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As filed with the Securities and Exchange Commission on March 26, 1999
Securities Act registration no. 333-72511
Investment Company Act file no. 811-09237
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
________________________________________________________________________________
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO.1 [X]
________________________________________________________________________________
CALAMOS INSURANCE TRUST
(Registrant)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Telephone number: 630-245-7200
________________________________________________________________________________
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James S. Hamman, Jr., Secretary Cameron S. Avery
Calamos Asset Management, Inc. Bell, Boyd, & Lloyd
1111 East Warrenville Road 70 West Madison Street, Suite 3300
Naperville, Illinois 60563-1493 Chicago, Illinois 60602-4207
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(Agents for service)
________________________________________________________________________________
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. (S) 270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8 (a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8 (a), MAY DETERMINE.
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CALAMOS(R) INSURANCE TRUST
PROSPECTUS
MAY 1, 1999
CALAMOS(R) Convertible Portfolio
[CALAMOS LOGO]
An investment in the Portfolio is not a bank deposit, is not FDIC-insured, and
may lose value.
The Securities and Exchange Commission has not approved the Portfolio's shares
as an investment or determined whether this prospectus is accurate or complete.
If anyone tells you otherwise, they are committing a crime.
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TABLE OF CONTENTS
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Summary............................................................ 3
Investment Objective.......................................... 3
Principal Investment Strategies............................... 3
Principal Risks of Investing in the Portfolio................. 3
Investment Returns............................................ 4
Fees and Expenses............................................. 4
How the Portfolio Invests.......................................... 5
Management of the Portfolio........................................ 10
Shareholder Information............................................ 11
Purchasing Shares............................................. 11
Selling Shares................................................ 12
Valuing Shares................................................ 12
Other Information............................................. 13
Distributions and Taxes............................................ 13
For More Information............................................... 15
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PORTFOLIO INFORMATION
The Calamos Convertible Portfolio is a portfolio of the Calamos Insurance
Trust (the "Trust"). The Trust offers the Portfolio's shares to certain life
insurance companies (Participating Insurance Companies) for allocation to
certain separate accounts established for the purpose of funding qualified and
non-qualified variable annuity contracts and variable life insurance contracts
(together, "Variable Contracts"). The Trust may also offer the Portfolio to
certain pension plans and retirement arrangements and accounts permitting
accumulation of funds on a tax-deferred basis ("Retirement Plans"). These
separate accounts of the Participating Insurance Companies are the shareholders
of the Portfolio. Individual variable annuity and variable life insurance
contract holders are not the "shareholders" of the Portfolio. In other words,
you cannot directly purchase shares of the Portfolio.
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SUMMARY
Investment Objective
The Portfolio seeks current income as its primary objective with capital
appreciation as its secondary objective.
Principal Investment Strategies
The Portfolio invests primarily in a diversified portfolio of convertible
securities. These convertible securities may be either debt securities (bonds)
or preferred stock that are convertible into common stock, and may be issued by
both U.S. and foreign companies. Under normal market conditions, the Portfolio
invests at least 65% of its total assets in convertible securities.
The Portfolio may invest without limit in high yield or "junk" bonds, and
may invest up to 25% of its net assets in foreign securities. The Portfolio may
also invest a substantial portion of its assets in securities that have not been
registered for public sale, but that are eligible for purchase and sale by
certain qualified institutional buyers (Rule 144A securities).
Principal Risks of Investing in the Portfolio
As with any security, there are market and investment risks associated with
your investment in the Portfolio. The value of your investment in the Portfolio
will fluctuate over time and it is possible to lose money on your investment in
the Portfolio if any of the following occurs:
- The stock market goes down.
- There is an economic downturn, a substantial period of changing
interest rates or a period of political uncertainty that affects the
Portfolio's investments.
- The value of the underlying common stock of the Portfolio's
convertible security investments fall below the price at which the
Portfolio can exchange the security for the common stock.
- A corporate bond issuer does not make interest or principal payments
when due or its credit quality falls. The Portfolio's investment in
junk bonds entails a greater risk, including the risk of default, than
an investment in higher rated securities.
In addition, you could lose money on your investment in the Portfolio if
the Portfolio invests in foreign securities, because such securities tend to be
more volatile than U.S.
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securities and may subject the Portfolio to risks it may not encounter with an
investment in U.S. securities. These risks include:
- Less available public information
- Country risk, including economic and political instability
- Higher transaction costs
- Higher price volatility and less liquidity
- Currency exchange rate fluctuation
The Portfolio may be appropriate for long-term conservative investors who
seek a lower-risk alternative to equity investments or a way to diversify their
fixed-income investments.
Please refer to "How the Portfolio Invests" below for more information
regarding certain securities that the Portfolio may buy and a more detailed
discussion of risks.
Investment Returns
The Portfolio will provide you with performance information to assist you
in understanding that the Portfolio's return may vary and that there are risks
associated with investing in the Portfolio. As always, please note that the past
performance of the Portfolio will not indicate future performance.
Fees and Expenses
THE TABLES BELOW DESCRIBE THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY
AND HOLD SHARES OF THE PORTFOLIO.
The Portfolio's shares can be purchased by Retirement Plans and by separate
accounts of Participating Insurance companies offering Variable Contracts. The
Portfolio's shares are not offered directly to the public. The tables below do
not reflect the expenses charged at the separate account level. Please read the
Variable Contract prospectus to obtain that information.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
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Maximum Sales Charge (Load) Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends NONE
Redemption Fee NONE
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ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM
PORTFOLIO ASSETS)
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Management Fees .75%
Distribution (12b-1) Fees NONE
Other Expenses (1) 1.25
Total Annual Portfolio Operating Expenses (2) 2.00%
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(1) "Other Expenses" are based on estimated amounts for the current
fiscal year.
(2) The investment manager has voluntarily undertaken to waive fees and/or
reimburse Portfolio expenses so that the Total Annual Portfolio Operating
Expenses are limited to 1.00% of the Portfolio's average net assets. The
investment manager may terminate the expense limitation at any time.
EXAMPLE: This example is intended to help you compare the cost of investing
in the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
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1 year* 3 years*
$204 $637
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* The Example is based on Total Annual Portfolio Operating Expenses, as
described in the Annual Portfolio Operating Expense table above. If the expenses
had been computed based on the net expenses (Total Annual Portfolio Operating
Expenses less fee waivers and/or expense reimbursements), your costs would have
been $102 for 1 year and $318 for 3 years.
HOW THE PORTFOLIO INVESTS
The Portfolio seeks current income as its primary objective with capital
appreciation as its secondary objective. The Trust's board of trustees may
change the Portfolio's investment objective without shareholder approval. The
Portfolio invests primarily in a diversified portfolio of convertible
securities. Under normal market conditions, the Portfolio invests at least 65%
of its total assets in convertible securities.
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Calamos Asset Management, Inc., the Portfolio's investment manager,
believes that there are various advantages to buying convertible securities.
These advantages include the potential for capital appreciation if the value of
the underlying common stock increases, the relatively high yield received from
dividend or interest payments as compared to common stock dividends, and the
relatively lower price volatility as compared to common stock. The Portfolio
seeks to profit from this strategy by receiving interest on the convertible
security and through an increase in value of the convertible security if the
market value of the underlying common stock increases above the conversion price
on the convertible security.
In selecting securities for the Portfolio, the investment manager applies a
four-step approach:
- analysis of the default risk of the convertible security using
traditional credit analysis
- employment of fundamental equity analysis to determine the capital
appreciation potential of the common stock into which the security
converts
- consideration of the risk/return potential of the convertible security
- consideration of the diversification of the Portfolio and other
portfolio composition criteria
In its equity and credit analysis, the investment manager considers
the issuer's:
- financial soundness
- ability to make interest and dividend payments
- earnings and cash-flow forecast
- quality of management
TYPES OF INVESTMENTS
CONVERTIBLE SECURITIES. Convertible securities include debt obligations and
preferred stock of an issuer which may be exchanged for a predetermined price
(the conversion price) into the common stock of the issuer. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality.
Many convertible securities are issued with a call feature that allows the
issuer of the security to choose when to redeem the security. If a convertible
security held by the Portfolio is called for redemption, the Portfolio will be
required to redeem the security, convert it into the underlying common stock, or
sell it to a third party at a time that may be unfavorable to the Portfolio.
Conversely, certain convertible debt securities may
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provide a "put option" to the Portfolio which entitles the Portfolio to make
the issuer redeem the security at a premium over the stated principal amount of
the debt security.
The investment manager may also create a "synthetic" convertible security.
The investment manager may create a "synthetic" convertible security by
combining fixed income securities ("fixed income component") with the right to
acquire equity securities ("convertible component"). The fixed-income component
is achieved by investing in non-convertible fixed-income securities such as
bonds, preferred stocks and money market instruments. The convertible component
is achieved by investing in warrants or options to buy common stock at a certain
exercise price, or options on a stock index. The Portfolio may also purchase
synthetic securities manufactured by other parties (typically investment banks),
including convertible structured notes. More flexibility is possible in the
assembly of a synthetic convertible security than in the purchase of a
convertible security. The fixed income component and the convertible component
may be represented by different issuers, and each component may be purchased
separately, at different times. Synthetic convertible securities are not
considered convertible securities for purposes of the Portfolio's policy to
invest at least 65% of its total assets in convertible securities. Additional
information regarding synthetic securities appears below.
EQUITY INVESTMENTS. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and depository
receipts. An investment in the equity securities of a company represents a
proportionate ownership interest in the company. Therefore, the Portfolio
participates in the financial success or failure of any company in which it has
an equity interest. Compared with other asset classes, equity investments have a
greater potential for gain.
FOREIGN SECURITIES. The Portfolio may invest up to 25% of its net assets in
securities of foreign issuers. A foreign issuer is a company organized under the
laws of a foreign country that has its principal trading market for its security
in a foreign country. For purposes of the 25% limitation, foreign securities do
not include securities represented by American Depository Receipts (ADRs) or
securities guaranteed by a U.S. person. ADRs are traded on U.S. exchanges and
represent an ownership interest in a foreign security. They are generally issued
by a U.S. bank as a substitute for direct ownership of the foreign security.
International investing allows the Portfolio to achieve greater diversification
and to take advantage of changes in foreign economies and market conditions.
144A SECURITIES. The Portfolio may invest a substantial portion of its
assets in securities that are not publicly traded, but that are eligible for
purchase and sale by certain qualified institutional buyers pursuant to Rule
144A under the Securities Act of 1933.
JUNK BONDS. The Portfolio may invest without limit in convertible and
non-convertible debt securities rated BB or lower by Standard & Poor's
Corporation, or Ba or lower by Moody's Investor Services, Inc., and securities
that are not rated but are considered by the investment manager to be of similar
quality (commonly called "junk" bonds). The
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Portfolio will not, however, acquire a security rated below C. The Portfolio
expects to maintain, over the long-term, an average credit quality rating of
investment grade.
DEFENSIVE INVESTING. The Portfolio may depart from its principal
investment strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions without limitation in all
types of money market and short term debt securities, and repurchase agreements.
In a repurchase agreement, the Portfolio purchases a security and the seller (a
bank or securities dealer) simultaneously agrees to repurchase the security at
the same price plus an amount equal to an agreed-upon interest rate, on a
specified date. During periods when the Portfolio has assumed a temporary
defensive position, the Portfolio may not be able to achieve its investment
objective.
INVESTMENT RISKS
All investments, including those in mutual funds, have risks. The Portfolio
is designed for long-term investors who can accept the fluctuations in portfolio
value and other risks associated with the Portfolio. There can be no guarantee
that the Portfolio will achieve its objective.
MARKET RISK. There are market risks with any security. Market risk is the
risk that the securities markets will increase or decrease in value. Your
investment may lose value in response to a general decline in the stock market
regardless of the individual results of the company in which the Portfolio
invests.
DEFAULT RISK. Default risk refers to the risk that an issuer of a debt
security will be unable to fulfill its obligation to repay principal and
interest. The lower a bond is rated, the greater its default risk.
INTEREST RATE RISK. Interest rate risk is the risk that the Portfolio's
investments will decrease in value as a result of an increase in interest rates.
Generally, there is an inverse relationship between the value of a debt security
and interest rates. Therefore, the value of bonds held by the Portfolio
generally decreases in periods of rising interest rates. In addition, the
prices of bonds with a longer term to maturity are normally more volatile in
response to interest rate changes than are shorter-term bonds.
INVESTMENT MANAGEMENT. The investment manager's ability to choose suitable
investments for the Portfolio has a significant impact on the Portfolio's
ability to achieve its investment objective.
CONVERTIBLE SECURITIES. As with all fixed-income securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. However, when the market
price of the common stock of the company issuing the convertible security is
more than the conversion price, the convertible security tends to reflect the
market price of the underlying common stock. As the market price of the
underlying common stock declines, the price of the convertible security tends to
be influenced more by the yield of the convertible security, and thus
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may not decline in price to the same extent as the underlying common stock.
Holders of convertible securities would be paid before the company's common
stock holders in the event of a liquidation of the issuing company.
Consequently, the issuer's convertible securities entail less risk than the
issuer's common stock.
EQUITY INVESTMENTS. Equity investments are subject to greater fluctuations
in market value than other asset classes as a result of such factors as the
company's business performance, investor perceptions, stock market trends and
general economic conditions. Smaller companies are especially sensitive to these
factors, and therefore may experience more price volatility than larger
companies.
FOREIGN MARKET RISK. There are special risks associated with investing in
foreign securities including fluctuations in exchange rates of foreign
currencies that will affect the U.S. dollar value of the security, and the
possibility of substantial price volatility as a result of political and
economic instability in the foreign country. Other risks of investing in foreign
securities include: less public information with respect to issuers of
securities, different accounting, auditing and financial reporting standards,
and less liquidity in foreign markets than in U.S. markets.
RULE 144A SECURITIES. As mentioned above, the Portfolio may purchase
securities that have been privately placed but that are eligible for purchase
and sale by certain qualified institutional buyers under Rule 144A. The
investment manager, under the supervision of the board of trustees, will
determine whether securities purchased under Rule 144A are illiquid (that is,
not readily marketable) and thus subject to the Portfolio's restriction of
investing no more than 10% of its net assets in illiquid securities. Investing
in Rule 144A securities could have the effect of increasing the amount of the
Portfolio's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
JUNK BONDS. Although junk bonds typically pay higher interest rates than
investment grade bonds, there is a greater likelihood that the junk bond issuer
will default on interest and principal payments. In the event of an issuer's
bankruptcy, claims of other creditors may have priority over the claims of junk
bond holders, leaving few or no assets to repay junk bond holders. Junk bonds
are also more sensitive to adverse economic changes or individual corporate
developments than higher quality bonds. During a period of adverse economic
changes, including a period of rising interest rates, issuers of such bonds may
be unable to make principal and interest payments.
SYNTHETIC CONVERTIBLE SECURITIES. Because a synthetic convertible security
is composed of two or more separate securities, each with its own market value,
the value of a synthetic convertible security will respond differently to market
fluctuations than a convertible security. In addition, if the value of the
underlying common stock or the level of the index involved in the convertible
component falls below the exercise price of the warrant or option, the warrant
or option may lose all value.
OTHER SECURITIES. While not the principal investments or strategies of the
Portfolio, the Portfolio may utilize other investments and investment techniques
which may impact
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Portfolio performance, including options, warrants, futures and other strategic
transactions. More information about Portfolio investments and strategies is
provided in the Statement of Additional Information.
The Portfolio is sold to the separate accounts of Participating Insurance
Companies offering Variable Contracts that are sold in a number of
jurisdictions. Certain states have regulations or guidelines concerning
concentration of investments and other investment techniques. If applied to the
Portfolio, the Portfolio may be limited in its ability to engage in certain
techniques and to manage its investments with the flexibility provided herein.
In order to permit the Portfolio to be available under Variable Contracts sold
in certain states, the Portfolio may make commitments that are more restrictive
than the investment policies and limitations described herein and in the
Statement of Additional Information. If the Portfolio determines that such a
commitment is no longer in the Portfolio's best interest, the commitment may be
revoked by terminating the availability of the Portfolio to Variable Contract
owners residing in such states.
MANAGEMENT OF THE PORTFOLIO
The Portfolio's investments are managed by its investment manager, Calamos
Asset Management, Inc. ("CAM"), 1111 E. Warrenville Road, Naperville, IL. At
February 1, 1999, CAM managed approximately $3.5 billion in assets of
individuals and institutions. CAM has been registered as an investment adviser
under the Investment Advisers Act of 1940 since 1987. John P. Calamos, president
of CAM, has been engaged in the investment advisory business since 1977.
Subject to the overall authority of the board of trustees, CAM furnishes
continuous investment supervision and management to the Portfolio under a
management agreement and also furnishes office space, equipment and management
personnel. For these services, the Portfolio pays CAM a fee based on average
daily net assets that is accrued daily and paid monthly. The fee paid by the
Portfolio is at the annual rate of .75% of average daily net assets. Additional
expenses are incurred under the Variable Contracts. These expenses are not
described in this prospectus. Variable contract owners and Retirement Plan
participants should consult with the Variable Contract disclosure document or
Retirement Plan information regarding these expenses.
From time to time, CAM may pay Participating Insurance Companies or other
organizations that provide administrative services for the Portfolio or that
provide Variable Contract owners and/or Retirement Plan participants other
services relating to the Portfolio. The amount of any such payment will be
determined by the nature and extent of the services provided by the
Participating Insurance Companies or other organizations. Payment of such
expenses by CAM will not increase the fees paid by the Portfolio or its
shareholders.
CAM has voluntarily undertaken to limit the annual ordinary operating
expenses of shares of the Portfolio to 1.00% of average daily net assets. This
expense limitation is voluntary and may be terminated by CAM at any time.
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John P. Calamos, President of the Trust, and Nick P. Calamos, Vice
President of the Trust, have managed the Portfolio since its inception in 1999.
During the past five years, John P. Calamos has been president of CAM and Nick
P. Calamos has been a managing director of CAM.
YEAR 2000 COMPLIANCE
Like other mutual funds, financial and business organizations and
individuals around the world, the Portfolio could be adversely affected if the
computer systems used by the investment manager and other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." CAM,
as investment manager, is taking steps that it believes are reasonably designed
to address the Year 2000 Problem with respect to computer systems that it uses
and to obtain reasonable assurances that comparable steps are being taken by the
Portfolio's other major service providers. At this time, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Portfolio. In addition, there can be no assurances that the Year 2000 Problem
will not have an adverse effect on global markets or economies, or on the
issuers whose securities are held by the Portfolio. Although CAM may consider
the Year 2000 Problem when evaluating investment opportunities, there can be no
assurance that improperly functioning computers will not affect specific issuers
or broad markets.
EURO CONVERSION
The introduction of the Economic and monetary union (EMU) in Europe
occurred on January 1, 1999, when eleven European countries adopted a single
currency # the euro. The full conversion to the euro is being phased in over a
three year period. During this time, valuation systems and other operational
problems may occur in connection with the Portfolio's investments quoted in the
euro. The investment manager is actively working to address euro-related issues
and understands that other key service providers are taking similar steps. EMU
is driven by the expectation of a number of economic benefits, including lower
transaction costs, reduced exchange risk, greater competition, and a broadening
and deepening of European financial markets. However, there are a number of
significant risks associated with EMU. Monetary and economic union on this
scale has never been attempted before. In addition, there is a significant
degree of uncertainty as to whether participating countries will remain
committed to EMU in the face of changing economic conditions. This uncertainty
may increase the volatility of the international markets in which the Portfolio
invests.
SHAREHOLDER INFORMATION
Purchasing Shares
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Shares of the Portfolio are purchased by the separate accounts of
Participating Insurance Companies or by Retirement Plans based on the
instructions they receive from the Variable Contract holders or Retirement Plan
participants. You cannot purchase Portfolio shares directly.
Selling Shares
Portfolio shares are sold by the separate accounts of Participating
Insurance Companies or by Retirement Plans. Shares may be sold to generate cash
to, among other things, pay a contract owner who requested a withdrawal or who
terminated a contract.
Valuing Shares
The Portfolio's share price, or net asset value (NAV), is determined as of
the close of regular session trading on the New York Stock Exchange (currently
4:00 p.m. Eastern time) each day that the Exchange is open. The Exchange is
regularly closed on New Year's Day, the third Monday in January and February,
Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving
and Christmas.
The NAV per share is calculated by dividing the value of all of the
securities and other assets of the Portfolio, less its liabilities, by the
number of Portfolio shares outstanding. Shares are purchased or sold at the NAV
next determined after receipt of a purchase or sale order in good form.
Portfolio securities are valued on the basis of market prices from the primary
market in which they are traded. As a general rule, equity securities listed on
a U.S. securities exchange or NASDAQ National Market are valued at the last
quoted sale price on the day the valuation is made. Bonds and other
fixed-income securities that are traded over the counter and on an exchange will
be valued according to the broadest and most representative market, and it is
expected this will ordinarily be the over-the-counter market.
The foreign securities held by the Portfolio are traded on exchanges
throughout the world. Trading on these foreign securities exchanges is
completed at various times throughout the day and often does not coincide with
the close of trading on the New York Stock Exchange. The value of foreign
securities is determined as of the earlier of the time the exchange on which the
securities are traded closes or as of the close of trading on the NYSE. As a
result, it is possible that events affecting the value of such securities may
occur that are not reflected in the computation of the Portfolio's NAV ,and the
NAV may change on days when shareholders will not be able to buy or sell the
Portfolio's shares.
If market prices are not readily available, securities and other assets are
valued at a fair value as determined by the board of trustees. The effect of any
fair value pricing will be that NAV will not be based on the last quoted price
of a security, but on a price which the board believes reflects the current and
true price of the security.
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OTHER INFORMATION
The Portfolio's shares can be purchased by Retirement Plans and by separate
accounts of certain life insurance companies (Participating Insurance Companies)
offering Variable Contracts. Individual variable annuity and variable life
insurance contract holders are not the "shareholders" of the Portfolio. Rather,
the separate accounts of the Participating Insurance Companies are the
shareholders of the Portfolio. You cannot directly purchase shares of the
Portfolio.
Please read the prospectus for the Variable Contract that you want to
purchase to learn about purchasing a contract. The Portfolio assumes no
responsibility for such prospectuses.
The Portfolio currently does not foresee any disadvantages to the holders
of variable life insurance contracts and variable annuity contracts arising from
the fact that the interests of the holders of such contracts may differ.
Nevertheless, the Trust's board of trustees intends to monitor events in order
to identify any material irreconcilable conflicts that may arise and to
determine what action, if any, should be taken.
DISTRIBUTIONS AND TAXES
Dividends and Capital Gains
The Portfolio intends to distribute to its shareholders substantially all
of its net investment income and net realized capital gains. The Portfolio
declares and pays dividends from net investment income quarterly, and pays any
long-term capital gains annually.
Taxes
The Trust intends that the Portfolio will qualify as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986 and will meet certain
diversification requirements applicable to mutual funds underlying variable
insurance products. For a discussion regarding what it means to qualify as a
RIC and a general discussion concerning some of the possible tax consequences
associated with the operation of the Trust, please refer to the section
entitled, "Taxation" in the Statement of Additional Information.
For a discussion of the taxation of the Participating Insurance Companies
and separate accounts, as well as the tax treatment of the Variable Contracts
and the owners thereof, see the disclosure documents for the Variable Contracts.
For information regarding the taxation of Retirement Plans, as well as the
participants thereunder, see the plan administrator and plan documents for the
Retirement Plan.
PLEASE CONSULT WITH YOUR TAX ADVISOR REGARDING YOUR PARTICULAR TAX SITUATION.
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You do not own the Portfolio's shares directly; therefore, the Portfolio's
distributions are not likely to affect your tax situation. However, the
separate accounts, in which you own a Variable Contract, may be affected by
Portfolio distributions. Tax consequences to Variable Contract holders are
described in the separate prospectuses issued by the Participating Insurance
Companies.
Portfolio distributions may be taxed as ordinary income or capital gains.
Capital gains may be taxed at different rates depending on the length of time
that the assets are held by the Portfolio. The Portfolio's distributions,
whether received in cash or reinvested in additional Portfolio shares, may be
subject to federal income tax.
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FOR MORE INFORMATION
If you would like more information about the Calamos are
available upon request, free of charge.
This prosectus is intended for use in connection with Variable Contacts or
Retirement Plans.
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the Portfolio's investments will be available
in the Portfolio's annual and semiannual reports to shareholders. The reports
will contain a discussion of the market conditions and investment strategies
that significantly affected the Portfolio's performance for the past six-month
and twelve-month periods.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information provides more detailed information
about the Portfolio and is incorporated herein by reference.
You can get free copies of reports and the SAI, request other information
and discuss your questions about the Portfolio by contacting Calamos Asset
Management, Inc. at:
CALAMOS(R) ASSET MANAGEMENT, INC.
1111 E Warrenville Road
Naperville, Illinois 60563-1493
Telephone: 1-800-823-7386
Internet: http://www.calamos.com
You can review the Portfolio's reports and SAI at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies for free
from the Commission's Internet website at: http://www.sec.gov, or for a fee by
calling or writing to:
Public Reference Section of the Commission
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Investment Company Act file no.811-09237
15
<PAGE> 17
Statement of Additional Information May 1, 1999
CALAMOS(R) INSURANCE TRUST
CALAMOS(R) Convertible Portfolio
1111 East Warrenville Road
Naperville, Illinois 60563-1493
(630) 245-7200
Toll Free: (800) 823-7386
This Statement of Additional Information relates to CALAMOS(R) Convertible
Portfolio (the "Portfolio"), which is a series of Calamos Insurance Trust (the
"Trust"). It is not a prospectus, but provides information that should be read
in conjunction with the Portfolio's prospectus dated the same date as this
Statement of Additional Information and any supplements thereto. The prospectus
may be obtained without charge by writing or telephoning the Portfolios at the
address or telephone numbers set forth above.
The Portfolio is currently available for sale to the separate accounts of
certain life insurance companies (Participating Insurance Companies) offering
variable annuity contracts and variable life insurance contracts (together,
"Variable Contracts") and may be offered to certain types of pension plans and
retirement arrangements and accounts permitting accumulation of funds on a
tax-deferred basis ("Retirement Plans") as described in the prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
The Trust and the Portfolio......................... B-2
Investment Strategies and Risks..................... B-2
Investment Restrictions............................. B-16
Management.......................................... B-18
Investment Advisory Services........................ B-20
Purchasing and Redeeming Shares..................... B-21
Performance Information............................. B-22
Distributor......................................... B-24
Portfolio Transactions.............................. B-25
Taxation............................................ B-26
Certain Shareholders................................ B-27
Custodian........................................... B-27
Independent Auditors................................ B-28
Shareholder Information............................. B-28
Appendix--Description of Bond Ratings............... B-30
Report of Independent Auditors...................... B-32
Statement of Net Assets............................. B-33
</TABLE>
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<PAGE> 18
THE TRUST AND THE PORTFOLIO
The Portfolio is a series of Calamos Insurance Trust (the "Trust") which was
organized as a Massachusetts business trust on February 17, 1999. The
Portfolio is an open-end, diversified management investment company that seeks
current income as its primary objective with capital appreciation as its
secondary objective.
The prospectus contains information concerning the Portfolio's investment
objective and principal investment strategies and risks. This SAI provides
additional information concerning certain securities and strategies used by the
Portfolio and their associated risks.
INVESTMENT STRATEGIES AND RISKS
The following information supplements, and should be read in conjunction with
the discussion of the Portfolio's investment objectives, strategies and risks
that are described in the prospectus.
CONVERTIBLE SECURITIES
As described in the prospectus, the Portfolio invests primarily in a
diversified portfolio of convertible securities. Under normal market conditions,
the Portfolio invests at least 65% of its total assets in convertible
securities.
Convertible securities include any corporate debt security or preferred
stock that may be converted into underlying shares of common stock. The common
stock underlying convertible securities may be issued by a different entity than
the issuer of the convertible securities. Convertible securities entitle the
holder to receive interest payments paid on corporate debt securities or the
dividend preference on a preferred stock until such time as the convertible
security matures or is redeemed or until the holder elects to exercise the
conversion privilege. As a result of the conversion feature, however, the
interest rate or dividend preference on a convertible security is generally less
than would be the case if the securities were issued in non-convertible form.
The value of convertible securities is influenced by both the yield of
non-convertible securities of comparable issuers and by the value of the
underlying common stock. The value of a convertible security viewed without
regard to its conversion feature (i.e., strictly on the basis of its yield) is
sometimes referred to as its "investment value." The investment value of the
convertible security will typically fluctuate inversely with changes in
prevailing interest rates. However, at the same time, the convertible security
will be influenced by its "conversion value," which is the market value of the
underlying common stock that would be obtained if the convertible security were
converted. Conversion value fluctuates directly with the price of the underlying
common stock.
If, because of a low price of the common stock, the conversion value is
substantially below the investment value of the convertible security, the price
of the convertible security is governed principally by its investment value. If
the conversion value of a convertible security increases to a point that
approximates or exceeds its investment value, the value of the security will be
principally influenced by its conversion value. A convertible security will sell
at a premium over its conversion value to the extent investors place value on
the right to acquire the underlying common stock while holding a fixed income
security. Holders of convertible securities have a claim on the assets of the
issuer prior to the common stockholders, but may be subordinated to holders of
similar non-convertible securities of the same issuer.
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SYNTHETIC CONVERTIBLE SECURITIES
The investment manager may create a "synthetic" convertible security by
combining fixed income securities with the right to acquire equity securities.
More flexibility is possible in the assembly of a synthetic convertible security
than in the purchase of a convertible security. Although synthetic convertible
securities may be selected where the two components are issued by a single
issuer, thus making the synthetic convertible security similar to the true
convertible security, the character of a synthetic convertible security allows
the combination of components representing distinct issuers, when management
believes that such a combination would better promote the Portfolio's investment
objective. A synthetic convertible security also is a more flexible investment
in that its two components may be purchased separately. For example, the
Portfolio may purchase a warrant for inclusion in a synthetic convertible
security but temporarily hold short-term investments while postponing the
purchase of a corresponding bond pending development of more favorable market
conditions. The Portfolio's holdings of synthetic convertible securities are not
considered convertible securities for purposes of the Portfolio's policy to
invest at least 65% of its assets in convertible securities.
A holder of a synthetic convertible security faces the risk of a decline in
the price of the security or the level of the index involved in the convertible
component, causing a decline in the value of the call option or warrant
purchased to create the synthetic convertible security. Should the price of the
stock fall below the exercise price and remain there throughout the exercise
period, the entire amount paid for the call option or warrant would be lost.
Since a synthetic convertible security includes the fixed-income component as
well, the holder of a synthetic convertible security also faces the risk that
interest rates will rise, causing a decline in the value of the fixed-income
instrument.
The Portfolio may also purchase synthetic convertible securities
manufactured by other parties, including convertible structured notes.
Convertible structured notes are fixed income debentures linked to equity, and
are typically issued by investment banks. 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.
DEBT SECURITIES
In pursuing its investment objective, the Portfolio may invest in
convertible and non-convertible debt securities, including lower-rated
securities (i.e., securities rated BB or lower by Standard & Poor's Corporation
or Ba or lower by Moody's Investor Services, Inc.) and securities that are not
rated but are considered by the investment manager to be of similar quality.
There are no restrictions as to the ratings of debt securities acquired by the
Portfolio or the portion of the Portfolio's assets that may be invested in debt
securities in a particular ratings category, except that the Portfolio will not
acquire a security rated below C.
Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than
higher-quality instruments and generally are more sensitive to adverse economic
changes or individual corporate developments. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds may experience difficulty in servicing their principal and interest
payment obligations.
Achievement by the Portfolio of its investment objectives will be more
dependent on the investment manager's credit analysis than would be the case if
the Portfolio were investing in higher-quality debt securities. Since the
ratings of rating services (which evaluate the safety of principal and interest
payments, not market risks) are used only as preliminary indicators of
investment quality, the investment
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manager employs its own credit research and analysis. These analyses may take
into consideration such quantitative factors as an issuer's present and
potential liquidity, profitability, internal capability to generate funds,
debt/equity ratio and debt servicing capabilities, and such qualitative factors
as an assessment of management, industry characteristics, accounting
methodology, and foreign business exposure.
Medium- and lower-quality debt securities may be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and the Portfolio may have greater difficulty selling
its portfolio securities. The market value of these securities and their
liquidity may be affected by adverse publicity and investor perceptions.
RULE 144A SECURITIES
The Portfolio may invest a substantial portion of its assets in securities
that have been privately placed but that are eligible for purchase and sale by
certain qualified institutional buyers, such as the Portfolio, under Rule 144A
under the Securities Act of 1933. The investment manager, under the supervision
of the Trust's board of trustees, will consider whether securities purchased
under Rule 144A are illiquid and thus subject to the Portfolio's restriction of
investing no more than 10% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is a question of
fact. In making this determination, the investment manger will consider the
trading markets for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, the investment manger could
consider the (1) frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market and (4) nature of
a security and of marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer). The
liquidity of Rule 144A securities will be monitored and, if as a result of
changed conditions, it is determined that a Rule 144A security is no longer
liquid, the Portfolio's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Portfolio does not
invest more than 10% of its assets in illiquid securities. Investing in Rule
144A securities could have the effect of increasing the amount of the
Portfolio's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
FOREIGN SECURITIES
The Portfolio may invest up to 25% of its net assets in securities of
foreign issuers. A foreign issuer is a company organized under the laws of a
foreign country that has its principal trading market for its securities in a
foreign country. For this purpose, foreign securities do not include American
Depositary Receipts (ADRs) or securities guaranteed by a United States person,
but may include foreign securities in the form of European Depositary Receipts
(EDRs), Global Depositary Receipts (GDRs) or other securities representing
underlying shares of foreign issuers. Positions in those securities are not
necessarily denominated in the same currency as the common stocks into which
they may be converted. EDRs are European receipts listed on the Luxembourg Stock
Exchange evidencing a similar arrangement. GDRs are U.S. dollar-denominated
receipts evidencing ownership of foreign securities. Generally, ADRs, in
registered form, are designed for the U.S. securities markets and EDRs and GDRs,
in bearer form, are designed for use in foreign securities markets. The
Portfolio may invest in sponsored or unsponsored ADRs. In the case of an
unsponsored ADR, the Portfolio is likely to bear its proportionate share of the
expenses of the depository and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored ADR.
To the extent positions in portfolio securities are denominated in foreign
currencies, the Portfolio's investment performance is affected by the strength
or weakness of the U.S. dollar against those currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged.
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Conversely, if the dollar rises in value relative to the yen, the dollar value
of the Japanese stock will fall. (See discussion of transaction hedging and
portfolio hedging below under "Currency Exchange Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; and sometimes less advantageous legal, operational
and financial protections applicable to foreign sub-custodial arrangements.
Although the Portfolios intends to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
The Portfolio expects that substantially all of its investments will be in
developed nations. However, the Portfolio may invest in the securities of
emerging countries. The securities markets of emerging countries are
substantially smaller, less developed, less liquid and more volatile than the
securities markets of the U.S. and other more developed countries. Disclosure
and regulatory standards in many respects are less stringent than in the U.S.
and other major markets. There also may be a lower level of monitoring and
regulation of emerging markets and the activities of investors in such markets,
and enforcement of existing regulations has been extremely limited. Economies in
individual emerging markets may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging market
countries have experienced high rates of inflation for many years, which has had
and may continue to have very negative effects on the economies and securities
markets of those countries.
CURRENCY EXCHANGE TRANSACTIONS. The Portfolio may enter into currency
exchange transactions. Currency exchange transactions may be conducted either on
a spot (i.e., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are contractual agreements to
purchase or sell a specified currency at a specified future date (or within a
specified time period) and price set at the time of the contract. Forward
contracts are usually entered into with banks, foreign exchange dealers and
broker-dealers, are not exchange traded, and are usually for less than one year,
but may be renewed.
Forward currency exchange transactions may involve currencies of the
different countries in which the Portfolios may invest and serve as hedges
against possible variations in the exchange rate between these currencies.
Currency exchange transactions are limited to transaction hedging and portfolio
hedging involving either specific transactions or portfolio positions, except to
the extent described below under "Synthetic Foreign Money Market Positions."
Transaction hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of the Portfolio accruing in connection with
the purchase and sale of its portfolio securities or the receipt of dividends or
interest thereon. Portfolio hedging is the use of forward contracts with respect
to portfolio security positions denominated or quoted in a particular foreign
currency. Portfolio hedging allows the Portfolio to limit or reduce its exposure
in a foreign currency by entering into a forward contract to sell such foreign
currency (or another foreign currency that acts as a proxy for that currency) at
a future date for a price
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payable in U.S. dollars so that the value of the foreign denominated portfolio
securities can be approximately matched by a foreign denominated liability. The
Portfolio may not engage in portfolio hedging with respect to the currency of a
particular country to an extent greater than the aggregate market value (at the
time of making such sale) of the securities held in its portfolio denominated or
quoted in that particular currency, except that the Portfolio may hedge all or
part of its foreign currency exposure through the use of a basket of currencies
or a proxy currency where such currencies or currency act as an effective proxy
for other currencies. In such a case, the Portfolio may enter into a forward
contract where the amount of the foreign currency to be sold exceeds the value
of the securities denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into separate
forward contracts for each currency held in the Portfolio. The Portfolio may not
engage in "speculative" currency exchange transactions.
If the Portfolio enters into a forward contract, the Portfolio's custodian
will segregate liquid assets of the Portfolio having a value equal to the
Portfolio's commitment under such forward contract. At the maturity of the
forward contract to deliver a particular currency, the Portfolio may either sell
the portfolio security related to the contract and make delivery of the
currency, or it may retain the security and either acquire the currency on the
spot market or terminate its contractual obligation to deliver the currency by
purchasing an offsetting contract with the same currency trader obligating it to
purchase on the same maturity date the same amount of the currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for the Portfolio to purchase additional currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of currency the Portfolio is obligated to
deliver and if a decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot market some of the
currency received upon the sale of the portfolio security if its market value
exceeds the amount of currency the Portfolio is obligated to deliver.
If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss to the extent
that there has been movement in forward contract prices. If the Portfolio
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the currency. Should forward prices decline during the
period between the Portfolio's entering into a forward contract for the sale of
a currency and the date it enters into an offsetting contract for the purchase
of the currency, the Portfolio will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell. A default on the contract would
deprive the Portfolio of unrealized profits or force the Portfolio to cover its
commitments for purchase or sale of currency, if any, at the current market
price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the value of a portfolio security traded in that currency or
prevent a loss if the value of the security declines. Hedging transactions also
preclude the opportunity for gain if the value of the hedged currency should
rise. Moreover, it may not be possible for the Portfolio to hedge against a
devaluation that is so generally anticipated that the Portfolio is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. The cost to the Portfolio of engaging in currency exchange
transactions varies with such factors as the currency involved, the length of
the contract period, and prevailing market conditions. Since currency exchange
transactions are usually conducted on a principal basis, no fees or commissions
are involved.
SYNTHETIC FOREIGN MONEY MARKET POSITIONS. The Portfolio may invest in money
market instruments denominated in foreign currencies. In addition to, or in lieu
of, such direct investment, the Portfolio may construct a synthetic foreign
money market position by (a) purchasing a money market instrument denominated in
one currency, generally U.S. dollars, and (b) concurrently entering into a
forward contract to deliver a corresponding amount of that currency in exchange
for a different currency on a future date and at a specified rate of exchange.
For example, a synthetic money market position in
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Japanese yen could be constructed by purchasing a U.S. dollar money market
instrument, and entering concurrently into a forward contract to deliver a
corresponding amount of U.S. dollars in exchange for Japanese yen on a
specified date and at a specified rate of exchange. Because of the
availability of a variety of highly liquid short-term U.S. dollar money market
instruments, a synthetic money market position utilizing such U.S. dollar
instruments may offer greater liquidity than direct investment in foreign
currency and a concurrent construction of a synthetic position in such foreign
currency, in terms of both income yield and gain or loss from changes in
currency exchange rates, in general should be similar, but would not be
identical because the components of the alternative investments would not be
identical.
LENDING OF PORTFOLIO SECURITIES
The Portfolio may lend its portfolio securities, up to 33-1/3% of its total
assets, including collateral received, to broker-dealers and banks. Any such
loan must be continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the market value of
the securities loaned by the Portfolio. The Portfolio would continue to receive
the equivalent of the interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be in the form of a
fixed fee or a percentage of the collateral. The Portfolio may pay reasonable
fees to persons unaffiliated with the Portfolio for services in arranging the
loans. The Portfolio would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five business days. The
Portfolio would not have the right to vote the securities during the existence
of the loan but would call the loan to permit voting of the securities, if, in
the investment manager's judgment, a material event requiring a shareholder vote
would otherwise occur before the loan was repaid. In the event of bankruptcy or
other default of the borrower, the Portfolio could experience both delays in
liquidating the loan collateral or recovering the loaned securities and losses,
including (a) possible decline in the value of the collateral or in the value of
the securities loaned during the period while the Portfolio seeks to enforce its
rights thereto, (b) possible subnormal levels of income and lack of access to
income during this period, and (c) expenses of enforcing its rights. In an
effort to reduce these risks, the investment manager will monitor the
creditworthiness of the firms to which the Portfolio lends securities.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements, provided that the
Portfolio may not invest more than 10% of its net assets in repurchase
agreements maturing in more than seven days and any other illiquid securities. A
repurchase agreement is a sale of securities to the Portfolio in which the
seller agrees to repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a specified time.
Such agreements generally have maturities of no more than seven days and could
be used to permit the Portfolio to earn interest on assets awaiting long term
investment. The Portfolio requires continuous maintenance by the custodian for
the Portfolio's account in the Federal Reserve/Treasury Book Entry System of
collateral in an amount equal to, or in excess of, the market value of the
securities that are the subject of a repurchase agreement. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, the Portfolio will enter in repurchase agreements only with sellers
the investment manager believes present minimum credit risk in accordance with
guidelines approved by the board of trustees. The investment manager will review
and monitor the creditworthiness of such institutions, and will consider the
capitalization of the institution, the investment manager's prior dealing with
the institution, and rating of the institution's senior long-term debt by
independent rating agencies and other relevant factors. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Portfolio
could experience both delays in liquidating the underlying security and losses,
including: (a) possible decline in the value of the underlying security during
the period while the Portfolio seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights.
OPTIONS ON SECURITIES, INDEXES AND CURRENCIES
The Portfolio may purchase and sell put options and call options on
securities, indexes or foreign currencies in standardized contracts traded on
recognized securities exchanges, boards of
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trade, or similar entities, or quoted on NASDAQ. The Portfolio may purchase
agreements, sometimes called cash puts, that may accompany the purchase of a new
issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign currency has the
obligation upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise,
the writer of an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
The Portfolio will write call options and put options only if they are
"covered." For example, in the case of a call option on a security, the option
is "covered" if the Portfolio owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio.
If an option written by the Portfolio expires, the Portfolio realizes a
capital gain equal to the premium received at the time the option was written.
If an option purchased by the Portfolio expires, the Portfolio realizes a
capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Portfolio desires.
The Portfolio will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the premium received
from writing the option, or, if it is more, the Portfolio will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Portfolio will realize a capital gain
or, if it is less, the Portfolio will realize a capital loss. The principal
factors affecting the market value of a put or a call option include supply and
demand, interest rates, the current market price of the underlying security or
index in relation to the exercise price of the option, the volatility of the
underlying security or index, and the time remaining until the expiration date.
A put or call option purchased by the Portfolio is an asset of the
Portfolio, valued initially at the premium paid for the option. The premium
received for an option written by the Portfolio is recorded as a deferred
credit. The value of an option purchased or written is marked-to-market daily
and is valued at the closing price on the exchange on which it is traded or, if
not traded on an exchange or no closing price is available, at the mean between
the last bid and asked prices.
RISKS ASSOCIATED WITH OPTIONS. There are several risks associated with
transactions in options. For example, there are significant differences between
the securities markets, the currency markets and the options markets that could
result in an imperfect correlation among these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
There can be no assurance that a liquid market will exist when the
Portfolio seeks to close out an option position. If the Portfolio were unable
to close out an option that it has purchased on a security, it would have to
exercise the option in order to realize any profit or the option would expire
and become worthless. If the Portfolio were unable to close out a covered call
option that it had written
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on a security, it would not be able to sell the underlying security until the
option expired. As the writer of a covered call option on a security, the
Portfolio foregoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call option above the
sum of the premium and the exercise price of the call. As the writer of a
covered call option on a foreign currency, the Portfolio foregoes, during the
option's life, the opportunity to profit from currency appreciation.
If trading were suspended in an option purchased or written by the
Portfolio, the Portfolio would not be able to close out the option. If
restrictions on exercise were imposed, the Portfolio might not be able to
exercise an option it has purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio may use interest rate futures contracts, index futures
contracts and foreign currency futures contracts. An interest rate, index or
foreign currency futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a financial instrument or
the cash value of an index 1 at a specified price and time. A public market
exists in futures contracts covering a number of indexes (including, but not
limited to: the Standard & Poor's 500 Index, the Russell 2000 Index, the Value
Line Composite Index, and the New York Stock Exchange Composite Index) as well
as financial instruments (including, but not limited to: U.S. Treasury bonds,
U.S. Treasury notes, Eurodollar certificates of deposit and foreign currencies).
Other index and financial instrument futures contracts are available and it is
expected that additional futures contracts will be developed and traded.
The Portfolio may purchase and write call and put futures options. Options
on futures possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option,
the opposite is true. The Portfolio might, for example, use futures contracts
to hedge against or gain exposure to fluctuations in the general level of stock
prices, anticipated changes in interest rates or currency fluctuations that
might adversely affect either the value of the Portfolio's securities or the
price of the securities that the Portfolio intends to purchase. Although other
techniques could be used to reduce or increase the Portfolio's exposure to stock
price, interest rate and currency fluctuations, the Portfolio may be able to
achieve its desired exposure more effectively and perhaps at a lower cost by
using futures contracts and futures options.
The Portfolio will only enter into futures contracts and futures options
that are standardized and traded on an exchange, board of trade or similar
entity, or quoted on an automated quotation system.
The success of any futures transaction depends on the investment manager
correctly predicting changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should those
predictions be incorrect, the Portfolio's return might have been better had the
transaction not been attempted; however, in the absence of the ability to use
futures contracts, the investment manager might have taken portfolio actions in
anticipation of the same market movements with similar investment results, but,
presumably, at greater transaction costs.
When a purchase or sale of a futures contract is made by the Portfolio, the
Portfolio is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of cash or U.S. Government securities or other
securities acceptable to the broker ("initial margin"). The margin required
_________________________________
1 A futures contract on an index is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.
Although the value of a securities index is a function of the value of
certain specified securities, no physical delivery of those securities is
made.
B-9
<PAGE> 26
for a futures contract is set by the exchange on which the contract is traded
and may be modified during the term of the contract, although the Portfolio's
broker may require margin deposits in excess of the minimum required by the
exchange. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract, which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Portfolio expects to earn interest income on its initial margin
deposits. A futures contract held by the Portfolio is valued daily at the
official settlement price of the exchange on which it is traded. Each day the
Portfolio pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking-to-market." Variation margin paid or received by the Portfolio does
not represent a borrowing or loan by the Portfolio but is instead settlement
between the Portfolio and the broker of the amount one would owe the other if
the futures contract had expired at the close of the previous day. In
computing daily net asset value, the Portfolio will mark-to-market its open
futures positions.
The Portfolio is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin
deposits will vary depending on the nature of the underlying futures contract
(and the related initial margin requirements), the current market value of the
option and other futures positions held by the Portfolio.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Portfolio engaging in
the transaction realizes a capital gain, or if it is more, the Portfolio
realizes a capital loss. Conversely, if an offsetting sale price is more than
the original purchase price, the Portfolio engaging in the transaction realizes
a capital gain, or if it less, the Portfolio realizes a capital loss. The
transaction costs must also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES. There are several risks associated with the
use of futures contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. In trying to increase or reduce market exposure, there can be no
guarantee that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as: variations in speculative market
demand for futures, futures options and the related securities, including
technical influences in futures and futures options trading and differences
between the securities markets and the securities underlying the standard
contracts available for trading. For example, in the case of index futures
contracts, the composition of the index, including the issuers and the weighing
of each issue, may differ from the composition of the Portfolio's holdings, and,
in the case of interest rate futures contracts, the interest rate levels,
maturities and creditworthiness of the issues underlying the futures contract
may differ from the financial instruments held in the Portfolio. A decision as
to whether, when and how to use futures contracts involves the exercise of skill
and judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected stock price or interest rate
trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
B-10
<PAGE> 27
There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures or futures option position. The
Portfolio would be exposed to possible loss on the position during the interval
of inability to close, and would continue to be required to meet margin
requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If other options, futures contracts or futures options of types other than
those described herein are traded in the future, the Portfolio may also use
those investment vehicles, provided the board of trustees determines that their
use is consistent with the Portfolio's investment objective.
The Portfolio will not enter into a futures contract or purchase an option
thereon if, immediately thereafter, the initial margin deposits for futures
contracts held by the Portfolio plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money,"2
would exceed 5% of the Portfolio's total assets.
When purchasing a futures contract or writing a put option on a futures
contract, the Portfolio must maintain with its custodian (or broker, if legally
permitted) cash or cash equivalents (including any margin) equal to the market
value of such contract. When writing a call option on a futures contract, the
Portfolio similarly will maintain with its custodian cash or cash equivalents
(including any margin) equal to the amount by which such option is in-the-money
until the option expires or is closed by the Portfolio.
The Portfolio may not maintain open short positions in futures contracts,
call options written on futures contracts or call options written on indexes if,
in the aggregate, the market value of all such open positions exceeds the
current value of the securities in its portfolio, plus or minus unrealized gains
and losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the positions. For
this purpose, to the extent the Portfolio has written call options on specific
securities in its portfolio, the value of those securities will be deducted from
the current market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," the Portfolio will
use commodity futures or commodity options contracts solely for bona fide
hedging purposes within the meaning and intent of Regulation 1.3(z), or, with
respect to positions in commodity futures and commodity options contracts that
do not come within the meaning and intent of 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not exceed 5% of
the fair market value of the assets of the Portfolio, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into (in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount, as defined in Section 190.01(x) of the Commission
Regulations,, may be excluded in computing such 5%).
TAXATION OF OPTIONS AND FUTURES
If the Portfolio exercises a call or put option that it holds, the premium
paid for the option is added to the cost basis of the security purchased (call)
or deducted from the proceeds of the security sold (put). For cash settlement
options and futures options exercised by the Portfolio, the difference between
the cash received at exercise and the premium paid is a capital gain or loss.
_________________________________
2 A call option is "in-the-money" if the value of the futures contract that is
the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures
contract that is the subject of the option.
B-11
<PAGE> 28
If a call or put option written by the Portfolio is exercised, the premium
is included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by the Portfolio, the difference between the
cash paid at exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain or
loss. If an option written by the Portfolio was in-the-money at the time it was
written and the security covering the option was held for more than the
long-term holding period prior to the writing of the option, any loss realized
as a result of a closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not include the
period of time the option is outstanding.
If the Portfolio writes an equity call option 3 other than a "qualified
covered call option," as defined in the Internal Revenue Code, any loss on such
option transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.
A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If the Portfolio delivers securities under a futures contract,
the Portfolio also realizes a capital gain or loss on those securities.
For federal income tax purposes, the Portfolio generally is required to
recognize as income for each taxable year its net unrealized gains and losses as
of the end of the year on futures, futures options and non-equity options
positions ("year-end mark-to-market"). Generally, any gain or loss recognized
with respect to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and 40% short-term,
without regard to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the recognition of losses on
certain positions (including options, futures and futures options positions, the
related securities and certain successor positions thereto) may be deferred to a
later taxable year. Sale of futures contracts or writing of call options (or
futures call options) or buying put options (or futures put options) that are
intended to hedge against a change in the value of securities held by the
Portfolio: (1) will affect the holding period of the hedged securities; and (2)
may cause unrealized gain or loss on such securities to be recognized upon entry
into the hedge.
If the Portfolio were to enter into a short index future, short index
futures option or short index option position and the Portfolio's portfolio were
deemed to "mimic" the performance of the index underlying such contract, the
option or futures contract position and the Portfolio's stock positions would be
deemed to be positions in a mixed straddle, subject to the above-mentioned loss
deferral rules.
In order for the Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities and gains from the sale of
securities or foreign currencies, or other income (including but not limited to
gains from options, futures or forward contracts). Any net gain realized from
futures (or futures options) contracts will be considered gain from the sale of
securities and therefore be qualifying income for purposes of the 90%
requirement.
The Taxpayer Relief Act of 1997 (the "Act") imposed constructive sale
treatment for federal income tax purposes on certain hedging strategies with
respect to appreciated securities. Under these
- -----------------------
3 An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel-casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).
B-12
<PAGE> 29
rules taxpayers will recognize gain, but not loss, with respect to securities if
they enter into short sales or "offsetting notional principal contracts" (as
defined by the Act) with respect to, or futures or "forward contracts" (as
defined by the Act) with respect to, the same or substantially identical
property, or if they enter into such transactions and then acquire the same or
substantially identical property. The Secretary of the Treasury is authorized to
promulgate regulations that will treat as constructive sales certain
transactions that have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to deliver the
same or substantially similar property.
The Portfolio distributes to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions. Such distributions
are combined with distributions of capital gains realized on the Portfolio's
other investments, and shareholders are advised of the nature of the payments.
WARRANTS
The Portfolio may invest in warrants. A warrant is a right to purchase
common stock at a specific price (usually at a premium above the market value of
the underlying common stock at time of issuance) during a specified period of
time. A warrant may have a life ranging from less than a year to twenty years or
longer, but a warrant becomes worthless unless it is exercised or sold before
expiration. In addition, if the market price of the common stock does not exceed
the warrant's exercise price during the life of the warrant, the warrant will
expire worthless. Warrants have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the value of a warrant may tend to be greater
than the percentage increase or decrease in the value of the underlying common
stock.
SHORT SALES
The Portfolio may attempt to hedge against market risk and to enhance
income by selling short "against the box," that is: (1) entering into short
sales of securities that it currently has the right to acquire through the
conversion or exchange of other securities that it owns, or to a lesser extent,
entering into short sales of securities that it currently owns; and (2) entering
into arrangements with the broker-dealers through which such securities are sold
short to receive income with respect to the proceeds of short sales during the
period the Portfolio's short positions remain open. The Portfolio may make short
sales of securities only if at all times when a short position is open the
Portfolio owns an equal amount of such securities or securities convertible into
or exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short.
In a short sale against the box, the Portfolio does not deliver from its
portfolio the securities sold and does not receive immediately the proceeds from
the short sale. Instead, the Portfolio borrows the securities sold short from a
broker-dealer through which the short sale is executed, and the broker-dealer
delivers such securities, on behalf of the Portfolio, to the purchaser of such
securities. Such broker-dealer is entitled to retain the proceeds from the short
sale until the Portfolio delivers to such broker-dealer the securities sold
short. In addition, the Portfolio is required to pay to the broker-dealer the
amount of any dividends paid on shares sold short. Finally, to secure its
obligation to deliver to such broker-dealer the securities sold short, the
Portfolio must deposit and continuously maintain in a separate account with the
Portfolio's custodian an equivalent amount of the securities sold short or
securities convertible into or exchangeable for such securities without the
payment of additional consideration. The Portfolio is said to have a short
position in the securities sold until it delivers to the broker-dealer the
securities sold, at which time the Portfolio receives the proceeds of the sale.
Because the Portfolio ordinarily will want to continue to hold securities in its
portfolio that are sold
B-13
<PAGE> 30
short, the Portfolio will normally close out a short position by purchasing on
the open market and delivering to the broker-dealer an equal amount of the
securities sold short, rather than by delivering portfolio securities.
A short sale works the same way, except that the Portfolio places in the
segregated account cash or U.S. government securities equal in value to the
difference between (i) the market value of the securities sold short at the time
they were sold short and (ii) any cash or U.S. government securities required to
be deposited with the broker as collateral. In addition, so long as the short
position is open, the Portfolio must daily adjust the value of the segregated
account so that the amount deposited in it, plus any amount deposited with the
broker as collateral, will equal the current market value of the security sold
short. However, the value of the segregated account may not be reduced below the
point at which the segregated account, plus any amount deposited with the
broker, is equal to the market value of the securities sold short at the time
they were sold short.
Short sales may protect the Portfolio against the risk of losses in the
value of its portfolio securities because any unrealized losses with respect to
such portfolio securities should be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in such
portfolio securities should be wholly or partially offset by a corresponding
loss in the short position. The extent to which such gains or losses are offset
will depend upon the amount of securities sold short relative to the amount the
Portfolio owns, either directly or indirectly, and, in the case where the
Portfolio owns convertible securities, changes in the conversion premium.
Short sale transactions of the Portfolio involve certain risks. In
particular, the imperfect correlation between the price movements of the
convertible securities and the price movements of the underlying common stock
being sold short creates the possibility that losses on the short sale hedge
position may be greater than gains in the value of the portfolio securities
being hedged. In addition, to the extent that a Portfolio pays a conversion
premium for a convertible security, the Portfolio is generally unable to protect
against a loss of such premium pursuant to a short sale hedge. In determining
the number of shares to be sold short against the Portfolio's position in the
convertible securities, the anticipated fluctuation in the conversion premiums
is considered. The Portfolio will also incur transaction costs in connection
with short sales. Certain provisions of the Internal Revenue Code may limit the
degree to which the Portfolio is able to enter into short sales, which
limitations might impair the Portfolio's ability to achieve its investment
objective. See "Taxation."
In addition to enabling the Portfolio to hedge against market risk, short
sales may afford the Portfolio an opportunity to earn additional current income
to the extent the Portfolio is able to enter into arrangements with
broker-dealers through which the short sales are executed to receive income with
respect to the proceeds of the short sales during the period the Portfolio's
short positions remain open.
The Taxpayer Relief Act of 1997 imposed constructive sale treatment for
federal income tax purposes on certain hedging strategies with respect to
appreciated securities. Under these rules taxpayers will recognize gain, but not
loss, with respect to securities if they enter into short sales or "offsetting
notional principal contracts" (as defined by the Act) with respect to, or
futures or "forward contracts" (as defined by the Act) with respect to the same
or substantially identical property, or if they enter into such transactions and
then acquire the same or substantially identical property. The Secretary of the
Treasury is authorized to promulgate regulations that will treat as constructive
sales certain transactions that have substantially the same effect as short
sales.
B-14
<PAGE> 31
"WHEN-ISSUED" AND DELAYED DELIVERY SECURITIES AND REVERSE REPURCHASE
AGREEMENTS
The Portfolio may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time the Portfolio enters into the commitment, the securities
may be delivered and paid for a month or more after the date of purchase, when
their value may have changed. The Portfolio makes such commitments only with the
intention of actually acquiring the securities, but may sell the securities
before settlement date if the investment manager deems it advisable for
investment reasons. The Portfolio may utilize spot and forward foreign currency
exchange transactions to reduce the risk inherent in fluctuations in the
exchange rate between one currency and another when securities are purchased or
sold on a when issued or delayed-delivery basis.
The Portfolio may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Portfolio is the seller of, rather than the investor in, securities
and agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
At the time when the Portfolio enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse repurchase agreement,
liquid assets (cash, U.S. Government securities or other "high-grade" debt
obligations) of the Portfolio having a value at least as great as the purchase
price of the securities to be purchased will be segregated on the books of the
Portfolio and held by the custodian throughout the period of the obligation. The
use of these investment strategies, as well as borrowing under a line of credit
as described below, may increase net asset value fluctuation.
ILLIQUID SECURITIES
The Portfolio may invest up to 10% of its total assets, taken at market
value, in illiquid securities, including any securities that are not readily
marketable either because they are restricted securities or for other reasons.
Restricted securities are securities that are subject to restrictions on resale
because they have not been registered for sale under the Securities Act of 1933.
A position in restricted securities might adversely affect the liquidity and
marketability of a portion of the Portfolio's holdings, and the Portfolio might
not be able to dispose of its holdings in such securities promptly or at
reasonable prices. In those instances where a Portfolio is required to have
restricted securities held by it registered prior to sale by the Portfolio and
the Portfolio does not have a contractual commitment from the issuer or seller
to pay the costs of such registration, the gross proceeds from the sale of
securities would be reduced by the registration costs and underwriting
discounts. Any such registration costs are not included in the percentage
limitation on a Portfolio's investment in restricted securities. The Portfolio
does not intend to invest in illiquid securities during the next fiscal year,
except that the Portfolio may invest in options traded on the NASDAQ National
Market System.
B-15
<PAGE> 32
TEMPORARY INVESTMENTS
The Portfolio may make temporary investments without limitation when the
investment manager determines that a defensive position is warranted. Such
investments may be in money market instruments, consisting of obligations of, or
guaranteed as to principal and interest by, the U.S. Government or its agencies
or instrumentalities; certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million and
which are regulated by the U.S. Government, its agencies or instrumentalities;
commercial paper rated in the highest category by a recognized rating agency;
and repurchase agreements.
PORTFOLIO TURNOVER
Although the Portfolio does not purchase securities with a view to rapid
turnover, there are no limitations on the length of time that portfolio
securities must be held. Portfolio turnover can occur for a number of reasons,
including calls for redemption, general conditions in the securities markets,
more favorable investment opportunities in other securities, or other factors
relating to the desirability of holding or changing a portfolio investment. The
portfolio turnover rates may vary greatly from year to year. A high rate of
portfolio turnover in the Portfolio would result in increased transaction
expense, which must be borne by the Portfolio. High portfolio turnover may also
result in the realization of capital gains or losses and, to the extent net
short-term capital gains are realized, any distributions resulting from such
gains will be considered ordinary income for federal income tax purposes.
INVESTMENT RESTRICTIONS
The Portfolio operates under the following investment restrictions. The
Portfolio may not (except as indicated):
(i) as to 75% of its assets, invest more than 5% of its total assets, taken
at market value at the time of a particular purchase, in the securities
of any one issuer, except that this restriction does not apply to
securities issued or guaranteed by the United States Government or its
agencies or instrumentalities;
(ii) acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any one issuer;
(iii) act as an underwriter of securities, except insofar as it may be deemed
an underwriter for purposes of the Securities Act of 1933 on disposition
of securities acquired subject to legal or contractual restrictions on
resale;
(iv) purchase or sell real estate (although it may purchase securities secured
by real estate or interests therein, or securities issued by companies
which invest in real estate or interests therein), commodities or
commodity contracts;
(v) make loans, but this restriction shall not prevent the Portfolio from (a)
investing in debt obligations, (b) investing in repurchase agreements or
(c) lending portfolio securities;
(vi) invest more than 10% of the Portfolio's net assets (taken at market value
at the time of each purchase) in illiquid securities, including
repurchase agreements maturing in more than seven days;
B-16
<PAGE> 33
(vii) borrow, except that the Portfolio may (a) borrow from banks for temporary
or emergency purposes in amounts not exceeding 33% of the value of the
Portfolio's total assets at the time of the borrowing, and (b) enter into
transactions in options, futures and options on futures 4;
(viii) invest in a security if more than 25% of its total assets (taken at
market value at the time of a particular purchase) would be invested in
the securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; or
(ix) issue any senior security, except to the extent permitted under the
Investment Company Act of 1940 (the "1940 Act").
The above restrictions are fundamental policies and may not be changed
without the approval of a "majority" of the outstanding shares of the
Portfolio, which for this purpose means the approval of the lesser of (a) more
than 50% of the outstanding voting securities of the Portfolio or (b) 67% or
more of the outstanding shares if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented at the meeting
by proxy.
In addition to the fundamental restrictions listed above, the Portfolio
may not:
(a) invest in shares of other open-end investment companies (except in
connection with a plan of merger or reorganization);
(b) invest in companies for the purpose of exercising control or
management;
(c) purchase securities on margin (except for use of such short-term
credits as are necessary for the clearance of transactions, including
transactions in options, futures and options on futures), or participate on a
joint or a joint and several basis in any trading account in securities, except
in connection with transactions in options, futures and options on futures;
(d) make short sales of securities, except that the Portfolio may make
short sales of securities if the Portfolio owns an equal amount of such
securities, or owns securities that are convertible or exchangeable, without
payment of further consideration, into an equal amount of such securities;
(e) invest more than 25% of its net assets (valued at time of purchase) in
securities of foreign issuers (other than securities represented by American
Depositary Receipts and securities guaranteed by a U.S. person).
Restrictions (a) through (e) may be changed by the board of trustees
without shareholder approval.
Notwithstanding the foregoing investment restrictions, the Portfolio may
purchase securities pursuant to the exercise of subscription rights, subject to
the condition that such purchase will not result in the Portfolio's ceasing to
be a diversified investment company. Far Eastern and European
________________________________
4 State insurance laws currently restrict the Portfolio's borrowing to
facilitate redemptions to no more than 25% of the Portfolio's net assets.
B-17
<PAGE> 34
corporations frequently issue additional capital stock by means of subscription
rights offerings to existing shareholders at a price substantially below the
market price of the shares. The failure to exercise such rights would result in
the Portfolio's interest in the issuing company being diluted. The market for
such rights is not well developed in all cases and, accordingly, the Portfolio
may not always realize full value on the sale of rights. The exception applies
in cases where the limits set forth in the investment restrictions would
otherwise be exceeded by exercising rights or would have already been exceeded
as a result of fluctuations in the market value of the Portfolio's portfolio
securities with the result that the Portfolio would be forced either to sell
securities at a time when it might not otherwise have done so, to forego
exercising the rights.
In addition, pursuant to state insurance laws, the Portfolio is subject to
the following guidelines, which may also be changed by the board of trustees:
(a) The Portfolio will be invested in a minimum of five different foreign
countries at all times, except that this minimum is reduced to four
when foreign country investments comprise less than 80% of the value
of the Portfolio's net assets; to three when less than 60% of such
value; to two when less than 40%; and to one when less than 20%.
(b) The Portfolio will have no more than 20% of its net assets invested in
securities of issuers located in any one country; except that the
Portfolio may have an additional 15% of its net assets invested in
securities of issuers located in any one of the following countries:
Australia; Canada; France; Japan; the United Kingdom; or Germany.
(c) The Portfolio may not acquire the securities of any issuer if, as a
result of such investment, more than 10% of the Portfolio's total
assets would be invested in the securities of any one issuer, except
that this restriction shall not apply to U.S. Government securities or
foreign government securities; and the Portfolio will not invest in a
security if, as a result of such investment, it would hold more than
10% of the outstanding voting securities of any one issuer.
(d) The Portfolio may borrow no more than 10% of the value of its net
assets when borrowing for any general purpose and 25% of net assets
when borrowing as a temporary measure to facilitate redemptions.
MANAGEMENT
TRUSTEES AND OFFICERS
The management of the Trust, including general supervision of the duties
performed for the Portfolio under the Investment Management Agreement, is the
responsibility of its board of trustees. Set forth below is information about
the trustees and officers of the Trust.
<TABLE>
<CAPTION>
Name, Position(s) with Trust Principal Occupation(s)
and Age at March 31, 1999 During Past Five Years
- ---------------------------- -----------------------
<S> <C>
John P. Calamos (1) President, Calamos Asset Management,
Trustee and President, 58 Inc. ("CAM"); President, Calamos
Financial Services, Inc. ("CFS"), a
broker-dealer and the Portfolio's
distributor.
Nick P. Calamos (1)
Trustee and Vice President, 38 Managing Director, CAM and CFS.
</TABLE>
B-18
<PAGE> 35
<TABLE>
<CAPTION>
Name, Position(s) with Trust Principal Occupation(s)
and Age at March 31, 1999 During Past Five Years
- ---------------------------- ----------------------
<S> <C>
Richard J. Dowen (2) Professor of Finance, Northern Illinois
Trustee, 54 University.
Robert Frost (2) Management Consultant,
Trustee, 59 ECOM Consultants, Inc.
William A. Kaun (2) Principal, W.A. Kaun Co. (investment adviser
Trustee, 71 and publisher).
John P. Salmon Vice President - Mutual Fund Operations,
Treasurer and Assistant CAM, since 1997; Manager and Assistant Vice
Secretary, 53 President, Collective Investment Fund
Accounting Group, First National Bank of
Chicago, prior thereto. Vice President and
General Counsel, CAM, since 1998;
James S. Hamman, Jr. Vice President and Associate Counsel,
Secretary, 29 Scudder Kemper Investments, Inc. (investment
manager), 1996 - 1998; attorney, Vedder,
Price, Kaufman & Kammholz, prior thereto.
</TABLE>
________________________________
(1) John P. Calamos and Nick P. Calamos are trustees who are "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "1940 Act") and are members of the executive committee of the board
of trustees, which has authority during intervals between meetings of the
board of trustees to exercise the powers of the board.
(2) Messrs. Dowen, Frost and Kaun are members of the audit committee of the
board of trustees, which makes recommendations regarding the selection of
the Trust's independent auditors and meets with representatives of the
independent auditors to determine the scope and review the results of each
audit.
The trustees of the Trust are also trustees of Calamos Investment Trust,
an open-end investment company advised by CAM.
The address of Mr. Dowen is Department of Finance, Northern Illinois
University, DeKalb, Illinois 60115; that of Mr. Frost is 53 Ward Drive, New
Rochelle, New York 10804; and that of Mr. Kaun is 1750 Grandstand Place, Elgin,
Illinois 60123. The address of the officers of the Trust is 1111 East
Warrenville Road, Naperville, Illinois 60563-1493. Nick Calamos is a nephew of
John Calamos.
The following table shows the compensation paid to each trustee who was
not an "interested person" of the Trust. The information in the last column is
for the 1998 calendar year.
<TABLE>
<CAPTION>
Estimated
Aggregate Total
Compensation Compensation
Name of Trustee from the Trust* From Calamos Funds Complex
- --------------- --------------- --------------------------
<S> <C> <C>
Richard J. Dowen $ $6,000
Robert Frost $ $6,000
William A. Kaun $ $6,000
</TABLE>
_________________________________
* Estimated payments for the period May 1, 1999 through December 31,
1999.
B-19
<PAGE> 36
Trustees who are "interested" persons of the Trust, as well as officers of
the Trust, are compensated by CAM and not by the Trust. The Trust does not
provide any pension or retirement benefits to its trustees.
INVESTMENT ADVISORY SERVICES
Investment management and administrative services are provided to the
Portfolio by CAM pursuant to an Investment Management Agreement (the
"Agreement") dated May 1, 1999. The Trust pays CAM a fee accrued daily and paid
monthly at the annual rate of .75% of average daily net assets.
The Agreement will remain in effect with respect to the Portfolio until
August 1, 2000, and from year to year thereafter so long as such continuation is
approved at least annually by (1) the board of trustees or the vote of a
majority of the outstanding voting securities of the Portfolio, and (2) a
majority of the trustees who are not interested persons of any party to the
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The Agreement may be terminated at any time, without penalty, by
either the Trust or the Adviser upon 60 days' written notice, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.
The use of the name "Calamos" in the name of the Trust and in the name of
the Portfolio is pursuant to licenses granted by the Adviser, and the Trust has
agreed to change the names to remove those references if CAM ceases to act as
investment adviser to the Portfolio. The Adviser is controlled by John P.
Calamos.
EXPENSES
Subject to the expense limitation described below, the Portfolio pays all
its own operating expenses that are not specifically assumed by CAM, including
(i) fees of the investment adviser; (ii) interest, taxes and any governmental
filing fees; (iii) compensation and expenses of the trustees, other than those
who are interested persons of the Trust, the investment adviser or the
distributor; (iv) legal, audit, custodial and transfer agency fees and expenses;
(v) registration and qualification of the Portfolio and its shares under federal
and state securities laws; (vi) expenses of printing and mailing reports,
notices and proxy material to shareholders, and expenses incidental to meetings
of shareholders; (vii) expenses of preparing prospectuses and of printing and
distributing them to existing shareholders; (viii) insurance premiums; (ix)
litigation and indemnification expenses and other extraordinary expenses not
incurred in the normal course of the business of the Trust; and (x) brokerage
commissions and other transaction-related costs.
The investment manager has voluntarily undertaken to reimburse the
Portfolio for any annual operating expenses in excess of 1.00% of average daily
net assets. This reimbursement is voluntary and may be terminated by CAM at any
time.
B-20
<PAGE> 37
PURCHASING AND REDEEMING SHARES
Shares of the Portfolio may not be purchased or redeemed directly by
individual Variable Contract owners. Purchases and redemptions are discussed in
the prospectus. The Portfolio may suspend the right of redemption during any
period when (a) trading on the NYSE is restricted, as determined by the
Commission, or that exchange is closed for other than customary weekend and
holiday closings, (b) the Commission has by order permitted such suspension, or
(c) an emergency, as determined by the Commission, exists making disposal of the
Portfolio's securities or valuation of the net assets of the Portfolio not
reasonably practicable.
Because shares of the Portfolio are offered to separate accounts supporting
variable annuity contracts and separate accounts supporting variable life
insurance contracts, a potential for certain conflicts may exist between the
interests of owners of variable annuity contracts and owners of variable life
insurance contracts. Likewise, in the event that shares of the Portfolio are
offered to qualified pension and retirement plans, a potential for certain
conflicts may exist between the interest of variable annuity contract owners,
variable life insurance contract owners and plan participants. The Trust does
not currently foresee any disadvantage to owners of either variable annuity
contracts or variable life insurance contracts arising from the fact that shares
of the Portfolio might be held by such entities. The Trust's board of trustees,
however, will monitor the Portfolio in order to identify any material
irreconcilable conflicts of interest which may possibly arise, and to determine
what action, if any, should be taken in response to such conflicts.
NET ASSET VALUE
In computing the net asset value of the Portfolio, portfolio securities,
including options, that are traded on a national securities exchange and
securities reported on the NASDAQ National Market System are valued at the last
reported sales price. Securities traded in the over-the-counter market and
listed securities for which no sales were reported are valued at the mean of the
most recently quoted bid and asked prices. Each outstanding futures contract is
valued at the official settlement price for the contract on the exchange on
which the contract is traded, except that if the market price of the contract
has increased or decreased by the maximum amount permitted on the valuation date
("up or down the limit"), the contract is valued at a fair value as described
below. Short-term obligations with maturities of 60 days or less are valued at
amortized cost.
When market quotations are not readily available for the Portfolio's
securities, such securities are valued at a fair value following procedures
approved by the board of trustees. These procedures include determining fair
value on the basis of valuations furnished by pricing services approved by the
board of trustees, which include market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders, as well as on the basis of appraisals received from a
pricing service using a computerized matrix system, or appraisals derived from
information concerning the securities or similar securities received from
recognized dealers in those securities.
The Portfolio's net asset value is determined only on days on which the New
York Stock Exchange (the "NYSE") is open for trading. The NYSE is regularly
closed on Saturdays
B-21
<PAGE> 38
and Sundays and on New Year's Day, the third Mondays in January and February,
Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving
and Christmas. If one of these holidays falls on a Saturday or Sunday, the NYSE
will be closed on the preceding Friday or the following Monday, respectively.
Securities that are principally traded in a foreign market are valued as of
the close of the appropriate exchange or other designated time. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed at various times before the close of business on
each day on which the NYSE is open. Trading of these securities may not take
place on every NYSE business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the NYSE is not open
and on which the Portfolio's net asset value is not calculated. Therefore, such
calculation does not take place contemporaneously with the determination of the
prices of many of the portfolio securities used in such calculation and the
value of the Portfolio's portfolio may be significantly affected on days when
shares of the Portfolio may not be purchased or redeemed.
REDEMPTION IN KIND
The Portfolio has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which it is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the Portfolio
during any 90-day period for any one shareholder. Redemptions in excess of
these amounts will normally be paid in cash, but may be paid wholly or partly by
a distribution in kind of securities. If a redemption is made in-kind, the
redeeming shareholder would bear any transaction costs incurred in selling the
securities received.
PERFORMANCE INFORMATION
TOTAL RETURN
From time to time the Portfolio may quote total return figures. "Total
Return" for a period is the percentage change in value during a period of an
investment in Portfolio shares, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.
Average Annual Total Return will be computed as follows:
<TABLE>
<S> <C> <C>
ERV = P(1+T)N
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ENDING REDEEMABLE VALUE OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE BEGINNING OF
THE PERIOD, AT THE END OF THE PERIOD
(OR FRACTIONAL PORTION THEREOF)
</TABLE>
YIELD
The Portfolio may also quote yield figures. The yield of the Portfolio is
calculated by dividing its net investment income per share (a hypothetical
figure as defined in SEC rules) during a 30-day period by the net asset value
per share on the last day of the period. The yield formula provides for
semiannual compounding, which assumes that net investment
B-22
<PAGE> 39
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period. The yield is not based on actual dividends paid.
Yield will be computed as follows:
<TABLE>
<S> <C> <C>
YIELD 2[((a-b/cd)+1)6-1]
Where: a = dividends and interest earned
during the period
b = expenses accrued for the period
(net of reimbursements)
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share
on the last day of the period
</TABLE>
Figures quoted will assume reinvestment of all dividends and distributions.
Income taxes are not taken into account. The figures will not necessarily be
indicative of future performance. The performance of the Portfolio is a result
of conditions in the securities markets, portfolio management, and operating
expenses. Although information such as yield and total return is useful in
reviewing the Portfolio's performance and in providing some basis for comparison
with other investment alternatives, it should not be used for comparison with
other investments using different reinvestment assumptions or time periods.
Performance figures do not reflect expenses of the separate accounts of the
Participating Insurance Companies or expenses imposed under the Variable
Contracts or expenses imposed by Retirement Plans.
In advertising and sales literature, the performance of the Portfolio may
be compared with that of other mutual funds, indexes or averages of other
mutual funds, indexes of related financial assets or data, other accounts or
partnerships managed by Calamos Asset Management, Inc., and other competing
investment and deposit products available from or through other financial
institutions. The composition of these indexes, averages or accounts differs
from that of the Portfolio. Comparison of the Portfolio to an alternative
investment should consider differences in features and expected performance.
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Portfolio generally believes
to be accurate. The Portfolio may also note its mention (including performance
or other comparative rankings) in newspapers, magazines, or other media from
time to time. However, the Portfolio assumes no responsibility for the
accuracy of such data. Newspapers and magazines which might mention the
Portfolio include, but are not limited to, the following:
B-23
<PAGE> 40
<TABLE>
<S> <C>
Barron's Money
Business Week Mutual Fund Letter
Changing Times Mutual Fund Values
Chicago Tribune (Morningstar)
Chicago Sun-Times Newsweek
Crain's Chicago Business The New York Times
Consumer Reports Pensions and Investments
Consumer Digest Personal Investor
Financial World Stanger Reports
Forbes Time
Fortune USA Today
Investor's Daily U.S. News and World Report
Los Angeles Times The Wall Street Journal
</TABLE>
The Portfolio may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.
The performance of the Portfolio may be compared to the following indexes
or averages: Standard & Poor's 400 MidCap Index, Value Line Index, Lipper
Balanced Index, Lipper Convertible Fund Index, Lipper Growth and Income Index,
Lehman Brothers Government/Corporate Index and mutual fund performance indices
published by Variable Annuity Research & Data Service. The performance of the
Portfolio may also be compared to the Russell 2000 Index, the Wilshire Small
Growth Index, and the Fisher Small-Cap Growth Index, all supplied by the
Carmack Group. All three of these indexes represent equity investments in
smaller-capitalization stocks.
The Lipper averages are unweighted averages of total return performance of
mutual funds as classified, calculated and published by Lipper, Inc.
("Lipper"), an independent service that monitors the performance of more than
1,000 funds. The Portfolio may also use comparative performance as computed in
a ranking by Lipper or category averages and rankings provided by another
independent service. Should Lipper or another service reclassify the Portfolio
to a different category or develop (and place the Portfolio into) a new
category, the Portfolio may compare its performance or ranking against other
funds in the newly assigned category, as published by the service. Moreover,
the Portfolio may compare its performance or ranking against all funds tracked
by Lipper or another independent service.
To illustrate the historical returns on various types of financial assets,
the Portfolio may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or
obtains) very long-term (since 1926) total return data (including, for example,
total return indexes, total return percentages, average annual total returns
and standard deviations of such returns) for common stocks, small company
stocks, long-term corporate bonds, long-term government bonds,
intermediate-term government bonds, U.S. Treasury bills and Consumer Price
Index.
DISTRIBUTOR
Calamos Financial Services, Inc. ("CFS"), a broker-dealer whose sole
shareholder and principal officer is John P. Calamos, serves as distributor for
the Portfolio, subject to change by a majority of the "non-interested" trustees
at any time. CFS is located at 1111 East Warrenville Road, Naperville, Illinois
60563-1493. CFS is responsible for all purchases, sales, redemptions and other
transfers of shares of the Portfolio without any charge to the Portfolio or
Participating Insurance Companies or Retirement Plans purchasing the Portfolio's
shares. However, each Variable Contract imposes its own charges and fees on
owners of the Variable Contract and may impose such charges on participants in a
Retirement Plan. CFS is also responsible for all expenses incurred in
connection with its performance of services for the Portfolio, including, but
not limited to, personnel, office space and equipment, telephone, postage and
stationery expenses. CFS
B-24
<PAGE> 41
receives brokerage commissions for executing portfolio transactions for the
Portfolio. See "Portfolio Transactions."
CFS has the exclusive right to distribute shares of the Portfolio. The
obligation of CFS is an agency or "best efforts" arrangement, which does not
obligate CFS to sell any stated number of shares.
PORTFOLIO TRANSACTIONS
Portfolio transactions on behalf of the Portfolio effected on stock
exchanges involve the payment of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Portfolio usually includes
an undisclosed dealer commission or mark-up. In underwritten offerings, the
price paid by the Portfolio includes a disclosed, fixed commission or discount
retained by the underwriter or dealer.
In executing portfolio transactions, the investment manager uses its best
efforts to obtain for the Portfolio the most favorable price and execution
available. In seeking the most favorable price and execution, the investment
manager considers all factors it deems relevant, including price, the size of
the transaction, the nature of the market for the security, the amount of
commission, the timing of the transaction taking into account market prices and
trends, the execution capability of the broker-dealer and the quality of
service rendered by the broker-dealer in other transactions.
The trustees have determined that portfolio transactions for the Portfolio
may be executed through CFS if, in the judgment of the investment manager, the
use of CFS is likely to result in prices and execution at least as favorable to
the Portfolio as those available from other qualified brokers and if, in such
transactions, CFS charges the Portfolio commission rates consistent with those
charged by CFS to comparable unaffiliated customers in similar transactions.
The board of trustees, including a majority of the trustees who are not
"interested" trustees, has adopted procedures that are reasonably designed to
provide that any commissions, fees or other remuneration paid to CFS are
consistent with the foregoing standard. The Portfolio will not effect
principal transactions with CFS.
In allocating the portfolio brokerage transactions to unaffiliated
broker-dealers, the investment manager may take into consideration the
research, analytical, statistical and other information and services provided
by the broker-dealer, such as general economic reports and information, reports
or analyses of particular companies or industry groups, market timing and
technical information, and the availability of the brokerage firm's analysts
for consultation. Although the investment manager believes these services have
substantial value, they are considered supplemental to the investment manager's
own efforts in the performance of its duties under the management agreement.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 ("1934
Act"), the investment manager may pay a broker-dealer that provides brokerage
and research services an amount of commission for effecting a securities
B-25
<PAGE> 42
transaction for the Portfolio in excess of the commission that another
broker-dealer would have charged for effecting that transaction if the amount
is believed by the investment manager to be reasonable in relation to the value
of the overall quality of the brokerage and research services provided. Other
clients of the investment manager may indirectly benefit from the availability
of these services to the investment manager, and the Portfolio may indirectly
benefit from services available to the investment manager as a result of
transactions for other clients.
TAXATION
The following is only a summary of certain tax considerations. The summary
is not intended to present a detailed explanation or as a substitute for careful
tax planning. Investors are urged to consult their tax advisors with specific
reference to their own tax situations.
Shares of the Portfolio are offered to separate accounts of Participating
Insurance Companies that fund Variable Contracts and may be offered to certain
Retirement Plans. See the disclosure documents for the Variable Contracts or the
plan documents (including the summary plan description) for the Retirement Plans
for a discussion of the special taxation of insurance companies with respect to
the separate accounts and the Variable Contracts, and the holders thereof, or
the special taxation of Retirement Plans and the participants therein. The
Portfolio intends to qualify and elect to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code") so as to be relieved of federal income tax on its net investment income
and capital gains that it distributes to shareholders.
The Portfolio must meet several requirements to maintain its status as a
regulated investment company. These requirements include the following: (1) at
least 90% of the Portfolio's gross income must be derived from dividends,
interest, payments with respect to securities loaned, and gains from the sale or
disposition of securities; and (2) at the close of each quarter of the
Portfolio's taxable year, (a) at least 50% of the value of the Portfolio's total
assets must consist of cash, U.S. Government securities and other securities (no
more than 5% of the value of the Portfolio may consist of such other securities
of any one issuer, and the Portfolio must not hold more than 10% of the
outstanding voting stock of any issuer), and (b) the Portfolio must not invest
more than 25% of the value of its total assets in the securities of any one
issuer (other than U.S. Government securities).
In order to maintain the qualification of the Portfolio's status as a
regulated investment company, the Trust may, in its business judgment, restrict
the Portfolio's ability to enter into stock index futures contracts or options
on such futures contracts or engage in short-term trading and transactions in
securities (including stock index futures contracts and options on such futures
contracts). For the same reason, the Trust may, in its business judgement,
require the Portfolio to defer the closing out of a contract beyond the time
when it might otherwise be advantageous to do so.
Pursuant to the requirements of Section 817(h) of the Code, the only
shareholders of the Portfolio will be insurance companies and their separate
accounts that fund variable insurance contracts. The prospectus that describes a
particular variable insurance contract discusses the taxation of separate
accounts and the owner of the particular variable insurance contract.
The Portfolio intends to comply with the requirements of Section 817(h) and
related regulations. Section 817(h) of the code and the regulations issued by
the Treasury Department impose certain diversification requirements affecting
the securities in which the Portfolio may invest. These diversification
requirements are in addition to the diversification requirements under
subchapter M and the Investment Company Act of 1940.
B-26
<PAGE> 43
In order to comply with the current or future requirements of section
817(h) (or related provisions of the Code), the Trust may be required, e.g., to
alter the investment objectives of the Portfolio. No such change of investment
objectives will take place without notice to the shareholders of the Portfolio,
the approval of a majority of the outstanding voting shares, and the approval of
the Securities and Exchange commission, to the extent legally required.
The Portfolio's investment in foreign securities or currencies may require
it to pay withholding or other taxes to foreign governments. Foreign tax
withholding from dividends and interest, if any, is generally at a rate between
10% and 35%. The investment yield of the Portfolio will be reduced by these
foreign taxes. Shareholders will bear the cost of any foreign tax withholding,
but may not be able to claim a foreign tax credit or deduction for these foreign
taxes. Investing in securities of passive foreign investment companies may be
subject to U.S. Federal income taxes and interest charges, and the investment
yield of the Portfolio will be reduced by these taxes and interest charges.
Shareholders will bear the cost of these taxes and interest charges, but will
not be able to claim a deduction for these amounts.
If the Portfolio failed to qualify as a regulated investment company,
owners of Variable Contracts based on the Portfolio (1) might be taxed currently
on the investment earnings under their contracts and thereby lose the benefit of
tax deferral, and (2) the Portfolio might incur additional taxes. In addition,
if the Portfolio failed to comply with the diversification requirements of
Section 817(h) of the regulations thereunder, owners of Variable Contracts based
on the Portfolio would be taxed on the investment earnings under their contracts
and thereby lose the benefit of tax deferral. Accordingly, compliance with the
above rules is carefully monitored by the investment manager and it is intended
that the Portfolio will comply with these rules as they exist or as they may be
modified from time to time. Compliance with the tax requirements described above
may result in a reduction in the return achieved by the Portfolio, since, to
comply with the above rules, the investments utilized (and the time at which
such investments are entered into and closed out) may be different from what the
investment manager might otherwise believe to be desirable.
CERTAIN SHAREHOLDERS
As of March 26, 1999, Calamos Asset Management, Inc. was the initial seed
money shareholder of 100% of the shares of the Portfolio. As of March 26, 1999,
trustees and officers of the Trust, as a group, owned less than 1% of the shares
of the Portfolio.
CUSTODIAN
The Bank of New York, 48 Wall Street, New York, New York 10286, is the
custodian for the assets of the Portfolio. The custodian is responsible for
holding all cash and securities of the Portfolio, directly or through a book
entry system, delivering and receiving payment for securities sold by the
Portfolio, receiving and paying for securities purchased by the Portfolio,
collecting income from investments of the Portfolio and performing other duties,
all as directed by authorized persons of the Trust. The custodian does not
exercise any
B-27
<PAGE> 44
supervisory functions in such matters as the purchase and sale
of securities by the Portfolio, payment of dividends or payment of expenses of
the Portfolio.
INDEPENDENT AUDITORS
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606, audits and reports on the Portfolio's annual financial statements,
reviews certain regulatory reports and the Portfolios' federal income tax
returns, and performs other professional accounting, tax and advisory services
when engaged to do so by the Portfolio.
SHAREHOLDER INFORMATION
Under the terms of the Agreement and Declaration of Trust, the trustees may
issue an unlimited number of shares of beneficial interest without par value for
each series of shares authorized by the trustees and the trustees may divide the
shares of any series into two or more classes of shares of that series.
Currently the Trust has one series in operation. All Shares issued will be fully
paid and non-assessable and will have no preemptive or conversion rights. In the
future, the board of trustees may authorize the issuance of shares of additional
series and additional classes of shares of any series.
The Portfolio's shares are entitled to participate pro rata in any
dividends and other distributions declared by the Trust's board of trustees with
respect to shares of the Portfolio. All shares of the Portfolio have equal
rights in the event of liquidation of the Portfolio.
Under Massachusetts law, the shareholders of the Trust may, under certain
circumstances, be held personally liable for the Trust's obligations. However,
the Trust's Declaration of Trust disclaims liability of the shareholders,
trustees, and officers of the Trust for acts or obligations of the Portfolio,
which are binding only on the assets and property of the Portfolio. The
Declaration of Trust requires that notice of such disclaimer be given in each
agreement, obligation, or contract entered into or executed by the Trust or the
board of trustees. The Declaration of Trust provides for indemnification out of
a Portfolio's assets of all losses and expenses of any Portfolio shareholder
held personally liable for the Portfolio's obligations. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
remote, since it is limited to circumstances in which the disclaimer is
inoperative and the Portfolio itself is unable to meet its obligations.
B-28
<PAGE> 45
VOTING RIGHTS
Each share has one vote and fractional shares have fractional votes. As a
business trust, the Trust is not required to hold annual shareholder meetings.
However, special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies or approving an investment
advisory agreement.
Under current interpretations of the 1940 Act, the Portfolio expects that
Participating Insurance Company shareholders will offer variable contract
holders the opportunity to instruct them as to how Portfolio shares attributable
to such contracts will be voted with respect to matters to be voted upon. The
separate prospectuses describing the Variable Contracts include additional
disclosure of how contract holder voting rights are computed.
B-29
<PAGE> 46
APPENDIX -- DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general
and are not absolute standards of quality or guarantees as to the
creditworthiness of an issuer. Consequently, the Portfolio's investment manager
believes that the quality of debt securities in which the Portfolio invests
should be continuously reviewed. A rating is not a recommendation to purchase,
sell or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the ratings services from other sources which they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
MOODY'S RATINGS
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
B-30
<PAGE> 47
S&P RATINGS
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal
and interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and
interest and differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
B-31
<PAGE> 48
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
Calamos Insurance Trust -- Calamos Convertible Portfolio
We have audited the accompanying statement of net assets of Calamos
Insurance Trust -- Calamos Convertible Portfolio of Calamos Insurance Trust as
of March 26, 1999. This statement of net assets is the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on this
statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of net assets is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of net assets. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.
In our opinion the statement of net assets referred to above presents
fairly, in all material respects, the financial position of Calamos Insurance
Trust -- Calamos Convertible Portfolio at March 26, 1999 in conformity with
generally accepted accounting principles.
Ernst & Young LLP
___________________________________________________________________________
Chicago, Illinois
March 26,1999
B-32
<PAGE> 49
CALAMOS INSURANCE TRUST
CALAMOS CONVERTIBLE PORTFOLIO
STATEMENT OF NET ASSETS
MARCH 26, 1999
<TABLE>
<S> <C>
ASSETS
Cash.......................................... $100,000
NET ASSETS
Net assets, applicable to shares of beneficial
interest (unlimited number of shares authorized,
no par value) outstanding..................... $100,000
THE PRICING Of SHARES
Net asset value and redemption price per share
($100,000 / 10,000 shares outstanding)........ $10.00
</TABLE>
NOTES:
Calamos Convertible Portfolio ("Portfolio") is a series of Calamos
Insurance Trust ("Trust") an open-end management investment company,
organized as a business trust under the laws of the Commonwealth of
Massachusetts on February 17, 1999. All shares of beneficial interest of
the Portfolio were issued to Calamos Asset Management, Inc., the investment
manager for the Portfolio of the Trust, on March 26, 1999. The costs of
organization of the Trust will be paid by Calamos Asset Management, Inc.
B-33
<PAGE> 50
PART C OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<S> <C>
(a) Amended and Restated Agreement and Declaration of Trust*
(b) Bylaws
(c) See Articles IV and V of Exhibit (a), above.
(d) Form of Management agreement with Calamos Asset Management, Inc.
(e) Form of Distribution agreement with Calamos Financial Services, Inc.
(f) None
(g) Form of Custody agreement with Bank of New York
(h)(1) Form of Investment company services agreement with First Data Corp.
Investor Services Group
(h)(2) Use of name agreement dated May 1, 1999
(i) Opinion of Goodwin, Procter & Hoar L.L.P. dated March 25, 1999
(j) Consent of independent auditors*
(k) None
(l) Subscription agreement
(m) None
(n) None
(o) None
</TABLE>
* Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A filed on February 17, 1999.
Item 24. Persons Controlled By or Under Common Control with Registrant
Shares of the Registrant will be offered and sold to Kansas City Life
Insurance Company, a stock life insurance company, domiciled in Missouri and
its separate investment accounts, "Kansas City Life Variable Annuity Separate
Account" and "Kansas City Life Variable Life Separate Account". The purchasers
of insurance contracts and annuity contracts issued in connection with such
accounts will have the right to instruct Kansas City Life with respect to the
voting of the Registrant's shares held by the separate accounts.
C-1
<PAGE> 51
Item 25. INDEMNIFICATION
Article VI of the agreement and declaration of trust of registrant (exhibit
(a) to this registration statement which is incorporated herein by reference)
provides that the Trust shall indemnify (from the assets of the Sub-Trust or
Sub-Trusts in question) each of its Trustees and officers (including persons who
serve at the Trust's request as directors, officers or trustees of another
organization in which the trust has any interest as a shareholder, creditor or
otherwise #hereinafter referred to as a "Covered Person"# against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined in one of the manners described below,
that such covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described in (i) and
(ii) being referred to hereafter as "Disabling Conduct").
A determination that the Covered Person is not entitled to indemnification
due to Disabling conduct may be made by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the person to be
indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a
court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding, or
(b) an independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time in advance of the final disposition
of any such action, suit or proceeding, provided that the Covered Person shall
have undertaken to repay the amounts so paid to the Sub-Trust in question if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Party ultimately will be found entitled to
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C-2
<PAGE> 52
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The information in the statement of additional information under the
caption "Management -- Trustees and Officers" is incorporated by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Calamos Financial Services, Inc. ("CFS") serves as principal
underwriter for the Calamos Investment Trust and the Calamos Insurance
Trust.
(b) Information on the officers and directors of CFS is set forth below.
The principal business address is 1111 East Warrenville Road,
Naperville, Illinois 60563.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
<S> <C> <C>
John P. Calamos Director, President President
Nick P. Calamos Vice President Vice President
John P. Calamos, Jr. Vice President None
James W. Faulkner Treasurer None
James S. Hamman, Jr. Secretary Trustee, Secretary
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, at the offices of the Registrant's investment manager,
Calamos Asset Management, Inc., and Calamos Financial Services, Inc., the
Registrant's principal underwriter, 1111 East Warrenville Road, Naperville,
Illinois 60563, at the offices of the custodian, Bank of New York, 90 Washington
Street, New York, NY 10286, or at the offices of the transfer agent, First Data
Corp., 3200 Horizon Drive, King of Prussia, PA 19406.
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
None.
C-3
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Naperville, Illinois on March 26, 1999.
CALAMOS INSURANCE TRUST
By /s/ James S. Hamman, Jr.
----------------------------------
James S. Hamman, Jr., Sole Trustee
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/ James S. Hamman, Jr. Trustee March 26, 1999
- ------------------------
James S. Hamman, Jr.
</TABLE>
C-4
<PAGE> 54
EXHIBIT INDEX
(b) Bylaws
(d) Form of Management Agreement with Calamos Asset Management, Inc.
(e) Form of Distribution agreement with Calamos Financial Services, Inc.
(g) Form of Custody agreement with Bank of New York
(h)(1) Form of Investment company services agreement with First Data Corp.
Investor Services Group
(h)(2) Use of name agreement dated May 1, 1999
(i) Opinion of Goodwin, Procter & Hoar LLP dated March 25, 1999
(j) Consent of independent auditors
(l) Subscription agreement
<PAGE> 1
EXHIBIT (b)
BY-LAWS OF
CALAMOS INSURANCE TRUST
Section 1. Agreement and Declaration of
Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Calamos Insurance Trust, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust; Resident Agent. The principal office
of the Trust shall be located in Naperville, Illinois. Its resident agent in
Massachusetts shall be CT Corporation System, 2 Oliver Street, Boston,
Massachusetts or such other person as the Trustees may from time to time select.
Section 2. Shareholders
2.1 Shareholder Meetings. Meetings of the shareholders may be called at
any time by the Trustees, by the President or, if the Trustees and the President
shall fail to call any meeting of shareholders for a period of 30 days after
written application of one or more shareholders who hold at least 25% of all
shares issued and outstanding and entitled to vote at the meeting (or 10% if the
purpose of the meeting is to determine if a Trustee shall be removed from
office), then such shareholders may call such meeting. Each call of a meeting
shall state the place, date, hour and purposes of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall be held at
the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as shall be
designated by the Trustees or the President of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be given
at least seven days before the meeting to each shareholder entitled to vote
thereat by leaving such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such shareholder at
his address as it appears in the records of the Trust. Such notice shall be
given by the Secretary or an Assistant Secretary or by an officer designated by
the Trustees. No notice of any meeting of shareholders need be given to a
1
<PAGE> 2
shareholder if a written waiver of notice, executed before or after the meeting
by such shareholder or his attorney thereunto duly authorized, is filed with the
records of the meeting.
2.4 Ballots. No ballot shall be required for any election unless
requested by a shareholder present or represented at the meeting and entitled to
vote in the election.
2.5 Proxies and Voting. Shareholders entitled to vote may vote either in
person or by proxy in writing dated not more than six months before the meeting
named therein, which proxies shall be filed with the Secretary or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting. At all meetings of
shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their
number an executive committee and other committees. Any such committee may be
abolished and reconstituted at any time and from time to time by the Trustees.
Except as the Trustees may otherwise determine, any such committee may make
rules for the conduct of its business. The Trustees may appoint an advisory
board to consist of not less than two nor more than five members. The members
of the advisory board shall be compensated in such manner as the Trustees may
determine and shall confer with and advise the Trustees regarding the
investments and other affairs of the Trust. Each member of the advisory board
shall hold office until the first meeting of the Trustees following the meeting
of the shareholders, if any, next following his appointment and until his
successor is appointed and qualified, or until he sooner dies, resigns, is
removed, or becomes disqualified, or until the advisory board is sooner
abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such
2
<PAGE> 3
determination shall be given to absent Trustees. A regular meeting of the
Trustees may be held without call or notice immediately after and at the same
place as any meeting of the shareholders.
3.3 Special Meetings. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when called by the
Chairman of the Board or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by
mail at least three days or by telegram at least twenty-four hours before the
meeting addressed to the Trustee at his or her usual or last known business or
residence address or to give notice to him or her in person or by telephone at
least twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him or her
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of a meeting nor
a waiver of a notice need specify the purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees, one-third of the Trustees
then in office shall constitute a quorum; provided, however, a quorum (unless
the Board of Trustees consists of two or fewer persons) shall not be less than
two. Any meeting may be adjourned from time to time by a majority of the votes
cast upon the question, whether or not a quorum is present, and the meeting may
be held as adjourned without further notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint. The Trust
may also have such agents, if any, as the Trustees from time to time may in
their discretion appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and
3
<PAGE> 4
powers herein and in the Declaration of Trust set forth, such duties and powers
as are commonly incident to his or her office as if the Trust were organized as
a Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
4.3 Election. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees at their first meeting in each calendar year or
at such later meeting in such year as the Trustees shall determine. Other
officers or agents, if any, may be elected or appointed by the Trustees at said
meeting or at any other time.
4
<PAGE> 5
4.4 Tenure. The President, Treasurer and Secretary shall hold office
until the first meeting of Trustees in each calendar year and until their
respective successors are chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed or becomes disqualified. Each other officer
shall hold office and each agent shall retain his or her authority at the
pleasure of the Trustees.
4.5 Chairman of the Board. The Chairman of the Board of Trustees, if one
is so appointed, shall be chosen from among the Trustees and may hold office
only so long as he continues to be a Trustee. The Chairman of the Board, if any
is so appointed, shall preside at all meetings of the shareholders and of the
Trustees at which he is present; and shall have such other duties and powers as
specified herein and as may be assigned to him by the Trustee.
4.6 President and Vice Presidents. The President shall be the chief
executive officer of the Trust. The President shall, subject to the control of
the Trustees, have general charge and supervision of the Trust and shall perform
such other duties and have such other powers as the Trustees shall prescribe
from time to time. Any Vice President shall at the request or in the absence or
disability of the President exercise the powers of the President and perform
such other duties and have such other powers as shall be designated from time to
time by the Trustees.
4.7 Treasurer and Controller. The Treasurer shall be the chief financial
officer of the Trust and, subject to any arrangement made by the Trustees with a
bank or trust company or other organization as custodian or transfer or
shareholder services agent, shall be in charge of its valuable papers and shall
have such other duties and powers as may be designated from time to time by the
Trustees or by the President. If at any time there shall be no Controller, the
Treasurer shall also be the chief accounting officer of the Trust and shall have
the duties and power prescribed herein for the Controller. Any Assistant
Treasurer shall have such duties and powers as shall be designated from time to
time by the Trustees.
The Controller, if any be elected, shall be the chief accounting officer of the
Trust and shall be in charge of its books of account and accounting records. The
Controller shall be responsible for preparation of financial statements of the
Trust and shall have such other duties and powers as may be designated from time
to time by the Trustees or the President.
4.8 Secretary and Assistant Secretaries. The Secretary shall
5
<PAGE> 6
record all proceedings of the shareholders and the Trustees in books to be kept
therefor, which books shall be kept at the principal office of the Trust. In
the absence of the Secretary from any meeting of shareholders or Trustees, an
Assistant Secretary, or if there be none or if he or she is absent, a temporary
clerk chosen at the meeting shall record the proceedings thereof in the
aforesaid books.
Section 5. Resignations and Removals
Any Trustee may resign his trust or retire as a Trustee in accordance with
procedures set forth in the Declaration of Trust. Any officer or advisory board
member may resign at any time by delivering his or her resignation in writing to
the Chairman of the Board, the President or the Secretary or to a meeting of the
Trustees. The Trustees may remove any officer or advisory board member elected
or appointed by them with or without cause by the vote of a majority of the
Trustees then in office. Except to the extent expressly provided in a written
agreement with the Trust, no Trustee, officer, or advisory board member
resigning, and no officer or advisory board member removed, shall have any right
to any compensation for any period following his or her resignation or removal,
or any right to damages on account of such removal.
Section 6. Vacancies
A vacancy in the office of Trustee shall be filed in accordance with the
Declaration of Trust. Vacancies resulting from the death, resignation,
incapacity or removal of any officer may be filled by the Trustees. Each
successor of any such officer shall hold office for the unexpired term, and in
the case of the President, the Treasurer and the Secretary, until his or her
successor is chosen and qualified, or in each case until he or she sooner dies,
resigns, is removed or becomes disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the ownership of
shares shall be issued except as the Trustees may otherwise authorize. In the
event that the Trustees authorize the issuance of share certificates, subject to
the provisions of Section 7.3, each shareholder shall be entitled to a
certificate stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such certificate shall
be signed by the President or a Vice President
6
<PAGE> 7
and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary.
Such signatures may be facsimiles if the certificate is signed by a transfer or
shareholder services agent or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Trust with
the same effect as if he or she were such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or destruction
or the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
Section 8. Record Date
The Trustees may fix in advance a time, which shall not be more than 90 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date.
7
<PAGE> 8
Section 9. Seal
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts" together with the name of
the Trust, cut or engraved thereon; but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument, or other paper executed
and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the President or by one of the Vice
Presidents or by the Treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
Section 11. Fiscal Year
The fiscal year of the Trust shall end on such date in each year as the Trustees
shall from time to time determine.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such majority.
8
<PAGE> 1
EXHIBIT (d)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of May, 1999, by and between CALAMOS INSURANCE
TRUST, a Massachusetts business trust (the "Fund"), and CALAMOS ASSET
MANAGEMENT, INC., an Illinois corporation (the "Adviser").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, the shares of beneficial interest
("Shares") of which are registered under the Securities Act of 1933;
WHEREAS, the Fund is authorized to issue Shares in separate series or
portfolios with each representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund currently offers or intends to offer Shares in one
portfolio, the Initial Portfolio, together with any other Fund portfolios which
may be established later and served by the Adviser hereunder, being herein
referred to collectively as the "Portfolios" and individually referred to as a
"Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser to render
investment advisory and management services to the Initial Portfolio, and the
Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser
for the Initial Portfolio and other Portfolios hereunder and to manage the
investment and reinvestment of the assets of each such Portfolio in accordance
with the applicable investment objectives and policies and limitations, and to
administer the affairs of each such Portfolio to the extent requested by and
subject to the supervision of the Board of Trustees of the Fund for the period
and upon the terms herein set forth, and to place orders for the purchase or
sale of portfolio securities for the Fund's account with brokers or dealers
selected by it; and, in connection therewith, the Adviser is authorized as the
agent of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund best execution of orders.
Subject to such
<PAGE> 2
policies as the Board of Trustees of the Fund determines, the Adviser shall not
be deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the clients of the Adviser as to which the
Adviser exercises investment discretion. The Fund recognizes that all research
services and research that the Adviser receives or generates are available for
all clients, and that the Fund and other clients may benefit thereby. The
investment of funds shall be subject to all applicable restrictions of the
Agreement and Declaration of Trust and By-Laws of the Fund as may from time to
time be in force.
The Adviser accepts such employment and agrees during such period to render
such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit any of its
officers or employees to serve without compensation as trustees or officers of
the Fund if elected to such positions and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall for all purposes
herein provided be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund. It is
understood and agreed that the Adviser, by separate agreements with the Fund,
may also serve the Fund in other capacities.
2. In the event that the Fund establishes one or more portfolios other
than the Initial Portfolio with respect to which it desires to retain the
Adviser to render investment advisory and management services hereunder, it
shall notify the Adviser in writing. If the Adviser is willing to render such
services, it shall notify the Fund in writing whereupon such portfolio or
portfolios shall become a Portfolio or Portfolios hereunder.
3. For the services and facilities described in Section 1, the Fund will
pay to the Adviser at the end of each calendar month, an investment management
fee for each Portfolio computed by applying the annual rate of .75% to the
applicable average daily
2
<PAGE> 3
net assets of the Portfolio.
The fee as computed above shall be computed separately for, and charged as
an expense of, each Portfolio based upon the average daily net assets of such
Portfolio. For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
4. The services of the Adviser to the Fund under this Agreement are not
to be deemed exclusive, and the Adviser shall be free to render similar services
or other services to others so long as its services hereunder are not impaired
thereby.
5. In addition to the fee of the Adviser, the Fund shall assume and pay
any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian, and for calculating the net asset value of the
Fund as provided in the prospectus of the Fund. The Adviser shall not be
required to pay and the Fund shall assume and pay the charges and expenses of
its operations, including the cost and expense of maintaining the books and
records of the Fund, including general ledger accounting, compensation of the
trustees (other than those affiliated with the Adviser), charges and expenses of
independent auditors, of legal counsel, of any transfer or dividend disbursing
agent, and of any registrar of the Fund, costs of acquiring and disposing of
portfolio securities, interest, if any, on obligations incurred by the Fund,
costs of share certificates and of reports, membership dues in the Investment
Company Institute or any similar organization, costs of reports and notices to
shareholders, other like miscellaneous expenses and all taxes and fees payable
to federal, state or other governmental agencies on account of the registration
of securities issued by the Fund, filing of trust documents or otherwise. The
Fund shall not pay or incur any obligation for any expenses for which the Fund
intends to seek reimbursement from the Adviser as herein provided without first
obtaining the written approval of the Adviser. The Adviser shall arrange, if
desired by the Fund, for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of the Fund if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law.
3
<PAGE> 4
The net asset value for each Portfolio shall be calculated in accordance
with the provisions of the Fund's prospectus or as the trustees may determine in
accordance with the provisions of the Investment Company Act of 1940. On each
day when net asset value is not calculated, the net asset value of a Portfolio
shall be deemed to be the net asset value of such Portfolio as of the close of
business on the last day on which such calculation was made for the purpose of
the foregoing computations.
6. Subject to applicable statutes and regulations, it is understood that
trustees, officers or agents of the Fund are or may be interested in the Adviser
as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as a trustee, officer or agent.
7. The Adviser shall not be liable for any error of judgment or of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under this Agreement.
8. This Agreement shall become effective with respect to the Initial
Portfolio on the date hereof and shall remain in full force until August 1,
2000, unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to each Portfolio,
but only as long as such continuance is specifically approved for each Portfolio
at least annually in the manner required by the Investment Company Act of 1940
and the rules and regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a Portfolio, the Adviser may
continue to serve in such capacity for such Portfolio in the manner and to the
extent permitted by the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the Fund
or by the Adviser on sixty (60) days written notice to the other party. The Fund
may effect termination with respect to any Portfolio by action of the Board of
Trustees or by vote of a majority of the outstanding voting securities of such
Portfolio.
4
<PAGE> 5
This Agreement may be terminated with respect to any Portfolio at any time
without the payment of any penalty by the Board of Trustees or by vote of a
majority of the outstanding voting securities of such Portfolio in the event
that it shall have been established by a court of competent jurisdiction that
the Adviser or any officer or director of the Adviser has taken any action which
results in a breach of the covenants of the Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
3 earned prior to such termination.
9. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
10. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
11. All parties hereto are expressly put on notice of the Fund's Agreement
and Declaration of Trust and all amendments thereto, all of which are on file
with the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund hereunder
are not binding upon any of the trustees, officers, or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund. With
respect to any claim by the Adviser for recovery of that portion of the
investment management fee (or any other liability of the Fund arising hereunder)
allocated to a particular Portfolio, whether in accordance with the express
terms hereof or otherwise, the Adviser shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall have no recourse
against the assets of any other Portfolio for such purpose.
12. This Agreement shall be construed in accordance with
5
<PAGE> 6
applicable federal law and (except as to Section 11 hereof which shall be
construed in accordance with the laws of The Commonwealth of Massachusetts) the
laws of the State of Illinois.
13. This Agreement is the entire contract between the parties relating to
the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.
6
<PAGE> 7
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed as of the day and year first above written.
CALAMOS INSURANCE TRUST
By:____________________________
Title: PRESIDENT
ATTEST:
_____________________________
Title: SECRETARY
CALAMOS ASSET MANAGEMENT, INC.
By:____________________________
Title: PRESIDENT
ATTEST:
_____________________________
Title: SECRETARY
7
<PAGE> 1
EXHIBIT (e)
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 1st day of May, 1999 between Calamos Insurance
Trust, a Massachusetts business trust (hereinafter called the "Fund"), and
CALAMOS FINANCIAL SERVICES, INC., an Illinois corporation (hereinafter called
the "Underwriter");
W I T N E S S E T H:
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of shares of beneficial interest (hereinafter called "shares") of
the Fund in jurisdictions wherein shares of the Fund may legally be offered for
sale; provided, however, that the Fund in its absolute discretion may (a) issue
or sell shares directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; or (b) issue or
sell shares at net asset value to the shareholders of any other investment
company, for which the Underwriter shall act as exclusive distributor, who wish
to exchange all or a portion of their investment in shares of such other
investment company for shares of the Fund.
2. The Underwriter hereby accepts appointment as agent for the
distribution of the shares of the Fund and agrees that it will use its best
efforts with reasonable promptness to sell such part of the authorized shares of
the Fund remaining unissued as from time to time shall be effectively registered
under the Securities Act of 1933 ("Securities Act"), at prices determined as
hereinafter provided and on terms hereinafter set forth, all subject to
applicable Federal and state laws and regulations and to the Agreement and
Declaration of Trust of the Fund.
3. The Fund agrees that it will use its best efforts to keep effectively
registered under the Securities Act for sale as herein contemplated such shares
as the Underwriter shall reasonably request and as the Securities and Exchange
Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of shares
1
<PAGE> 2
whenever, in its sole discretion, it deems such action to be desirable.
5. The Underwriter shall sell shares of the Fund to or through qualified
dealers or others in such manner, not inconsistent with the provisions hereof
and the then effective registration statement of the Fund under the Securities
Act (and related prospectus), as the Underwriter may determine from time to
time, provided that no dealer or other person shall be appointed or authorized
to act as agent of the Fund without the prior consent of the Fund. It is
mutually agreed that, in addition to sales made by it as agent of the Fund, the
Underwriter may, in its discretion, also sell shares of the Fund as principal to
persons with whom it does not have dealer selling group agreements.
6. Shares of the Fund offered for sale or sold by the Underwriter shall
be so offered or sold at a price per share determined in accordance with the
then current prospectus relating to the sale of such shares except as departure
from such prices shall be permitted by the rules and regulations of the
Securities and Exchange Commission; provided, however, that any public offering
price for shares of the Fund shall be the net asset value per share. The net
asset value per share shall be determined in the manner and at the times set
forth in the then current prospectus of the Fund relating to such shares.
7. The price the Fund shall receive for all shares purchased from the
Fund shall be the net asset value used in determining the public offering price
applicable to the sale of such shares.
8. The Underwriter shall issue and deliver on behalf of the Fund such
confirmations of sales made by it as agent pursuant to this agreement as may be
required. At or prior to the time of issuance of shares, the Underwriter will
pay or cause to be paid to the Fund the amount due the Fund for the sale of such
shares. Certificates shall be issued or shares registered on the transfer books
of the Fund in such names and denominations as the Underwriter may specify.
9. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as the Underwriter may
reasonably request (it being understood that the Fund shall not be required
without its consent to comply with any requirement
2
<PAGE> 3
which in its opinion is unduly burdensome).
10. The Fund will furnish to the Underwriter from time to time such
information with respect to the Fund and its shares as the Underwriter may
reasonably request for use in connection with the sale of shares of the Fund.
The Underwriter agrees that it will not use or distribute or authorize the use,
distribution or dissemination by its dealers or others in connection with the
sale of such shares any statements, other than those contained in the Fund's
current prospectus, except such supplemental literature or advertising as shall
be lawful under Federal and state securities laws and regulations, and that it
will furnish the Fund with copies of all such material.
11. The Underwriter shall order shares of the Fund from the Fund only to
the extent that it shall have received purchase orders therefor. The
Underwriter will not make, or authorize any dealers or others to make any short
sales of shares of the Fund.
12. The Underwriter, as agent of and for the account of the Fund, may
repurchase the shares of the Fund at such prices and upon such terms and
conditions as shall be specified in the current prospectus of the Fund.
13. In selling or reacquiring shares of the Fund for the account of the
Fund, the Underwriter will in all respects conform to the requirements of all
state and Federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by the Underwriter or any
employee, representative or agent of the Underwriter. The Underwriter will
observe and be bound by all the provisions of the Agreement and Declaration of
Trust of the Fund (and of any fundamental policies adopted by the Fund pursuant
to the Investment Company Act of 1940, notice of which shall have been given to
the Underwriter) which at the time in any way require, limit, restrict or
prohibit or otherwise regulate any action on the part of the Underwriter.
14. The Underwriter will require each dealer to conform to the provisions
hereof and the Registration Statement (and related prospectus) at the time in
effect under the Securities Act with respect to the public offering price of the
Fund's shares, and neither the Underwriter nor any such dealers shall withhold
the placing of purchase orders so as to make a profit thereby.
15. The Fund will pay or cause to be paid expenses
3
<PAGE> 4
(including the fees and disbursements of its own counsel) and all taxes and fees
payable to the Federal, state or other governmental agencies on account of the
registration or qualification of securities issued by the Fund or otherwise. The
Fund will also pay or cause to be paid expenses incident to the issuance of
shares of beneficial interest, such as the cost of share certificates, issue
taxes, and fees of the transfer agent. The Underwriter will pay all expenses
(other than expenses which one or more Firms may bear pursuant to any agreement
with the Underwriter) incident to the sale and distribution of the shares issued
or sold hereunder, including, without limiting the generality of the foregoing,
all expenses of preparing, printing and distributing or disseminating any
literature, advertising and selling aids in connection with the offering of the
shares for sale (except that such expenses need not include expenses incurred by
the Fund in connection with the preparation, typesetting, printing and
distribution of any registration statement or report or other communication to
shareholders in their capacity as such)and expenses of advertising in connection
with such offering.
16. This agreement shall become effective on the date hereof and shall
continue in effect until August 1, 2000 and from year to year thereafter, but
only so long as such continuance is approved in the manner required by the
Investment Company Act of 1940. Either party hereto may terminate this
agreement on any date by giving the other party at least six months prior
written notice of such termination specifying the date fixed therefor. Without
prejudice to any other remedies of the Fund in any such event the Fund may
terminate this agreement at any time immediately upon any failure of fulfillment
of any of the obligations of the Underwriter hereunder.
17. This agreement shall automatically terminate in the event of its
assignment.
18. Any notice under this agreement shall be in writing, addressed and
delivered or mailed, postage postpaid, to the other party at such address as
such other party may designate for the receipt of such notice.
19. All parties hereto are expressly put on notice of the Fund's Agreement
and Declaration of Trust and all amendments thereto, all of which are on file
with the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of
4
<PAGE> 5
the Fund hereunder are not binding upon any of the Trustees, officers or
shareholders of the Fund individually but are binding upon only the assets and
the property of the Fund. With respect to any claim by the Underwriter for
recovery of any liability of the Fund arising hereunder allocated to a
particular series of the Fund, if there be more than one, whether in accordance
with the express terms hereof or otherwise, the Underwriter shall have recourse
solely against the assets of that series to satisfy such claim and shall have no
recourse against the assets of any other Portfolio for such purpose.
5
<PAGE> 6
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
agreement to be executed on the day and year first above written.
Calamos Insurance Trust
<TABLE>
<S> <C>
By:______________________________
Title: PRESIDENT
Attest:______________________
Title: SECRETARY
CALAMOS FINANCIAL SERVICES, INC.
By:______________________________
Title: PRESIDENT
Attest:______________________
Title: SECRETARY
</TABLE>
6
<PAGE> 1
EXHIBIT (g)
CUSTODY AGREEMENT
Agreement made as of this day of , 1999, between
CALAMOS INSURANCE TRUST, a Massachusetts business trust organized and existing
under the laws of the Commonwealth of Massachusetts, having its principal office
and place of business at 1111 East Warrenville Road, Naperville, Illinois
60563-1493 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at 48 Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to an Investment Company
Services Agreement (as hereinafter defined) between First Data Investor Services
Group, Inc. ("FDS") and the Fund, FDS (a) has agreed to perform certain
administrative functions which may include the functions of administrator,
transfer agent and accounting services agent and (b) has been appointed by the
Fund to act as its agent in respect of certain transactions contemplated in this
Agreement; and
WHEREAS, the Fund represents that (a) FDS has agreed to act as Fund's agent
in respect of certain transactions contemplated in this Agreement and (b) the
Custodian is authorized and directed to rely upon and follow Certificates and
Instructions given by FDS, the Fund's agent, in respect of transactions
contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Administrator" shall mean FDS and such successors or permitted
assigns as may succeed and perform its duties under the Investment Company
Services Agreement.
<PAGE> 2
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any (a) any two Officers, or (b) in the case of a Certificate
referred to in Article IV, V, VIII, IX or X, any one officer and the term
Certificate shall also include Instructions communicated to the Custodian by the
Administrator.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or any
other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and
- 2 -
<PAGE> 3
include any other person authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a
resolution of the Fund's Board of Trustees specifically approving deposits
therein by the Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified month at an agreed
upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Officer or unsigned) and tested telex.
16. "Investment Company Services Agreement" shall mean that certain
separate agreement so entitled dated as of _______________, 1999 between the
Fund and the FDS.
17. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
18. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements,
- 3 -
<PAGE> 4
debt obligations issued or guaranteed as to interest and principal by the
government of the United States or agencies or instrumentalities thereof, any
tax, bond or revenue anticipation note issued by any state or municipal
government or public authority, commercial paper, certificates of deposit and
bankers' acceptances, repurchase agreements with respect to the same and bank
time deposits, where the purchase and sale of such securities normally
requires settlement in federal funds on the same day as such purchase or sale.
19. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
20. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any other
person or persons, including officers or employees of the Administrator, whether
or not any such other person is an officer of the Fund, duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
21. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
22. "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from an Officer or from a person reasonably believed by the
Custodian to be an Officer.
23. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
24. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
25. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public
- 4 -
<PAGE> 5
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
26. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
27. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the Fund
and listed on Appendix B hereto as amended from time to time.
28. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.
29. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
30. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and money at any time owned by the Fund during the period of this
Agreement.
- 5 -
<PAGE> 6
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as herein after set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with
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<PAGE> 7
respect to Clearing Member confirmations for Options and transactions in
Options for a Series as provided in this Agreement, the Custodian shall have
received a certified resolution of the Fund's Board of Trustees, substantially
in the form of Exhibit C hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis, until instructed to the contrary
by a Certificate actually received by the Custodian, to accept, utilize and act
in accordance with such confirmations as provided in this Agreement with respect
to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Administrator with confirmations and a summary, on a per Series
basis, of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Administrator with a detailed statement, on a per Series basis, of the
Securities and money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of
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<PAGE> 8
the Custodian as the Custodian may from time to time determine, or in the name
of the Book-Entry System or the Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish or cause to be furnished
to the Custodian appropriate instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository any
Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such Securities
specifically allocated to a Series which are not held in the Book-Entry System
or in the Depository in a separate account in the name of such Series physically
segregated at all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income due or payable;
(b) present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix C annexed hereto, which may be amended at
any time by the Custodian without the prior notification or consent of the Fund;
(c) present for payment and collect the amount payable upon all
Securities which mature;
(d) surrender Securities in temporary form for definitive Securities;
(e) execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
(f) hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
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<PAGE> 9
(a) execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any conversion privilege and receive and hold hereunder specifically allocated
to such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing
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<PAGE> 10
out upon its receipt from a broker, dealer, or futures commission merchant of a
statement or confirmation reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission merchants with
respect to such Futures Contracts, Options, or Futures Contract Options, as the
case may be, confirming that such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the Fund, provided,
however, that notwithstanding the foregoing, payments to or deliveries from the
Margin Account and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver or cause the Administrator to deliver to the Custodian (i)
with respect to each purchase of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate or Oral Instructions, specifying with respect
to each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the broker specified in the
Certificate out of
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<PAGE> 11
the money held for the account of such Series the total amount payable upon
such purchase, provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale
of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver or cause the Administrator to
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, a Certificate, and (ii) with respect to each sale
of Money Market Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the
total amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate against
payment upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the Series to which such
Option is specifically allocated; (b) the type of Option (put or call); (c) the
name of the issuer and the title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Stock Index Options purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the
total amount payable by the Fund in con- nection with such purchase; (h) the
name of the Clearing Mem- ber through whom such Option was purchased; and (i)
the name of the broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the purchase of such
Option held by such Clearing Member for the account of the Custodian (or any
duly appointed and registered nominee of the Custodian) as custodian for the
Fund, out of money held for the account of the Series to which such Option is to
be specifically allocated, the total amount
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<PAGE> 12
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically allocated; (b) the
type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options sold; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such sale; and (h) the
name of the Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph 1 of this
Article with respect to such Option against payment to the Custodian of the
total amount payable to the Fund, provided that the same conforms to the total
amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Call Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Call Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing Member through
whom such Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of the money
held for the account of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the total amount
payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Put Option: (a) the Series to which such Put Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing
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<PAGE> 13
Member through whom such Put Option was exercised. The Custo- dian shall, upon
receipt of the amount payable upon the exercise of the Put Option, deliver or
direct the Depository to deliver the Securities specifically allocated to such
Series, provided the same conforms to the amount payable to the Fund as set
forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series to which such Stock
Index Option was specifically allocated; (b) the type of Stock Index Option (put
or call); (c) the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such exercise;
and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall deliver
or cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and number of
shares for which the Covered Call Option was written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was written; and (g)
the name of the Clearing Member through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to such Covered Call Option,
such receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate instructing
the Custodian to deliver, or to direct the Depository to deliver, the Securities
subject to such Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing Member
to
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<PAGE> 14
whom the underlying Securities are to be delivered; and (d) the total amount
payable to the Fund upon such delivery. Upon the return and/or cancellation of
any receipts delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the underlying Securities as
specified in the Certificate against payment of the amount to be received as set
forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series for which such Put Option was
written; (b) the name of the issuer and the title and number of shares for which
the Put Option is written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Put Option is written; (g) the name of the Clearing Member through whom
the premium is to be received and to whom a Put Option guarantee letter is to be
delivered; (h) the amount of cash, and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; and (i) the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the Certificate, issue a
Put Option guarantee letter substantially in the form utilized by the Custodian
on the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying: (a) the
Series to which such Put Option was written; (b) the name of the issuer and
title and number of shares subject to the Put Option; (c) the Clearing Member
from whom the underlying Securities are to be received; (d) the total amount
payable by the Fund upon such delivery; (e) the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to be withdrawn
from the Collateral Account for such Series and (f) the amount of cash and/or
the amount and kind of Securities, specifically allocated to such Series, if
any, to be withdrawn from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar document issued by
the Custodian in connection with such Put Option, the Custodian shall pay out
of the money held for the
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<PAGE> 15
account of the Series to which such Put Option was specifically allocated the
total amount payable to the Clearing Member specified in the Certificate as set
forth in such Certificate cate against delivery of such Securities, and shall
make the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall deliver
or cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) whether such Stock Index Option is a put or a
call; (c) the number of options written; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such Option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in the
Senior Security Account for such Se ries; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and (k) the amount of
cash and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be de posited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall, upon receipt of
the premium specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1) deliver
such receipts, if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account specified
in the Certificate, or (2) make the deposits into the Margin Account specified
in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with re spect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) such information as may be necessary to identify
the Stock Index Option being ex ercised; (c) the Clearing Member through whom
such Stock Index Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to the Fund; (e) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Margin Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Col lateral Account for such Series. Upon the return
and/or can cellation of the receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay
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<PAGE> 16
out of the money held for the account of the Series to which such Stock Index
Option was specifically allocated to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate specifying with
respect to the Option being purchased: (a) that the transaction is a Closing
Purchase Transaction; (b) the Series for which the Option was written; (c) the
name of the issuer and the title and number of shares subject to the Option, or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of the Clearing Member to
whom the premium is to be paid; and (j) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account for such Series. Upon
the Custodian's payment of the premium and the return and/or cancellation of any
receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to
the Option being liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Con tract, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Futures Contract, (or with respect
to any number of
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<PAGE> 17
identical Futures Contract(s)): (a) the Series for which the Futures Contract
is being entered; (b) the category of Futures Contract (the name of the
underlying stock index or financial instrument); (c) the number of identical
Futures Contracts entered into; (d) the delivery or settlement date of the
Futures Contract(s); (e) the date the Futures Contract(s) was (were) entered
into and the maturity date; (f) whether the Fund is buying (going long) or
selling (going short) on such Futures Contract(s); (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer, or futures
commission merchant through whom the Futures Contract was entered into; and (i)
the amount of fee or commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the money specifically allocated to such Series of the
fee or commission, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and the Series to
which the same relates; (b) with respect to a Stock Index Futures Contract, the
total cash settlement amount to be paid or received, and with respect to a
Financial Futures Contract, the Securities and/or amount of cash to be delivered
or received; (c) the broker, dealer, or futures commission merchant to or from
whom payment or delivery is to be made or received; and (d) the amount of cash
and/or Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein.
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<PAGE> 18
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder,the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in paragraph 1 of this
Article, and (b) the Futures Contract being offset. The Custodian shall make
payment out of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and delete the Futures Contract
being offset from the statements delivered to the Fund pursuant to paragraph 3
of Article III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
5. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a future commission merchant
upon receipt of a Certificate from the Fund or the Administrator specifying: (a)
the name of the future commission merchant; (b)the specific cash and Securities
to be delivered; (c) the date of such delivery; and (d) the date of the
agreement between the Fund and such future commission merchant entered pursuant
to Rule 17f-6 under the Investment Company Act 1940, as amended. Each delivery
of such a Certificate by the Fund shall constitute (x) a representation and
warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the future commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such future commission
merchant.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Futures Contract
Option:(a) the Series to which such Option is specifically allocated; (b) the
type of Futures Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the expiration date; (e)
the exercise price; (f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the name of the broker or
futures commission merchant through whom such option was purchased; and (i) the
name of the broker, or futures commission merchant, to whom payment is
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to be made. The Custodian shall pay out of the money specifically allocated
to such Series, the total amount to be paid upon such purchase to the
broker or futures commissions merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to each such sale: (a) Series to which such Futures Contract Option was
specifically allocated; (b) the type of Future Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option; (d) the
date of sale; (e) the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of the broker of
futures commission merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being closed against
payment to the Custodian of the total amount payable to the Fund, provided the
same conforms to the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option (put or call) being exercised; (c) the type
of Futures Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission merchant through whom
the Futures Contract Option is exercised; (f) the net total amount, if any,
payable by the Fund; (g) the amount, if any, to be received by the Fund; and (h)
the amount of cash and/or the amount and kind of Securities to be deposited in
the Senior Security Account for such Series. The Custodian shall make, out of
the money and Securities specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series for
which such Futures Contract Option was written; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the exercise price; (f)
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<PAGE> 20
the premium to be received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in the Senior Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of the money and
Securities specifically allocated to such Series the deposits into the Senior
Security Account, if any, as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon its receipt of the
net total amount payable to the Fund, if any, specified in such Certificate make
the payments, if any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying: (a) the Series to which
such Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount and
kind of Securities and/or cash to be withdrawn from or deposited in, the Senior
Security Account for such Series, if any. The Custodian shall, upon its receipt
of the net total amount payable to the Fund, if any, specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series, the payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits to and/or
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<PAGE> 21
withdrawals from the Margin Account, if any, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Op tion described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to the Futures Contract Option being
purchased: (a) the Series to which such Option is specifically allocated; (b)
that the transaction is a closing transaction; (c) the type of Future Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein and, (b) make such withdrawals from and/or
in the case of an exercise such deposits into the Senior Security Account as
may be specified in a Certificate. The deposits to and/or withdrawals from
the Margin Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of
a Futures Contract Option described in this Article shall be subject to
Article VI hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a future commission
merchant upon receipt of a Certificate from the Fund or the Administrator
specifying: (a) the name of the future commission merchant; (b) the specific
cash and Securities to be delivered; (c) the date of such delivery; and (d) the
date of the agreement between the Fund and such future commission merchant
entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall constitute
(x) a representation and warranty by the Fund that the Rule 17f-6 agreement
has been duly authorized, executed
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<PAGE> 22
and delivered by the Fund and the future commission merchant and complies with
Rule 17f-6, and (y) an agreement by the Fund that the Custodian shall not be
liable for the acts or omissions of any such future commission merchant.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale was made;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or principal amount sold, and accrued interest or dividends, if any;
(d) the dates of the sale and settlement; (e) the sale price per unit; (f) the
total amount credited to the Fund upon such sale, if any, (g) the amount of cash
and/or the amount and kind of Securities, if any, which are to be deposited in
a Margin Account and the name in which such Margin Account has been or is to be
established; (h) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in a Senior Security Account, and (i) the name of the
broker through whom such short sale was made. The Custodian shall upon its
receipt of a statement from such broker confirming such sale and that the total
amount credited to the Fund upon such sale, if any, as specified in the
Certificate is held by such broker for the account of the Custodian
(or any nominee of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior Security Account
specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which
such transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued
interest or dividends, if any, required to effect such closing-out to be
delivered to the broker; (d) the dates of closing-out and settlement; (e) the
purchase price per unit; (f) the net total amount payable to the Fund upon
such closing-out; (g) the net total amount payable to the broker upon such
closing-out; (h) the amount of cash and the amount and kind of Securities to
be withdrawn, if any, from the Margin Account; (i) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Senior
Security Account; and (j) the name of the broker through whom the Fund is
effecting such closing-out. The Custodian shall, upon receipt of the net total
amount payable to the Fund upon such closing-out, and the return and/or
cancellation of the receipts, if any, issued by the Custodian with
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<PAGE> 23
respect to the short sale being closed-out, pay out of the money held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder, the
Fund shall deliver or cause the Administrator to deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate or Oral Instructions specifying: (a) the
Series for which the Reverse Repurchase Agreement is entered; (b) the total
amount payable to the Fund in connection with such Reverse Repurchase
Agreement and specifically allocated to such Series; (c) the broker or
dealer through or with whom the Reverse Repurchase Agreement is entered;
(d) the amount and kind of Securities to be delivered by the Fund to such
broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase
Agreement. The Custodian shall, upon receipt of the total amount payable to
the Fund specified in the Certificate or Oral Instructions make the
delivery to the broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described
in preceding paragraph 1 of this Article, the Fund shall deliver or cause
the Administrator to deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions to the Custodian specifying: (a) the Reverse Repurchase
Agreement being terminated and the Series for which same was entered; (b)
the total amount payable by the Fund in connection with such termination;
(c) the amount and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f)
the amount of cash and/or the amount and kind of Securities to be withdrawn
from the Senior Securities Account for such Series. The Custodian shall,
upon receipt of the amount and kind of Securities to be received by the
Fund specified in the Certificate or Oral Instructions, make the payment to
the broker or dealer, and the withdrawals,
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<PAGE> 24
if any, from the Senior Security Account, specified in such Certificate or
Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such loan: (a) the Series to
which the loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities, (c) the number of shares or the
principal amount loaned, (d) the date of loan and delivery, (e) the total
amount to be delivered to the Custodian against the loan of the Securities,
including the amount of cash collateral and the premium, if any, separately
identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution
to which the loan was made upon receipt of the total amount designated as
to be delivered against the loan of Securities. The Custodian may accept
payment in connection with a delivery otherwise than through the Book-Entry
System or Depository only in the form of a certified or bank cashier's
check payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each such loan
termination and return of Securities: (a) the Series to which the loaned
Securities are specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of shares or the
principal amount to be returned, (d) the date of termination, (e) the total
amount to be delivered by the Custodian (including the cash collateral for
such Securities minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or financial
institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof
shall pay, out of the money held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the
Certificate.
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<PAGE> 25
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event the Certificate fails to specify the Series, the name of the
issuer, the title and the number of shares or the principal amount of any
particular Securities to be deposited by the Custodian into, or withdrawn from,
a Senior Securities Account, the Custodian shall be under no obligation to make
any such deposit or withdrawal and shall so notify the Administrator.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer,
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<PAGE> 26
or futures commission merchant specified in the name of a Margin Account a copy
of the statement furnished the Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Administrator with a statement with respect to
such Collateral Account specifying the amount of cash and/or the amount and kind
of Securities held therein. No later than the close of business next succeeding
the delivery to the Fund of such statement, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying the then
market value of the Securities described in such statement. In the event such
then market value is indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option guarantee letter or similar document, the
Fund shall promptly specify or cause the Administrator to promptly specify in a
Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to deliver to the
Custodian a copy of the resolution of the Board of Trustees of the Fund,
certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant
Clerk, either (i) setting forth with respect to the Series specified therein the
date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral Instructions
or Certificate, as the case may be, the Custodian shall pay out of the money
held for the account of each Series the total amount payable to the Dividend
Agent and any
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<PAGE> 27
sub-dividend agent or co-dividend agent of the Fund with respect to
such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause the
Administrator to deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate delivered
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time
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<PAGE> 28
to time be offered by the Fund, the Custodian, unless otherwise instructed by a
Certificate, shall, upon receipt of an advice from the Fund or its agent setting
forth that the redemption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part of such check
redemption privilege out of the money held in the separate account of the Series
of the Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement, (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum, or at such other rate
per annum, if any, as the Fund and the Custodian may agree upon in writing from
time to time. In addition, the Fund hereby agrees that the Custodian shall have
a continuing lien and security interest in and to any property specifically
allocated to such Series at any time held by it for the benefit of such Series
or in which the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third party acting in
the Custodian's behalf. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to such
Series' credit on the Custodian's books. In addition, the Fund hereby covenants
that on each Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third party, or which next
succeeds a Business Day on which at the
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<PAGE> 29
close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City
time, advise the Custodian, in writing, of each such borrowing, shall
specify the Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which
such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be
entered into, (e) the date on which the loan becomes due and payable, (f)
the total amount payable to the Fund on the borrowing date, (g) the market
value of Securities to be delivered as collateral for such loan, including
the name of the issuer, the title and the number of shares or the principal
amount of any particular Securities, and (h) a statement specifying whether
such loan is for investment purposes or for temporary or emergency purposes
and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of
the total amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The Custodian
may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan agreement.
The Custodian shall deliver such Securities as additional collateral as may
be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian, and the
Custodian shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered
as collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any Securities.
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ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the Custodian to the
Administrator in order for the Administrator to transmit Instructions to
the Custodian (the "Software"), the Custodian grants to the Administrator a
personal, nontransferable and nonexclusive license to use the Software
solely for the purpose of transmitting Instructions on behalf of the Fund
to, and receiving communications from, the Custodian in connection with its
account(s). The Administrator agrees not to sell, reproduce, lease or
otherwise provide, directly or indirectly, the Software or any portion
thereof to any third party without the prior written consent of the
Custodian.
2. The Administrator shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to
communications services, necessary for it to utilize the Software and
transmit Instructions to the Custodian. The Custodian shall not be
responsible for the reliability, compatibility with the Software or
availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Administrator acknowledges for itself and the Fund that the
Software, all data bases made available to the Administrator by utilizing
the Software (other than data bases relating solely to the assets of the
Fund and transactions with respect thereto), and any proprietary data,
processes, information and documentation (other than which are or become
part of the public domain or are legally required to be made available to
the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Administrator shall keep the
Information confidential by using the same care and discretion that the
Administrator uses with respect to its own confidential property and trade
secrets and shall neither make nor permit any disclosure without the prior
written consent of the Custodian. Upon termination of this Agreement or the
Software license granted hereunder for any reason, the Fund shall return to
the Custodian all copies of the Information which are in its possession or
under its control or which the Fund distributed to third parties.
4. The Custodian reserves the right to modify the Software from time
to time upon reasonable prior notice and the Administrator shall install
new releases of the Software as the Custodian may direct. The Administrator
agrees not to modify or attempt to modify the Software without the
Custodian's prior written consent. The Administrator acknowledges that any
modifications to the Software, whether by the Administrator or the
Custodian and whether with or
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without the Custodian's consent, shall become the property of the Custodian.
5. The Custodian makes no warranties or representations of any kind with
regard to the Software or the method(s) by which the Administrator may transmit
Instructions to the Custodian, express or implied, including but not limited to
any implied warranties or merchantability or fitness for a particular purpose.
6. Where the method for transmitting Instructions by the Administrator on
behalf of the Fund involves an automatic systems acknowledgment by the Custodian
of its receipt of such Instructions, then in the absence of such acknowledgment
the Custodian shall not be liable for any failure to act pursuant to such
Instructions, neither the Administrator nor the Fund may claim that such
Instructions were received by the Custodian, and the Administrator or the Fund
shall deliver a Certificate by some other means.
7. (a) The Administrator and the Fund agree that where the Administrator
delivers to the Custodian Instructions hereunder, it shall be the
Administrator's sole responsibility to ensure that only persons duly authorized
by the Administrator transmit such Instructions to the Custodian. The
Administrator will cause all persons transmitting Instructions to the Custodian
to treat applicable user and authorization codes, passwords and authentication
keys with extreme care, and irrevocably authorizes the Custodian to act in
accordance with and rely upon Instructions received by it pursuant hereto.
(b) The Administrator hereby represents, acknowledges and agrees that
it is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Custodian and that there may be more
secure methods of transmitting instructions to the Custodian than the method(s)
selected by the Administrator on behalf of the Fund. The Fund hereby agree that
the security procedures (if any) to be followed in connection with the Fund's
transmission of Instructions provide a commercially reasonable degree of
protection in light of its particular needs and circumstances.
8. The Administrator and the Fund hereby represent, warrant and covenant
to the Custodian that this Agreement has been duly approved by a resolution of
the Fund's Board of Trustees, and that its transmission of Instructions pursuant
hereto shall at all times comply with the Investment Company Act of 1940, as
amended.
9. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable,
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and in any event within 24 hours after the earliest of (i) discovery thereof,
(ii) the Business Day on which discovery should have occurred through the
exercise of reasonable care and (iii) in the case of any error, the date of
actual receipt of the earliest notice which reflects such error, it being agreed
that discovery and receipt of notice may only occur on a business day. The
Custodian shall promptly advise the Administrator whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Fund's ability to send Instructions.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Foreign Securities (as such term is defined in paragraph (c)(1)
of Rule 17f-5 under the Investment Company Act of 1940, as amended) and other
assets, the foreign banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to
carry out their respective responsibilities in accordance with the terms of the
sub-custodian agreement between each such Foreign Sub-Custodian and the
Custodian, copies of which have been previously delivered to the Fund and
receipt of which is hereby acknowledged (each such agreement, a "Foreign
Sub-Custodian Agreement"). Upon receipt of a Certificate, together with a
certified resolution substantially in the form attached as Exhibit E of the
Fund's Board of Trustees, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to act
as the Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate
from the Fund, the Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's assets and such
Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the
form previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series
of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a
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consequence of any loss, damage, cost, expense, liability or claim sustained
or incurred by the Fund or any Series if and to the extent that the Fund or such
Series has not been made whole for any such loss, damage, cost, expense,
liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian Agreement, use reasonable
efforts to arrange for the independent accountants of the Fund to be afforded
access to the books and records of any Foreign Sub-Custodian insofar as such
books and records relate to the performance of such Foreign Sub-Custodian
under its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of
each Series held by Foreign Sub-Custodians, including but not limited
to, an identification of entities having possession of each Series' Foreign
Securities and other assets, and advices or notifications of any
transfers of Foreign Securities to or from each custodial account maintained
by a Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any
Series and delivery of securities maintained for the account of such Series may
be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction
or market in which the transaction occurs, including, without limitation,
delivery of securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole
responsibility and liability of the Custodian shall be to take appropriate
action at the Fund's expense to recover such loss or damage from the Foreign
Sub-Custodian. It is expressly understood and agreed that the Custodian's
sole responsibility and liability shall be limited to amounts so recovered
from the Foreign Sub-Custodian.
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<PAGE> 34
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund
shall promptly deliver or cause the Administrator to deliver to the
Custodian a Certificate or Oral Instructions specifying with respect to
such FX Transaction: (c) the Series to which such FX Transaction is
specifically allocated; (b) the type and amount of Currency to be purchased by
the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date
on which the Currency to be sold is to be delivered; and (f) the name of the
person from whom or through whom such currencies are to be purchased and sold.
Unless otherwise instructed by a Certificate or Oral Instructions, the
Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to
deliver, the Currency to be sold on the date on which such delivery is to be
made, as set forth in the Certificate, and shall receive, or instruct a
Foreign Sub-Custodian to receive, the Currency to be purchased on the date as
set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt
and delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or
subsidiary of The Bank of New York Company, Inc., or any Foreign Sub-Custodian
acting as principal or otherwise through customary banking channels. The
Fund may issue a standing Certificate with respect to FX Transaction but the
Custodian may establish rules or limitations concerning any foreign
exchange facility made available to the Fund. The Fund shall bear all
risks of investing in Securities or holding Currency. Without limiting the
foregoing, the Fund shall bear the risks that rules or procedures imposed by
a Foreign Sub-Custodian or foreign depositories, exchange controls, asset
freezes or other laws, rules, regulations or orders shall prohibit or impose
burdens or costs on the transfer to, by or for the account of the Fund of
Securities or any cash held outside the Fund's jurisdiction or denominated in
Currency other than its home jurisdiction or the conversion of cash from one
Currency into another
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<PAGE> 35
currency. The Custodian shall not be obligated to substitute another Currency
for a Currency (including a Currency that is a component of a Composite
Currency Unit) whose transferability, convertibility or availability has
been affected by such law, regulation, rule or procedure. Neither the
Custodian nor any Foreign Sub-Custodian shall be liable to the Fund for any
loss resulting from any of the foregoing events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI neither
the Custodian nor its nominee shall be liable for any loss or damage,
including reasonable counsel fees, resulting from its action or omission
to act or otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of its own
negligence or willful misconduct. The Custodian agrees to indemnify and
hold harmless the Trust and Trust's Trustees and officers to the extent
described below against any loss as a result of any breach or violation
of this Agreement by the Custodian or its officers, employees and agents
or its nominees, resulting from their negligence or willful misconduct. The
Custodian may, with respect to questions of law arising hereunder or
under any Margin Account Agreement, apply for and obtain the advice and
opinion of counsel to the Fund or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to anything done or
omitted by it in good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage resulting
from the use of the Book-Entry System or any Depository arising by reason of
any negligence or willful misconduct on the part of the Custodian or any of
its employees or agents. Notwithstanding the foregoing, or any other
provision contained in this Agreement, in no event shall the Custodian be liable
to the Trust, its Trustees or officers, or any third party, for
special, indirect or consequential damages, or lost profits or loss of
business, arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and regardless of the
form of action.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
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<PAGE> 36
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by
the Fund;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or
held by it at any time as a result of such loan of portfolio Securities of
the Fund is adequate collateral for the Fund against any loss it might
sustain as a result of such loan. The Custodian specifically, but not by
way of limitation, shall not be under any duty or obligation periodically
to check or notify the Fund that the amount of such cash collateral held by
it for the Fund is sufficient collateral for the Fund, but such duty or
obligation shall be the sole responsibility of the Fund. In addition, the
Custodian shall be under no duty or obligation to see that any broker,
dealer or financial institution to which portfolio Securities of the Fund
are lent pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of the
Fund during the period of such loan or at the termination of such loan,
provided, however, that the Custodian shall promptly notify the Fund in the
event that such dividends or interest are not paid and received when due;
or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see that
any broker, dealer, futures commission merchant or Clearing Member makes
payment to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission merchant or
Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the
Fund until the Custodian actually receives and collects such money directly
or by the final crediting of the account representing the Fund's interest
at the Book-Entry System or the Depository.
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<PAGE> 37
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities
held in the Depository, unless the Custodian shall have actually received
timely notice from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to collect,
or for the late collection or late crediting by the Depository of any
amount payable upon Securities deposited in the Depository which may mature
or be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities
held in the Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be
under any obligation to appear in, prosecute or defend any action suit or
proceeding in respect to any Securities held by the Depository which in its
opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often
as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution
by the Transfer Agent of the Fund of any amount paid by the Custodian to
the Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand
or presentation, unless and until (i) it shall be directed to take such
action by a Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or
Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not
limited to, banking institutions located in foreign countries, of
Securities and money at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or
by any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to
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ascertain whether any transactions by the Fund, whether or not involving
the Custodian, are such transactions as may properly be engaged in by the
Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund.
The Fund represents that the Administrator has agreed to pay such
compensation and expenses promptly upon receipt of statements therefor, and
hereby directs the Custodian to (i) send all statements for compensation to
its attention care of FDS at the following address: FDS Services, Inc.,
3200 Horizon Drive, King of Prussia, PA 19406-0903, Attention: Mr. Elmer
Gardner, Senior Vice President, and (ii) accept all payments made by FDS in
the Fund's name as if such payments were made directly by the Fund. The
Fund shall pay to FDS fees for services (including custodian services
provided by the Custodian) in accordance with the Investment Company
Services Agreement. The Custodian's compensation for services rendered
hereunder is set forth in a separate agreement between the Custodian and
FDS. Should FDS fail to pay or remit such compensation to the Custodian
within 20 days of the date the same is due and payable, Custodian shall
notify the Fund. If such payment or remittance is not received from FDS
within 15 days of such notice, then the Custodian will be entitled to debit
the Custody Account directly for such compensation. The Custodian may
charge compensation with respect to which it has properly sent a notice to
the Fund, as provided in the preceding sentence, and any expenses with
respect to a Series incurred by the Custodian in the performance of its
duties pursuant to such agreement against any money specifically allocated
to such Series. Unless and until the Fund or the Administrator instructs
the Custodian by a Certificate to apportion any loss, damage, liability or
expense among the Series in a specified manner, the Custodian shall also be
entitled to charge against any money held by it for the account of a Series
such Series' pro rata share (based on such Series net asset value at the
time of the charge to the aggregate net asset value of all Series at that
time) of the amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not limited to,
the expenses of sub-custodians and foreign branches of the Custodian
incurred in settling outside of New York City transactions involving the
purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and
reasonably believed by the Custodian to be a Certificate. The Custodian
shall be entitled to rely upon any Oral Instructions actually received by
the Custodian. The
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<PAGE> 39
Fund agrees to forward or cause the Administrator to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
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<PAGE> 40
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any such liability,
claim, loss and demand arising out of the Custodian's own negligence or
willful misconduct. For any legal proceeding giving rise to the
indemnification set forth above in this paragraph, the Fund shall be entitled
to defend or prosecute any claim in the name of the Custodian at its own
expense and through counsel of its own choosing reasonably acceptable to the
Custodian if it gives written notice to the Custodian within ten (10)
Business days of receiving notice of such claim. Notwithstanding the foregoing,
the Custodian may participate in the litigation at its own expense and with
counsel of its own choosing.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may deliver
and receive Securities, and receipts with respect to such Securities, and
arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not
be completed simultaneously. The Fund assumes all responsibility and liability
for all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to Certificates or instructions of the Fund or the
Administrator which responsibility and liability shall continue until final
payment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Fund that the Fund
is no longer utilizing the services of the Administrator, then the Custodian
shall furnish or give to the Fund the statements or notices described above
as to be furnished or given to the Administrator.
17. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason of any terms or
provisions in the Investment Company Services Agreement, and if such
Investment Company Services Agreement shall cease to be in effect the
Custodian shall have no additional duties hereunder.
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ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
giving of such notice, provided, however, that if such notice is sent by the
Fund and recites that it is being given contemporaneously with a termination
of the Investment Company Services Agreement with FDS, such notice may
specify any date of termination selected by the Fund. In the event such
notice is given by the Fund, it shall be accompanied by a copy of a resolution
of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, electing to terminate this
Agreement and designating a successor custodian or custodians, each of which
shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such
notice is given by the Custodian, the Fund shall, on or before the termination
date, deliver to the Custodian a copy of a resolution of the Board of
Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian
may designate a successor custodian which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and undivided
profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of acceptance by the
successor custodian on that date deliver directly to the successor custodian
all Securities and money then owned by the Fund and held by it as Custodian,
after deducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby
be relieved of all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
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ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of
the present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Officer ceases to be an Officer or in the event that other or additional
Officers are elected or appointed. Until such new Certificate shall be
received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon Oral Instructions or signatures of the
present Officers as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at
90 Washington Street, New York, New York 10286, or at such other place as
the Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the
address for the Fund first above written, or at such other place as the Fund
may from time to time designate in writing, and any notice or other instrument
in writing authorized or required to be given to the Administrator shall be
sufficiently given if addressed to the Administrator at such address as the
Administrator may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute
- 42 -
<PAGE> 43
arising hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The State of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular
Series of the Fund shall look only to the assets of that particular Series
for payment of such credit, contract or claim.
- 43 -
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Officers, thereunto duly authorized and
their respective seals to be hereunto affixed, as of the day and year first
above written.
<TABLE>
<S> <C>
CALAMOS INSURANCE TRUST
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________
</TABLE>
<PAGE> 45
APPENDIX A
I, , President and I, ,
of CALAMOS INSURANCE TRUST a Massachusetts
business trust (the "Fund"), do hereby certify that:
The following individuals including officers and employees of the
Administrator have been duly authorized by the Board of Trustees of the
Fund in conformity with the Fund's Declaration of Trust and By-Laws to give
Certificates or Oral Instructions on behalf of the Fund, and the signatures
set forth opposite their respective names are their true and correct
signatures:
<TABLE>
<S> <C>
Name Signature
_____________________ _________________________
</TABLE>
<PAGE> 46
APPENDIX B
SCHEDULE
CALAMOS CONVERTIBLE PORTFOLIO
<PAGE> 47
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 48
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of CALAMOS INSURANCE TRUST, a Massachusetts business
trust (the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held
on , 1999, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 , (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CALAMOS
INSURANCE TRUST, as of the day of , 1999.
[SEAL]
<PAGE> 49
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of CALAMOS INSURANCE TRUST , a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 , (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CALAMOS
INSURANCE TRUST, as of the day of , 1999.
[SEAL]
<PAGE> 50
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of CALAMOS INSURANCE TRUST, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all
times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 , (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the Depository to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales
of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CALAMOS
INSURANCE TRUST, as of the day of , 1999.
[SEAL]
<PAGE> 51
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of CALAMOS INSURANCE TRUST, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Participants Trust Company as Depository, as defined in the
Custody Agreement, all securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated, and to utilize
the Participants Trust Company to the extent possible in connection with
its performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CALAMOS
INSURANCE TRUST, as of the day of , 1999.
[SEAL]
<PAGE> 52
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of CALAMOS INSURANCE TRUST, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 , (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CALAMOS
INSURANCE TRUST, as of the day of , 1999.
[SEAL]
<PAGE> 53
EXHIBIT D
The undersigned, , hereby certifies
that he or she is the duly elected and acting President of CALAMOS
INSURANCE TRUST, a Massachusetts business trust (the "Fund"), further
certifies that the following resolutions were adopted by the Board of
Trustees of the Fund at a meeting duly held on , 199 , at
which a quorum was at all times present and that such resolutions have not
been modified or rescinded and are in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to act in accordance with, and to rely on
Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Officers of the Fund as defined in
the Custody Agreement, shall establish internal safekeeping procedures
to safeguard and protect the confidentiality and availability of user
and access codes, passwords and authentication keys, and shall use
Instructions only in a manner that does not contravene the Investment
Company Act of 1940, as amended, or the rules and regulations
thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
CALAMOS INSURANCE TRUST, as of the day of , 199 .
[SEAL]
<PAGE> 54
EXHIBIT E
The undersigned, , hereby certifies that he or she is the duly
elected and acting of CALAMOS INSURANCE TRUST, a
Massachusetts business trust (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Trustees of the Fund at a meeting duly
held on , 199 , at which a quorum was at all times present and
that such resolutions have not been modified or rescinded and are in full force
and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country listed
in Schedule I hereto be, and hereby is, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located in
the countries specified therein, and with the foreign sub custodians and
depositories listed in Schedule I located in the countries specified therein be,
and hereby is, approved by the Board of Trustees as consistent with the best
interest of the Fund and its shareholders; and further
RESOLVED, that the Sub custodian Agreements presented to this meeting
between the Bank and each of the foreign sub custodians and depositories listed
in Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby authorized
to place assets of the Fund with the afore mentioned foreign branches and
foreign sub-custodians and depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them, are
authorized to do any and all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to be necessary or desirable and
proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of CALAMOS
INSURANCE TRUST, as of the day of , 199 .
[SEAL]
<PAGE> 1
EXHIBIT (h)(1)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this ____ day of _________________, 199_ (the
"Effective Date") between Calamos Insurance Trust (the "Fund"), a Massachusetts
Business Trust having its principal place of business at 1111 Warrenville Road,
Naperville , IL, 60563-1493 and FIRST DATA INVESTOR SERVICES GROUP, INC.
("Investor Services Group"), a Massachusetts corporation with principal offices
at 4400 Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its administrator, fund accounting agent, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
-1-
<PAGE> 2
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to
this Agreement.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(j) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person;
(k) "Portfolio" shall mean each separate series of shares offered
by the Fund representing interests in a separate portfolio of
securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital stock
or beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
administrator, fund accounting agent, shareholder
-2-
<PAGE> 3
servicing agent for the Fund and Investor Services Group hereby accepts such
appointments and agrees to perform the duties hereinafter set forth. This
Agreement shall be effective as of the Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to
Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares
of each Portfolio which are authorized, based upon data provided to it
by the Fund, and issued and outstanding. Investor Services Group shall
provide the Fund on a regular basis with the total number of Shares of
each Portfolio which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions shall be
the sole responsibility of the Fund.
(c) Investor Services Group shall be responsible for the
following: performing the customary services of an administrator,
including corporate secretarial, treasury and blue sky services, and
fund accounting agent for the Fund, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and subject to the supervision and
direction of the Board of Directors of the Fund.
(d) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its exclusive service
provider with respect to the Print/Mail Services as set forth in
Schedule C for the fees also identified in Schedule C. Investor
Services Group agrees to perform the services and its obligations
subject to the terms and conditions of this Agreement.
(e) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any
-3-
<PAGE> 4
dividend by the Board of Directors, or the legality of the issuance
of any Shares in payment of any dividend; or (iv) the legality
of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services
Group in writing those transactions and assets to be treated as exempt from blue
sky reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of Investor Services Group for
the Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services
Group shall perform such other duties and functions, and shall be paid such
amounts therefor, as may from time to time be agreed upon in writing between the
Fund and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
-4-
<PAGE> 5
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees and other charges set forth in the written Fee Schedule
annexed hereto as Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the
Fund on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by Investor Services Group in
the performance of its duties hereunder. Out-of-pocket expenses shall include,
but shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all
fees, charges and out-of-pocket expenses to Investor Services Group by Federal
Funds Wire within fifteen (15) business days following the receipt of the
respective invoice. In addition, with respect to all fees
-5-
<PAGE> 6
under this Agreement, Investor Services Group may charge a service fee equal to
the lesser of (i) one and one half percent (1 1/2%) per month or (ii) the
highest interest rate legally permitted on any past due invoiced amounts,
provided however, the foregoing service fee shall not apply if the Fund in good
faith legitimately disputes any invoice amount in which case the Fund shall do
the following within thirty (30) days of the postmark date: (a) pay Investor
Services Group the undisputed amount of the invoice; and (b) provide Investor
Services Group a detailed written description of the disputed amount and the
basis for the Fund's dispute with such amount. In addition, the Fund shall
cooperate with Investor Services Group in resolving disputed invoice amounts and
then promptly paying such amounts determined to be due.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees and charges that Investor
Services Group charges the Fund under this Agreement reflect the allocation of
risk between the parties, including the disclaimer of warranties in Section 9.3
and the limitations on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is stated here would
affect the fees that Investor Services Group charges, and in consideration of
those fees, the Fund agrees to the stated allocation of risk.
6.6 Investor Services Group will from time to time employ or
associate with itself such person or persons as Investor Services Group may
believe to be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are employed
by both Investor Services Group and the Fund. The compensation of such person or
persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Fund in such respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund. Investor Services Group shall not be
required to pay any Blue Sky registration or filing fees unless and until it has
received the amount of such fees from the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
-6-
<PAGE> 7
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of
any and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited
license to the Investor Services Group System for the sole and limited purpose
of having Investor Services Group provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or interpreted
otherwise and such license shall immediately terminate with the termination of
this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of
the Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency
as a transfer agent and such registration will remain in effect for the
duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
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(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered and
lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
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(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent
act or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited to the prior transfer agent for the Fund, in the
performance of Investor Services Group's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the securities laws or regulations of any state that such shares
be registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale
of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 The Fund agrees and acknowledges that Investor Services Group has
not prior to the date hereof assumed, and will not assume, any obligations or
liabilities arising out of the conduct by the Company prior to the date hereof
of those duties which Investor Services Group has agreed to perform pursuant to
this Agreement. The Fund further agrees to indemnify Investor Services Group
against any losses, claims, damages or liabilities to which Investor Services
Group may become subject in connection with the conduct by the Fund or its agent
of such duties prior to the date hereof.
10.3 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
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10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Investor Services Group becomes aware of
the event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause whatsoever
(including but not limited to those arising out of or related to this Agreement)
and regardless of the form of action or legal theory shall not exceed the lesser
of (i) $500,000 or (ii) the fees received by Investor Services Group for
services provided under this Agreement during the twelve months immediately
prior to the date of such loss or damage. Fund understands the limitation on
Investor Services Group's damages to be a reasonable allocation of risk and Fund
expressly consents with respect to such allocation of risk. In allocating risk
under the Agreement, the parties agree that the damage limitation set forth
above shall apply to any alternative remedy ordered by a court in the event such
court determines that sole and exclusive remedy provided for in the Agreement
fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
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NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, should the Fund desire to move any of the services provided by
Investor Services Group hereunder to a successor service provider prior to the
expiration of the then current Initial or Renewal Term, or should the Fund or
any of its affiliates take any action which would result in Investor Services
Group ceasing to provide transfer agency, administration or fund accounting
services to the Fund prior to the expiration of the Initial or any Renewal Term,
Investor Services Group shall make a good faith effort to facilitate the
conversion on such prior date, however, there can be no
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guarantee that Investor Services Group will be able to facilitate a conversion
of services on such prior date. In connection with the foregoing, should
services be converted to a successor service provider or should the Fund or any
of its affiliates take any action which would result in Investor Services Group
ceasing to provide transfer agency, administration or fund accounting services
to the Fund prior to the expiration of the Initial or any Renewal Term, the
payment of fees to Investor Services Group as set forth herein shall be
accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained with Investor Services Group until
the expiration of the then current Initial or Renewal Term and calculated at the
asset and/or Shareholder account levels, as the case may be, on the date notice
of termination was given to Investor Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. The Fund and Investor Services Group shall exercise at least the
same degree of care, but not less than reasonable care, to safeguard the
confidentiality of the Confidential Information of the other as it would
exercise to protect its own confidential information of a similar nature. The
Fund and Investor Services Group shall not duplicate, sell or disclose to
others the Confidential Information of the other, in whole or in part, without
the prior written permission of the other party. The Fund and Investor Services
Group may, however, disclose Confidential Information to their respective
parent corporation, their respective affiliates, their subsidiaries and
affiliated companies and employees, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed in breach of this Agreement. The Fund and Investor Services Group may
also disclose the Confidential Information to independent contractors,
auditors, and professional advisors, provided they first agree in writing to be
bound by the confidentiality obligations substantially similar to this Section
15.1. Notwithstanding the previous sentence, in no event shall either the Fund
or Investor Services Group disclose the Confidential Information to any
competitor of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past,
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present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement
or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of
any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving the other party as much advance notice of the
possibility of such disclosure as practical so the other party may
attempt to stop such disclosure or obtain a protective order concerning
such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 Force Majeure; Excused Non-Performance.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly,
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by (i) fire, flood, elements of nature or other acts of God; (ii) any outbreak
or escalation of hostilities, war, riots or civil disorders in any country,
(iii) any act or omission of the other party or any governmental authority; (iv)
any labor disputes (whether or not the employees' demands are reasonable or
within the party's power to satisfy); or (v) nonperformance by a third party or
any similar cause beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other equipment.
In addition, no party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and to the extent that
such default or delay is caused, directly or indirectly, by the actions or
inactions of the other party. In any such event, the non-performing party shall
be excused from any further performance and observance of the obligations so
affected only for as long as such circumstances prevail and such party continues
to use commercially reasonable efforts to recommence performance or observance
as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
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Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Calamos Asset Management
1111 Warrenville Road
Naperville IL 60563-1493
Attention: John Calamos, President
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal,
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accounting or regulatory requirements after making reasonable efforts in the
circumstances to consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 Miscellaneous.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally,
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but shall bind only the assets and property of the Fund as provided in the
Articles of Incorporation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
Calamos Insurance Trust
By:
-------------------------------
John Calamos
Title: President
-----------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
-------------------------------
Kennth J Kempf
Title: Senior Vice President
----------------------
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SCHEDULE A
LIST OF PORTFOLIOS
Calamos Convertible Portfolio
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SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
I. TRANSFER AGENCY SERVICES
(a) Shareholder Information. Investor Services Group shall maintain a
record of the number of Shares held by each Shareholder of record which shall
include name, address, taxpayer identification and which shall indicate whether
such Shares are held in certificates or uncertificated form.
(b) Shareholder Services. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
(c) Share Certificates.
- At the expense of the Fund, the Fund shall supply Investor
Services Group with an adequate supply of blank share certificates
to meet Investor Services Group requirements therefor. Such Share
certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or removal of
any officer of the Fund whose signature appears on such
certificates, Investor Services Group or its agent may continue to
countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
- Investor Services Group shall issue replacement Share certificates
in lieu of certificates which have been lost, stolen or destroyed,
upon receipt by Investor Services Group of properly executed
affidavits and lost certificate bonds, in form satisfactory to
Investor Services Group, with the Fund and Investor Services Group
as obligees under the bond.
- Investor Services Group shall also maintain a record of each
certificate issued, the number of Shares represented thereby and
the Shareholder of record. With respect to Shares held in open
accounts or uncertificated form (i.e., no certificate being issued
with respect thereto) Investor Services Group shall maintain
comparable records of the Shareholders thereof, including their
names, addresses and taxpayer identification. Investor Services
Group shall further maintain a stop transfer record on lost and/or
replaced certificates.
(d) Mailing Communications to Shareholders; Proxy Materials. Investor
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In
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connection with meetings of Shareholders, Investor Services Group will prepare
Shareholder lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies voted prior to
meetings, act as inspector of election at meetings and certify Shares voted at
meetings.
(e) Sales of Shares.
- Investor Services Group shall not be required to issue any Shares
of the Fund where it has received a Written Instruction from the
Fund or official notice from any appropriate authority that the
sale of the Shares of the Fund has been suspended or discontinued.
The existence of such Written Instructions or such official notice
shall be conclusive evidence of the right of Investor Services
Group to rely on such Written Instructions or official notice.
- In the event that any check or other order for the payment of
money is returned unpaid for any reason, Investor Services Group
will endeavor to: (i) give prompt notice of such return to the
Fund or its designee; (ii) place a stop transfer order against all
Shares issued as a result of such check or order; and (iii) take
such actions as Investor Services Group may from time to time deem
appropriate.
(f) Transfer and Repurchase.
- Investor Services Group shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase
procedures set forth in the Fund's Prospectus.
- Investor Services Group will transfer or repurchase Shares upon
receipt of Oral or Written Instructions or otherwise pursuant to
the Prospectus and Share certificates, if any, properly endorsed
for transfer or redemption, accompanied by such documents as
Investor Services Group reasonably may deem necessary.
- Investor Services Group reserves the right to refuse to transfer
or repurchase Shares until it is satisfied that the endorsement on
the instructions is valid and genuine. Investor Services Group
also reserves the right to refuse to transfer or repurchase Shares
until it is satisfied that the requested transfer or repurchase is
legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or repurchases which
Investor Services Group, in its good judgement, deems improper or
unauthorized, or until it is reasonably satisfied that there is no
basis to any claims adverse to such transfer or repurchase.
- When Shares are redeemed, Investor Services Group shall, upon
receipt of the instructions and documents in proper form, deliver
to the Custodian and the Fund or its designee a notification
setting forth the number of Shares to be repurchased. Such
repurchased shares shall be reflected on appropriate accounts
maintained by Investor
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Services Group reflecting outstanding Shares of the Fund and
Shares attributed to individual accounts.
- Investor Services Group shall upon receipt of the monies provided
to it by the Custodian for the repurchase of Shares, pay such
monies as are received from the Custodian, all in accordance with
the procedures described in the written instruction received by
Investor Services Group from the Fund.
- Investor Services Group shall not process or effect any repurchase
with respect to Shares of the Fund after receipt by Investor
Services Group or its agent of notification of the suspension of
the determination of the net asset value of the Fund.
(g) Dividends.
- Upon the declaration of each dividend and each capital gains
distribution by the Board of Directors of the Fund with respect to
Shares of the Fund, the Fund shall furnish or cause to be
furnished to Investor Services Group Written Instructions setting
forth the date of the declaration of such dividend or
distribution, the ex-dividend date, the date of payment thereof,
the record date as of which Shareholders entitled to payment shall
be determined, the amount payable per Share to the Shareholders of
record as of that date, the total amount payable on the payment
date and whether such dividend or distribution is to be paid in
Shares at net asset value.
- On or before the payment date specified in such resolution of the
Board of Directors, the Fund will provide Investor Services Group
with sufficient cash to make payment to the Shareholders of record
as of such payment date.
- If Investor Services Group does not receive sufficient cash from
the Fund to make total dividend and/or distribution payments to
all Shareholders of the Fund as of the record date, Investor
Services Group will, upon notifying the Fund, withhold payment to
all Shareholders of record as of the record date until sufficient
cash is provided to Investor Services Group.
(h) Retirement Plans. In connection with the individual retirement
account, simplified employee pension plan, rollover individual retirement plan,
educational IRA and ROTH individual retirement account (each hereinafter
referred to as an "IRA" and, collectively, the "IRAs") within the meaning of
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code")
offered by the Fund for which contributions of the Funds' shareholders (the
"Participants") in the IRA's are invested in shares of the Fund, Investor
Services Group shall provide the following administrative services in addition
to those services described herein:
- Establish a record of types and reasons for distributions (i.e.,
attainment of age 59-1/2, disability, death, return of excess
contributions, etc.);
- Record method of distribution requested and/or made;
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- Receive and process designation of the beneficiary forms;
- Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over to the successor assets
in the account and records pertaining thereto as requested;
- Prepare any annual reports or returns required to be prepared
and/or filed by a custodian of an IRA, including, but not limited
to, an annual fair market value report, Forms 1099R and 5498 and
file with the IRS and provide to Participant/Beneficiary; and
- Perform applicable federal withholding and send
Participants/Beneficiaries an annual TEFRA notice regarding
required federal tax withholding.
(i) Cash Management Services. Funds received by Investor Services
Group in the course of performing its services hereunder will be held in bank
accounts and/or money market fund accounts. With respect to funds maintained in
money market fund accounts, Investor Services Group shall retain any interest
generated or earned. With respect to funds maintained in bank accounts, Investor
Services Group shall retain any excess balance credits or excess benefits earned
or generated by or associated with such bank accounts or made available by the
institution at which such bank accounts are maintained after such balance
credits or benefits are first applied towards banking service fees charged by
such institution in connection with banking services provided on behalf of the
Fund.
(j) Lost Shareholders. Investor Services Group shall perform such
services as are required in order to comply with Rules 17a-24 and 17Ad-17 of the
34 Act (the Lost Shareholder Rules"), including, but not limited to those set
forth below. Investor Services Group may, in its sole discretion, use the
services of a third party to perform the some or all such services.
- documentation of electronic search policies and procedures;
- execution of required searches;
- creation and mailing of confirmation letters;
- taking receipt of returned verification forms;
- providing confirmed address corrections in batch via electronic
media;
- tracking results and maintaining data sufficient to comply with the
Lost Shareholder Rules; and
- preparation and submission of data required under the Lost
Shareholder Rules.
II. FUND ACCOUNTING SERVICES
Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
- Daily, Weekly, and Monthly Reporting
- Portfolio and General Ledger Accounting
-23-
<PAGE> 24
- Daily Valuation of all Portfolio Securities
- Daily Valuation and NAV Calculation
- Comparison of NAV to market movement
- Review research of price tolerance/fluctuation report to market
movements and events
- Research of items appearing on the price exception report
- Weekly cost monitoring along with market-to-market valuations in
accordance with Rule 2a-7
- Security trade processing
- Daily cash and position reconciliation with the custodian bank
- Daily updating of price and distribution rate information to the
Transfer Agent/Insurance Agent
- Daily support and report delivery to Portfolio Management
- Daily calculation of Portfolio adviser fees and waivers
- Daily calculation of distribution rates
- Daily investable cash call
- Monitor and research aged receivables
- Collect aged income items and perform reclaims
- Update NASDAQ reporting
- Daily maintenance of each Portfolio's general ledger including expense
accruals
- Daily NAV per share notification to other vendors as required
- Calculation of 30-day SEC yields and total returns
- Preparation of month-end reconciliation package
- Monthly reconciliation of Portfolio expense records
-24-
<PAGE> 25
- Application of monthly pay down gain/loss
- Preparation of all annual and semi-annual audit work papers
III Custody Administration Services
- Assign an experienced Custody Administrator to accept, control and
process the Fund's daily portfolio transactions.
- Match and review DTC eligible ID's and trade information with the
Fund's instructions for accuracy and coordinating with the Custodian
and the Accounting Agent for recording and affirmation processing with
the depository.
- Settle all depository eligible issues in a totally automated
environment. Transactions requiring physical delivery will be settled
through the Custodian's New York office.
- Assist the Fund in placing cash management trades through the
Custodian, such as commercial paper, CDs and repurchase agreements.
- Provide the Fund's fund accounting agent and investment Adviser with
daily custodian statements reflecting all prior day cash activity on
behalf of each portfolio by 8:30 a.m. eastern time. Complete
descriptions of any posting, inclusive of Sedol/CUSIP numbers,
interest/dividend payment date, capital stock details, expense
authorizations, beginning/ending cash balances, etc., will be provided
by the Custodian's reports or system.
- Provide monthly activity statements combining both cash changes and
security trades, and a full portfolio listing.
- Communicate to the Fund and the Fund's fund accounting agent on any
corporate actions, capital changes and interest rate changes supported
by appropriate supplemental reports received from the Custodian.
Follow-up will be made with the Custodian to ensure all necessary
actions and/or paperwork is completed.
- Work with fund accounting and the Custodian Bank on monthly asset
reconciliations.
- Coordinate and resolve unsettled dividends, interest, paydowns and
capital changes. Assist in resolution of failed transactions and any
settlement problems.
- Provide a comprehensive program that audits transactions, monitors and
evaluates the Custodian's service and recommends changes that may
improve performance.
- Arrange for Securities Lending, Lines of Credit, and/or Letters of
Credit through the Custodian.
-25-
<PAGE> 26
- Monitor Fund cash positions.
- Provide Automated Mortgage-Backed processing through the Custodian.
- Provide the Fund's auditors with trade documentation to help expedite
the fund's audit.
- Cooperation and communication between Fund Accounting, the Custodian
and the Transfer Agent is facilitated smoothly when Custody
Administration is performed by Investor Service Group.
-26-
<PAGE> 27
SCHEDULE C
FEE SCHEDULE
(All fees will be for a term of five (5) years from effective date, discount
fees specified below will be offered for the first two years with full fees
effective for year 3)
I. Fees related to Portfolio Valuation and Mutual Fund Accounting
A. Annual Fee Schedule Per Domestic Portfolio: **U.S. Dollar Denominated
Securities only (1/12th payable monthly)
$25,000 Minimum to $ 20 Million of Average Daily Net Assets*
.0003 On Next $ 30 Million of Average Daily Net Assets*
.0002 On Next $ 50 Million of Average Daily Net Assets*
.0001 Over $100 Million of Average Daily Net Assets*
Each additional class is $7,500 minimum per year.
* For multiple class portfolios, fees are based on Combined Classes'
Average Daily Net Assets.
** Should a portfolio hold more than 5 non-U.S.D. securities, Section "B"
below will apply in lieu of Section A.
Should a portfolio require the use of multiple Custodians with
separate statements and accounts, resulting in additional FPS
reconciliations and money movements, Section "B" below will apply in
lieu of Section A.
B. Annual Fee Schedule per Complex Domestic Portfolio: **(1/12th payable
monthly)
$30,000 Minimum to $ 20 Million of Average Daily Net Assets*
.0003 On Next $ 30 Million of Average Daily Net Assets*
.0002 On Next $ 50 Million of Average Daily Net Assets*
.0001 Over $100 Million of Average Daily Net Assets*
Each additional class is $7,500 minimum per year.
* For multiple class portfolios, fees are based on Combined Classes'
Average Daily Net Assets.
** Should a portfolio hold more than 50% of its assets in non-U.S.D.
securities, Section "C" below will apply in lieu of Section A or B.
C. Annual Fee Schedule Per Global Portfolio: (1/12th payable monthly)
$40,000 Minimum to $ 20 Million of Average Daily Net Assets*
.0003 On Next $ 30 Million of Average Daily Net Assets*
-1-
<PAGE> 28
.0002 On Next $ 50 Million of Average Daily Net Assets*
.0001 Over $100 Million of Average Daily Net Assets*
Each additional class is $7,500 minimum per year.
- For multiple class portfolios, fees are based on Combined Classes'
Average Daily Net Assets.
Summary
- -------------------------------------------------------------------------------
The above fees are subject to the following discounts;
- Full fee for any portfolio over $10 million
- 20% discount on annual fee schedule first year for any fund under $10
million
- 10% discount on annual fee schedule second year for any fund under $10
million
- -------------------------------------------------------------------------------
D. Pricing Services Quotation Fee
Specific costs will be identified based upon options selected by the
Trust and will be billed monthly.
FPS does not currently pass along the charges for the U.S. equity
prices supplied by Muller Data. Should the Fund invest in security
types other than domestic equities supplied by Muller, the following
fees would apply.
<TABLE>
<CAPTION>
----------------- ---------------- --------------
MULLER DATA INTERACTIVE J.J. KENNY
SECURITY TYPES CORP.* DATA CORP.* CO., INC.*
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
--------------------------------------------------------------------------------------------------
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
--------------------------------------------------------------------------------------------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
--------------------------------------------------------------------------------------------------
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
--------------------------------------------------------------------------------------------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
--------------------------------------------------------------------------------------------------
Convertible Bonds .50 .50 1.00 (a)
--------------------------------------------------------------------------------------------------
High Yield Bonds .50 .50 1.00 (a)
--------------------------------------------------------------------------------------------------
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
--------------------------------------------------------------------------------------------------
U.S. Equities (d) .15 n/a
==================================================================================================
</TABLE>
-2-
<PAGE> 29
<TABLE>
<CAPTION>
----------------- ---------------- --------------
MULLER DATA INTERACTIVE J.J. KENNY
SECURITY TYPES CORP.* DATA CORP.* CO., INC.*
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Options n/a .15 n/a
--------------------------------------------------------------------------------------------------
Domestic Dividends & Capital Changes
(per Issue per Month) (d) 3.50 n/a
--------------------------------------------------------------------------------------------------
Foreign Securities .50 .50 n/a
--------------------------------------------------------------------------------------------------
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
--------------------------------------------------------------------------------------------------
Set-up Fees (one-time) n/a n/a (e) .25 (c)
--------------------------------------------------------------------------------------------------
All Added Items n/a n/a .25 (c)
--------------------------------------------------------------------------------------------------
</TABLE>
* Based on current Vendor costs, subject to change. Costs are quoted
based on individual security CUSIP/identifiers and are per issue
per day except as noted.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to FPS clients
(e) Interactive Data also charges monthly transmission costs
and disk storage charges.
1) Futures and Currency Forward Contracts $2.00 per Issue per Day
2) Dow Jones Markets (formerly Telerate Systems, Inc.)* (if
applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the Trust and will be billed monthly.
3) Reuters, Inc.*
*Based on current vendor costs, subject to change.
FPS does not currently pass along the charges for the domestic
security prices supplied by Reuters, Inc.
4) Municipal Market Data* (if applicable)
*Based on current vendor costs, subject to change.
-3-
<PAGE> 30
Specific costs will be identified based upon options selected by
the Trust and will be billed monthly.
E. SEC Yield Calculation - For Domestic Funds Only: (if applicable)
Provide up to 12 reports per year to reflect the yield calculations
for non-money market Funds required by the SEC, $1,000 per year per
Fund. For multiple class Funds, $1,000 per year per class. Daily SEC
yield reporting is available at $3,000 per year per Fund (US dollar
denominated securities only).
II. Fees related to Shareholder Servicing
A. Transfer Agent and Shareholder Services:
$20.00 per account per year per portfolio
Minimum monthly fee - $1,000 per portfolio Each additional class
minimum monthly fee is $1,000.
III. Fees related to Custody Administration
A. The Bank of New York
1. Domestic Securities and ADRs, Per Portfolio: (1/12th payable monthly)
U.S. Dollar Denominated Securities only
.00010 On First $100 Million of Average Daily Net Assets
.000085 On the Next $100 Million of Average Daily Net Assets
.000075 Over $200 Million of Average Daily Net Assets
Minimum monthly fee is $250 per portfolio
2. Custody Domestic Securities Transactions Charge: (billed monthly)
Book Entry DTC, Federal Book Entry, PTC $11.00
Options/Futures $20.00
Physical Securities $20.00
P & I Paydowns $ 5.50
Wires $ 7.00
Check Request $ 6.00
A transaction includes buys, sells, maturities or free security
movements.
Cedel/Euroclear
4 BPS safekeeping charge, $25 transaction charge.
Fee expressed in basis points per annum based upon month end market
value.
-4-
<PAGE> 31
CUSTODY OF FOREIGN SECURITIES PER GLOBAL PORTFOLIO
(Bank of New York Custody Schedule)
<TABLE>
<CAPTION>
============================================================================================
COUNTRIES *SAFEKEEPING CHARGES TRANSACTION FEE
(BASIS POINTS) (USD)
-----------------------------------------------
<S> <C> <C>
Argentina 22 75
--------------------------------------------------------------------------------------------
Australia 5 65
--------------------------------------------------------------------------------------------
Austria 6 90
--------------------------------------------------------------------------------------------
Bangladesh 49 180
--------------------------------------------------------------------------------------------
Belgium (reg bds) 3.5 80
--------------------------------------------------------------------------------------------
Belgium (equities and Cpn bds) 6 80
--------------------------------------------------------------------------------------------
Brazil 34 40
--------------------------------------------------------------------------------------------
Canada 3 20
--------------------------------------------------------------------------------------------
Chile 34 65
--------------------------------------------------------------------------------------------
China 24 20
--------------------------------------------------------------------------------------------
Colombia 54 165
--------------------------------------------------------------------------------------------
Czech Republic 27 65
--------------------------------------------------------------------------------------------
Denmark 4 110
--------------------------------------------------------------------------------------------
Euromarket (Cedel/Euroclear) 4 20
--------------------------------------------------------------------------------------------
Finland 16 75
--------------------------------------------------------------------------------------------
France 5 75
--------------------------------------------------------------------------------------------
Germany 3 40
--------------------------------------------------------------------------------------------
Greece 34 150
--------------------------------------------------------------------------------------------
Hong Kong 10 70
--------------------------------------------------------------------------------------------
Hungary 69 205
--------------------------------------------------------------------------------------------
India 54 180**
--------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE> 32
<TABLE>
<CAPTION>
============================================================================================
COUNTRIES *SAFEKEEPING CHARGES TRANSACTION FEE
(BASIS POINTS) (USD)
-----------------------------------------------
<S> <C> <C>
Indonesia 15 105
--------------------------------------------------------------------------------------------
Ireland 4.5 55
--------------------------------------------------------------------------------------------
Israel 79 60
--------------------------------------------------------------------------------------------
Italy 5 95
--------------------------------------------------------------------------------------------
Japan (bonds) 5 15
--------------------------------------------------------------------------------------------
Japan (equities) 4 15
--------------------------------------------------------------------------------------------
Luxembourg 9.50 85
--------------------------------------------------------------------------------------------
Malaysia 11 95
--------------------------------------------------------------------------------------------
Mexico 15 30
--------------------------------------------------------------------------------------------
Morocco 39 115
--------------------------------------------------------------------------------------------
Netherlands 8 17
--------------------------------------------------------------------------------------------
New Zealand 4.5 90
--------------------------------------------------------------------------------------------
Norway 4 90
--------------------------------------------------------------------------------------------
Pakistan 44 170
--------------------------------------------------------------------------------------------
Peru 79 195
--------------------------------------------------------------------------------------------
Philippines 15 145
--------------------------------------------------------------------------------------------
Poland 59 155
--------------------------------------------------------------------------------------------
Portugal 34 145
--------------------------------------------------------------------------------------------
Russia 31 170
--------------------------------------------------------------------------------------------
Singapore 7 45
--------------------------------------------------------------------------------------------
South Africa 3 40
--------------------------------------------------------------------------------------------
South Korea 16 30
--------------------------------------------------------------------------------------------
Spain 6 55
--------------------------------------------------------------------------------------------
Sri Lanka 21 75
--------------------------------------------------------------------------------------------
Sweden 4 65
--------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 33
<TABLE>
<CAPTION>
============================================================================================
COUNTRIES *SAFEKEEPING CHARGES TRANSACTION FEE
(BASIS POINTS) (USD)
-----------------------------------------------
<S> <C> <C>
Switzerland 4 105
--------------------------------------------------------------------------------------------
Taiwan 20 105
--------------------------------------------------------------------------------------------
Thailand 6 50
--------------------------------------------------------------------------------------------
Turkey 34 105
--------------------------------------------------------------------------------------------
United Kingdom 4 40
--------------------------------------------------------------------------------------------
United Kingdom (gilts) 4 55
--------------------------------------------------------------------------------------------
Uruguay (Equities) 64 90
--------------------------------------------------------------------------------------------
Uruguay (bonds) 44 90
--------------------------------------------------------------------------------------------
Venezuela 54 180
============================================================================================
</TABLE>
CHART NOTES:
* Fee expressed in basis points per annum is calculated based upon
month-end market value.
** Transaction charge is per 10,000 shares or part thereof.
A transaction includes buys, sells, maturities or Free Security
movements.
GLOBAL NETWORK USAGE FEE:
$350 per portfolio per month.
If trades in foreign assets denominated in foreign currencies held in
the local country, the above fee will apply. The $350 fee is waived on
Euroclear/Cedel transactions.
Minimum charges imposed by Agent Banks/Local Administrators
Chile - USD 5,000 per annum.
Columbia - USD 600 per month.
Peru - USD 6,000 per annum per account.
Brazil - USD 15 basis points for annual administrative charge.
Taiwan - USD 3,000 account opening charge.
C. When Issued, Securities Lending, Index Futures, etc:
Should any investment vehicle require a separate segregated custody
account, a fee of $250 per account per month will apply.
-7-
<PAGE> 34
D. Custody Miscellaneous Fees
Administrative fees incurred in certain local markets will be passed onto
the customer with a detailed description of the fees. Fees include income
collection, corporate action handling, overdraft charges, funds transfer,
special local taxes, stamp duties, registration fees, messenger and courier
services and other out-of-pocket expenses.
IV. Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000 so long
as the Fund retains Keane Tracers, Inc. ("KTI") to provide the Fund
with KTI's "In-Depth Research Program" services.
V. Print/Mail Fees.
(a) Standard Pricing:
Implementation Fee: $ 5000.00
-------------------
Testing Application or Data Requirements: $3.00/fax
Work Order: $15.00 per workorder
Daily Work (Confirms):
Hand: $71/K with $75.00 minimum (includes BRE or CRE)
$0.07/each additional insert
Machine: $42/K with $50.00 minimum (includes BRE or CRE)
$0.01/each additional insert
Daily Checks*:
Hand: $91/K with $100.00 minimum daily (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $75.00 minimum (includes 1 insert)
$0.01/each additional insert
* There is a $3.00 charge for each 3606 Form sent.
Statements:
Hand: $78/K with $75.00 minimum (includes BRE or CRE)
$0.08/each additional insert
$125/K for intelligent inserting
Machine: $52/K with $75.00 minimum (includes BRE or CRE)
$0.01 each additional insert
$58/K for intelligent inserting
Periodic Checks:
Hand: $91/K with $100.00 minimum (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $100.00 minimum (includes 1 insert)
-8-
<PAGE> 35
$0.01/each additional insert
12B1/Dealer Commission Checks/Statements: $0.78/each envelope with $100.00
minimum
Spac Reports/Group Statements: $78/K with $75.00 minimum
Listbills: $0.78 per envelope with $75.00 minimum
Printing Charges: (price ranges dependent on volumes)
$0.08/per confirm/statement/page
$0.10/per check
Folding (Machine): $18/K
Folding (Hand): $.12 each
Presort Charge: postage rate
$0.035 per piece
Courier Charge: $15.00 for each on call courier trip/or
actual cost for on demand
Overnight Charge: $3.50 per package service charge plus Federal
Express/Airborne charge
Inventory Storage: $20.00 for each inventory location as of the
15th of the month
Inventory Receipt: $20.00 for each SKU / Shipment
Hourly work; special projects, opening envelopes, etc.: $24.00 per hour
Special Pulls: $2.50 per account pull
Boxes/Envelopes: Shipping boxes $0.85 each
Oversized Envelopes $0.45 each
Forms Development/Programming Fee: $100/hr
Systems Testing: $85/hr
Cutting Charges: $10.00/K
(b) Special Mailings:
Special mailing pricing is based on appropriate notification
(standard of 30 day notification) and scheduling for special
mailings. Scheduling requirements include having collateral arrive
at agreed upon times in advance of deadlines. Mailings which arise
with shorter time frames and turns will be billed at a premium based
on turn around requirements.
Work Order: $30.00 per Workorder
Daily Work (Confirms):
Hand: $135.00 to create an admark tape
$10.00/K to zip + 4 data enhance/$125.00 minimum
$80.00/hr for any data manipulation
$10.00/K combo charge
-9-
<PAGE> 36
Admark & Machine Insert
#10, #11, 6x9: $62/K to admark envelope and machine insert
1 piece/$125.00 min
$2.50/K for each additional insert
$38/K to admark only with $75.00 minimum
$25.00/K hand sort
9x12: $135/K to admark envelope and machine insert
1 piece/$125.00 min
$5.00/K for each additional insert
$38/K to admark only/$75.00 minimum
$0.08 for each hand insert
Admark & Hand Insert:
#10, #11, 6x9: $0.08 for each hand insert
$25.00/K hand sort
9x12 $0.09 for each hand insert
$35.00/K hand sort
Pressure/Sensitive Labels:
$0.32 each to create, affix and hand insert 1 piece/$75.00
minimum
$0.08 for each hand insert
$0.10 to affix labels only
$0.10 to create labels only
Legal Drop: $150.00 / compliant legal drop per job and processing fees
Create Mailing List: $0.40 per entry with $75.00 minimum
Presort Fee: $0.035 per piece
VI. Investor Services Group shall be entitled to the following fee for the
performance of any Special Legal Services as described in Schedule B in
accordance with the Written Instructions of the Fund: $185 per hour subject to
certain project caps as may be agreed to by Investor Services Group and the
Fund. Services and charges may vary based on volume.
VII. Charges. The Fund shall be charged for the following products and
services as applicable:
- Ad hoc reports
- Ad hoc SQL time
- COLD Storage
- Digital Recording
- Banking Services, including incoming and outgoing wire charges
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Manual Pricing
- Materials for Rule 15c-3 Presentations
- Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
-10-
<PAGE> 37
VIII. Fee Adjustments. After the one year anniversary of the effective date of
this Agreement, Investor Services Group may adjust the fees described in the
above sections once per calendar year, upon thirty (30) days prior written
notice in an amount not to exceed the cumulative percentage increase in the
Consumer Price Index for All Urban Consumers (CPI-U) U.S. City Average, All
items (unadjusted) - (1982-84=100), published by the U.S. Department of Labor
since the last such adjustment in the Client's monthly fees (or the Effective
Date absent a prior such adjustment).
IX. Programming Costs. The following programming rates are subject to an
annual 5% increase after the one year anniversary of the effective date of this
Agreement.
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per programmer
-11-
<PAGE> 38
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Postage - direct pass through to the Fund
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Shipping, Certified and Overnight mail and insurance
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Distribution and Redemption Check Issuance
- Courier services
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Pricing services (or services used to determine Fund NAV)
- Vendor set-up charges for Blue Sky and other services
- Blue Sky filing or registration fees
- EDGAR filing fees
- Vendor pricing comparison
- Such other expenses as are agreed to by Investor Services Group and
the Fund
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition, the
Fund will promptly reimburse Investor Services Group for any other unscheduled
expenses incurred by Investor Services Group whenever the Fund and Investor
Services Group mutually agree that such expenses are not otherwise properly
borne by Investor Services Group as part of its duties and obligations under the
Agreement.
-12-
<PAGE> 39
SCHEDULE E
FUND DOCUMENTS
- - Certified copy of the Articles of Incorporation of the Fund, as amended
- - Certified copy of the By-laws of the Fund, as amended
- - Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
- - Copies of all agreements between the Fund and its service providers
- - Specimens of the certificates for Shares of the Fund, if applicable, in the
form approved by the Board of Directors of the Fund, with a certificate of
the Secretary of the Fund as to such approval
- - All account application forms and other documents relating to Shareholder
accounts or to any plan, program or service offered by the Fund
- - Certified list of Shareholders of the Fund with the name, address and
taxpayer identification number of each Shareholder, and the number of
Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which
stop transfer orders have been placed, together with the reasons therefore,
and the number of Shares redeemed by the Fund
- - All notices issued by the Fund with respect to the Shares in accordance
with and pursuant to the Articles of Incorporation or By-laws of the Fund
or as required by law and shall perform such other specific duties as are
set forth in the Articles of Incorporation including the giving of notice
of any special or annual meetings of shareholders and any other notices
required thereby.
- - A listing of all jurisdictions in which each Portfolio is registered and
lawfully available for sale as of the date of this Agreement and all
information relative to the monitoring of sales and registrations of Fund
shares in such jurisdictions
- - Each Fund's most recent post-effective amendment to its Registration
Statement
- - Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements thereto
-13-
<PAGE> 1
EXHIBIT (h)(2)
USE OF NAME AGREEMENT
CALAMOS INSURANCE TRUST, a Massachusetts business trust registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Trust"), and CALAMOS ASSET MANAGEMENT, INC., an Illinois corporation with
its principal place of business in Naperville, Illinois ("CAM"), in
consideration for the engagement of CAM by the Trust as manager and investment
adviser to the Trust for its series designated CALAMOS CONVERTIBLE PORTFOLIO,
agree that:
1. The name "Calamos" and any logo associated with that name are the
valuable property of CAM.
2. For so long as CAM serves as investment adviser to any series of the
Trust, the Trust shall have the right to use the name "Calamos" and any logo
associated with that name in the names of such series of the Trust, and in
related marketing materials, including any prospectus and statement of
additional information.
3. Upon the cessation of CAM's services as investment adviser to a
series of the Trust, the Trust agrees to cease to use the "Calamos" name and any
associated logo in connection with such series as promptly as it can reasonably
do so.
Dated: May 1, 1999
CALAMOS INSURANCE TRUST
By
-----------------------
John P. Calamos
President
CALAMOS ASSET MANAGEMENT, INC.
By
-----------------------
James S. Hamman, Jr.
Vice President
<PAGE> 1
Exhibit (i)
March 25, 1999
Calamos Insurance Trust
1111 East Warrenville road
Naperville, Illinois 60563-1493
Ladies and Gentlemen:
As special Massachusetts counsel to Calamos Insurance Trust, a
Massachusetts business trust (the "Trust"), we have been asked to deliver this
opinion in connection with the issuance of an indefinite number of shares,
without par value, of the Trust's series designated Calamos Convertible
Portfolio (the "Shares") that are subject of Form N-1A Registration Statement
No. 333-72511, (the "Registration Statement).
We have examined the Amended and Restated Declaration of Trust of the Trust
as filed with the Secretary of State of the Commonwealth of Massachusetts, such
records of the proceedings of the Trustees of the Trust as we deem appropriate
and the Registration Statement.
Based upon the foregoing, we are of the opinion that under Massachusetts
law, when issued and sold and paid for in accordance with the then applicable
Prospectus included as a part of the Registration Statement as then effective,
the Shares will be duly authorized, validly issued, fully paid and nonassessable
by the Trust.
We consent to a copy of this opinion being filed as an exhibit to the
Registration Statement.
Very truly yours,
Goodwin, Procter & Hoar LLP
<PAGE> 1
Exhibit (j)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report on the Calamos Insurance Trust -- Calamos
Convertible Portfolio dated March 26, 1999 in the Registration Statement (Form
N-1A) and in the related Prospectus and Statement of Additional Information of
Calamos Insurance Trust, filed with the Securities and Exchange Commission in
this Pre-Effective Amendment No. 1 to the Registration Statement under the
Securities Act of 1933 (Registration No. 333-72511) and in this Amendment No. 1
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-09237).
ERNST & YOUNG LLP
Chicago, Illinois
March 26, 1999
<PAGE> 1
EXHIBIT (l)
SUBSCRIPTION AGREEMENT
Calamos Insurance Trust
1. Shares Subscription. The undersigned agrees to purchase from Calamos
Insurance Trust (the "Fund") the number of shares (the "Shares") of the Fund's
Calamos Convertible Portfolio (the "Portfolio"), without par value, set forth at
the end of this Agreement on the terms and conditions set forth herein and in
the Preliminary Prospectus ("Preliminary Prospectus") described below, and
hereby tenders the amount of the price required to purchase these Shares at the
price set forth at the end of this Agreement.
The undersigned understands that the Fund has prepared a registration
statement or an amendment thereto for filing with the Securities and Exchange
Commission on Form N-1A, which contains the Preliminary Prospectus which
describes the Fund, the Portfolio and the Shares. By its signature hereto, the
undersigned hereby acknowledges receipt of a copy of the Preliminary Prospectus.
The undersigned recognizes that the Portfolio will not be fully
operational until such time as it commences the public offering of its shares.
Accordingly, a number of features of the Portfolios described in the Preliminary
Prospectus, including, without limitation, the declaration and payment of
dividends, and redemption of shares upon request of shareholders, are not, in
fact, in existence at the present time and will not be instituted until the
Fund's registration under the Securities Act of 1933 is made effective.
2. Representations and Warranties. The undersigned hereby represents and
warrants as follows:
(a) It is aware that no Federal or state agency has made any findings
or determination as to the fairness for investment, nor any recommendation or
endorsement, of the Shares;
(b) It has such knowledge and experience of financial and business
matters as will enable it to utilize the information made available to it in
connection with the offering of the Shares, to evaluate the merits and risks of
the prospective investment and to make an informed investment decision;
<PAGE> 2
(c) It recognizes that the Portfolio has no financial or operating
history and, further, that investment in the Portfolio involves certain risks,
and it has taken full cognizance of and understands all of the risks related to
the purchase of the Shares, and it acknowledges that it has suitable financial
resources and anticipated income to bear the economic risk of such an
investment;
(d) It is purchasing the Shares for its own account, for investment,
and not with any present intention of redemption, distribution, or resale of the
Shares, either in whole or in part;
(e) It will not sell the Shares purchased by it without registration of
the Shares under the Securities Act of 1933 or exemption therefrom;
(f) This Agreement and the Preliminary Prospectus and such material
documents relating to the Fund as it has requested have been provided to it by
the Fund and have been reviewed carefully by it; and
(g) It has also had the opportunity to ask questions of, and receive
answers from, representatives of the Fund concerning the Fund and the terms of
the offering.
3. The undersigned recognizes that the Fund reserves the unrestricted
right to reject or limit any subscription and to close the offer at any time.
Number of Shares of the Portfolio: 10,000 shares at a subscription
price of $10.000 per share for an aggregate price of $100,000 for the Calamos
Convertible Portfolio.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
26th day of March, 1999.
CALAMOS ASSET MANAGEMENT, INC.
By: /s/ James S. Hamman, Jr.
------------------------------
James S. Hamman, Jr.
Vice President
