PROSPECTUS
CALAMOS STRATEGIC INCOME FUND
CALAMOS CONVERTIBLE FUND
CALAMOS GROWTH AND INCOME FUND
CALAMOS GROWTH FUND
EACH A SERIES OF CFS INVESTMENT TRUST
1111 EAST WARRENVILLE ROAD
NAPERVILLE, ILLINOIS 60563-1448
(708) 245-7200
TOLL FREE: (800) 823-7386
- ------------------------
CALAMOS STRATEGIC INCOME FUND
Seeks high current income consistent with stability of principal, primarily
through investment in convertible securities and employing short selling to
enhance income and hedge against market risk.
CALAMOS CONVERTIBLE FUND
Seeks current income. Growth is a secondary objective that the Fund also
considers when consistent with its objective of current income.
CALAMOS GROWTH AND INCOME FUND
Seeks high long-term total return through capital appreciation and current
income derived from a diversified portfolio of convertible, equity and
fixed-income securities.
CALAMOS GROWTH FUND
Seeks long-term capital growth.
- -------------------------
MINIMUM INITIAL INVESTMENT: $500
Subsequent Investment: $50
INDIVIDUAL RETIREMENT ACCOUNT (IRA) PLAN AVAILABLE
This prospectus contains information you should know before investing in the
Funds. Please read it carefully and retain it for future reference. A
Statement of Additional Information dated the date of this prospectus and
containing more detailed information about the Funds has been filed with the
Securities and Exchange Commission and (together with any supplements thereto)
is incorporated herein by reference. The Statement of Additional Information
and the most recent financial statements are available without charge at the
address and telephone numbers set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
SEPTEMBER 1, 1995
<PAGE>
KEY FEATURES
INVESTMENT OBJECTIVES
Calamos Strategic Income Fund seeks high current income consistent with
stability of principal, primarily through investment in convertible securities
and employing short selling to enhance income and hedge against market risk.
Calamos Convertible Fund seeks current income. Growth is a secondary
objective that the Fund also considers when consistent with its objective of
current income.
Calamos Growth and Income Fund seeks high long-term total return through
capital appreciation and current income derived from a diversified portfolio
of convertible, equity and fixed-income securities.
Calamos Growth Fund seeks long-term capital growth.
There can be no assurance that a Fund will achieve its investment objective.
INVESTMENT RISKS
The Funds are designed for long-term investors who can accept the fluctuations
in portfolio value and other risks associated with seeking high current income
or long-term capital appreciation through investments in securities. The
Funds' investments in debt securities rated below investment grade, foreign
securities and options and futures, and use of short sales also present risks.
The Funds may have high portfolio turnover. See "Common Investment Practices"
and "Risk of Investment" for a more complete description of the risks of
investing in each of the Funds.
DIVIDENDS AND CAPITAL GAINS
Strategic Income Fund, Convertible Fund and Growth and Income Fund pay income
dividends quarterly; Growth Fund pays income dividends annually. Capital
gains, if any, are distributed by each Fund at least annually. Distributions
are automatically reinvested in additional shares at net asset value unless
payment in cash is requested. See "Dividends and Distributions."
REDEMPTION PRICE
Current net asset value, without charge. See "How to Redeem Shares."
SALES CHARGES
Shares of the Funds are sold with a front-end sales charge of 4.75% of the
offering price, with reduced sales charges on larger investments. There is no
sales charge on purchases of $1,000,000 or more or on reinvestment of
dividends. See "How to Purchase Shares."
EXPENSES OF THE FUNDS
Strategic Income Fund, Convertible Fund and Growth and Income Fund each pay a
monthly advisory fee at an annual rate of .75% of the first $150 million of
the Fund's average daily net assets and .50% of the Fund's average daily net
assets in excess of $150 million. Growth Fund pays a monthly advisory fee at
an annual rate of 1% of the first $150 million of its average net assets and
.75% thereafter. See "Management of the Funds - The Adviser." Each Fund also
pays the distributor monthly fees at annual rates aggregating .50% of the
Fund's average daily net assets for shareholder servicing and for services in
distributing Fund shares. See "Management of the Funds - Distribution Plan."
INVESTMENT ADVISER
Calamos Asset Management, Inc.
<PAGE>
DISTRIBUTOR
Calamos Financial Services, Inc.
EXPENSES
The following table shows all fees paid by shareholders or charged against the
assets of each Fund:
<TABLE>
<CAPTION>
Strategic Growth and
Income Convertible Income Growth
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchases
(as a percentage of offering price) 4.75% 4.75% 4.75% 4.75%
Maximum sales load imposed on reinvested
dividends None None None None
Deferred sales load (c) None None None None
Redemption fees (d) None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees .75% .75% .75% 1.00%
12b-1 fees (e) .50 .50 .50 .50
Other expenses (after expense reimbursement) .75 (a) .35 .75 (a) .50 (a)
Total fund operating expenses 2.00% (b) 1.60% 2.00% 2.00%
<FN>
(a) The Adviser has voluntarily undertaken to limit the total operating
expenses of each of Strategic Income Fund, Growth and Income Fund and Growth
Fund to 2% of average net assets through August 31, 1996, and the percentages
shown for "Other Expenses" take into account expected expense reimbursements.
Absent the reimbursement of expenses by the Adviser, the percentage shown for
"Other Expenses" of the Funds other than Convertible Fund would have been 3.5%
for Strategic Income Fund; 2.2% Growth and Income Fund; and 3.6% for Growth
Fund. See "Management of the Funds - The Adviser."
(b) Each Fund may incur expenses for dividends paid on short positions that
are not subject to the Adviser's expense limitation. Only the Strategic
Income Fund had such expenses and its ratio of expenses to average net assets,
including such expenses, was 0.4%.
(c) With respect to shares for which the initial purchase price was $1
million or more and, therefore, on which no initial sales charge was imposed,
if any of such shares are redeemed within one year after purchase (other than
by reinvestment of dividends or distributions), determined on a first-in,
first-out basis, a contingent deferred sales charge of 1% of the purchase
price will be imposed.
(d) A service charge of $15 is deducted from proceeds of redemption paid by
wire.
(e) The Trust's Distribution Plan, as permitted under Rule 12b-1, provides
for payment by each Fund of a service fee of .25% and a distribution fee of
.25% of the Fund's average daily net assets. Broker-dealers and others who
have executed selling group and service agreements with CFS (the distributor
of shares of the Funds) may receive payments from CFS for service fees and
additional sales compensation at annual rates of .25% and .05%, respectively,
of average daily net assets. Consequently, long-term shareholders eventually
may pay more than the economic equivalent of the maximum allowable front-end
sales charge.
</TABLE>
<PAGE>
Examples
You would pay the following expenses on a $1,000 investment, assuming (1) a 5%
annual return as required by the Securities and Exchange Commission for
purposes of this example and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Strategic Income Fund $67 $107 $150 $269
Convertible Fund 63 96 130 228
Growth and Income Fund 67 107 150 269
Growth Fund 67 107 150 269
</TABLE>
The purpose of this table and the example is to assist you in understanding
the various costs and expenses that an investor in a Fund bears, directly or
indirectly. The example assumes that the percentage amounts listed under
Annual Fund Operating Expenses remain the same through each of the periods,
all income dividends and capital gains distributions are reinvested in
additional shares of the Funds, and each Fund's net assets remain constant.
The example should not be considered a representation of past or future
expenses; the actual expenses of the Funds and the annual rate of return may
be greater or less than those shown. Although information such as that shown
in the example is useful in reviewing the expenses of the Funds and in
providing a basis for comparison of those expenses with the expenses of other
mutual funds, it should not be used for comparison with other investments
using different assumptions or time periods.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
The tables below reflect the results of the operations of each Fund on a
per-share basis. Information in the tables for the fiscal years ended on or
after April 30, 1988, was audited by Ernst & Young LLP, independent auditors.
Information for Convertible Fund for prior periods was audited by other
auditors. These tables should be read in conjunction with each Fund's
financial statements and notes thereto. The Funds' annual report, which may
be obtained from the Trust upon request at no charge, contains additional
performance information.
STRATEGIC INCOME FUND
<CAPTION>
Eleven Sept. 4, 1990
Months Year ended April 30, to
Ended April 30,
March 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.71 $10.96 $10.58 $10.60 $10.00
Income from investment operations:
Net investment income (a) .40 .36 .39 .59 .40
Net realized and unrealized
gain (loss) on investments (.43) .11 .79 .46 .61
------ ------ ------ ------ ------
Total from investment operations (.03) .47 1.18 1.05 1.01
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (.36) (.41) (.41) (.51) (.40)
Dividends from net realized capital gains (.19) (.31) (.39) (.56) (.01)
------ ------ ------ ------ ------
Total distributions (.55) (.72) (.80) (1.07) (.41)
------ ------ ------ ------ ------
Net asset value, end of period $10.13 $10.71 $10.96 $10.58 $10.60
------ ------ ------ ------ ------
Total return (c) (0.2%) 4.2% 11.5% 10.5% 10.2%
Ratios and supplemental data:
Net assets, end of period (000) $2,211 $3,004 $2,522 $1,410 $595
Ratio of expenses to average
net assets (a)(b) 2.4%* 2.2% 2.3% 2.5% 2.6%*
Ratio of net investment income to average
net assets 4.0%* 3.2% 3.9% 5.3% 6.6%*
Portfolio turnover rate 59.9% 79.4% 73.8% 97.0% 108.9%*
<FN>
(a) After the reimbursement and waiver of expenses by the Adviser equivalent
to 1.1%*, 1.0%, 0.7%, 1.25% and 4.8%* of average net assets, respectively.
(b) Includes 0.4%*, 0.2%, 0.3%, 0.5% and 0.6%,* respectively, related to
dividend expenses on short positions.
(c) Total return is not annualized for periods that are less than a full year
and does not reflect the effect of sales charges.
*Annualized.
</TABLE>
<PAGE>
<TABLE>
CONVERTIBLE FUND (b)
<CAPTION>
Eleven Months
Ended Year Ended April 30,
March 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.04 $13.96 $12.72 $11.39 $10.29
Income from investment
operations:
Net investment income .38 .40 .42 .41 .49
Net realized and unrealized
gain (loss) on investments (.01) .53 1.32 1.43 1.25
Total from investment
operations (.37) .93 .74 1.84 1.74
Less distributions:
Dividends from net
investment income (.32) (.39) (.40) (.45) (.52)
Dividends from net realized
capital gains (.56) (1.46) (.10) - -
Dividends in excess of
net realized capital gains (.12) - - - -
Distributions from paid in
capital - - - (.06) (.12)
------ ------ ------ ------ ------
Total distributions (1.00) (1.85) (.50) (.51) (.64)
------ ------ ------ ------ ------
Net asset value, end of period $12.41 $13.04 $13.96 $12.72 $11.39
------ ------ ------ ------ ------
Total return (a) 3.2% 6.5% 14.0% 16.5% 17.7%
Ratios and supplemental data:
Net assets, end of period (000) $16,646 $17,023 $17,213 $16,940 $13,953
Ratio of expenses to
average net assets 1.6%* 1.6% 1.7% 1.2% 1.2%
Ratio of net investment
income to average
net assets 3.3%* 2.8% 3.2% 3.4% 4.3%
Portfolio turnover rate 42.1% 73.1% 73.1% 83.8% 63.2%
<PAGE>
<CAPTION>
6/21/85
Year Ended April 30, to
1990 1989 1988(b) 1987 4/30/86
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.73 $10.56 $11.94 $11.99 $10.00
Income from investment
operations:
Net investment income .60 .59 .62 .52 .32
Net realized and unrealized
gain (loss) on investments (.32) .14 (1.24) .50 1.92
Total from investment
operations .28 .73 (.62) 1.02 2.24
Less distributions:
Dividends from net
investment income (.63) (.56) (.66) (.54) (.25)
Dividends from net realized
capital gains - - (.10) (.53) -
Dividends in excess of
net realized capital gains - - - - -
Distributions from paid in
capital (.09) - - - -
------ ------ ------ ------ ------
Total distributions (.72) (.56) (.76) (1.07) (.25)
------ ------ ------ ------ ------
Net asset value, end of period $10.29 $10.73 $10.56 $11.94 $11.99
------ ------ ------ ------ ------
Total return (a) 2.4% 7.2% (5.1%) 9.5% 22.2%
Ratios and supplemental data:
Net assets, end of period (000) $18,664 $21,270 $23,194 $23,632 $10,175
Ratio of expenses to
average net assets 1.1% 1.1% 1.2% 1.3% 2.0%*
Ratio of net investment
income to average
net assets 5.5% 5.6% 5.6% 4.6% 4.9%*
Portfolio turnover rate 93.4% 84.7% 55.5% 45.0% 30.0%*
<FN>
(a) Total return is not annualized for periods that are less than a full year
and does not reflect the effect of sales charges.
(b) Calamos Asset Management, Inc. became the Fund's investment adviser on
September 1, 1987.
*Annualized.
</TABLE>
<PAGE>
<TABLE>
GROWTH AND INCOME FUND
<CAPTION>
Eleven Months
Ended Year Ended April 30,
March 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.97 $13.90 $13.57 $11.54 $10.46
Net income from investment operations:
Net investment income (a) .35 .31 .35 .29 .31
Net realized and unrealized
gain (loss) on investments (.02) .34 1.97 2.02 1.09
------ ------ ------ ------ ------
Total from investment operations 0.33 .65 2.32 2.31 1.40
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income (.32) (.29) (.36) (.28) (.32)
Dividends from net realized
capital gains (.30) (1.29) (1.63) -- --
Total distributions (.62) (1.58) (1.99) (.28) (.32)
------ ------ ------ ------ ------
Net asset value, end of period $12.68 $12.97 $13.90 $13.57 $11.54
------ ------ ------ ------ ------
Total return (b) 2.8% 4.5% 18.8% 20.2% 13.4%
Ratios and supplemental data:
Net assets, end of period (000) $3,853 $4,663 $3,655 $2,694 $1,821
Ratio of expenses to average
net assets (a) 2.0%* 2.0% 2.0% 2.0% 2.0%
Ratio of net investment
income to average net assets 3.0%* 2.3% 2.6% 2.3% 2.9%
Portfolio turnover rate 84.7% 155.2% 132.3% 111.6% 103.6%
<PAGE>
<CAPTION>
Year Ended Sept. 22, 1988
April 30, to
1990 April 30, 1989
<S> <C> <C>
Net asset value, beginning of period $10.49 $10.00
Net income from investment operations:
Net investment income (a) .33 .38
Net realized and unrealized
gain (loss) on investments .09 .49
------ ------
Total from investment operations .42 .87
------ ------
Less distributions:
Dividends from net investment
income (.28) (.38)
Dividends from net realized
capital gains (.17) --
------ ------
Total distributions (.45) (.38)
------ ------
Net asset value, end of period $10.46 $10.49
------ ------
Total return (b) 3.8% 9.0%
Ratios and supplemental data:
Net assets, end of period (000) $1,345 $732
Ratio of expenses to average
net assets (a) 2.0% 2.0%*
Ratio of net investment
income to average net assets 3.0% 4.8%*
Portfolio turnover rate 103.0% 85.0%*
<FN>
(a) After the reimbursement and waiver of expenses by the Adviser equivalent
to 0.2%*, 0.1%, 0.5%, 0.5%, 1.7%, 2.3% and 8.4%* of average net assets,
respectively.
(B) Total return is not annualized for periods that are less than a full year
and does not reflect the effect of sales charges.
*Annualized.
</TABLE>
<PAGE>
<TABLE>
GROWTH FUND
<CAPTION>
Sept. 4, 1990
Eleven Months Year ended April 30, to
Ended April 30,
March 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.57 $13.95 $14.04 $12.48 $10.00
Income from investment operations:
Net investment income (loss) .02 .01 (.02) (.01) .07
Net realized and unrealized
gain (loss) on investments (.28) 1.21 .20 1.60 2.50
Total from investment operations (.26) 1.22 .18 1.59 2.57
Less distributions:
Dividends from net investment income - (.01) - - (.08)
Dividends from net realized capital gains (.13) (.59) (.27) (.03) (.01)
Total distributions (.13) (.60) (.27) (.03) (.09)
Net asset value, end of period $14.18 $14.57 $13.95 $14.04 $12.48
Total return (b) (1.8%) 8.9% 1.4% 12.7% 25.8%
Ratios and supplemental data:
Net assets, end of period (000) $1,791 $2,089 $1,861 $1,802 $862
Ratio of expenses to average net assets (a) 2.0%* 2.0% 2.0% 2.0% 2.0%*
Ratio of net investment income to average
net assets 0.2%* 0.1% (0.1%) (0.1%) 0.8%*
Portfolio turnover rate 104.3% 87.3% 56.8% 47.3% 15.8%*
<FN>
(a) After the reimbursement and waiver of expenses by the Adviser equivalent
to 1.6%*, 1.1%, 0.7%, 0.8% and 4.5%* of average net assets, respectively.
(b) Total return is not annualized for periods that are less than a full year
and does not reflect the effect of sales charges.
*Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a different investment objective and may invest in different
securities. The Funds differ principally in (i) the relative importance each
places on growth potential and current income as considerations in selecting
investments, and (ii) the types of securities selected for investment.
The investment objectives of a Fund may not be changed without the approval of
a "majority of the outstanding" shares of that Fund, as defined in the
Investment Company Act of 1940. There can be no assurance that a Fund will
achieve its objectives.
STRATEGIC INCOME FUND
Strategic Income Fund seeks high current income consistent with stability of
principal, primarily through investment in convertible securities and
employing short selling to enhance income and hedge against market risk.
Under normal market conditions, Strategic Income Fund will invest at least 65%
of its assets in income-producing securities. In furtherance of its
objective, Strategic Income Fund may also write covered call options and
purchase put options and invest in other types of securities. See "Common
Investment Practices."
Any assets of Strategic Income Fund not invested in convertible securities,
common stock received upon conversion or exchange of convertible securities,
or in short sales with respect to portfolio securities may be invested in
other securities including non-convertible equity and debt securities,
options, warrants, securities of the U.S. Government, its agencies and
instrumentalities, repurchase agreements and money market instruments.
<PAGE>
CONVERTIBLE FUND
Calamos Convertible Fund seeks current income. Growth is a secondary
objective that the Fund also considers when consistent with its objective of
current income.
Convertible Fund invests in a diversified portfolio of convertible securities,
primarily convertible bonds and convertible preferred stocks. See "Common
Investment Practices - Convertible Securities."
A significant portion of Convertible Fund's portfolio ordinarily is invested
in a number of long-term core positions, selected on the basis of the
investment adviser's assessment of the long-term value of an investment in
that issuer. Convertible Fund's investments are concentrated in the higher
end of the credit quality spectrum, and the Fund expects to maintain, over the
long-term, an average credit quality of BBB or better. However, debt
securities acquired by Convertible Fund may be unrated or may be rated below
investment grade, which would present increased risk. See "Common Investment
Practices - Debt Securities" for more information, including an analysis of
Convertible Fund's past investments in debt securities.
Convertible Fund is substantially invested in convertible securities,
including synthetic convertible securities, under normal market conditions.
See "Common Investment Practices - Convertible Securities." At least 65% of
Convertible Fund's assets ordinarily is invested in "true" convertibles. Any
portion of Convertible Fund's assets not invested in convertible securities as
described above may be invested in non-convertible equity and fixed-income
securities, and other securities as described under "Common Investment
Practices."
GROWTH AND INCOME FUND
Calamos Growth and Income Fund seeks high long-term total return through
capital appreciation and current income derived from a diversified portfolio
of convertible, equity and fixed-income securities. The Fund places equal
emphasis on capital appreciation and current income under normal market
conditions.
Growth and Income Fund invests at least 65% of its total assets in a
diversified portfolio of convertible securities, primarily convertible bonds
and convertible preferred stocks, under normal market conditions. See "Common
Investment Practices - Convertible Securities." The Fund's assets not
invested in convertible securities are invested in common stocks that, in the
judgment of the investment adviser, provide opportunities for long-term
capital appreciation, or in other securities as described under "Common
Investment Practices."
Growth and Income Fund generally invests in smaller and medium-sized
companies, the securities of which tend to be more volatile and less liquid
than the securities of larger companies. The debt securities of smaller and
medium-sized companies also are less likely to be rated investment grade, and
so the debt securities acquired by Growth and Income Fund may be unrated or
rated below investment grade, which would present increased risk. See "Common
Investment Practices - Debt Securities" for more information, including an
analysis of Growth and Income Fund's past investment in debt securities.
<PAGE>
GROWTH FUND
Growth Fund seeks long-term capital growth.
In pursuing Growth Fund's investment objective, the Adviser seeks out
securities that, in its opinion, are undervalued and offer above-average
potential for earnings growth. The selection process emphasizes earnings
growth potential coupled with financial strength and stability. The Adviser
performs its own fundamental analysis, in addition to depending upon
recognized rating agencies and other sources. The portfolio may include
securities of well-established companies with large market capitalizations as
well as small, unseasoned companies. Growth Fund will not invest more than 5%
of its assets in the securities of unseasoned issuers.
The Adviser anticipates that common stocks will generally afford the best
opportunities for capital growth. However, Growth Fund may invest in
securities convertible into common stock, preferred stocks, and obligations
such as bonds, debentures and notes that, in the opinion of the Adviser,
present opportunities for capital appreciation. The percentages of Fund
assets invested in various types of securities will vary in accordance with
the judgment of the Adviser. There are no limitations on the amount of the
Fund's assets that may be allocated to the various types of securities, or on
the ratings of debt securities acquired by the Fund. The Fund may also hold
cash and cash equivalents and may invest in other types of securities as
described under "Common Investment Practices."
<PAGE>
COMMON INVESTMENT PRACTICES
GENERAL
In selecting portfolio securities for a Fund, including unrated securities,
the investment adviser performs its own credit analysis in addition to
considering evaluations by recognized rating agencies and other sources,
giving consideration to, among other things, the issuer's financial soundness,
its anticipated cash flow, interest and dividend coverage, asset coverage,
sinking fund provisions, responsiveness to changes in interest rates, business
conditions, and liquidation value relative to the market price of the
security. Securities received by a Fund upon conversion or exercise of
warrants and securities remaining upon the breakup of units or detachments of
warrants may be retained to permit orderly disposition or to establish
long-term holding periods for federal income tax purposes. Convertible Fund
and Growth and Income Fund are not required to sell securities to ensure that
65% of that Fund's assets is invested in convertible securities. Strategic
Income Fund is not required to sell securities to ensure that 65% of its
assets is invested in income-producing securities.
DEBT SECURITIES
In pursuing its investment objectives, each Fund 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 ("S&P") or Ba or
lower by Moody's Investor Services, Inc. ("Moody's"), commonly called "junk
bonds") and securities that are not rated. There are no restrictions as to
the ratings of debt securities acquired by a Fund or the portion of a Fund's
assets that may be invested in debt securities in a particular ratings
category, except that no Fund will 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 each Fund of its investment objectives will be more dependent
on the Adviser's credit analysis than would be the case if the Fund 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 Adviser 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.
<PAGE>
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 a Fund may have greater difficulty selling its
portfolio securities. See "Net Asset Value." The market value of these
securities and their liquidity may be affected by adverse publicity and
investor perceptions.
The table below shows the percentages of net assets (on a dollar-weighted
monthly average basis) invested in debt securities in each ratings category
during the eleven months ended March 31, 1995 for Strategic Income Fund,
Convertible Fund and Growth and Income Fund. Growth Fund invested less than
2% of its assets in debt securities rated below investment grade during that
period.
<TABLE>
<CAPTION>
Percentage
Ratings Strategic Convertible Growth and
Category Income Fund Fund Income Fund
<S> <C> <C> <C>
U.S. Govt. 0% 6% 10%
AAA 0 0 0%
AA 0 5 5
A 9 6 4
BBB 34 15 11
BB 6 8 6
B 31 8 13
CCC 0 0 0
not rated 1 16 3
</TABLE>
The percentages in the table are based upon ratings by S&P, or by Moody's if
the security was not rated by S&P. A description of the ratings used by S&P
and Moody's is included as an appendix to this prospectus.
CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities. Under normal circumstances,
each of Convertible Fund and Growth and Income Fund will invest at least 65%
of its assets in convertible securities. Strategic Income Fund expects that a
significant portion of its assets will be invested in convertible securities,
but there is no restriction on the percentage of its assets that will be so
invested.
The Adviser believes that the characteristics of convertible securities make
them appropriate investments for the Funds. These characteristics include:
the potential for capital appreciation as 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 decreased risks of decline
in value relative to the underlying common stock due to their fixed-income
nature. 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.
<PAGE>
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.
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. A convertible security may be
subject to redemption at the option of the issuer at a price established in
the governing instrument pursuant to which the convertible security was
issued. If a convertible security held by a Fund is called for redemption,
the Fund will be required to redeem the security, convert it into the
underlying common stock or sell it to a third party. Certain convertible debt
securities may provide a put option to the holder which entitles the holder to
cause the security to be redeemed by the issuer at a premium over the stated
principal amount of the debt security.
"Synthetic" convertible securities, for purposes of this prospectus, are
created by combining separate securities which possess the two principal
characteristics of a true convertible security, i.e., fixed income
("fixed-income component") and the right to acquire equity securities
("convertible component"). The fixed-income component is achieved by investing
in non-convertible fixed-income securities such as non-convertible bonds,
preferred stocks and money market instruments. The convertible component is
achieved by investing in warrants, exchange or NASDAQ listed call options, or
stock index call options granting the holder the right to purchase a specified
quantity of securities within a specified period of time at a specified price
or to receive cash in the case of stock index options. Synthetic convertible
securities are not considered convertible securities for purposes of the
policies of Convertible Fund and Growth and Income Fund to normally invest at
least 65% of total assets in convertible securities.
<PAGE>
The synthetic convertible security differs from the true convertible security
in several respects. Unlike a true convertible security, which is a single
security having a unitary market value, a synthetic convertible security is
comprised of two or more separate securities, each with its own market value.
Therefore, the "market value" of a synthetic convertible security is the sum
of the values of its fixed-income component and its convertible component.
For this reason, the values of a synthetic convertible security and a true
convertible security will respond differently to market fluctuations.
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 a Fund's
investment objective. A synthetic convertible security also is a more
flexible investment in that its two components may be purchased separately.
For example, a Fund 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.
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. 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.
<PAGE>
FOREIGN SECURITIES
Each Fund may invest up to 25% of its net assets in securities of foreign
issuers that are not publicly traded in the United States ("foreign
securities"). For this purpose, foreign securities do not include securities
represented by American Depository Receipts (ADRs) or securities guaranteed by
a United States person. Investment in foreign securities entails a greater
degree of risk (including risk arising from exchange rate fluctuations; tax
provisions; exchange and currency controls; less public information regarding
issuers of securities; less governmental supervision of stock exchanges,
securities brokers and issuers of securities; different accounting, auditing
and financial reporting standards; different settlement practices; political
risks; and expropriation of assets) than investment in securities of domestic
issuers. Each Fund expects that all of its investments in foreign securities
will be in developed nations.
In connection with the purchase of foreign securities, a Fund may contract to
purchase an amount of foreign currency sufficient to pay the purchase price of
such securities at the settlement date; such a contract involves the risk that
the value of the foreign currency may decline relative to the value of the
dollar prior to the settlement date, which risk is in addition to the risk
that the value of the foreign security purchased may decline. In addition,
each Fund may enter into foreign currency contracts, to the extent its
portfolio positions are denominated in foreign currencies, as a hedging
technique to limit or reduce its exposure to currency fluctuations. For a
more complete explanation, please refer to the Statement of Additional
Information.
At March 31, 1995, Convertible Fund had invested 11% of its net assets in
foreign securities, and Growth Fund had invested 2% of its net assets in ADRs.
WARRANTS
Each Fund may invest up to 15% of the value of its net assets at the time of
purchase in warrants (not including those acquired in units or attached to
other securities), including up to 5% of its net assets in warrants the
underlying common stock of which is not listed on the New York or American
stock exchanges. 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.
<PAGE>
OPTIONS AND FUTURES
Consistent with its objective, each Fund may purchase and write both call
options and put options on securities and on indexes, and Growth Fund may
enter into interest rate and index futures contracts and options on such
futures contracts ("derivative products") in order to provide additional
revenue, or to hedge against changes in security prices or interest rates.
Growth Fund will limit its use of futures contracts and options on futures
contracts to hedging transactions to the extent required to do so by
regulatory agencies.
An option on a security (or index) is a contract that gives the holder, in
return for a premium, the right to buy (call) from or sell (put) to the option
seller (writer) the security (or the cash value of the index) underlying the
option at a designated price during the term of the option. Prior to exercise
or expiration, an option may be closed out by an offsetting purchase or sale
of an option of the same series. A Fund may write a call or put option only
if the option is covered.
There are several risks associated with the use of derivative products. As
the writer of a covered call option, a Fund foregoes, during the option's
life, the opportunity to profit from increases in market value of the security
covering the call option above the call price. Because of low margin deposits
required, the use of futures contracts involves a high degree of leverage and
may result in losses in excess of the amount of the margin deposit. Since
there can be no assurance that a liquid market will exist when a Fund seeks to
close out a derivative product position, these risks may become magnified.
Because of these and other risks, successful use of derivative products
depends on the Adviser's ability to predict correctly changes in the level and
the direction of stock prices, interest rates and other market factors, but
even a well-conceived transaction may be unsuccessful because of an imperfect
correlation between the securities and derivative product markets. For a more
complete explanation, please refer to the Statement of Additional Information.
<PAGE>
SHORT SALES
Each Fund may attempt to hedge against market risk and enhance income by: (1)
entering into short sales of securities that it currently has the right to
acquire, without payment of any further consideration, 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 while the
Fund's short positions remain open.
In addition, Strategic Income Fund may enter into short sales of securities
that it currently has the right to acquire upon payment of additional
consideration, for instance, upon exercise of any option or warrant. This
technique would be used to hedge against market risk in connection with a
synthetic convertible position in the same way selling short a true
convertible security owned by a Fund would hedge against market risk. During
the time such a short position is open, the Fund would maintain in a
segregated account with the Fund's custodian, cash or U.S. Government
securities in an amount such that the value of the segregated account, plus
the value of any collateral required to be deposited with the broker in
connection with the short sale, (i) will equal the current market value of the
securities sold short and (ii) will not be less than the market value of the
securities at the time they were sold short. Strategic Income Fund will
conduct its short sales so that no more than 10% of the net assets of the
Fund, when added together, will be (i) deposited with brokers as collateral,
and (ii) allocated to segregated accounts in connection with short sales, at
any time.
Short sales and short sales against the box may protect the Funds against the
risk of losses in the value of their 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 Fund owns, either directly or indirectly,
and, in the case where the Fund owns convertible securities, changes in the
conversion premium.
Short sale transactions involve certain risks. In particular, the variable
degree of correlation between the price movements of the convertible
securities (or portion of the synthetic convertible) 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
Fund pays a conversion premium for a convertible security, the Fund is
generally unable to protect against a loss of such premium by entering into a
short sale hedge. In determining the number of shares to be sold short
against the Fund's position in the convertible securities, the anticipated
fluctuation in the conversion premiums is considered. A Fund will also incur
transaction costs in connection with short sales. Certain provisions of the
Internal Revenue Code may limit the degree to which the Funds are able to
enter into short sales, which limitations might impair a Fund's ability to
achieve its investment objective. Please refer to the Statement of Additional
Information for a more complete explanation.
<PAGE>
LENDING PORTFOLIO SECURITIES
In order to generate additional income, each Fund may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its total
assets to brokers, dealers and financial institutions such as banks and trust
companies for which it will receive collateral in cash, United States
Government securities or irrevocable letters of credit that will be maintained
in an amount equal to at least 100% of the current market value of the loaned
securities. Cash collateral will be invested in short-term securities, which
will increase the current income of the Fund. Such loans will be terminable
at any time. A Fund will have the right to regain record ownership of loaned
securities to exercise beneficial rights such as voting rights and rights to
interest or other distributions. A Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging such loans. The lending
of portfolio securities exposes a Fund to the risk of failure by the borrower
to return the securities involved in such transactions, in which event the
Fund may incur a loss. In an effort to reduce that risk, the Adviser will
monitor the creditworthiness of the firms to which the Funds lend portfolio
securities.
TEMPORARY INVESTMENTS
Each Fund may make temporary investments without limitation in periods of
unusual market conditions when the Adviser determines that its stated
investment strategy would not best achieve the Fund's investment objectives, a
defensive position is warranted, or in order to provide liquidity for
redemptions or purchases of portfolio securities. 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. In a repurchase agreement, a Fund 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. In the event of a bankruptcy
or other default of a seller of a repurchase agreement, a Fund could
experience delays in liquidating the underlying security and losses.
<PAGE>
RISK OF INVESTMENT
All investments, including those in mutual funds, have risks. No investment
is suitable for all investors. Each Fund is designed for long-term investors
who can accept the fluctuations in portfolio value and other risks associated
with investments in securities. There can be no guarantee that a Fund will
achieve its objective.
Each Fund diversifies its portfolio holdings to reduce risk. Although risk
cannot be eliminated, diversification reduces the impact of any single
investment. Certain risk factors may also be associated with the Funds'
investment practices, including investing in debt securities rated below
investment grade, short selling and investing in foreign securities. Risk
factors specific to those practices are described under "Common Investment
Practices."
Although the Funds do not purchase securities with a view to rapid turnover,
there are no limitations on the length of time portfolio securities must be
held. The turnover rate may vary significantly from year to year. The
portfolio turnover rate of each of Strategic Income Fund and Growth and Income
Fund may be greater than 100%. A high rate of portfolio turnover may result
in higher transaction costs and the realization of capital gains and losses.
Please refer to the Statement of Additional Information for a more complete
explanation.
<PAGE>
INVESTMENT RESTRICTIONS
In pursuing its investment objective, a Fund will not:
1. 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;
2. Acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any issuer; or
3. 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.
These are fundamental restrictions that cannot be changed as to a Fund without
the approval of a "majority of the outstanding" voting securities of that
Fund, as defined in the Investment Company Act of 1940. All investment
restrictions for the Funds are described in the Statement of Additional
Information.
<PAGE>
HOW TO PURCHASE SHARES
Shares of the Funds are sold through selected broker-dealers and banks that
have signed agreements with Calamos Financial Services, Inc. ("CFS"), the
Funds' distributor, or may be purchased by check or wire sent to CFS. The
minimum initial investment by a shareholder is $500 and $50 thereafter. Each
Fund reserves the right to reject any order for the purchase of its shares in
whole or in part, and to suspend the sale of its shares to the public in
response to conditions in the securities markets or otherwise. Generally, a
Fund will not issue share certificates representing shares, although share
certificates in full share amounts will be furnished without charge upon a
shareholder's written request. Fractional shares, if any, will be carried on
the books of a Fund without issuance of certificates.
OFFERING PRICE
The current offering price for shares of a Fund is the net asset value next
determined after an order is received, plus a sales charge that varies as
shown below depending upon the dollar value of the investment:
<TABLE>
<CAPTION>
Paid by Investor % of Offering
Price
As a % of As a % of Retained by
Net Amount Invested Offering Price Selling Dealer
<S> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.44% 4.25% 3.50%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None* None* None*
<FN>
* On a sale of $1 million or more CFS from its own resources pays the selling
dealer a sales commission at the rate of .25% of the amount of the sale,
subject to repayment of the commission if the shares are redeemed within one
year after purchase. A contingent deferred sales charge of 1% will be imposed
on such shares that are redeemed within one year after purchase (other than by
reinvestment of dividends or distributions), determined on a first-in,
first-out basis.
</TABLE>
<PAGE>
Under certain circumstances CFS may reallow up to the entire sales commission
to dealers. Dealers who receive 90% or more of the sales commission are
deemed to be underwriters under the Securities Act of 1933. CFS may from time
to time conduct promotional campaigns in which incentives would be offered to
dealers meeting or exceeding stated target sales of shares of a Fund. The
cost of any such promotional campaign, including any incentives offered, would
be borne entirely by CFS and would have no effect on either the public
offering price of Fund shares or the percentage of the public offering price
retained by the selling dealer. At various times CFS may also implement
programs under which CFS will reallow, to all dealers or to dealers that meet
uniformly applied targets for sales of shares of the Funds, an amount not
exceeding the total applicable sales charges on the sales generated by the
dealer at the public offering price during such programs.
PURCHASES THROUGH DEALERS
If a purchase order accompanied by payment is received by a dealer prior to
the close of regular session trading on the New York Stock Exchange, the
applicable offering price will be the offering price per share determined on
the day the order is received by the dealer, provided the dealer conveys the
order to CFS prior to 4:30 p.m., Chicago time, on that day. Orders received
by dealers or CFS after such time will be effective on the next business day.
Neither CFS nor the dealers are permitted to withhold placing orders to
benefit themselves by a price change.
PURCHASES BY WIRE
You may also purchase shares by wiring funds from your bank. Please call the
Funds at the numbers on the front cover of this prospectus for wiring
instructions. The applicable offering price for a purchase by wire is the
offering price per share next determined after receipt by the Fund of the
wired funds. After you have wired funds, you must complete the application
form and send it to CFS. A Fund will not honor redemption requests until the
completed application has been received.
PURCHASES BY MAIL
You may also purchase shares of a Fund by sending to CFS a check payable to
the Fund, along with information identifying you and your account number. An
initial investment made by check must be accompanied by a completed
application. All checks should be drawn on a U.S. bank in U.S. funds in order
to avoid fees and delays. A charge may be imposed if any check submitted for
investment does not clear.
PURCHASES BY EXCHANGE
You may purchase shares of a Fund by exchange of shares from another Fund or
by exchange of Money Market Portfolio, Government Securities Portfolio or
Tax-Exempt Portfolio, each a portfolio of Cash Account Trust (such shares are
referred to as "Cash Account Shares"), either by mail, or by instructing your
broker-dealer or other sales agent, who will communicate your order to CAM.
You may not make more than four exchanges from any Fund during any calendar
year. No sales charge is imposed on purchases by exchange. Please review the
information under "How to Redeem Shares--Redemption by Exchange."
<PAGE>
SALES COMMISSION WAIVER
Dividends and distributions paid by a Fund will be reinvested in shares of
that Fund at net asset value without the payment of any sales commission
unless you elect to receive dividends and distributions in cash. Proceeds of
shares redeemed by a Fund within the previous 60 days also may be reinvested
in that Fund's shares at net asset value without the payment of any sales
commission. See "Shareholder Services - Investment in Related Funds."
In addition, the following persons or entities may purchase shares of a Fund
at net asset value without payment of any sales commission, upon written
assurance that the purchase is made for investment purposes and that the
shares will not be sold except through redemption by the Fund: (a) any
employee or registered representative of CFS, one of its affiliates or a
broker-dealer with a selling group agreement with CFS; (b) any trustee of the
Trust; (c) any member of the immediate family of a person qualifying under (a)
or (b), including a spouse, child, stepchild, sibling, parent, stepparent,
grandchild and grandparent, in each case including in-law and adoptive
relationships; (d) any trust, pension, profit sharing, or other benefit plan
in which any person qualifying under (a) is a participant; (e) any 401(k) plan
(cash or deferred arrangement intended to qualify under section 401(k) of the
Internal Revenue Code) or other qualified retirement plan to which a person
qualifying under (a), (b) or (c) makes voluntary contributions and has
investment self-direction, provided the purchase is for the account of such
person; (f) any company exchanging shares with a Fund pursuant to a merger,
acquisition or exchange offer; (g) any investment advisory client of the
Adviser or brokerage customer of CFS who has, in writing, given investment
discretion to CFS, to the extent the investment is from the account managed by
the Adviser or CFS; (h) any investor purchasing shares upon the recommendation
of an institutional consultant to which the investor pays a fee for services
relating to investment selection; and (i) any investor who purchases shares of
a Fund by exchange of shares of a Cash Account Fund previously purchased
through use of the exchange privilege. Any shareholder of Convertible Fund at
April 30, 1992, the date on which that Fund became a series of the Trust and
sales of Fund shares became subject to a sales charge, may continue to
purchase shares of Convertible Fund without a sales charge if the Fund or
participating broker is notified at the time of each qualifying purchase.
RIGHTS OF ACCUMULATION
The sales charges described above also apply on a cumulative basis to shares
of the Funds and any other series of the Trust as to which a sales charge
applies, and over any period of time. Therefore, the value of all your shares
of a Fund and any other series of the Trust with respect to which a sales
charge was paid, taken at the current offering price or original cost,
whichever is greater, can be combined with a current purchase to determine the
applicable offering price of the current purchase. In order to receive the
cumulative quantity reduction, you must give CFS or your dealer notification
of the prior purchases at the time of the current purchase.
<PAGE>
LETTER OF INTENT
You may reduce the sales commissions you pay by making investments pursuant to
a letter of intent. The applicable sales commission then is based upon the
indicated amount intended to be invested during a thirteen-month period in
shares of the Funds as to which a sales commission would be imposed and any
other series of the Trust. You may compute the thirteen-month period starting
up to ninety days before the date of execution of the letter of intent. Your
initial investment must be at least 5% of the amount your letter of intent
indicates you intend to invest. Each investment made during the period
receives the reduced sales commission applicable to the total amount of the
intended investment. During the term of the letter of intent, shares
representing 5% of the indicated amount will be held in escrow. Shares held
in escrow have full dividend and voting privileges. The escrowed shares will
be released when the full amount indicated has been purchased. If the full
indicated amount is not purchased during the term of the letter of intent, you
will be required to pay CFS an amount equal to the difference between the
dollar amount of the sales charges actually paid and the amount of the sales
charges which you would have paid on your aggregate purchase if the total of
such purchases had been made at a single time. A letter of intent does not
obligate you to buy or a Fund to sell the indicated amount of the shares but
you should read it carefully before signing. Additional information is
contained in the letter of intent included in the application.
NET ASSET VALUE
The net asset value of the shares of each Fund is determined as of the close
of regular session trading on the New York Stock Exchange each day that
exchange is open for trading by dividing the value of all of the securities
and other assets of the Fund, less its liabilities, by the number of shares of
the Fund outstanding.
Portfolio securities are valued on the basis of market valuation. Securities
and other assets for which market values are not readily available are valued
at a fair value as determined by a method the board of trustees believes
represents a fair value. For a more complete explanation, please refer to the
Statement of Additional Information.
HOW TO REDEEM SHARES
Shares of the Funds will be redeemed at the respective net asset value next
determined after receipt of a redemption request in good form on any day the
New York Stock Exchange is open for trading. Requests received after the time
for computation of a Fund's net asset value for that day will be processed the
next business day.
<PAGE>
REDEMPTION BY MAIL
A written request for redemption (and an endorsed share certificate, if
issued) must be received by the Fund's transfer agent, Calamos Asset
Management, Inc. ("CAM"), to constitute a valid redemption request.
Your redemption request must:
1. specify the Fund and the number of shares or dollar amount to be redeemed,
if less than all shares are to be redeemed;
2. be signed by all owners exactly as their names appear on the account; and
3. include a signature guarantee for each signature on the redemption request
by CFS, by a securities firm that is a member of the New York Stock Exchange,
or by a bank, savings bank, credit union, savings and loan association or
other entity that is authorized by applicable state law to guarantee
signatures.
In the case of shares held by a corporation, the redemption request must be
signed in the name of the corporation by an officer whose title must be
stated, and a certified bylaw provision or resolution of the board of
directors authorizing the officer to so act may be required. In the case of a
trust or partnership, the signature must include the name of the registered
shareholder and the title of the person signing on its behalf. Under certain
circumstances, before shares can be redeemed, additional documents may be
required in order to verify the authority of the person seeking to redeem.
REDEMPTION BY WIRE OR TELEPHONE
Broker-dealers or other sales agents may communicate redemption orders by wire
or telephone to CAM. These firms may charge for their services in connection
with your redemption request but neither the Funds nor CAM impose any such
charges.
EXPEDITED REDEMPTION
Unless share certificates have been issued to you, you may have redemption
proceeds of at least $5,000 wired directly to a domestic commercial bank
account or brokerage account that you have previously designated. Normally,
such payments will be transmitted no later than the second business day
following receipt of your redemption request (provided redemptions may be made
under the general criteria set forth below). A $15 service charge for payment
of redemption proceeds by wire will be deducted from the proceeds.
<PAGE>
REDEMPTION BY EXCHANGE
You may redeem all or any portion of your shares of a Fund and use the
proceeds to purchase shares of any of the other Funds or Cash Account Shares
if your signed, properly completed application is on file. An exchange
transaction is a sale and purchase of shares for federal income tax purposes
and may result in capital gain or loss. You may not make more than four
exchanges from any Fund in any calendar year. Before exchanging into Cash
Account Shares, you should obtain the prospectus relating to the Cash Account
Shares from the Adviser and read it carefully. The exchange privilege is not
an offering or recommendation of Cash Account Shares. The registration of the
account to which you are making an exchange must be exactly the same as that
of the account from which the exchange is made and the amount you exchange
must meet any applicable minimum investment of the fund being purchased. An
exchange may be made by following the redemption procedure described above
under "Redemption by Mail" and indicating the fund to be purchased, except
that a signature guarantee normally is not required. An exchange may also be
made by instructing your broker-dealer or other sales agent, who will
communicate your instruction to CAM. No sales charge is imposed on purchases
by exchange.
GENERAL
Shares of a Fund may not be redeemed until the check used to purchase the
shares has been collected, which is usually no more than 15 days after
purchase. You may avoid this delay by purchasing shares in such a way that
the Fund receives immediate payment for your purchase, such as by wire
transfer of funds or payment by a certified or cashier's check. A Fund may
suspend the right of redemption under certain extraordinary circumstances in
accordance with the rules of the Securities and Exchange Commission. Due to
the relatively high cost of handling small accounts, each Fund reserves the
right upon 30 days' written notice to involuntarily redeem, at net asset
value, the shares of any shareholder whose account has a value of less than
$500, unless the reduction in value to less than $500 was the result of market
fluctuation.
Please telephone the Funds if you have any questions about requirements for a
redemption before submitting a request. You may not cancel or revoke your
redemption request once your instructions have been received and accepted.
SHAREHOLDER SERVICES
SHAREHOLDER ACCOUNTS
Each shareholder of a Fund receives quarterly account statements showing
transactions in shares of the Fund and with a balance denominated in Fund
shares. A confirmation will be sent to the shareholder upon purchase,
redemption, dividend reinvestment, or change of shareholder address.
RETIREMENT PLANS
You may use the Funds as investments for your Individual Retirement Account
("IRA"), profit sharing or pension plan, Section 40l(k) plan, Section
403(b)(7) plan in the case of employees of public school systems and certain
non-profit organizations, and certain other qualified plans. A master IRA
plan and information regarding plan administration, fees, and other details
are available from CFS and authorized broker-dealers.
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
You may request that a Fund periodically redeem shares having a specified
redemption value and send you a check for the proceeds. In order to initiate
the Systematic Withdrawal Plan, your account must have a share balance of
$25,000 or more. Withdrawal proceeds are likely to exceed dividends and
distributions paid on shares in your account and therefore may deplete and
eventually exhaust your account. The periodic payments are proceeds of
redemption and are taxable as such. Because a sales commission is charged on
purchases of shares of the Funds, you should not purchase shares while
participating in the Systematic Withdrawal Plan.
EXCHANGE PRIVILEGE
You may exchange shares of any Fund for Cash Account Shares or exchange Cash
Account Shares for shares of a Fund, without payment of any sales commission
as described above under "How to Purchase Shares--Purchase by Exchange" and
"How to Redeem Shares--Redemption by Exchange."
DIVIDENDS AND DISTRIBUTIONS
Shareholders may receive two kinds of distributions from a Fund: dividends
and capital gains distributions. All dividends and capital gains
distributions are paid in the form of additional shares credited to your
account at the net asset value per share next computed after the dividend or
distribution is payable to shareholders (without a sales charge) unless you
requested on the account application or in writing that distributions be made
in cash. Strategic Income Fund, Convertible Fund and Growth and Income Fund
declare and pay dividends from net investment income quarterly; Growth Fund
declares dividends annually. Net realized long-term capital gains, if any,
are paid to shareholders by each Fund at least annually.
If two consecutive dividend checks from a Fund are returned as undeliverable,
undelivered dividends will be invested in additional shares of that Fund at
the current net asset value and the account will be designated as a dividend
reinvestment account.
<PAGE>
TAXES
Each Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, and thus not be subject to
federal income taxes on amounts it distributes to shareholders.
You may realize a capital gain or capital loss when you redeem (sell) shares.
The federal tax treatment will depend, of course, on how long you owned the
shares and on your individual tax position. You may be subject to state and
local taxes on your investment in a Fund, depending on the laws of your home
state and locality.
Dividends and distributions paid by a Fund are subject to taxation as of the
date of payment, except that distributions declared in October, November or
December to shareholders of record in one of those months will be treated as
received by shareholders on December 31 of the year in which they are
declared, provided they are paid prior to February 1 of the next year.
Dividends from net investment income and capital gains distributions may be
taxed to shareholders at different rates depending on their individual tax
situations. You will be advised annually as to the source of your
distributions for tax purposes. If you are not subject to income taxation,
you will not be required to pay tax on amounts distributed to you.
Each Fund is required by law to withhold federal income tax from reportable
payments (which may include redemptions, capital gains distributions and other
taxable distributions, if any) paid to any non-exempt shareholder who has
failed to certify to the Fund that the social security or taxpayer
identification number provided to the Fund is correct and that the shareholder
is not subject to backup withholding.
Please refer to the Statement of Additional Information for a more complete
explanation.
<PAGE>
MANAGEMENT OF THE FUNDS
THE TRUSTEES
The board of trustees of CFS Investment Trust has overall responsibility for
the conduct of the affairs of the Trust. The trustees serve indefinite terms
of unlimited duration. The trustees appoint their own successors, provided
that at least two-thirds of the trustees, after any such appointment, have
been elected by the shareholders. Shareholders may remove a trustee, with or
without cause, upon the declaration in writing or vote of two-thirds of the
Trust's outstanding shares. A trustee may be removed with or without cause
upon the written declaration of a majority of the trustees.
THE ADVISER
Each Fund's investments are managed by its investment adviser, Calamos Asset
Management, Inc. ("CAM"). At May 31, 1995, CAM managed approximately $1.3
billion in assets of individuals and institutions. CAM is wholly owned by
John P. Calamos, who has been engaged in the investment advisory business
since 1977. Mr. Calamos is also the sole shareholder of CFS, the distributor
of the Funds.
Subject to the overall authority of the board of trustees, CAM furnishes
continuous investment supervision and management to each Fund under a
management agreement and also furnishes office space, equipment and management
personnel. For these services CAM receives from each of Strategic Income
Fund, Convertible Fund and Growth and Income Fund a fee accrued daily and paid
monthly at the annual rate of .75% of the first $150 million of the Fund's
average daily net assets and .50% of the Fund's average daily net assets in
excess of $150 million. Growth Fund pays CAM a fee computed and paid in the
same way, but at the rate of 1% of the first $150 million of average net
assets and .75% of average net assets in excess of $150 million. Although
these rates are higher than those paid by most other mutual funds, the board
of trustees believes that the fees are not significantly different from the
advisory fees of many comparably sized funds with similar investment
objectives. CAM also acts as transfer agent and dividend disbursing agent for
the Funds under a transfer agency agreement.
The management agreement also provides that the total annual expenses of a
Fund, exclusive of taxes, interest, extraordinary litigation expenses and
brokers' commissions and other charges relating to the purchase and sale of
securities but including fees paid to CAM and fees paid pursuant to the
Distribution Plan, shall not exceed the limits, if any, prescribed by any
state in which shares of the Fund are being sold or are qualified for sale,
and CAM has agreed to reimburse the Fund for any such expenses in excess of
such limits. In addition, CAM has voluntarily undertaken to limit the ordinary
operating expenses of each of Strategic Income Fund, Growth and Income Fund
and Growth Fund to 2% annually of that Fund's average net assets through
August 31, 1996. Subject to those expense limitations, each Fund pays all of
its operating expenses not specifically assumed by CAM.
John P. Calamos and John P. Calamos, Jr. are primarily responsible for the
day-to-day management of the portfolios of Strategic Income Fund and Growth
Fund; John P. Calamos and Nick P. Calamos are responsible for managing the
portfolios of Growth and Income Fund and Convertible Fund. During the past
five years, John P. Calamos has been president and trustee of the Trust and
president of CAM and CFS; John P. Calamos, Jr. has been an employee of CAM;
and Nick P. Calamos has been vice president of the Trust since 1992 and
managing director of CAM and CFS.
<PAGE>
DISTRIBUTION PLAN
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 whereby each Fund pays to CFS fees
accrued daily and paid monthly at annual rates aggregating .50% of the Fund's
average daily net assets. In return, CFS bears all expenses incurred in
providing services to shareholders and potential investors, and in the
distribution and promotion of each Fund's shares, including the printing of
prospectuses and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, and other distribution related
expenses. Among the expenses borne by CFS are amounts paid to broker-dealers
and others who have signed selling group and services agreements with CFS for
service fees and additional sales compensation at annual rates of .25% and
.05%, respectively, of average daily net assets of accounts for which that
agent provides services or is dealer of record.
The expenses incurred by CFS may be more or less than the distribution fee
paid to CFS by a Fund. Amounts paid by a Fund pursuant to the Plan are not
intended to finance distribution of the shares of the other Funds.
PERFORMANCE INFORMATION
Information about the performance of each Fund is contained in the Funds'
annual report, which may be obtained from the Trust upon request at no charge.
Each Fund may provide information about its investment performance from time
to time in advertisements, sales literature and otherwise. Strategic Income
Fund, Convertible Fund and Growth and Income Fund may quote "yield," an
annualized figure based on the amount of net investment income per share (a
hypothetical figure defined by SEC rules) earned during a 30-day period,
divided by the public offering price per share on the last day of the period.
Each Fund may advertise its "Total Return." Total Return for a period is the
percentage change in value during a period of an investment in Fund shares,
including the value of all 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. All of these calculations assume the reinvestment of
dividends and distributions in additional shares of the Fund. Quotations of
Average Annual Total Return will take into account the effect of the sales
charge on the amount available for investment; quotations of Total Return will
indicate whether the effect of the sales charge is included. Income taxes
payable by a shareholder are not taken into account. Please refer to the
Statement of Additional Information for a more complete explanation.
In advertising and sales literature, a Fund's performance may be compared with
that of market indices and other mutual funds, comparative performance as
computed in a ranking determined by Lipper Analytical Services, Inc., an
independent service that monitors the performance of over 1,000 mutual funds,
or that of another service.
Performance of a Fund will vary from time to time, and past results are not
necessarily indicative of future results. Performance information supplied by
a Fund may not provide a basis for comparison with other investments using
different reinvestment assumptions or time periods.
<PAGE>
PORTFOLIO TRANSACTIONS
Consistent with the Trust's policy of obtaining best price and execution on
portfolio transactions, the trustees have determined that portfolio
transactions for a Fund may be executed through CFS if, in the judgment of the
Adviser, the use of CFS is likely to result in a combination of net price and
execution at least as favorable to the Fund as those available from other
qualified brokers and if, in such transactions, CFS charges the Fund
commission rates consistent with those charged by CFS to comparable
unaffiliated customers in similar transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable combination
of net price and execution available and such other policies as the trustees
may determine, the Adviser may consider sales of shares of a Fund as a factor
in the selection of broker-dealers to execute portfolio transactions for that
Fund.
THE TRUST AND ITS SHARES
Each Fund is a series of CFS Investment Trust (the "Trust"), which was
organized as a Massachusetts business trust on December 21, 1987 and is an
open-end diversified management investment company. Growth and Income Fund
was named "Calamos Small/Mid Cap Convertible Fund" from May 1, 1992 through
April 29, 1994, "Calamos Convertible Total Return Fund" from September 1, 1990
through April 30, 1992, and "Kalliston Convertible Total Return Fund" prior to
September 1, 1990. Convertible Fund, which became a series of the Trust on
April 30, 1992, was named Calamos Convertible Income Fund before that date and
was a series of Calamos Investment Trust (named Noddings-Calamos Convertible
Income Fund and Noddings-Calamos Investment Trust, respectively, before
September 1, 1987).
SHARES
Under the terms of the 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. All shares issued will be fully
paid and non-assessable and will have no preemptive or conversion rights.
Each Fund'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 Fund. All shares of a Fund have equal rights in the event of
liquidation of the Fund.
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 a
Fund, which are binding only on the assets and property of the Fund. 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 Fund's assets of all losses and expenses of any Fund shareholder held
personally liable for the Fund'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
Fund itself is unable to meet its obligations.
<PAGE>
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. On any matters submitted to a vote of shareholders,
shares are voted by individual series and not in the aggregate, except when
voting in the aggregate is required by the 1940 Act or other applicable law.
Shares of a Fund are not entitled to vote on any matter not affecting that
Fund. All shares of the Trust vote together in the election of trustees.
CERTAIN SHAREHOLDERS
At May 31, 1995, the Calamos Financial Services, Inc. 401(k) Profit Sharing
Plan and Trust, of which John P. Calamos and Nick P. Calamos, the trustees,
owned 97,035 shares (31.5%) of Growth and Income Fund and 55,903 shares
(41.7%) of Growth Fund. Messrs. John Calamos and Nick Calamos owned
beneficially an additional 106,467 shares (34.6%) and 97,400 shares (31.6%),
respectively, of Growth and Income Fund, and John P. Calamos owned
beneficially an additional 20,692 shares (57.1%) of Growth Fund. No other
person is known to own beneficially 25% or more of any Fund. Under the 1940
Act, a holder of more than 25% of a Fund's outstanding shares is presumed to
control the Fund. The address of Messrs. John Calamos and Nick Calamos is
1111 East Warrenville Road, Naperville, Illinois 60563-1448.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds may be directed to the address or telephone
numbers on the cover of this prospectus.
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 Funds' investment adviser believes that the
quality of debt securities in which a Fund 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
TABLE OF CONTENTS
Page
Key Features 2
Expenses 3
Financial Highlights 5
Investment Objectives and Policies 9
Common Investment Practices 10
Risk of Investment 16
Investment Restrictions 16
How to Purchase Shares 17
How to Redeem Shares 20
Shareholder Services 21
Dividends and Distributions 22
Taxes 22
Management of the Funds 22
Performance Information 24
Portfolio Transactions 24
The Trust and Its Shares 25
Appendix--Description of Bond Ratings 26
INVESTMENT ADVISER AND
TRANSFER AGENT:
Calamos Asset Management, Inc.
1111 East Warrenville Road
Naperville, Illinois 60563-1448
DISTRIBUTOR:
Calamos Financial Services, Inc.
1111 East Warrenville Road
Naperville, Illinois 60563-1448
COUNSEL:
Bell, Boyd & Lloyd
Chicago, Illinois
INDEPENDENT AUDITORS:
Ernst & Young LLP
Chicago, Illinois
No dealer, salesman or any other person is authorized, in connection with the
offer contained in this prospectus, to act as agent for CFS Investment Trust,
nor is any person authorized to give any information or to make any
representations not contained in this prospectus or in supplementary
information or in supplemental sales material authorized by CFS Investment
Trust, and no person is entitled to rely upon any information or
representation not contained herein or therein. This prospectus does not
constitute an offering in any jurisdiction in which such offering may not
lawfully be made.
<PAGE>
CALAMOS
STRATEGIC INCOME FUND
CONVERTIBLE FUND
GROWTH AND INCOME FUND
GROWTH FUND
EACH A SERIES OF CFS INVESTMENT TRUST
Picture of three men
PROSPECTUS
SEPTEMBER 1, 1995
Graphic: Calamos logo
1111 EAST WARRENVILLE ROAD
NAPERVILLE, ILLINOIS 60563-1448
Statement of Additional Information September 1, 1995
CALAMOS STRATEGIC INCOME FUND
CALAMOS CONVERTIBLE FUND
CALAMOS GROWTH AND INCOME FUND
CALAMOS GROWTH FUND
Series of CFS Investment Trust
1111 East Warrenville Road
Naperville, Illinois 60563-1448
(708) 245-7200
Toll Free: (800) 8-CFS-FUND (800/823-7386)
This Statement of Additional Information relates to Calamos Strategic Income
Fund, Calamos Convertible Fund, Calamos Growth and Income Fund and Calamos
Growth Fund (the "Funds"), each of which is a series of CFS Investment Trust
(the "Trust"). It is not a prospectus, but provides information that should
be read in conjunction with the Funds' prospectus dated September 1, 1995 and
any supplements to the prospectus and the annual report to shareholders for
the eleven months ended March 31, 1995. A copy of the annual report to
shareholders accompanies this statement of additional information.
The prospectus and additional copies of the annual report to shareholders may
be obtained without charge by writing or telephoning the Funds at the address
or telephone numbers set forth above.
TABLE OF CONTENTS
Page
Investment Objectives 2
Investment Practices 2
Investment Restrictions 9
Management 11
Investment Advisory Services 13
Distribution Plan 14
Purchasing and Redeeming Shares 16
Performance Information 17
Transfer Agent 20
Distributor 20
Portfolio Transactions 21
Taxation 23
Allocation Among Funds 26
Certain Shareholders 26
Custodian 27
Independent Auditors 27
General Information 27
Financial Statements 28
<PAGE>
INVESTMENT OBJECTIVES
Each Fund's investment objective is shown below:
Calamos Strategic Income Fund seeks high current income consistent with
stability of principal, primarily through investment in convertible securities
and employing short selling to enhance income and hedge against market risk.
Calamos Convertible Fund seeks current income. Growth is a secondary
objective that the Fund also considers when consistent with its objective of
current income.
Calamos Growth and Income Fund seeks high long-term total return through
capital appreciation and current income derived from a diversified portfolio
of convertible, equity and fixed-income securities.
Calamos Growth Fund seeks long-term capital growth.
The investment objective of each Fund is "fundamental," which means that a
Fund's objective cannot be changed without the approval of the holders of a
"majority of the outstanding voting securities" of that Fund, as defined in
the Investment Company Act of 1940.
<PAGE>
INVESTMENT PRACTICES
In pursuing its investment objective, each Fund will invest as described below
and in the prospectus.
Foreign Securities
Each of the Funds may invest up to 25% of its net assets in foreign
securities. Foreign securities may entail a greater degree of risk (including
risk arising from exchange rate fluctuations; tax provisions; exchange and
currency controls; less public information regarding issuers of securities;
less governmental supervision of stock exchanges, securities brokers and
issuers of securities; different accounting, auditing and financial reporting
standards; different settlement practices; political risks; and expropriation
of assets) than does investment in securities of domestic issuers. For this
purpose, foreign securities do not include American Depository Receipts (ADRs)
or securities guaranteed by a United States person. ADRs are receipts
typically issued by an American bank or trust company evidencing ownership of
the underlying securities.
As of March 31, 1995, the Convertible Fund had invested 11% of its net assets
in foreign securities. The other Funds had no investments in foreign
securities at that date.
To the extent positions in portfolio securities are denominated in foreign
currencies, a Fund's investment performance is affected by the strength or
weakness of the U.S. dollar against these 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. 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 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.
<PAGE>
Although the Funds intend 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. Each Fund expects that all of its investments in foreign securities
will be in developed nations.
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
and broker-dealers, are not exchange traded, and are usually for less than one
year, but may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the Funds may invest and serve as hedges against possible
variations in the exchange rate between these currencies. The currency
transactions of each Fund are limited to transaction hedging and portfolio
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward contracts with respect
to specific receivables or payables of a Fund 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
currency. A Fund 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, nor may it engage
in speculative currency exchange transactions.
If a Fund enters into a forward contract, the Fund's custodian will segregate
liquid assets of the Fund having a value equal to the Fund's commitment under
such forward contract. At the maturity of the forward contract, the Fund may
either sell the portfolio security related to the contract and deliver 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 a Fund 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 Fund 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 a Fund is obligated to deliver.
<PAGE>
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund 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 Fund'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 Fund 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 Fund 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
Fund of unrealized profits or force the Fund 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 a Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. The cost to a Fund 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.
Options and Futures
In order to provide additional revenue, or to hedge against changes in
security prices or interest rates, each Fund may purchase and write both call
options and put options on securities and on indexes, and Growth Fund may
enter into interest rate and index futures contracts and options on such
futures contracts.
<PAGE>
Options. An option on a security (or index) is a contract that gives the
holder, in return for a premium, the right to buy (call) from or sell (put) to
the option seller (writer) the security (or the cash value of the index)
underlying the option at a designated price during the term of the option
(normally not exceeding nine months). A Fund may write a call or put option
only if the option is "covered" by the Fund's holding a position, in the
underlying security or otherwise, which would allow immediate satisfaction of
its obligation. Prior to exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series.
There are several risks associated with transactions in options on securities
and on indexes. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between 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 a Fund seeks to
close out an option position. If a Fund were unable to close out an option
that it had purchased in a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless.
If a Fund were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying security unless the
option expired without exercise. As the writer of a covered call option, a
Fund 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.
If trading were suspended in an option purchased or written by a Fund, the
Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it had purchased.
Except to the extent that a call option on an index written by a Fund is
covered by an option on the same index purchased by the Fund, movements in the
index may result in a loss to the Fund; however, such losses may be mitigated
by changes in the value of the Fund's securities during the period the option
was outstanding.
The Funds will only enter into options that are standardized and traded on a
U.S. exchange or board of trade, or quoted on NASDAQ. It is the position of
the staff of the Securities and Exchange Commission that over-the-counter
options are illiquid securities. See "Investment Practices - Illiquid
Securities."
Futures. Growth Fund may also engage in futures transactions. An interest
rate futures contract provides for the future sale by one party and purchase
by another party of a specified quantity of a financial instrument (such as
U.S. Treasury bonds) at a specified price and time. A futures contract on a
index is an agreement pursuant to which the 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 futures contract was originally written. A futures contract may be
satisfied by delivery or purchase, as the case may be, of the instrument or by
payment of the change in the cash value of the index. More commonly, a
futures contract is closed out prior to delivery by entering into an
offsetting transaction in a matching futures contract.
<PAGE>
Growth Fund may also purchase and write call and put options on futures
contracts ("futures options"). 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 prior to
the expiration 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. Prior to exercise or expiration, a futures option may be closed out by
an offsetting purchase or sale of a futures option of the same series.
Growth Fund will limit its use of futures contracts and futures options to
hedging transactions to the extent required to do so by regulatory
authorities. For example, Growth Fund might use futures contracts to hedge
against fluctuations in the general level of stock prices or anticipated
changes in interest rates that might adversely affect either the value of the
Fund's securities or the price of the securities that the Fund intends to
purchase. Growth Fund's hedging may include sales of futures contracts as an
offset against the effect of expected declines in stock prices or increases in
interest rates and purchases of futures contracts as an offset against the
effect of expected increases in stock prices or declines in interest rates.
There are several risks associated with the use of futures contracts and
futures options for hedging purposes. There can be no guarantee that there
will be a correlation between price movements in the hedging vehicle and the
portfolio securities being hedged. Successful hedging depends on the
Adviser's ability to predict correctly changes in the level and the direction
of stock prices, interest rates, and other market factors. An incorrect
prediction could result in a loss on both the hedged securities in Growth
Fund's portfolio and the hedging vehicle so that the Fund's return might have
been better had hedging not been attempted. In addition, because of the low
margin deposits required, futures trading involves a high degree of leverage.
As a result, a relatively small price movement in a futures contract may
result in immediate and substantial loss, or gain, to the investor. A
purchase or sale of a futures contract may result in losses in excess of the
amount of the margin deposit. However, in the absence of the ability to
hedge, Growth Fund might have taken portfolio actions in anticipation of the
same events with similar investment results but, presumably, at greater
transaction costs.
There can be no assurance that a liquid market will exist at a time when
Growth Fund seeks to close out a futures contract or a futures option
position. This may prevent Growth Fund from liquidating an unfavorable
position and the Fund 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, certain of
these instruments are relatively new and without a significant trading
history. As a result, there is no assurance that an active secondary market
will develop or continue to exist.
Growth Fund will only enter into futures contracts or futures options that are
standardized and traded on a U.S. exchange or board of trade, or quoted on an
automated quotation system. Growth Fund will not enter into a futures
contract or purchase a futures option if immediately thereafter the initial
margin deposits for futures contracts held by Growth Fund plus premiums paid
by it for open futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the Fund's total assets.
<PAGE>
Portfolio Turnover
Although the Funds do 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
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 of Convertible Fund and of Growth Fund are expected to be less
than 100% annually. The portfolio turnover rates of Growth and Income Fund
and Strategic Income Fund may be in excess of 100% annually, and may vary
greatly from year to year. A high rate of portfolio turnover in a Fund would
result in increased transaction expense, which must be borne by that Fund.
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. See "Risk of Investment" and "Dividends and
Distributions" in the Prospectus.
Short Sales
Each Fund 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 Fund's short positions remain open. Convertible Fund, Growth and
Income Fund and Growth Fund may make short sales of securities only if at all
times when a short position is open the Fund 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 addition to selling short against the box, Strategic Income Fund may sell
short securities that it currently has the right to acquire upon payment of
additional consideration, for instance, upon exercise of a warrant or option.
This technique would be used by Strategic Income Fund to hedge against market
risk in connection with a synthetic convertible security in the same way
selling short against the box hedges against market risk in connection with a
true convertible security.
<PAGE>
In a short sale against the box, a Fund does not deliver from its portfolio
the securities sold and does not receive immediately the proceeds from the
short sale. Instead, the Fund 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 Fund, to the purchaser of such
securities. Such broker-dealer is entitled to retain the proceeds from the
short sale until the Fund delivers to such broker-dealer the securities sold
short. In addition, the Fund 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
Fund must deposit and continuously maintain in a separate account with the
Fund'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 Fund 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 Fund receives the proceeds of the sale.
Because the Fund ordinarily will want to continue to hold securities in its
portfolio that are sold short, the Fund 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 Fund 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 Fund 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 a Fund 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
Fund owns, either directly or indirectly, and, in the case where the Fund owns
convertible securities, changes in the conversion premium.
<PAGE>
Short sale transactions of a Fund 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 Fund pays a conversion premium for a
convertible security, the Fund 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 a Fund's position in the convertible
securities, the anticipated fluctuation in the conversion premiums is
considered. A Fund will also incur transaction costs in connection with short
sales. Certain provisions of the Internal Revenue Code may limit the degree
to which the Fund is able to enter into short sales, which limitations might
impair the Fund's ability to achieve its investment objective. See
"Taxation."
In addition to enabling a Fund to hedge against market risk, short sales may
afford a Fund an opportunity to earn additional current income to the extent
the Fund 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 Fund's short positions remain open.
Unseasoned Issuers
Each Fund may invest up to 5% of its total assets in the securities of
unseasoned issuers, that is, issuers that, together with predecessors, have
been in operation less than three years. The Adviser believes that investment
in securities of unseasoned issuers may provide opportunities for long-term
capital growth, although the risks of investing in such securities are greater
than with common stocks of more established companies because unseasoned
issuers have only a brief operating history and may have more limited markets
and financial resources. Convertible Fund, Growth and Income Fund and
Strategic Income Fund do not currently intend to invest in securities of
unseasoned issuers.
"When Issued" and Delayed Delivery Securities
Each Fund may, from time to time, purchase "when issued" securities or delayed
delivery securities. "When issued" securities are securities that have not
been issued at the time they are purchased and thus the delivery of and
payment for these securities may be delayed for several weeks or more, as
compared to the timing of a normal settlement. Delayed delivery securities
are outstanding securities the settlement for which is delayed beyond a normal
settlement date. A Fund will set aside in a segregated account liquid assets
having a value equal to the aggregate purchase price of any "when issued" or
delayed delivery securities that it has purchased. As of the trade date, the
Fund will record the "when issued" or delayed delivery security as an asset
and its purchase price as an offsetting liability. Because subsequent changes
in the market price will affect the value of the security to be delivered, the
purchase of "when issued" or delayed delivery securities creates the potential
for profit or loss to the Fund without any investment by the Fund. However, a
Fund will not engage in the purchase of "when issued" or delayed delivery
securities for speculative purposes. Although a Fund may sell a "when issued"
or delayed delivery security prior to its delivery, it will not enter into any
purchase with that intention. The Funds do not intend to invest in "when
issued" or delayed delivery securities during the next fiscal year.
<PAGE>
Illiquid Securities
Each Fund 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 have not been registered under the
Securities Act of 1933 and are thus subject to restrictions on resale. A
position in restricted securities might adversely affect the liquidity and
marketability of a portion of the Fund's portfolio, and the Fund might not be
able to dispose of its holdings in such securities promptly or at reasonable
prices. In those instances where a Fund is required to have restricted
securities held by it registered prior to sale by the Fund and the Fund 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 10% limitation on a Fund's
investment in restricted securities. The Funds do not intend to invest in
illiquid securities during the next fiscal year, except that the Funds may
invest in options traded on the NASDAQ National Market System.
Repurchase Agreements
As part of its strategy for the temporary investment of cash, each Fund may
enter into "repurchase agreements" pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers (as
designated by the Federal Reserve Bank of New York) in such securities. A
repurchase agreement arises when a Fund purchases a security and
simultaneously agrees to resell it to the vendor at an agreed upon future
date. The resale price is greater than the purchase price, reflecting an
agreed upon market rate of return that is effective for the period of time the
Fund holds the security and that is not related to the coupon rate on the
purchased security. Such agreements generally have maturities of no more than
seven days and could be used to permit a Fund to earn interest on assets
awaiting long term investment. The Funds require continuous maintenance by
the custodian for the Fund'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.
Repurchase agreements maturing in more than seven days are considered illiquid
securities. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Fund 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 Fund seeks to enforce
its rights thereto; (b) possible subnormal levels of income and lack of access
to income during this period; and (c) expenses of enforcing its rights.
<PAGE>
INVESTMENT RESTRICTIONS
Each Fund operates under the following investment restrictions. A Fund 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 Fund from (a)
investing in debt obligations, (b) investing in repurchase agreements or (c)
lending portfolio securities;
(vi) invest more than 10% of the Fund'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;
(vii) borrow, except that the Fund may (a) borrow up to 10% of its total
assets, taken at market value at the time of such borrowing, as a temporary
measure for extraordinary or emergency purposes, but not to increase portfolio
income (the total of reverse repurchase agreements1/ and such borrowings will
not exceed 10% of total assets, and the Fund will not purchase securities when
its borrowings exceed 5% of total assets) and (b) enter into transactions in
options;
(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 that Strategic Income Fund may sell
securities short.
The above restrictions are fundamental policies and may not be changed with
respect to a Fund without the approval of a "majority" of the outstanding
shares of that Fund, which for this purpose means the approval of the lesser
of (a) more than 50% of the outstanding voting securities of that Fund or (b)
67% or more of the outstanding shares if the holders of more than 50% of the
outstanding shares of that Fund are present or represented at the meeting by
proxy.
1/No Fund currently intends to enter into reverse repurchase agreements.
<PAGE>
In addition to the fundamental restrictions listed above, no Fund may:
(a) invest in any of the following: (i) interests in oil, gas, or other
mineral exploration or development programs; (ii) puts, calls, straddles,
spreads, or any combination thereof (except that each Fund may enter into
transactions in options and Growth Fund may enter into transactions in futures
and options on futures); and (iii) 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 a Fund may make short sales
of securities (i) if the Fund 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 and (ii) Strategic
Income Fund may make short sales of securities other than those described in
clause (i), provided that no more than 10% of its net assets would, when added
together, be deposited with brokers as collateral or allocated to segregated
accounts in connection with short sales other than those described in clause
(i).
(e) purchase or hold securities of an issuer if 5% of the securities of such
issuer are owned by those officers, directors, or trustees of the Trust or of
its investment adviser who each own beneficially more than 1/2 of 1% of the
securities of that issuer;
(f) purchase securities of issuers (other than issuers of Federal agency
obligations) which, including their predecessors, have been in operation for
less than three years, if by reason of such purchase the value of the Fund's
aggregate investment in such securities will exceed 5% of its total assets;
(g) mortgage, pledge, or hypothecate in excess of 15% of the Fund's total
assets (taken at cost), except as may be necessary in connection with options,
futures, and options on futures;
(h) invest more than 15% of the Fund's net assets (valued at time of
purchase) in warrants, nor more than 5% of its net assets in warrants the
underlying common stock of which is not listed on the New York or American
stock exchange;
(i) write an option on a security unless the option is issued by the Options
Clearing Corporation, an exchange or similar entity; or buy or sell an option
on a security unless the option is offered through the facilities of a
recognized securities association or listed on a recognized exchange or
similar entity;
<PAGE>
(j) buy or sell a futures contract, or an option on a futures contract,
except that Growth Fund may buy or sell a futures contract, or an option on a
futures contract, if the futures contract or the option on the futures
contract is offered through the facilities of a recognized securities
association or listed on a recognized exchange or similar entity;
(k) invest more than 5% of its total assets in securities of issuers which
the Fund is restricted from selling to the public without registration under
the Securities Act of 1933; or
(l) invest more than 25% of its net assets (valued at time of purchase) in
securities of foreign issuers (other than securities represented by American
Depository Receipts (ADRs) and securities guaranteed by a U.S. person).
Restrictions (a) through (l) may be changed by the board of trustees without
shareholder approval.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in the percentage resulting from fluctuation in the
market values of assets will not constitute a violation of such restriction.
<PAGE>
MANAGEMENT
Trustees and Officers
Set forth below is information about the trustees and officers of CFS
Investment Trust (the "Trust").
Name and
Position(s) with Trust
Principal Occupation(s)
During Past Five Years
John P. Calamos (1)
Trustee and President
President, Calamos Asset Management, Inc. ("CAM"), an investment adviser and
the Funds' investment adviser; President, Calamos Financial Services, Inc.
("CFS"), a broker-dealer and the Funds' distributor.
Richard J. Dowen (2)
Trustee
Professor of Finance, Northern Illinois University.
Robert Frost (2)
Trustee
Management Consultant, ECOM Consultants, Inc.
Paul J. Marnell (1)
Trustee and Vice President
Senior Vice President and Chief Administrative Officer, CAM and CFS since
December 1994; Vice President and Manager, IndoSuez Carr Futures, Inc., an
investment manager, January 1992 - November 1994; consultant, October 1991 -
January 1992; Senior Director - Operations, Continental Bank Global Finance,
prior thereto.
William A. Kaun (2)
Trustee
Principal, W.A. Kaun Co. (investment adviser and publisher), since January
1992; partner, Mueller & Company (certified public accountants), prior
thereto.
Nick P. Calamos
Vice President
Managing Director, CAM and CFS.
<PAGE>
Helen L. Callaghan
Secretary and Treasurer
Controller, CAM and CFS, since 1991, and Staff Accountant prior thereto
Diane Anderson
Assistant Secretary
Administrative Assistant, CAM and CFS, since 1995; Assistant Secretary, Alpha
Source Asset Management, Inc. 1992-1995; Assistant Secretary, Hamilton
Investments, Inc. prior thereto
(1) John P. Calamos and Paul J. Marnell 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 address of Mr. Dowen is Department of Finance, Northern Illinois
University, DeKalb, Illinois 60115; that of Mr. Frost is 475 Park Avenue
South, New York, New York 10016; 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 60563-1448. Nick Calamos is
a nephew of John Calamos.
The following table shows the compensation paid by the Trust for the eleven
months ended May 31, 1995 to each trustee who was not an "interested person"
of the Trust:
Aggregate
Compensation
Name of Trustee from the Trust*
Richard J. Dowen $4,400
Robert Frost 4,400
William A. Kaun 4,400
*The Trust is not part of a fund complex.
Trustees who are "interested " persons of the Trust, as well as officers of
the Trust, are compensated by the Adviser and not by the Trust. The Trust
does not provide any pension or retirement benefits to its trustees.
<PAGE>
INVESTMENT ADVISORY SERVICES
Investment management and administrative services are provided to the Funds by
Calamos Asset Management, Inc. (the "Adviser") pursuant to an Investment
Management Agreement (the "Agreement") dated July 5, 1988. See the prospectus
- - "Management of the Funds--The Adviser." Each of Strategic Income Fund,
Convertible Fund and Growth and Income Fund pays the Adviser a fee accrued
daily and paid monthly at the annual rate of .75% of the first $150 million of
the Fund's average net daily assets and .50% of the Fund's average daily net
assets in excess of $150 million. Growth Fund pays the Adviser a fee computed
on the same basis but at the rate of 1% of the first $150 million of the
Fund's average net assets and .75% of average net assets in excess of $150
million.
During the periods shown below, the Funds paid total advisory fees and were
reimbursed by the Adviser for expenses in excess of applicable expense
limitations as follows:
<TABLE>
<CAPTION>
Eleven Months
Ended March 31, Fiscal year ended April 30,
1995 1994 1993
<S> <C> <C> <C>
Strategic Income Fund
Advisory fee $ 17,684 $ 22,706 $ 14,880
Waiver or reimbursement 25,683 28,776 14,660
---------- ---------- ----------
Net fee $ (7,999) $ (6,070) $ 220
========== ========== ==========
Convertible Fund $ 113,445 $ 131,180 $ 127,847
Growth and Income
========== ========== ==========
Fund Advisory fee $ 27,059 $ 34,072 $ 22,781
Waiver or reimbursement 6,006 5,876 14,925
---------- ---------- ----------
Net fee $ 21,053 $ 28,196 $ 7,856
========== ========== ==========
Growth Fund
Advisory fee $ 17,037 $ 20,610 $ 19,274
Waiver or reimbursement 27,587 21,653 14,201
---------- ---------- ----------
Net fee $ (10,550) $ (1,043) $ 5,073
========== ========== ==========
</TABLE>
<PAGE>
The Agreements will remain in effect until July 5, 1996, 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 Fund, 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 as to a Fund 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 "CFS" in the name of the Trust and the use of the name
"Calamos" in the names of the Funds are pursuant to licenses granted by the
Adviser, and the Trust has agreed to change the names to remove those
references if the Adviser ceases to act as investment adviser to the Funds.
Expenses
Subject to the expense limitations described below, the Funds pay all their
own operating expenses that are not specifically assumed by the Adviser,
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) fees and expenses related to the organization of the
Funds and registration and qualification of the Funds and their 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; (x)
distribution expenses pursuant to the Funds' Distribution Plans; and (xi)
brokerage commissions and other transaction-related costs.
Pursuant to the Investment Management Agreement, the Adviser will reimburse
each Fund to the extent that the total annual expenses of that Fund, exclusive
of taxes, interest, brokers' commissions and other charges related to the
purchase and sale of securities and extraordinary litigation expenses, exceed
the limits, if any, prescribed by any state in which shares of that Fund are
being sold or are qualified for sale. The Trust believes that the most
restrictive expense limitation applicable to a Fund is currently 2-1/2% of the
first $30 million of average daily net assets of the Fund, 2% of the next $70
million of average daily net assets and 1-1/2% per year of average daily net
assets in excess of $100 million. In addition, the Adviser has voluntarily
undertaken to reimburse each of Strategic Income Fund, Growth and Income Fund
and Growth Fund for any annual operating expenses in excess of 2% of that
Fund's average net assets through August 31, 1996.
In connection with the exchange privilege, CAM provides subaccounting and
other services to Money Market Portfolio, Government Securities Portfolio and
Tax-Exempt Portfolio, which are portfolios of Cash Account Trust. For its
services it receives from the portfolios or their affiliates a fee of .15% in
the case of Money Market Portfolio, and .10% in the case of the other two
portfolios, of the average annual net assets of each account in those
portfolios established through the exchange privilege.
<PAGE>
DISTRIBUTION PLAN
The Trust has adopted a plan pursuant to rule 12b-1 under the Investment
Company Act of 1940 (the "Plans"), whereby each Fund pays to Calamos Financial
Services, Inc., the Funds' distributor ("CFS"), service and distribution fees
accrued daily and paid monthly at annual rates aggregating .50% of the Fund's
average daily net assets, consisting of a service fee of .25% of average daily
net assets and additional sales compensation of .25% of average daily net
assets. From the payments made by a Fund to CFS, CFS pays service fees and
additional sales compensation to brokers and others who have signed selling
group and services agreements ("Service Agents") with CFS and thereby
participate in the distribution of Fund shares and provide services to Fund
shareholders. Payments to Service Agents are made at the following rates:
.25% of the average daily net assets of the accounts for which the Service
Agent performs shareholder servicing and .05% of the average daily net asset
value of those accounts as additional sales compensation. CFS from its own
resources may pay additional sales compensation to Service Agents under
special circumstances.
The board of trustees of the Trust has determined that a continuous cash flow
resulting from the sale of new shares is necessary and appropriate to meet
redemptions and to take advantage of buying opportunities without having to
make unwarranted liquidations of portfolio securities. The board also
considered that continuing growth in the size of the Funds would be in the
best interests of shareholders because increased size would allow the Funds to
realize certain economies of scale in their operations and would likely reduce
the proportionate share of expenses borne by each shareholder. The board of
trustees therefore determined that it would benefit each of the Funds to have
monies available for the direct distribution and service activities of CFS, as
the Funds' distributor, in promoting the continuous sale of the Funds' shares.
The board of trustees, including the non-interested trustees, concluded, in
the exercise of their reasonable business judgment and in light of their
fiduciary duties, that there is a reasonable likelihood that the Plans will
benefit the Funds and their shareholders.
The Plan has been approved by the board of trustees, including all of the
trustees who are non-interested persons as defined in the 1940 Act. The Plan
must be reviewed annually and may be continued from year to year by vote of
the board of trustees, including a majority of the trustees who are
non-interested persons of the Funds and who have no direct or indirect
financial interest in the operation of the Plan ("non-interested trustees"),
cast in person at a meeting called for that purpose. It is also required that
the selection and nomination of non-interested trustees be done by
non-interested trustees. The Plan and any distribution or service agreement
may be terminated at any time, without any penalty, by such trustees, by any
act that terminates the distribution agreement between the Trust and CFS, or,
as to any Fund, by vote of a majority of that Fund's outstanding shares. Any
agreement related to the Plan, including any distribution or service
agreement, may be terminated in the same manner, except that termination by a
majority of the outstanding shares must be on not more than 60 days' written
notice to any other party to such agreement. Any distributor, dealer or
institution may also terminate its distribution or service agreement at any
time upon written notice.
<PAGE>
Neither the Plan nor any distribution or service agreement may be amended to
increase materially the amount spent for distribution or service expenses or
in any other material way without approval by a majority of the outstanding
shares of the affected Fund, and all such material amendments to the Plan or
any distribution or service agreement must also be approved by the
non-interested trustees, in person, at a meeting called for the purpose of
voting on any such amendment.
CFS is required to report in writing to the board of trustees at least
quarterly on the amounts and purpose of any payments made under the Plan and
any distribution or service agreement, as well as to furnish the board with
such other information as may reasonably be requested in order to enable the
board to make an informed determination of whether the Plan should be
continued. Payments by a Fund pursuant to the Plan are not intended to
finance distribution of shares of the other Funds.
During the eleven months ended March 31, 1995, each of the Funds made payments
to CFS pursuant to the Plan, and CFS paid expenses in connection with the
distribution of that Fund's shares, as shown below.
<TABLE>
<CAPTION>
Strategic Convertible Growth and Growth
Income Fund Fund Income Fund Fund
<S> <C> <C> <C> <C>
Payments by Fund to CFS $ 10,633 $ 68,045 $ 16,206 $ 7,693
Distribution Expenses Paid by CFS:
Reallowance to outside brokers $ 1,345 $ 2,506 $ 2,265 $ 232
Advertising 1,302 1,303 1,302 1,302
Prospectuses and reports 3,050 3,050 3,050 3,050
Sales representative travel 3,658 3,658 3,658 3,658
Overhead allocation for personnel 17,417 17,417 17,417 17,417
--------- --------- --------- ---------
Total $(16,139) $40,111 $(11,485) $(17,965)
</TABLE>
<PAGE>
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Funds' prospectus under the
headings "How to Purchase Shares" and "How to Redeem Shares." All of that
information is incorporated herein by reference.
Net Asset Value. For purposes of this computation, 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 a Fund'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.
Each Fund's net asset value is determined only on days on which the New York
Stock Exchange is open for trading. That Exchange is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in 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
Exchange will be closed on the preceding Friday or the following Monday,
respectively.
Redemption in Kind. The Funds have elected to be governed by Rule 18f-1 under
the Investment Company Act of 1940 pursuant to which they are obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of a Fund 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.
<PAGE>
PERFORMANCE INFORMATION
Total Return. From time to time the Funds may quote total return figures.
"Total Return" for a period is the percentage change in value during a period
of an investment in Fund 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:
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)
Total Return (taking into account the effect of the sales charge) and Average
Annual Total Return for the Funds was as shown below for the following periods
ended March 31, 1995.
<PAGE>
<TABLE>
<CAPTION>
Average Annual
Total Return Total Return
<S> <C> <C>
Strategic Income Fund
One year (7.05%) (7.05%)
Life of Fund 34.57 6.71
(September 4, 1990)
Convertible Fund
One year (2.67) (2.67)
Five years 60.41 9.91
Life of Fund 128.68 8.82
(June 21, 1985)
Growth and Income Fund
One year (3.21) (3.21)
Five years 64.37 10.44
Life of Fund 88.69 10.22
(September 22, 1988)
Growth Fund
One year (3.37) (3.37)
Life of Fund 46.84 8.67
(September 4, 1990)
</TABLE>
Yield. Strategic Income Fund, Convertible Fund and Growth and Income Fund may
also quote yield figures. The yield of a Fund 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 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.
<PAGE>
Yield will be computed as follows:
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
The annualized yield of Strategic Income Fund for the 30 days ended March 31,
1995 was 4.47%.
The figures quoted assume reinvestment of all dividends and distributions.
Quotations of Average Annual Total Return take into account the effect of any
sales charge on the amount available for investment or redemption; quotations
of Total Return will indicate whether or not the effect of the sales charge is
included. Income taxes are not taken into account. The figures will not
necessarily be indicative of future performance. The performance of a Fund 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 a Fund'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.
In advertising and sales literature, the performance of a Fund 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
Funds. Comparison of a Fund to an alternative investment should consider
differences in features and expected performance.
<PAGE>
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Funds generally believe to
be accurate. A Fund may also note its mention (including performance or other
comparative rankings) in newspapers, magazines, or other media from time to
time. However, the Funds assume no responsibility for the accuracy of such
data. Newspapers and magazines which might mention the Funds include, but are
not limited to, the following:
Barron's
Business Week
Changing Times
Chicago Tribune
Chicago Sun-Times
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Investor's Daily
Los Angeles Times
Money
Mutual Fund Letter
Mutual Fund Values (Morningstar)
Newsweek
The New York Times
Pensions and Investments
Personal Investor
Stanger Reports
Time
USA Today
U.S. News and World Report
The Wall Street Journal
<PAGE>
Each Fund may compare its performance to the Consumer Price Index (All Urban),
a widely recognized measure of inflation.
The performance of a Fund may be compared to the following indexes or
averages: Convertible Fund and Growth and Income Fund - Standard & Poor's 400
MidCap Index, Value Line Index, Lipper Balanced Fund Index, Lipper Convertible
Fund Index, Lipper Growth and Income Index, Lehman Brothers
Government/Corporate Index; Strategic Income Fund - Lipper Long-Term Income
Fund Index, Lehman Brothers Corporate/Government Index, 30-day Treasury Bills;
Growth Fund - Standard & Poor's 500 Stock Index, Value Line Index, Lipper
Growth Fund Average. The performance of a Fund 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 Analytical
Services, Inc. ("Lipper"), an independent service that monitors the
performance of more than 1,000 funds. The Funds 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 a Fund to a different category or develop (and place a Fund
into) a new category, that Fund may compare its performance or ranking against
other funds in the newly assigned category, as published by the service.
Moreover, each Fund 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
Portfolios 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.
TRANSFER AGENT
For its services as transfer agent and dividend disbursing agent for the
Trust, Calamos Asset Management, Inc. ("CAM") receives from each Fund an
annual fee of $9.00 for each shareholder account of that Fund, $.50 for each
dividend paid on a shareholder account and $1.00 for each purchase (other than
by reinvestment), transfer or redemption of shares of the Fund. The board of
trustees believes the charges by CAM to the Funds are comparable to those of
others performing similar services.
CAM records all sales, transfers and redemptions of shares of each Fund,
disburses dividends of the Funds and performs other recordkeeping functions.
CAM is responsible for all personnel, office space and equipment expenses
related to the performance of these services for the Funds. The Funds pay all
other out-of-pocket expenses, including postage, mailing and stationery
expenses.
<PAGE>
DISTRIBUTOR
Calamos Financial Services, Inc. ("CFS"), a broker-dealer whose sole
shareholder and principal officer is John P. Calamos, serves as distributor
for the Funds, subject to change by a majority of the "non-interested"
trustees at any time. CFS is located at 1111 East Warrenville Road,
Naperville, Illinois 60563-1448. CFS is responsible for all purchases, sales,
redemptions and other transfers of shares of the Funds without any charge to
the Funds except the fees paid to CFS under the Distribution Plans. CFS is
also responsible for all expenses incurred in connection with its performance
of services for the Funds, including, but not limited to, personnel, office
space and equipment, telephone, postage and stationery expenses. CFS receives
commissions from sales of shares of the Funds that are not expenses of the
Funds but represent sales commissions added to the net asset value of shares
purchased from the Funds. See "How to Purchase Shares -- Offering Price" in
the prospectus. CFS also receives brokerage commissions for executing
portfolio transactions for the Funds. See "Portfolio Transactions." CFS
received and retained commissions on the sale of shares of the Funds as shown
below during the indicated periods:
<TABLE>
<CAPTION>
Eleven Months
Ended March 31, Fiscal Year Ended April 30,
1995 1994 1993
<S> <C> <C> <C>
Strategic Income Fund
Commissions received $ 3,505 $ 5,513 $ 13,229
Commissions retained 698 1,575 1,986
Convertible Fund
Commissions received 5,191 16,128 10,143
Commissions retained 1,015 4,379 2,069
Growth and Income Fund
Commissions received 7,324 16,005 8,270
Commissions retained 1,264 5,159 1,918
Growth Fund
Commissions received 2,539 4,829 5,010
Commissions retained 1,607 3,089 3,223
</TABLE>
<PAGE>
CFS has the exclusive right to distribute shares of the Funds through
affiliated and unaffiliated dealers. The obligation of CFS is an agency or
"best efforts" arrangement, which does not obligate CFS to sell any stated
number of shares.
In connection with the exchange privilege, CFS acts as a service organization
for the Money Market Portfolio, Government Securities Portfolio and Tax-Exempt
Portfolio, which are portfolios of Cash Account Trust. For its services it
receives from the portfolios or their affiliates fees at a rate of up to .50%
in the case of Tax-Exempt Portfolio, and .60% in the case of the other two
portfolios, of the average annual net assets of each account in those
portfolios established through the exchange plan.
CFS from its own resources may pay additional compensation to persons who sell
Fund shares or provide subaccounting and shareholder servicing. Such
additional compensation may amount to as much as 25% of the offering price,
depending on the volume of sales or anticipated volume of sales attributable
to the recipient of the commission, and up to .10% of the annual average value
of shares held in such accounts.
<PAGE>
PORTFOLIO TRANSACTIONS
See "Management of the Funds - The Adviser" and "Portfolio Transactions" in
the prospectus.
Portfolio transactions on behalf of the Funds 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 Funds usually includes an undisclosed
dealer commission or mark-up. In underwritten offerings, the price paid by
the Funds includes a disclosed, fixed commission or discount retained by the
underwriter or dealer.
In executing portfolio transactions, the Adviser uses its best efforts to
obtain for the Funds the most favorable price and execution available. In
seeking the most favorable price and execution, the Adviser 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 Funds may be
executed through CFS if, in the judgment of the Adviser, the use of CFS is
likely to result in prices and execution at least as favorable to the Funds as
those available from other qualified brokers and if, in such transactions, CFS
charges the Funds 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 Funds will not effect principal transactions with
CFS.
In allocating the Funds' portfolio brokerage transactions to unaffiliated
broker-dealers, the Adviser 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 Adviser believes these services have
substantial value, they are considered supplemental to the Adviser'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 Adviser may pay a broker-dealer that provides brokerage and
research services an amount of commission for effecting a securities
transaction for a Fund in excess of the commission that another broker-dealer
would have charged for effecting that transaction if the amount is believed by
the Adviser to be reasonable in relation to the value of the overall quality
of the brokerage and research services provided. Other clients of the Adviser
may indirectly benefit from the availability of these services to the Adviser,
and the Funds may indirectly benefit from services available to the Adviser as
a result of transactions for other clients.
<PAGE>
The following table shows for each Fund for the past three fiscal years: (i)
the aggregate principal amount of all portfolio transactions; (ii) the
percentage of the aggregate principal amount of all portfolio transactions
executed by CFS as agent; (iii) the aggregate principal amount of all
transactions executed on an agency basis, as to which the Fund paid brokerage
commissions; (iv) the percentage of the aggregate principal amount of such
transactions executed through CFS; (v) the aggregate brokerage commissions
(excluding the gross underwriting spread on securities purchased in
underwritten public offerings) paid to all brokers; (vi) the aggregate
brokerage commissions paid to CFS; and (vii) the percentage of aggregate
brokerage commissions paid to CFS.
<TABLE>
<CAPTION>
(i) (ii) (iii) (iv) (v) (vi) (vii)
% of (i) % of (iii)
$ Amount Executed $ Amount Executed Commissions (vi)
of All Through of Agency Through Aggregate Paid as %
Transactions CFS Transactions CFS Commissions to CFS of (v)
<S> <C> <C> <C> <C> <C> <C> <C>
Strategic Income Fund:
11 mos. ended 5/31/95 4,367,420 44% $1,924,82 44% $7,090 $7,010 99%
Year ended 4/30/94 5,928,489 35 2,101,091 100 7,498 7,498 100
Year ended 4/30/93 4,243,838 33 1,416,159 99 5,955 5,916 99
Convertible Fund:
11 mos. ended 3/31/95 13,968,604 34 4,979,389 97 16,754 15,702 94
Year ended 4/30/94 25,582,534 27 7,967,561 86 18,738 15,832 84
Year ended 4/30/93 24,561,195 22 5,871,866 92 15,798 14,247 90
Growth and Income Fund:
11 mos. ended 3/31/95 5,481,305 44 2,544,532 95 6,155 5,949 97
Year ended 4/30/94 12,357,052 37 4,715,465 96 10,806 10,536 98
Year ended 4/30/93 6,952,821 33 2,357,938 99 6,162 6,113 99
Growth Fund:
11 mos. ended 3/31/95 3,485,833 95 3,353,543 100 13,668 13,668 100
Year ended 4/30/94 3,720,379 79 2,938,684 100 13,317 13,317 100
Year ended 4/30/93 2,243,295 82 1,853,286 97 5,658 5,604 99
</TABLE>
Of the aggregate brokerage commissions paid during the eleven months ended
March 31, 1995, Convertible Fund and Growth and Income Fund paid commissions
of $1,053 and $206, respectively, to brokers who furnished research services.
Strategic Income Fund and Growth Fund paid no commissions to brokers
furnishing research.
<PAGE>
TAXATION
The following is only a summary of certain tax considerations affecting the
Funds and their shareholders. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Investors are urged to consult their tax advisers with specific reference to
their own tax situations.
Qualification as a Regulated Investment Company. Each Fund intends to
continue 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"). As a regulated investment company, a Fund will be exempt from
Federal income tax on its net investment income and capital gains that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the year (the
"Distribution Requirement") and satisfies certain other requirements of the
Code described below. Distributions of investment company taxable income made
during the taxable year or, under certain specified circumstances, after the
close of the taxable year will satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement, a Fund must (1)
derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities and other income derived with respect to
its business of investing in such stock or securities (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain offsetting gains from "designated hedge" transactions that are
described below) from the sale or other disposition of stock, securities (as
defined in Section 2(a)(36) of the 1940 Act) or options held for less than
three months (the "Short-Short Test"). There is currently pending in Congress
a proposal to repeal the Short-Short Test.
In addition, a Fund must diversify its holdings so that, at the close of each
quarter of its taxable year, at least 50% of the value of its assets consists
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer), and no more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other
regulated investment companies), or of two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses
(the "Diversification Requirement").
<PAGE>
Because of the Short-Short Test, a Fund may have to limit the sale of
appreciated (but not depreciated) securities that it has held for less than
three months. The short sale of (including for this purpose the acquisition
of a put option) (1) stock or securities held on the date of the short sale or
acquired after the short sale and on or before the date of closing thereof or
(2) stock or securities which are "substantially identical" to stock or
securities held on the date of the short sale or acquired after the short sale
and on or before the date of the closing thereof may reduce the holding period
of such stock or securities for purposes of the Short-Short Test. Where
preferred stock or bonds are convertible into common stock of the same
corporation, the relative values, price changes and other circumstances may be
such as to cause the bonds or preferred stock and the common stock to be
treated as "substantially identical" for this purpose.
Any increase in value of a position that is part of a "designated hedge" will
be offset by any decrease in value (whether realized or not) of the offsetting
hedging position during the period of such hedge for purposes of the
Short-Short Test. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of the Short-Short Test. Each
Fund anticipates engaging in hedging transactions that qualify as designated
hedges. However, because of the failure of the U.S. Treasury to promulgate
regulations as authorized by the Code, it is not clear at the present time
whether this treatment will be available to all of a Fund's hedging
transactions. To the extent a Fund's transactions do not qualify as
designated hedges, the Fund's investments in short sales, options or other
transactions may be limited.
A Fund's option and hedging activities are subject to special provisions of
the Code that may, among other things, limit the use of losses of the Fund and
affect the holding period of the securities held by the Fund and the nature of
the income realized by the Fund. These provisions may also require a Fund to
mark-to-market some of the positions in its portfolio (i.e., treat them as if
they were closed out), which may cause a Fund to recognize income without the
cash to distribute such income. A Fund and its shareholders may recognize
taxable income as a result of the Fund's hedging activities, a portion of
which may be treated as long-term capital gains. Each Fund will monitor its
transactions and may make certain tax elections in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company.
<PAGE>
Taxation of Distributions. Each Fund distributes substantially all of its net
investment income and net short-term capital gains for any taxable (i.e.,
fiscal) year. Distributions will be taxable to shareholders as described
below, regardless of whether such distributions are paid in cash or are
reinvested in shares. Shareholders receiving a distribution from a Fund in
the form of additional shares will generally be treated as receiving a taxable
distribution in an amount equal to the fair market value of the shares
received on the distribution date and will take a tax basis for such shares
equivalent to the amount deemed to have been distributed to them. Each Fund
intends to distribute to shareholders its excess of net long-term capital gain
over net short-term capital loss ("net capital gain") for each taxable year as
a capital gain dividend. A capital gain dividend will be taxable to
shareholders as long-term capital gain, regardless of the length of time the
shareholder has held his shares, whether the net capital gain distributed by
the Fund was recognized prior to the date on which a shareholder acquired
shares and whether the distribution was paid in cash or reinvested in shares.
The aggregate amount of distributions designated by the Fund as capital gain
dividends may not exceed the net capital gain of the Fund for any taxable
year, determined by excluding any net capital loss or net long-term capital
loss attributable to transactions occurring after October 31 of such year and
by treating any such loss as if it arose on the first day of the following
taxable year.
Dividends (whether received in cash or reinvested in shares) will generally be
subject to taxation when received. Dividends declared in October, November or
December of any year payable to shareholders of record on a specified date in
such a month, however, will be deemed to have been received by the
shareholders and paid by the Fund on December 31 of such year, if such
dividends are paid during January of the following year.
<PAGE>
Each Fund is required in certain cases to withhold and remit to the United
States Treasury a portion of dividends paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the Internal Revenue Service for
failure to report the receipt of interest or dividend income properly, or (3)
who has failed to certify to the Fund that such shareholder is not subject to
backup withholding or that such shareholder is an "exempt recipient."
Shareholders will be advised annually as to the U.S. Federal income tax
consequences of distributions made during the year.
Corporate Investors. In the case of corporate shareholders, Fund
distributions (other than capital gain dividends) for any taxable year
generally will qualify for the 70% dividends received deduction for regular
Federal income tax purposes to the extent of the gross amount of eligible
dividends received by the Fund for the year with respect to stock that has
been held for more than 45 days (more than 90 days in the case of certain
preferred stock). Legislation has been introduced from time to time to reduce
the percentage of dividends entitled to the dividends received deduction;
however, it is not known whether Congress will consider any such legislation
in the near future. A Fund's investment policies may affect the availability
of the dividends received deduction with respect to dividends paid on certain
stocks in that Fund's portfolio. For example, the holding period of any
dividend paying stock will not be deemed to include any day more than 45 days
(or more than 90 days in the case of certain preferred stock) after the date
on which the stock becomes ex-dividend or any period in which a Fund holds a
put option on, has contracted to sell, or has made but not closed a short sale
of, "substantially identical" stock or securities. Convertible bonds or
convertible preferred stock may be deemed "substantially identical" to common
stock for purposes of this rule. Each Fund will provide a statement annually
to shareholders of the amount of dividends eligible for the dividends received
deduction.
<PAGE>
Corporate investors should also note that although the dividends received
deduction is available to reduce regular corporate Federal income tax
liability, any amount so deducted may increase the tax base upon which the
corporate alternative minimum tax and environmental tax is imposed.
ALLOCATION AMONG FUNDS
The assets received by the Trust from the sale of shares of each Fund, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are specifically allocated to that Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund are
required to be segregated on the books of account, and are to be charged with
the expense in respect to that Fund and with a share of the general expenses
of the Trust. Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund shall be allocated by or under the direction of
the trustees in such manner as the trustees determine to be fair and
equitable. Each share of each Fund represents an equal proportionate interest
in that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to that Fund as are declared by the
trustees. Upon any liquidation of a Fund, shareholders thereof are entitled
to share pro rata in the net assets belonging to that Fund available for
distribution.
<PAGE>
CERTAIN SHAREHOLDERS
The only persons known to own beneficially (as determined in accordance with
rule 13d-3 under the 1934 Act) 5% or more of the outstanding shares of any
Fund at May 31, 1995 were:
<TABLE>
<CAPTION>
Percentage of
Number Outstanding
Shareholder of Shares Shares of the Funds
<S> <C> <C>
STRATEGIC INCOME FUND
Apollo Metals, Ltd. Pen. Plans 32,045 15.1%
David E. Kropp, Trustee
P. O. Box 4045
Bethlehem, Pennsylvania 18018-0045
Vernon B. Marquez Testamentary 38,497 18.2
Trust u/w Caryl Broome Marquez
Jefferson Guaranty Bank
P.O. Box 8537, Suite 301
Metairie, Louisiana 70011
GROWTH AND INCOME FUND
Apollo Metals, Ltd. Pen. Plans 17,825 5.8
David E. Kropp, Trustee
Calamos Financial Services, Inc. 97,035 31.5
401(k) Profit Sharing Plan and Trust*
1111 East Warrenville Road
Naperville, Illinois 60563-1448
John P. Calamos* 106,467 34.6
1111 East Warrenville Road
Naperville, Illinois 60563-1448
Nick P. Calamos* 97,400 31.6
1111 East Warrenville Road
Naperville, Illinois 60563-1448
GROWTH FUND
K. R. Bertlet and D. M. Cravens 11,394 8.5
P/F TTEE for PS/MP Plans
c/o Triad Consultants, Inc.
175 Olde Half Day Road
Lincolnshire, Illinois 60069
Calamos Financial Services, Inc. 55,903 41.7
401(k) Profit Sharing Plan and Trust*
Calamos Financial Services, Inc.* 9,217 6.9
1111 East Warrenville Road
Naperville, Illinois 60563-1448
John P. Calamos* 76,595 57.1
</TABLE>
<PAGE>
*John P. Calamos and Nick P. Calamos are the trustees of the Calamos Financial
Services, Inc. 401(k) Profit Sharing Plan and Trust. The shares owned
beneficially by Messrs. John Calamos and Nick Calamos include the shares owned
by the Calamos Financial Services, Inc. 401(k) Profit Sharing Plan and Trust.
The shares shown as owned beneficially by Mr. John Calamos also include the
shares shown as owned by Calamos Financial Services, Inc.
At May 31, 1995 the trustees and officers of the Trust as a group owned
beneficially 637 shares (0.3%) of Strategic Income Fund, 7,686 shares (0.5%)
of Convertible Fund, 106,742 shares (34.7%) of Growth and Income Fund and
85,812 shares (64.0%) of Growth Fund.
CUSTODIAN
Prudential Securities, Inc., 100 Gold Street, New York, New York 10292, is the
custodian for the assets of the Funds. The custodian is responsible for
holding all cash and securities of the Funds, directly or through a book entry
system, delivering and receiving payment for securities sold by the Funds,
receiving and paying for securities purchased by the Funds, collecting income
from investments of the Funds and performing other duties, all as directed by
authorized persons of the Trust. The custodian does not exercise any
supervisory functions in such matters as the purchase and sale of securities
by a Fund, payment of dividends or payment of expenses of a Fund.
INDEPENDENT AUDITORS
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606, audits and reports on the Funds' annual financial statements, reviews
certain regulatory reports and the Funds' federal income tax returns, and
performs other professional accounting, tax and advisory services when engaged
to do so by the Funds.
GENERAL INFORMATION
Each Fund is a series of CFS Investment Trust. Calamos Growth and Income Fund
began operations on September 22, 1988. It was named Kalliston Convertible
Total Return Fund until September 1, 1990, Calamos Convertible Total Return
Fund from that date until April 30, 1992 and Calamos Small/Mid Cap Convertible
Fund from May 1, 1992 to April 30, 1994. Calamos Strategic Income Fund and
Calamos Growth Fund began operations on September 4, 1990. Calamos
Convertible Fund began operations on June 21, 1985 as a series of
Noddings-Calamos Investment Trust (named Calamos Investment Trust from 1987
until May 1, 1992) until it became a series of CFS Investment Trust on May 1,
1992; it was named Noddings-Calamos Convertible Fund until 1987 and Calamos
Convertible Income Fund since 1987.
<PAGE>
FINANCIAL STATEMENTS
The 1995 annual report of the Trust, a copy of which accompanies this
Statement of Additional Information, contains financial statements, notes
thereto, supplementary information entitled "Financial Highlights" for each of
the Funds and a report of independent auditors, all of which (but no other
part of the annual report) is incorporated herein by reference.
