3.125%, 10/01/35

    1,514,767   
  2,200,000       

Jefferies Group, Inc.µ

3.875%, 11/01/29

    2,184,017   
  912,000       

MGIC Investment Corp.

2.000%, 04/01/20

    1,024,915   
    Prospect Capital Corp.µ  
  2,300,000        5.750%, 03/15/18     2,199,053   
  2,000,000        4.750%, 04/15/20^     1,718,570   
  5,800,000       

Starwood Property Trust, Inc.µ~^

4.550%, 03/01/18

    5,838,483   
     

 

 

 
        36,624,964   
     

 

 

 
    Health Care (16.4%)   
  2,600,000       

Acorda Therapeutics, Inc.

1.750%, 06/15/21

    2,750,358   
  1,000,000       

Anacor Pharmaceuticals, Inc.

2.000%, 10/15/21

    2,428,935   
  3,400,000       

BioMarin Pharmaceutical, Inc.

1.500%, 10/15/20

    3,750,982   
  3,450,000       

Cepheidµ^

1.250%, 02/01/21

    2,922,323   
  1,500,000       

Depomed, Inc.

2.500%, 09/01/21

    1,531,268   
  4,165,000       

Emergent Biosolutions, Inc.

2.875%, 01/15/21

    5,446,341   
  1,300,000       

Gilead Sciences, Inc.µ^

1.625%, 05/01/16

    4,805,476   
  6,000,000       

HealthSouth Corp.µ

2.000%, 12/01/43

    6,527,220   
  6,100,000       

Hologic, Inc.µ‡

2.000%, 03/01/42

    7,541,552   
  3,300,000       

Illumina, Inc.µ^

0.250%, 03/15/16

    6,216,622   
  3,435,000       

Impax Laboratories, Inc.*

2.000%, 06/15/22

    3,210,111   
  1,460,000       

Incyte Corp.µ^

1.250%, 11/15/20

    2,248,677   
  2,300,000       

Integra LifeSciences Holdings Corp.

1.625%, 12/15/16

    2,762,680   
  4,500,000       

Ionis Pharmaceuticals, Inc.µ^

1.000%, 11/15/21

    4,011,930   
  4,500,000       

Jazz Investments I, Ltd.µ^

1.875%, 08/15/21

    4,585,657   
  2,400,000       

Medidata Solutions, Inc.µ^

1.000%, 08/01/18

    2,454,576   
  4,350,000       

Molina Healthcare, Inc.µ^

1.625%, 08/15/44

    4,983,751   
  3,300,000       

NuVasive, Inc.

2.750%, 07/01/17

    4,035,587   
PRINCIPAL
AMOUNT
                VALUE  
     
  3,150,000       

Wright Medical Group, Inc.*

2.000%, 02/15/20

  $ 3,013,180   
     

 

 

 
        75,227,226   
     

 

 

 
    Industrials (1.9%)   
  2,500,000       

Air Lease Corp.

3.875%, 12/01/18

    2,948,575   
  1,750,000       

Greenbrier Companies, Inc.

3.500%, 04/01/18

    1,778,420   
  3,500,000       

Trinity Industries, Inc.µ

3.875%, 06/01/36

    3,964,048   
     

 

 

 
        8,691,043   
     

 

 

 
    Information Technology (33.2%)   
  5,935,000       

Citrix Systems, Inc.µ^

0.500%, 04/15/19

    6,269,912   
  3,500,000       

Euronet Worldwide, Inc.µ

1.500%, 10/01/44

    4,392,972   
  4,475,000       

Finisar Corp.

0.500%, 12/15/33

    4,112,861   
    FireEye, Inc.*  
  4,234,000        1.625%, 06/01/35     3,241,402   
  3,400,000        1.000%, 06/01/35     2,793,389   
  3,000,000       

Inphi Corp.*

1.125%, 12/01/20

    2,907,240   
  2,717,000       

Integrated Device Technology, Inc.*

0.875%, 11/15/22

    2,737,581   
    Intel Corp.µ^  
  5,900,000        3.250%, 08/01/39     9,068,978   
  2,600,000        2.950%, 12/15/35     3,192,137   
  7,600,000       

LinkedIn Corp.µ

0.500%, 11/01/19

    7,707,578   
  2,100,000       

Mentor Graphics Corp.µ^

4.000%, 04/01/31

    2,171,379   
  7,400,000       

Microchip Technology, Inc.µ*

1.625%, 02/15/25

    7,168,787   
  3,850,000       

Micron Technology, Inc.µ

3.125%, 05/01/32

    5,098,170   
  3,500,000       

Novellus Systems, Inc.µ^

2.625%, 05/15/41

    7,478,257   
  5,750,000       

NVIDIA Corp.µ

1.000%, 12/01/18

    8,662,404   
  5,025,000       

NXP Semiconductors, NV

1.000%, 12/01/19

    5,298,084   
    ON Semiconductor Corp.µ  
  3,500,000        1.000%, 12/01/20*     3,113,145   
  3,100,000        2.625%, 12/15/26     3,304,244   
  875,000       

Palo Alto Networks, Inc.

0.000%, 07/01/19

    1,272,701   
  2,400,000       

Proofpoint, Inc.*

0.750%, 06/15/20

    2,280,588   
  4,125,000       

Red Hat, Inc. µ^

0.250%, 10/01/19

    4,901,428   
  8,545,000       

Salesforce.com, Inc.µ^

0.250%, 04/01/18

    10,126,722   
  4,300,000       

ServiceNow, Inc.µ^

0.000%, 11/01/18

    4,624,198   
  9,600,000       

SunEdison, Inc.µ*^

0.250%, 01/15/20

    1,949,136   
    SunPower Corp.  
  4,075,000        0.750%, 06/01/18µ^     4,873,639   
  1,600,000        4.000%, 01/15/23*     1,732,648   
  4,500,000       

Synchronoss Technologies, Inc.µ

0.750%, 08/15/19

    4,317,570   
 

 

See accompanying Notes to Schedule of Investments


Calamos Dynamic Convertible and Income Fund

 

SCHEDULE OF INVESTMENTS JANUARY 31, 2016 (UNAUDITED)

 

PRINCIPAL
AMOUNT
                VALUE  
     
    Take-Two Interactive Software, Inc.  
  2,950,000        1.000%, 07/01/18µ^   $ 4,909,169   
  400,000        1.750%, 12/01/16     729,780   
  10,075,000       

Twitter, Inc.µ^

1.000%, 09/15/21

    8,200,244   
  3,250,000       

Verint Systems, Inc.µ^

1.500%, 06/01/21

    2,983,468   
    Workday, Inc.  
  3,300,000        1.500%, 07/15/20µ^     3,496,977   
  1,300,000        0.750%, 07/15/18     1,354,600   
  6,000,000       

Yahoo!, Inc.µ~^

0.000%, 12/01/18

    5,774,850   
     

 

 

 
        152,246,238   
     

 

 

 
    Materials (0.7%)   
  3,200,000       

RTI International Metals, Inc.µ

1.625%, 10/15/19

    3,011,520   
     

 

 

 
    Utilities (0.6%)   
  3,400,000       

NRG Yield, Inc.*

3.250%, 06/01/20

    2,795,616   
     

 

 

 
   

TOTAL CONVERTIBLE BONDS

(Cost $418,384,426)

    350,938,376   
     

 

 

 
NUMBER OF
SHARES
                VALUE  
  CONVERTIBLE PREFERRED STOCKS (31.9%)   
    Consumer Discretionary (1.2%)   
  81,750       

Fiat Chrysler Automobiles, NVµ

7.875%

    5,288,040   
     

 

 

 
    Consumer Staples (1.8%)   
  29,400       

Post Holdings, Inc.µ

5.250%

    3,278,247   
  84,300       

Tyson Foods, Inc.µ

4.750%

    5,061,372   
     

 

 

 
        8,339,619   
     

 

 

 
    Energy (0.4%)   
  96,825       

Southwestern Energy Companyµ

6.250%

    1,975,230   
     

 

 

 
    Financials (10.9%)   
  104,000       

Affiliated Managers Group, Inc.µ

5.150%

    5,226,000   
  70,700       

American Tower Corp.µ

5.250%

    7,010,612   
  9,225       

Bank of America Corp.µ

7.250%

    10,120,563   
  43,500       

Crown Castle International Corp.µ

4.500%

    4,610,565   
  12,155       

Wells Fargo & Companyµ

7.500%

    14,245,660   
  76,025       

Welltower, Inc.

6.500%

    4,315,179   
  97,000       

Weyerhaeuser Companyµ

6.375%

    4,445,510   
     

 

 

 
        49,974,089   
     

 

 

 
    Health Care (8.6%)   
  18,600       

Allergan, PLCµ

5.500%

    17,638,194   
NUMBER OF
SHARES
                VALUE  
     
  34,500       

Amsurg Corp.µ

5.250%

  $ 4,767,555   
  210,225       

Anthem, Inc.µ

5.250%

    9,268,820   
  7,700       

Teva Pharmaceutical Industries, Ltd.

7.000%

    7,601,825   
     

 

 

 
        39,276,394   
     

 

 

 
    Industrials (1.9%)   
  67,900       

Stanley Black & Decker, Inc.µ

6.250%

    7,202,832   
  15,000       

Stericycle, Inc.

5.250%

    1,363,950   
     

 

 

 
        8,566,782   
     

 

 

 
    Materials (0.3%)   
  58,400       

Alcoa, Inc.

5.375%

    1,538,840   
     

 

 

 
    Telecommunication Services (2.3%)   
  45,662       

Frontier Communications Corp.

11.125%

    4,081,269   
  96,000       

T-Mobile USA, Inc.µ

5.500%

    6,625,920   
     

 

 

 
        10,707,189   
     

 

 

 
    Utilities (4.5%)   
  121,000       

Dominion Resources, Inc.µ

6.375%

    6,020,960   
  83,600       

Exelon Corp.µ

6.500%

    3,596,472   
  192,000       

NextEra Energy, Inc.µ

5.799%

    10,924,800   
     

 

 

 
        20,542,232   
     

 

 

 
   

TOTAL CONVERTIBLE PREFERRED STOCKS

(Cost $162,715,976)

    146,208,415   
     

 

 

 
  COMMON STOCKS (0.4%)   
    Industrials (0.4%)   
  19,545        United Technologies Corp.µ^     1,713,901   
     

 

 

 
   

TOTAL COMMON STOCKS

(Cost $2,285,330)

    1,713,901   
     

 

 

 
  SHORT TERM INVESTMENT (8.8%)   
  40,164,183       

Fidelity Prime Money Market Fund - Institutional Class

(Cost $40,164,183)

    40,164,183   
     

 

 

 

 
 

      TOTAL INVESTMENTS (144.7%)
(Cost $766,037,317)

    662,696,079   
     

 

 

 
  LIABILITIES, LESS OTHER ASSETS (-44.7%)     (204,819,942
     

 

 

 
  NET ASSETS (100.0%)   $ 457,876,137   
     

 

 

 
 

 

See accompanying Notes to Schedule of Investments


Calamos Dynamic Convertible and Income Fund

 

SCHEDULE OF INVESTMENTS JANUARY 31, 2016 (UNAUDITED)

 

NOTES TO SCHEDULE OF INVESTMENTS

 

µ   Security, or portion of security, is held in a segregated account as collateral for note payable aggregating a total value of $409,180,227. $98,998,226 of the collateral has been re-registered by one of the counterparties, BNP (see Note 3 — Borrowings).
*   Securities issued and sold pursuant to a Rule 144A transaction are excepted from the registration requirement of the Securities Act of 1933, as amended. These securities may only be sold to qualified institutional buyers (“QIBs”), such as the Fund. Any resale of these securities must generally be effected through a sale that is registered under the Act or otherwise exempted from such registration requirements.
~   Security, or portion of security, is segregated as collateral (or potential collateral for future transactions) for written options. The aggregate value of such securities is $10,991,699.
  Variable rate or step bond security. The rate shown is the rate in effect at January 31, 2016.
§   Securities exchangeable or convertible into securities of one or more entities that are different than the issuer. Each entity is identified in the parenthetical.
^   Security, or portion of security, is on loan.
 

 

See accompanying Notes to Schedule of Investments


NOTE 1 — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization. Calamos Dynamic Convertible and Income Fund (the “Fund”) was organized as a Delaware statutory trust on March 11, 2014 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 March 27, 2015.

The Fund’s investment strategy is to provide total return through a combination of capital appreciation and current income. Under normal circumstances, at least 80% of the Fund’s managed assets will be invested in convertible securities and income-producing securities, with at least 50% of the Fund’s managed assets invested in convertible securities (including synthetic convertible securities, which are single instruments, or multiple instruments held in concert, that are composed of two or more securities with investment characteristics that, when taken together, resemble those of traditional convertible securities). The Fund may invest up to 50% of its managed assets in securities of foreign issuers, with up to 15% of its managed assets in securities issued by foreign issuers in emerging markets. The Fund may invest up to 20% of its managed assets in high-yield non-convertible bonds (excluding such securities held to create synthetic convertible securities). “Managed assets” means the Fund’s total assets (including any assets attributable to any leverage that may be outstanding) minus total liabilities (other than debt representing financial leverage).

Significant Accounting Policies. The schedule of investments have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The following summarizes the significant accounting policies of the Fund:

Fund Valuation. The valuation of the Fund’s 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 official closing price, which is the last current reported sales price on its principal exchange at the time each 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 a 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 on its principal exchange 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 in 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 Fund’s 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 Fund’s 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.

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 as of January 31, 2016.

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.

Option Transactions. For hedging and investment purposes, the Fund may purchase or write (sell) put and call options. One of the risks associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of premium and change in value should the counterparty not perform under the contract. 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.

NOTE 2 — INVESTMENTS

The following information is presented on a federal income tax basis as of January 31, 2016. 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 January 31, 2016 was as follows:

 

Cost basis of investments

   $ 765,692,347   
  

 

 

 

Gross unrealized appreciation

     3,648,541   

Gross unrealized depreciation

     (106,644,809
  

 

 

 

Net unrealized appreciation (depreciation)

   $ (102,996,268
  

 

 

 

NOTE 3 — 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 “BNP Agreement”) with BNP Paribas Prime Brokerage International Ltd. (“BNP”) that allows the Fund to borrow up to $135.0 million and a lending agreement, (“Lending Agreement”) as defined below. In addition, the financing package also includes a Credit Agreement (the “SSB Agreement”, together with the BNP Agreement, “Agreements”) with State Street Bank and Trust Company (“SSB”) that allows the Fund to borrow up to a limit of $135.0 million, and a related securities lending authorization agreement (“Authorized Agreement”). Borrowings under the BNP Agreement and the SSB Agreement are secured by assets of the Fund that are held with the Fund’s custodian in a separate account (the “pledged collateral”). BNP and SSB share an equal claim on the pledged collateral, subject to any adjustment that may be agreed upon between the lenders. Interest on the BNP Agreement is charged at the three month LIBOR (London Inter-bank Offered Rate) plus .65% on the amount borrowed and .55% on the undrawn balance. Interest on the SSB Agreement is charged on the drawn amount at the rate of Overnight LIBOR plus .80% and .10% on the undrawn balance (if the undrawn amount is more than 75% of the borrowing limit, the commitment fee is .20%). For the period ended January 31, 2016, the average borrowings under the Agreements were $219.0 million. For the period ended January 31, 2016, the average interest rate was 0.99%. As of January 31, 2016, the amount of total outstanding borrowings was $215.0 million ($107.5 million under the BNP Agreement and $107.5 million under the SSB Agreement), which approximates fair value. The interest rate applicable to the borrowings on January 31, 2016 was 1.22%.

The Lending Agreement with BNP 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 BNP Agreement. The Lending Agreement is intended to permit the Fund to significantly reduce the cost of its borrowings under the BNP 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 Fund’s 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 with BNP, 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 Fund’s 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 Fund’s 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 Fund’s 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 for the ultimate delivery of such Lent Securities, or equivalent securities, to be made to the Fund’s custodian, 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.

Under the terms of the Authorized Agreement with SSB, all securities lent through SSB must be secured continuously by collateral received in cash, cash equivalents, or U.S. Treasury bills and maintained on a current basis at an amount at least equal to the market value of the securities loaned. Cash collateral held by SSB on behalf of the Fund may be credited against the amounts borrowed under the SSB Agreement. Any amounts credited against the SSB Agreement would count against the Fund’s leverage limitations under the 1940 Act, unless otherwise covered in accordance with SEC Release IC-10666. Under the terms of the Authorized Agreement with SSB, SSB will return the value of the collateral to the borrower upon the return of the lent securities, which will eliminate the credit against the SSB Agreement and will cause the amount drawn under the SSB Agreement to increase in an amount equal to the returned collateral. Under the terms of the Authorized Agreement with SSB, the Fund will make a variable “net income” payment related to any collateral credited against the SSB Agreement which will be paid to the securities borrower, less any payments due to the Fund or SSB under the terms of the Authorized Agreement. The Fund has the right to call a loan and obtain the securities loaned at any time. As of January 31, 2016, the Fund did not use any of its cash collateral to offset the SSB Agreement, and was required to pay a “net income” payment equal to an annualized interest rate of 0.29%, which can fluctuate depending on interest rates. As of January 31, 2016, no securities were on loan.

Note 4 — Fair Value Measurement

Various inputs are used to determine the value of the Fund’s 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.

 

   

Level 3 — Prices reflect unobservable market inputs (including the Fund’s 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 Fund’s 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 Fund’s holdings at fair value:

 

     Level 1      Level 2      Level 3      Total  

Assets:

           

Corporate Bonds

   $       $ 123,671,204       $       $ 123,671,204   

Convertible Bonds

             350,938,376                 350,938,376   

Convertible Preferred Stocks

     124,814,303         21,394,112                 146,208,415   

Common Stocks U.S.

     1,713,901                         1,713,901   

Short Term Investment

     40,164,183                         40,164,183   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 166,692,387       $ 496,003,692       $         —       $ 662,696,079   
  

 

 

    

 

 

    

 

 

    

 

 

 


ITEM 2. 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-Q 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 quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 3. EXHIBITS.

(a) Certification of Principal Executive Officer.

(b) Certification of Principal Financial Officer.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CALAMOS DYNAMIC CONVERTIBLE AND INCOME FUND
By:   /S/     JOHN P. CALAMOS, SR.
NAME:   John P. Calamos, Sr.
TITLE:   Principal Executive Officer
DATE:  

March 21, 2016

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 DYNAMIC CONVERTIBLE AND INCOME FUND

By:   /S/     JOHN P. CALAMOS, SR.
NAME:   John P. Calamos, Sr.
TITLE:   Principal Executive Officer
DATE:  

March 21, 2016

By:   /S/     NIMISH S. BHATT
NAME:   Nimish S. Bhatt
TITLE:   Principal Financial Officer
DATE:  

March 21, 2016