<PAGE>
PROSPECTUS September 30, 1997
CALAMOS FAMILY OF FUNDS(R)
CLASS A SHARES AND CLASS C SHARES
<TABLE>
<S> <C>
CONVERTIBLE FUND Seeks current income. Growth is a secondary objective that
the Fund also considers when consistent with its objective
of current income.
- -------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------
GROWTH FUND Seeks long-term capital growth.
- -------------------------------------------------------------------------------------------
GLOBAL GROWTH AND INCOME FUND Seeks high long-term total return through capital
appreciation and current income derived from a globally
diversified portfolio of convertible, equity and fixed-
income securities.
</TABLE>
MINIMUM INITIAL INVESTMENT: $500
Subsequent investment: $50
INDIVIDUAL RETIREMENT ACCOUNT (IRA) PLAN AVAILABLE
----------------
ALTHOUGH EACH FUND IS PERMITTED TO INVEST WITHOUT LIMIT IN DEBT SECURITIES
RATED BELOW INVESTMENT GRADE, COMMONLY KNOWN AS "JUNK BONDS," ONLY STRATEGIC
INCOME FUND INTENDS TO INVEST AS MUCH AS 35% OR MORE OF ITS NET ASSETS IN SUCH
SECURITIES. Those securities entail greater risks, including default risks,
than those found in higher rated securities. Investors should carefully
consider those risks before investing. See "Debt Securities."
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 by
calling the Trust at (800) 823-7386. You may also obtain the statement of
additional information and other information that has been electronically
filed from the SEC's web site (www.sec.gov).
SHARES OF THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
OR ANY GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
KEY FEATURES
INVESTMENT OBJECTIVES
The investment objectives of the Funds are stated on the cover of this
prospectus. 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
Growth Fund pays income dividends annually. Each other Fund pays income
dividends quarterly. 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."
PURCHASES AND REDEMPTIONS
Class A shares of each Fund are offered with a front-end sales charge, and
Class C shares of each Fund are offered without a sales charge, as described
below:
CLASS A SHARES Offered at net asset value plus a maximum sales charge of 4.75%
of the offering price, with reduced sales charges on investments of $50,000
or more and no sales charge on purchases of $1 million or more or on
reinvestment of dividends. Class A shares are subject to an annual .25%
service fee and a .25% distribution fee.
CLASS C SHARES Offered at net asset value without an initial or contingent
deferred sales charge if held for at least one year, but subject to an
annual .25% service fee and a .75% distribution fee, and, in the case of
shares redeemed within one year, a 1% contingent deferred sales charge.
Each class of shares of a Fund represents interests in the same portfolio of
investments of the Fund. The minimum initial investment in Class A shares or
Class C shares of a Fund is $500 and subsequent investments in the Fund must
be at least $50. Shares are redeemable at net asset value, which may be more
or less than original cost; however, if Class C shares, or Class A shares for
which the initial purchase price was $1 million or more, on which no sales
charge was imposed, are redeemed within one year, a deferred sales charge of
1% will be imposed. See "How to Purchase Shares" and "How to Redeem Shares."
EXPENSES OF THE FUNDS
Each Fund pays a management fee to the investment adviser. Each Fund also
compensates the Distributor, as expenses allocable to the Class A shares and
the Class C shares, for shareholder servicing and for services in distributing
those shares. See "Management of the Funds."
INVESTMENT ADVISER
Calamos Asset Management, Inc.(R) ("CAM" or the "Adviser").
DISTRIBUTOR
Calamos Financial Services, Inc.(R) ("CFS" or the "Distributor")
2
<PAGE>
EXPENSES
The following tables show certain information concerning shareholder
transaction expenses and projected annual fund operating expenses for Class A
shares and Class C shares of the Funds:
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------
Growth Global
and Strategic Growth and
Convertible Income Income Growth Income
Fund Fund Fund Fund Fund
----------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EX-
PENSES
Maximum sales charge on
purchases
(as a percentage of offer-
ing price) (b)............ 4.75% 4.75% 4.75% 4.75% 4.75%
Maximum sales charge on re-
invested dividends........ None None None None None
Deferred sales charge (c).. None None None None None
Exchange fee............... None None None None None
Redemption fees (d)........ None None None None None
ANNUAL FUND OPERATING EX-
PENSES
(AS A PERCENTAGE OF AVER-
AGE NET ASSETS)
Management fees............ .75% .75% .75% 1.00% 1.00%
12b-1 fees (e)............. .50 .50 .50 .50 .50
Other expenses (after ex-
pense reimbursement)...... .25 .75(a) .85(a) .50(a) .50(a)
---- ---- ---- ---- ----
Total Fund operating ex-
penses
(after expense reimburse-
ment)..................... 1.50% 2.00% 2.10%(a) 2.00% 2.00%
<CAPTION>
Class C Shares
----------------------------------------------------
Growth Global
and Strategic Growth and
Convertible Income Income Growth Income
Fund Fund Fund Fund Fund
----------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EX-
PENSES
Maximum sales charge on
purchases
(as a percentage of offer-
ing price) (b)............ None None None None None
Maximum sales charge on re-
invested dividends........ None None None None None
Deferred sales charge (c).. None None None None None
Exchange fee............... None None None None None
Redemption fees (d)........ None None None None None
ANNUAL FUND OPERATING EX-
PENSES
(AS A PERCENTAGE OF AVER-
AGE NET ASSETS)
Management fees............ .75% .75% .75% 1.00% 1.00%
12b-1 fees (e)............. 1.00 1.00 1.00 1.00 1.00
Other expenses (after ex-
pense reimbursement)...... .25(a) .75(a) .85(a) .50(a) .50(a)
---- ---- ---- ---- ----
Total Fund operating ex-
penses
(after expense reimburse-
ment)..................... 2.00% 2.50% 2.60%(a) 2.50% 2.50%
</TABLE>
- ------------------------------
(a) Because Global Growth and Income Fund is newly organized, its "Other
expenses" reflect an estimate. The Adviser has voluntarily undertaken to
limit the annual ordinary operating expenses of each class of shares of
each Fund, as a percentage of the average net assets of the class, to
2.00% for Class A shares and 2.50% for Class C shares through August 31,
1998, and the percentages shown for "Other expenses" take
3
<PAGE>
into account expected expense reimbursements. Absent that limitation, the
"Other expenses" and "Total Fund operating expenses," respectively, for
Class A shares of the Funds other than Convertible Fund would be .85% and
2.10% for Growth and Income Fund; 3.85% and 5.10% for Strategic Income
Fund; 1.20% and 2.70% for Growth Fund; and 2.30% and 3.80% for Global
Growth and Income Fund. In the case of Class C shares of the Funds other
than Convertible Fund, absent the expense limitation, the "Other expenses"
and "Total Fund operating expenses," respectively, would have been 1.35%
and 3.10% for Growth and Income Fund; 3.85% and 5.60% for Strategic Income
Fund; 1.20% and 3.20% for Growth Fund; and 2.30% and 4.30% for Global
Growth and Income Fund. See "Management of the Funds--The Adviser." Each
Fund may incur expenses for dividends paid on short positions that are not
subject to the Adviser's expense limitation and that are not included in
"Other expenses." Only Strategic Income Fund had such expenses, which
amounted to .10% of average net assets.
(b) Reduced sales charges apply to purchases of Class A shares of $50,000 or
more. See "How to Purchase Shares--Offering Price."
(c) With respect to Class C shares, or Class A shares for which the initial
purchase price was $1 million or more, 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 $9 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% in the case of Class A shares and .75% in the case of Class C shares,
of the average daily net assets of the respective class. Consequently,
long-term shareholders eventually may pay more than the economic
equivalent of the maximum initial charges permitted by the National
Association of Securities Dealers.
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>
Class A Shares
----------------------
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Convertible Fund......................................... $62 $93 $125 $218
Growth and Income Fund................................... 67 107 150 269
Strategic Income Fund.................................... 68 110 155 279
Growth Fund.............................................. 67 107 150 269
Global Growth and Income Fund............................ 67 107 150 269
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
--------------------------
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Convertible Fund..................................... $20 $62 $107 $231
Growth and Income Fund............................... 25 78 133 284
Strategic Income Fund................................ 26 81 138 293
Growth Fund.......................................... 25 78 133 284
Global Growth and Income Fund........................ 25 78 N/A N/A
</TABLE>
4
<PAGE>
The purpose of these tables and the examples is to assist you in understanding
the various costs and expenses that an investor in a Fund bears, directly or
indirectly. The examples assume 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 examples should not be considered a representation of past or future
expenses; the actual expenses of the Funds and the annual rates 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.
FINANCIAL HIGHLIGHTS
The tables below reflect the results of the operations of Class A shares and
Class C shares of each Fund. Information in the tables was audited by Ernst &
Young LLP, independent 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.
5
<PAGE>
CONVERTIBLE FUND
<TABLE>
<CAPTION>
Class A
- -------------------------------------------------------------------------------------------------------------------
Eleven
Year Months
Ended Ended
March 31, March 31, Year Ended April 30,
--------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(b)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $ 14.49 $ 12.41 $ 13.04 $ 13.96 $ 12.72 $ 11.39 $ 10.29 $ 10.73 $ 10.56 $ 11.94
Income from investment
operations:
Net investment income .36 .40 .38 .40 .42 .41 .49 .60 .59 .62
Net realized and
unrealized gain
(loss) on investments 1.39 3.06 (.01) .53 1.32 1.43 1.25 (.32) .14 (1.24)
--------------------------------------------------------------------------------------------
Total from investment
operations 1.75 3.46 .37 .93 1.74 1.84 1.74 .28 .73 (.62)
--------------------------------------------------------------------------------------------
Less distributions:
Dividends from net in-
vestment income (.45) (.31) (.32) (.39) (.40) (.45) (.52) (.63) (.56) (.66)
Dividends from net re-
alized
capital gains (1.11) (1.07) (.56) (1.46) (.10) - - - - (.10)
Dividends in excess of
net
realized capital gains - - (.12) - - - - - - -
Distributions from paid
in capital - - - - - (.06) (.12) (.09) - -
--------------------------------------------------------------------------------------------
Total distributions (1.56) (1.38) (1.00) (1.85) (.50) (.51) (.64) (.72) (.56) (.76)
--------------------------------------------------------------------------------------------
Net asset value, end of
period $ 14.68 $ 14.49 $ 12.41 $ 13.04 $ 13.96 $ 12.72 $ 11.39 $ 10.29 $ 10.73 $ 10.56
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Total return (a) 12.9% 28.8% 3.2% 6.5% 14.0% 16.5% 17.7% 2.4% 7.2% (5.1%)
Ratios and supplemental
data:
Net assets, end of pe-
riod (000) $35,950 $24,460 $16,646 $17,023 $17,213 $16,940 $13,953 $18,664 $21,270 $23,194
Ratio of expenses to
average
net assets 1.5% 1.5% 1.6%* 1.6% 1.7% 1.2% 1.2% 1.1% 1.1% 1.2%
Ratio of net investment
income
to average net assets 2.8% 3.0% 3.3%* 2.8% 3.2% 3.4% 4.3% 5.5% 5.6% 5.6%
</TABLE>
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------
July 5, 1996 through
March 31, 1997
--------------------------------
<S> <C>
Net asset value, beginning of
period $13.87
Income from investment opera-
tions:
Net investment income .30
Net realized and unrealized
gain on investments 1.21
------
Total from investment opera-
tions 1.51
------
Less distributions:
Dividends from net investment
income (.25)
Dividends from net realized
capital gains (.50)
======
Total distribution (.75)
------
Net asset value, end of period $14.63
======
Total return (b) 11.1%
Ratios and supplemental data:
Net assets, end of period
(000) $3,094
Ratio of expenses to average
net assets 2.0%*
Ratio of net investment in-
come to average net assets 2.7%*
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Eleven
Months
Year Ended Ended
March 31, March 31, Year Ended April 30,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(b)
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio turnover rate 52.3% 65.2% 42.1% 73.1% 73.1% 83.8% 63.2% 93.4% 84.7% 55.5%
Average brokerage com-
mission paid per share .0610 .0633 .0936 .0952 .1000 .0966 N/A N/A N/A N/A
</TABLE>
- -------------------------
(a) Total return is not annualized.
(b) Calamos Asset Management, Inc. became the Fund's investment adviser on
September 21, 1987.
* Annualized.
6
<PAGE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------
Eleven Sept. 22,
Months 1988
Year Ended Ended to
March 31, March 31, Year Ended April 30, April 30,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.62 $12.68 $12.97 $13.90 $13.57 $11.54 $10.46 $10.49 $10.00
Income from investment
operations:
Net investment income .34 .37 .35 .31 .35 .29 .31 .33 .38
Net realized and
unrealized gain (loss)
on investments 1.52 3.70 (.02) .34 1.97 2.02 1.09 .09 .49
------------------------------------------------------------------------------
Total from investment
operations 1.86 4.07 0.33 .65 2.32 2.31 1.40 .42 .87
------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (.28) (.42) (.32) (.29) (.36) (.28) (.32) (.28) (.38)
Dividends from net
realized
capital gains (1.68) (.71) (.30) (1.29) (1.63) - - (.17) -
------------------------------------------------------------------------------
Total distributions (1.96) (1.13) (.62) (1.58) (1.99) (0.28) (0.32) (0.45) (0.38)
------------------------------------------------------------------------------
Net asset value, end of
period $15.52 $15.62 $12.68 $12.97 $13.90 $13.57 $11.54 $10.46 $10.49
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total return (b) 12.9% 33.0% 2.8% 4.5% 18.8% 20.2% 13.4% 3.8% 9.0%
Ratios and supplemental
data:
Net assets, end of
period (000) $8,408 $5,813 $3,853 $4,663 $3,655 $2,694 $1,821 $1,345 $ 732
Ratio of expenses to
average net assets (a) 2.0% 2.0% 2.0%* 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%*
Ratio of net investment
income to average net
assets (a) 2.4% 2.6% 3.0%* 2.3% 2.6% 2.3% 2.9% 3.0% 4.8%*
</TABLE>
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------
August 5, 1996 through
March 31, 1997
--------------------
<S> <C>
Net asset value, beginning
of period $14.52
Income from investment oper-
ations:
Net investment income .26
Net realized and unrealized
gain (loss) on
investments 1.30
------
Total from investment op-
erations 1.56
------
Less distributions:
Dividends from net invest-
ment income (.25)
Dividends from net realized
capital gains (.33)
------
Total distributions (.58)
------
Net asset value, end of pe-
riod $15.50
======
Total return (b) 10.8%
Ratios and supplemental da-
ta:
Net assets, end of period
(000) $ 330
Ratio of expenses to aver-
age net assets (c) 2.5%*
Ratio of net investment in-
come to average
net assets (c) 2.4%*
</TABLE>
<TABLE>
------------------------------------------------------------------
<CAPTION>
Eleven Sept. 22,
Months 1988
Year Ended Ended to
March 31, March 31, Year Ended April 30, April 30,
------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio turnover rate 91.5% 86.4% 84.7% 155.2% 132.2% 111.6% 103.6% 103.0% 85.0%*
Average brokerage com-
mission paid per share .0609 .0604 .0924 .1002 .1010 .1004 N/A N/A N/A
</TABLE>
- ------------------------
(a) After reimbursement and waiver of expenses by the Adviser equivalent to
0.1%, 0.1%, 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.
(c) After reimbursement and waiver of expenses by the Adviser equivalent to
0.6%* of average net assets.
* Annualized.
7
<PAGE>
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Class A Shares
- ------------------------ --------------------------------------------------------------
Eleven
Months September 4,
Year Ended Ended 1990 through
March 31, March 31, Year ended April 30, April 30,
---------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $11.07 $10.13 $10.71 $10.96 $10.58 $10.60 $ 10.00
Income from investment
operations:
Net investment income .50 .53 .40 .36 .39 .59 .40
Net realized and
unrealized gain (loss)
on investments .29 .83 (.43) .11 .79 .46 .61
---------------------------------------------------
Total from investment
operations .79 1.36 (.03) .47 1.18 1.05 1.01
---------------------------------------------------
Less distributions:
Dividends from net in-
vestment income (.68) (.42) (.36) (.41) (.41) (.51) (.40)
Dividends from net re-
alized capital gains (.37) -- (.19) (.31) (.39) (.56) (.01)
---------------------------------------------------
Total distributions (1.05) (.42) (.55) (.72) (.80) (1.07) (.41)
---------------------------------------------------
Net asset value, end of
period $10.81 $11.07 $10.13 $10.71 $10.96 $10.58 $ 10.60
---------------------------------------------------
---------------------------------------------------
Total return (c) 7.4% 13.6% (0.2%) 4.2% 11.5% 10.5% 10.2%
Ratios and supplemental
data:
Net assets, end of pe-
riod (000) $1.317 $1,620 $2,211 $3,004 $2,522 $1,410 $ 595
Ratio of expenses to
average net assets
(a)(b) 2.1% 2.2% 2.4%* 2.2% 2.3% 2.5% 2.6%*
Ratio of net investment
income to average net
assets (a) 4.3% 4.6% 4.0%* 3.2% 3.9% 5.3% 6.6%*
Portfolio turnover rate 152.5% 81.1% 59.9% 79.4% 73.8% 97.0% 108.9%*
Average brokerage com-
mission paid per share $.0711 $.0636 $.0966 $.0977 $.1056 $.1200 N/A
</TABLE>
- ------------------------------
(a) After reimbursement and waiver of expenses by the Adviser equivalent to
3.0%, 1.6%, 1.1%*, 1.0%, 0.7%, 1.25% and 4.8%* of average net assets,
respectively.
(b) Includes 0.1%, 0.2%, 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.
* Annualized.
8
<PAGE>
GROWTH FUND
<TABLE>
<CAPTION>
Class A Shares
- ------------------------ --------------------------------------------------------------
Eleven
Months September 4,
Year Ended Ended 1990 through
March 31, March 31, Year Ended April 30, April 30,
-------------- --------- ---------------------- ------------
1997 1996 1995 1994 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $15.74 $14.18 $14.57 $13.95 $14.04 $12.48 $10.00
Income from investment
operations:
Net investment income
(loss) (.09) (.09) .02 .01 (.02) (.01) .07
Net realized and
unrealized gain (loss)
on investments 3.14 4.69 (.28) 1.21 .20 1.60 2.50
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total from investment
operations 3.05 4.60 (.26) 1.22 .18 1.59 2.57
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less distributions:
Dividends from net in-
vestment income - (.07) - (.01) - - (.08)
Dividends from net re-
alized capital gains (1.75) (2.97) (.13) (.59) (.27) (.03) (.01)
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total distributions (1.75) (3.04) (.13) (.60) (.27) (.03) (.09)
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, end of
period $17.04 $15.74 $14.18 $14.57 $13.95 $14.04 $12.48
<CAPTION>
==============================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Total return (b) 19.1% 35.2% (1.8%) 8.9% 1.4% 12.7% 25.8%
Ratios and supplemental
data:
Net assets, end of pe-
riod (000) $6,635 $2,866 $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% 2.0% 2.0%*
Ratio of net investment
income to average net
assets (a) (1.3)% (.08)% 0.2%* 0.1% (0.1)% (0.1)% 0.8%*
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
- ------------------------- -------------------------
September 3, 1996 through
March 31, 1997
-------------------------
<S> <C>
Net asset value, begin-
ning of period $ 17.63
Net income from invest-
ment operations:
Net investment income (.07)
Net realized and
unrealized gain (loss)
on investments 1.07
-------
Total from investment
operations 1.00
-------
Less distributions:
Dividends from net real-
ized capital gains (1.65)
-------
Net asset value, end of
period $ 16.98
=======
Total return (b) 5.4%
Ratios and supplemental
data:
Net assets, end of pe-
riod (000) $ 8
Ratio of expenses to av-
erage net assets (c) 2.5%*
Ratio of net investment
income to average net
assets (c) (1.9)%*
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Eleven
Months September 4,
Year Ended Ended 1990 through
March 31, March 31, Year Ended April 30, April 30,
------------- --------- -------------------- ------------
1997 1996 1995 1994 1993 1992 1991
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio turnover rate 173.9% 252.4% 104.3% 87.3% 56.8% 47.3% 15.8%*
Average brokerage com-
mission paid per share $.0614 $.0608 $.0910 $.0996 $.1011 $.1098 N/A
</TABLE>
- ------------------------------
(a) After reimbursement and waiver of expenses by the Adviser equivalent to
0.7%, 1.2%, 1.6%*, 1.1%, 0.7%, 0.8% and 4.5%* of average net assets,
respectively.
(b) Total return is not annualized.
(c) After reimbursement and waiver of expenses by the Adviser equivalent to
0.6% of average net assets.
* Annualized.
9
<PAGE>
GLOBAL GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Class A
---------------
September 9, 1996 through
March 31, 1997
-------------------------
<S> <C>
Net asset value, beginning of period $ 5.00
Net income from investment operations:
Net investment income .04
Net realized and unrealized gain (loss) on invest-
ments .36
------
Total from investment operations .40
------
Less distributions:
Dividends from net investment income (.01)
------
Net asset value, end of period $ 5.39
======
Total return (b) 8.0%
Ratios and supplemental data:
Net assets, end of period (000) $2,926
Ratio of expenses to average net assets (a) 2.0%*
Ratio of net investment income to average net assets
(a) 1.8%*
</TABLE>
<TABLE>
<CAPTION>
Class C
---------------
September 24, 1996 through
March 31, 1997
--------------------------
<S> <C>
Net asset value, beginning of period $ 5.00
Net income from investment operations:
Net investment income .03
Net realized and unrealized gain (loss) on invest-
ments .35
-------
Total from investment operations .38
-------
Less distributions:
Dividends from net investment income (.01)
-------
Net asset value, end of period $ 5.37
=======
Total return (b) 7.6%
Ratios and supplemental data:
Net assets, end of period (000) $ 390
Ratio of expenses to average net assets (a) 2.5%*
Ratio of net investment income to average net as-
sets (a) 1.6%*
---------------
<CAPTION>
September 9, 1996 through
March 31, 1997
- ------------------------------------------------------------------------------
<S> <C>
Portfolio turnover rate 160.4%*
Average brokerage commission paid per share .0758
</TABLE>
- ------------------------------
(a) After the reimbursement and waiver of expenses by the Adviser equivalent to
1.82%* of average net assets.
(b) Total return is not annualized.
* Annualized.
10
<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.
CONVERTIBLE FUND
Convertible Fund seeks current income. Growth is a secondary objective that
the Fund also considers when consistent with its objective of current income.
The 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 the 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.
The Fund's investments are concentrated in investment grade securities, and
the Fund expects to maintain, over the long-term, an average credit quality of
BBB or better. However, debt securities acquired by the 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 the Fund's past investments in debt securities.
The 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 the Fund's
assets ordinarily is invested in "true" convertibles. Any portion of the
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
Growth and Income Fund seeks high long-term total return through capital
appreciation and current income. Under normal market conditions the Fund
invests at least 65% of its total assets in a diversified portfolio of
convertible, equity and fixed-income securities, with equal emphasis on
capital appreciation and current income. 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."
The 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 the 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 the Fund's
past investment in debt securities.
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, the Fund will invest at least 65% of its assets in
income-producing securities. In furtherance of its objective, the Fund may
also write covered call options and purchase put options and invest in other
types of securities. See "Common Investment Practices."
11
<PAGE>
Any assets of the 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.
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. The 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, the 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."
GLOBAL GROWTH AND INCOME FUND
Global Growth and Income Fund seeks high long-term total return through
capital appreciation and current income. Under normal market conditions the
Fund invests at least 65% of its total assets in a globally diversified
portfolio of convertible, equity and fixed-income securities with equal
emphasis on capital appreciation and current income. Normally the Fund invests
in the securities markets of at least three countries, which may include the
United States.
The Fund generally invests in securities of companies that are medium-sized
and larger relative to the securities markets of the countries in which those
securities are traded. A significant portion of its assets will be invested in
securities of foreign issuers, which may be more volatile and less liquid than
the securities of United States companies. See "Common Investment Practices--
Foreign Securities" for more information.
The Fund's convertible and fixed-income investments are concentrated in
investment grade securities, and the Fund expects to maintain, over the long
term, an average credit quality of BBB or better or, in the case of unrated
securities, of comparable quality as determined by the Adviser. The debt
securities of foreign issuers are less likely to be rated by United States
rating agencies.
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
12
<PAGE>
purposes. Occasionally securities may be purchased on a when-issued or
delayed-delivery basis.
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, in which Strategic
Income Fund intends to invest as much as 35% or more of its assets, 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.
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 year ended March 31, 1997 for each Fund other than Growth Fund,
which did not invest in debt securities rated below investment grade during
that period.
<TABLE>
<CAPTION>
Growth Global
and Strategic Growth and
Rating Convertible Income Income Income
Category Fund Fund Fund Fund
---------- ----------- ------ --------- ----------
<S> <C> <C> <C> <C>
U.S. Govt. 15% 17% 0% 8
AAA - 0 0 0
AA 3 2 0 0
A 10 4 9 7
BBB 15 11 24 12
BB 3 7 6 0
B 3 10 32 1
CCC - 0 0 0
not rated 7 3 9 12
</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.
13
<PAGE>
CONVERTIBLE SECURITIES
Although each Fund may invest in convertible securities, only Convertible Fund
has a policy of investing at least 65% of its assets in convertible securities
under normal circumstances. Growth and Income Fund and Strategic Income Fund
expect that a significant portion of their respective assets will be invested
in convertible securities, but there is no minimum percentage of their 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.
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
14
<PAGE>
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.
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
composed 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.
FOREIGN SECURITIES
Global Growth and Income Fund may invest all of its assets, and each other
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.
International investing allows you to achieve greater diversification and to
take advantage of changes in foreign economies and market conditions. Many
foreign economies have, from time to time, grown faster than the U.S. economy,
and the returns on investments in those countries have exceeded those of
similar U.S. investments, although there can be no assurance that these
conditions will continue.
You should understand and consider carefully the greater risks involved in
investing internationally. Investing in securities of non-U.S. issuers,
positions in which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts involve both
opportunities and risks not typically associated with investing in U.S.
securities. These 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; different accounting, auditing and financial reporting standards;
different settlement periods and trading practices; less
15
<PAGE>
liquidity and frequently greater price volatility in foreign markets than in
the United States; imposition of foreign taxes; and sometimes less
advantageous legal, operational and financial protections applicable to
foreign subcustodial arrangements.
Although the Funds try to invest in companies and governments of countries
having stable political environments, there is the possibility of restriction
of foreign investment, expropriation of assets, 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 those countries.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the U.S. and other major
markets. There also may be a lower level of monitoring and regulation of
emerging markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited. Economies in
individual emerging markets may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Many emerging market countries
have experienced high rates of inflation for many years, which has had and may
continue to have very negative effects on the economies and securities markets
of those countries.
Any Fund may invest in ADRs that are not sponsored by the issuer of the
underlying security. To the extent it does so, the Fund would probably bear
its proportionate share of the expenses of the depository and might have
greater difficulty in receiving copies of the issuer's shareholder
communications than would be the case with a sponsored ADR.
When a Fund enters into a contract for the purchase or sale of a foreign
portfolio security, it usually is required to settle the purchase transaction
in the relevant foreign currency or receive the proceeds of the sale in that
currency. In either event, the Fund is obliged to acquire or dispose of an
appropriate amount of foreign currency by selling or buying an equivalent
amount of U.S. dollars. The Fund may wish to "lock-in" the U.S. dollar value
of a transaction at or near the time of the purchase or sale of the foreign
portfolio security at the exchange rate or rates then prevailing between the
U.S. dollar and the currency in which the security is denominated. The Fund
may accomplish such "transaction hedging" by purchasing or selling such
foreign currencies on a "spot" (i.e., cash) basis or on a forward basis
whereby the Fund purchases or sells a specific amount of foreign currency, at
a price set at the time of the contract, for receipt or delivery at a
specified date or at any time within a specified time period. In so doing, the
Fund will attempt to insulate itself against possible losses and gains
resulting from a change in the relationship between the U.S. dollar and the
foreign currency during the period between the date the security is purchased
or sold and the date on which payment is made or received. Similar
transactions may be entered into by using other currencies if the Fund seeks
to move investments denominated in one currency to investments denominated in
another.
When a Fund invests in foreign securities, in addition to the risk of change
in the market value of portfolio securities, the value of the portfolio in
U.S. dollars is subject to fluctuations in the exchange rate between the
foreign currencies and the U.S. dollar. When, in the opinion of the Adviser,
it is desirable to limit or reduce exposure in a foreign currency in order to
moderate potential changes in the U.S. dollar value of the portfolio, the Fund
may enter into a forward currency exchange contract to sell or buy such
foreign currency (or another foreign currency that acts as a proxy for that
currency) by which the U.S. dollar value of certain underlying foreign
portfolio securities can be approximately matched by an equivalent U.S. dollar
liability. This technique is known as "currency hedging" and, by locking in a
rate of exchange, is intended to moderate or reduce the risk of change in the
U.S. dollar value of the Fund's portfolio only
16
<PAGE>
during the period of the forward 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. 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.
Neither type of foreign currency transaction will eliminate fluctuations in
the prices of the Fund's portfolio securities or prevent loss if the price of
such securities should decline. In addition, such forward foreign currency
exchange contracts will diminish the benefit of the appreciation in the U.S.
dollar value of that foreign currency. For further information on forward
foreign currency exchange transactions, see the Statement of Additional
Information.
At March 31, 1997, Global Growth and Income Fund had invested 17% of its net
assets in foreign securities. No other Fund had as much as 1% of its net
assets so invested.
WARRANTS
Each Fund may invest up to 5% 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 2% of its net assets in warrants the
underlying common stock of which is not listed on the New York or American
stock exchange or, in the case of Global Growth and Income Fund, a recognized
foreign exchange. 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.
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 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. Each 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,
17
<PAGE>
please refer to the Statement of Additional Information.
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.
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
18
<PAGE>
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 when the Adviser
determines that a defensive position is warranted. Such investments may be in
money market instruments, consisting of obligations of, or guaranteed as to
principal and interest by, the U.S. Government or its agencies or
instrumentalities; certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million and
which are regulated by the U.S. Government, its agencies or instrumentalities;
commercial paper rated in the highest category by a recognized rating agency;
and repurchase agreements. 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.
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 any Fund may be greater than 100%. The portfolio
turnover rate of Global Growth and Income Fund is not expected to exceed 100%
under normal circumstances. A higher 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.
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.
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<PAGE>
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.
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 as described
below. 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.
Each purchase of shares is confirmed by a written statement mailed to the
shareholder, without issuance of share certificates.
OFFERING PRICE
Class A shares of each Fund are sold to investors at net asset value plus a
sales charge, which may be reduced or waived as described below. Class C
shares of each Fund are sold without an initial sales charge but are subject
to higher ongoing expenses than Class A shares of the same Fund. When placing
an order, you must specify whether the order is for Class A or Class C shares.
The differences between Class A shares and Class C shares lie primarily in
their initial and contingent deferred sales charge structures and in their
asset-based sales charges in the form of Rule 12b-1 distribution fees. These
differences are summarized in the table below. See also "Expenses" and "How to
Redeem Shares." Each class has distinct advantages and disadvantages for
different investors, and you may choose the class that best suits your
circumstances and objectives.
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of
average daily net
Class Initial Sales Charge assets)* Other Information
- ----- -------------------- ----------------- -----------------
<S> <C> <C> <C>
Class Maximum initial sales .50% Initial sales charge waived or
A charge of reduced for certain purchases**
4.75% of offering price
Class None 1.00%*** 1% deferred sales charge on
C shares redeemed within one year
</TABLE>
- ------------------------------
*Of this amount, .25% is for administrative services and the balance is for
distribution services.
**See the note to the following table.
***The 12b-1 fee of 1% for the first year is advanced to the Selling Dealer by
CFS from its own resources at the time of investment. Annual 12b-1 fees are
paid quarterly in arrears beginning in the second year.
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<PAGE>
The sales charges on sales of Class A shares of each Fund (except when waived
as described below under "How to Purchase Shares--Sales Charge Waiver") are as
follows:
<TABLE>
<CAPTION>
Sales Charge Paid by Investor on Purchase of Class A Shares
-------------------------------------------------------------
As a % of As a % of % of Offering Price
Net Amount Invested Offering Price Retained by 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
</TABLE>
- ------------------------------
*On an investment of $1 million or more, CFS from its own resources pays
the selling dealer a commission of .25% of the amount of the investment,
subject to repayment of the commission if the shares are redeemed within
one year after purchase. If you purchase such shares without a sales
charge, a contingent deferred sales charge of 1% will be imposed on 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.
----------------
Each Fund receives the entire net asset value of all of its Class A shares
sold. CFS, the Funds' principal underwriter, retains the sales charge on sales
of Class A shares from which it allows discounts from the applicable public
offering price to investment dealers. The normal discount to dealers is set
forth in the above table. Upon notice to all dealers with whom it has sales
agreements, CFS may reallow up to the full applicable sales charge, as shown
in the above table, during periods and for transactions specified in such
notice and such reallowances may be based upon attainment of minimum sales
levels. Dealers who receive 90% or more of the sales charge may be deemed to
be underwriters under the Securities Act of 1933. CFS retains the entire
amount of any deferred sales charge on Class C shares redeemed within one year
of purchase. 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.
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 5:00 p.m., Eastern 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. To insure proper
credit to your account, please call the Funds at (800) 823-7386 before sending
your wire. The wire should be sent to United Missouri Bank KC, N.A.; ABA #10-
10-00695; for FPS Services, Inc. bank account no. 98703719; FBO Calamos [fund
name] Fund; [shareholder name and account number]. The applicable offering
price for a purchase by wire is the offering price per share next determined
after receipt of the wired funds. Receipt of
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<PAGE>
a wire could be delayed by delays on the Federal Reserve wire system. After
you have wired funds, you must complete the application form and send it to
the Trust's transfer agent. A Fund will not honor redemption requests until
the completed application has been received, and failure to submit a completed
application may result in backup withholding as required by the Internal
Revenue Code.
PURCHASES BY MAIL
You may also purchase shares of a Fund by sending to the Trust's transfer
agent at its address shown on the back cover, 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. A
subsequent investment may be made by detaching the stub from your account
statement and sending it with your check in the envelope provided with your
statement. All checks must be drawn on a U.S. bank in U.S. funds. A check
written by a third party will not be accepted. A charge ($20 minimum) may be
imposed if any check submitted for investment does not clear. If you purchase
shares by check, you will not be able to redeem the shares until the check has
been collected, which may take 15 days.
PURCHASES BY EXCHANGE
You may purchase shares of a Fund by exchange of shares from another Fund, by
exchange of shares of Money Market Portfolio, 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 the Trust's transfer agent. If you have a brokerage account with
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") that
holds shares of Summit Cash Reserves Fund, a series of Financial Institution
Series Trust (such shares are referred to as "Summit Fund Shares"), and the
Summit Fund Shares were purchased by exchange from a Fund, you may purchase
shares of a Fund through your Merrill Lynch broker by exchange of Summit Fund
Shares. See "How to Redeem Shares--Redemption by Exchange." YOU MAY NOT MAKE
MORE THAN FOUR EXCHANGES FROM ANY FUND DURING ANY CALENDAR YEAR. No sales
charge is imposed on purchases of Class A shares by exchange of Class A shares
from another Fund or by exchange of Cash Account Shares or Summit Fund Shares,
previously purchased through use of the exchange privilege. Please review the
information under "How to Redeem Shares--Redemption by Exchange."
SALES CHARGE 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 charge) 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 charge. See
"Shareholder Services--Investment in Related Funds."
In addition, the following persons or entities may purchase Class A shares of
a Fund at net asset value without payment of any sales charge, 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
investor purchasing shares upon the recommendation of an investment consultant
to which the investor pays a fee for services relating to investment
selection; (b) any investor purchasing shares of a Fund by exchange of Cash
Account Shares or Summit Fund Shares previously purchased through use of the
exchange privilege; (c) any employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets invested in the
Funds; (d) any employee benefit plan purchasing shares through an intermediary
that has signed a participation agreement with CFS specifying certain asset
minimums and qualifications, and marketing, program and trading restrictions;
(e) any insurance company separate account used to fund annuity contracts for
employee benefit plans that in the aggregate have more than 200 eligible
employees or a minimum of $1 million in plan assets invested in the Funds; (f)
any employee or registered representative of CFS, one of its affiliates or
22
<PAGE>
a broker-dealer with a selling group agreement with CFS; (g) any trustee of
the Trust; (h) any member of the immediate family of a person qualifying under
(f) or (g), including a spouse, child, stepchild, sibling, parent, stepparent,
grandchild and grandparent, in each case including in-law and adoptive
relationships; (i) any trust, pension, profit sharing, or other benefit plan
in which any person qualifying under (f) is a participant; (j) 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 (f), (g) or (h) makes voluntary contributions and has
investment self-direction, provided the purchase is for the account of such
person; (k) any company exchanging shares with a Fund pursuant to a merger,
acquisition or exchange offer; (l) 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; and (m) any investor purchasing shares through Charles
Schwab & Co. or Fidelity Investments. Please note that, if you purchase or
redeem shares through a broker or dealer, the broker or dealer may charge a
fee for effecting the transaction.
Further, no sales charge will be imposed on the sale of Class A shares of a
Fund purchased and paid for with the proceeds of shares redeemed in the prior
12 months from a mutual fund on which an initial sales charge or contingent
deferred sales charge was paid, provided a waiver of the sales charge is
requested when the purchase order for Fund shares is placed, any requested
evidence of eligibility for the sales charge waiver is furnished; and 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 Class A 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 Class A
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
Class A 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.
LETTER OF INTENT
You may reduce the sales charges you pay on the purchase of Class A shares by
making investments pursuant to a letter of intent. The applicable sales charge
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 charge 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 charge 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, and CFS reserves the
right to redeem shares from your account if necessary to satisfy that
obligation. A letter of intent does not
23
<PAGE>
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, currently 3:00 p.m.
Chicago time, 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.
If Class C shares, or Class A shares for which the initial purchase price was
$1 million or more, on which no initial sales charge was imposed 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.
REDEMPTION BY MAIL
A written request for redemption (and an endorsed share certificate, if
issued) must be received by the Fund's transfer agent to constitute a valid
redemption request.
Your redemption request must:
1. specify the Fund, your account number 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 the Trust's transfer agent. These firms may charge for their
services in connection with your redemption request but the Funds do not
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
24
<PAGE>
redemptions may be made under the general criteria set forth below). A $9
service charge for payment of redemption proceeds by wire will be deducted
from the proceeds.
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
(or Summit Fund Shares if your Fund shares are held in a brokerage account
with Merrill Lynch and Merrill Lynch has commenced offering the exchange
program for Summit Fund 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 (or Summit Fund Shares), you should obtain
the prospectus relating to those shares from the Adviser (or from Merrill
Lynch, in the case of Summit Fund Shares) and read it carefully. The exchange
privilege is not an offering or recommendation of Cash Account Shares or
Summit Fund 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
the Trust's transfer agent. No sales charge is imposed on purchases by
exchange.
GENERAL
A check for proceeds of a redemption will not be released 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 through a
wire transfer of funds. 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 (sent to
the former address).
RETIREMENT PLANS
You may use the Funds as investments for your Individual Retirement Account
("IRA"), profit sharing or pension plan, Section 401(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.
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
25
<PAGE>
Systematic Withdrawal Plan, call (800) 823-7826 and request a Systematic
Withdrawal form. 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 charge is imposed on purchases of shares of the Funds,
you should not purchase shares while participating in the Systematic
Withdrawal Plan. You may modify or terminate your Systematic Withdrawal Plan
by written notice to the transfer agent at least seven business days prior to
the start of the month in which the change is to be effective.
AUTOMATIC BANK DRAFT PLAN
If you own shares of a Fund, you may purchase additional shares of that Fund
through the Automatic Bank Draft Plan. Under the Plan, the Trust will
automatically debit your bank checking account on a monthly or semi-monthly
basis in an amount ($50 or more) specified by you and invest the specified
amount in additional shares of the Fund. To obtain an Automatic Bank Draft
Plan form, call (800) 823-7386. The Plan is not available to clients of
Service Organizations that offer similar investment services.
EXCHANGE PRIVILEGE
You may exchange shares of any Fund for shares of another Fund or for Cash
Account Shares (or for Summit Fund Shares if your Fund shares are held in a
brokerage account with Merrill Lynch) or exchange Cash Account Shares or
Summit Fund Shares for shares of a Fund, without payment of any sales charge
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 of the same class 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. Convertible Fund, Growth and Income Fund, Strategic Income Fund and
Global 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.
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
26
<PAGE>
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.
MANAGEMENT OF THE FUNDS
THE TRUSTEES
The board of trustees of CALAMOS Investment Trust (the "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 March 31, 1997, CAM managed approximately $1.9
billion in assets of individuals and institutions. CAM is controlled by John
P. Calamos, who has been engaged in the investment advisory business since
1977. Mr. Calamos is also the controlling 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 each Fund pays CAM a fee based on average daily
net assets that is accrued daily and paid monthly. The fee paid by Growth Fund
is at the annual rate of 1% of the first $150 million of average net assets
and .75% of average net assets in excess of $150 million. The fee paid by
Global Growth and Income Fund is at the annual rate of 1% of average net
assets. The fee paid by each other Fund is at the annual rate of .75% of the
first $150 million of average net assets and .50% of average net assets in
excess of $150 million.
CAM has voluntarily undertaken to limit the annual ordinary operating expenses
of shares of each Fund, as a percentage of the average net assets of the
particular class of shares, to 2.00% for Class A shares and 2.50% for Class C
shares through August 31, 1998. Subject to those expense limitations, each
Fund pays all of its operating expenses not specifically assumed by CAM.
John P. Calamos and Nick P. Calamos are responsible for managing the
portfolios of Convertible Fund, Growth and Income Fund and Global Growth and
Income Fund; 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. During the past five years, John P. Calamos has
been president and a 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, a trustee of the Trust since 1997 and a
managing director of CAM and CFS.
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% in the case of
Class A shares, or 1.00% in the case of Class C shares, of the average
27
<PAGE>
daily net assets of the class (.25% as a service fee and the balance as a
distribution fee). 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. CFS may
reallow to investment professionals up to the full amount of the service fee
for services provided to shareholders, and up to the full amount of the
distribution fee for distribution services, based upon the level of services
provided. Reallowances by CFS on Class A shares are made quarterly in arrears.
Plan payments on Class C shares are made as follows: (i) for the first year
after investment, in a single payment advanced by CFS from its own resources;
and (ii) for the second and subsequent years, quarterly in arrears.
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 the investment performance of its
classes of shares from time to time in advertisements, sales literature and
otherwise. Convertible Fund, Growth and Income Fund and Strategic 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" for each class of
shares. Total Return for a class of shares of a Fund for a period is the
percentage change in value during a period of an investment in those 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 same class. Quotations
of Average Annual Total Return for Class A shares will take into account the
effect of the sales charge on the amount available for investment; quotations
of Total Return for Class A shares 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.
28
<PAGE>
LOGO
LOGO
LOGO
LOGO
29
<PAGE>
LOGO
LOGO
LOGO
LOGO
30
<PAGE>
LOGO
31
<PAGE>
CALAMOS FAMILY OF FUNDS
STANDARDIZED PERFORMANCE THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
Total Return Average Annual Total Return
------------- -----------------------------------------------
1 Year 5 Years 10 Years Since Inception
------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Convertible Fund
A Shares--
Inception: 6/21/85 12.94% 7.59% 12.47% 11.39% 9.78% 9.25% 11.17% 10.71%
C Shares--
Inception: 7/5/96 NA NA NA NA NA NA 11.12%/1/ NA
Growth and Income Fund
A Shares--
Inception: 9/22/88 12.86% 7.49% 13.34% 12.25% NA NA 13.60% 12.95%
C Shares--
Inception: 8/5/96 NA NA NA NA NA NA 10.83%/1/ NA
Strategic Income Fund
A Shares--
Inception: 9/4/90 7.42% 2.34% 7.26% 6.21% NA NA 8.59% 7.79%
Growth Fund
A Shares--
Inception: 9/4/90 19.08% 13.46% 11.04% 9.97% NA NA 14.77% 13.92%
C Shares--
Inception: 9/3/96 NA NA NA NA NA NA 5.35%/1/ NA
Global Growth and
Income Fund
A Shares--
Inception: 9/9/96 NA NA NA NA NA NA 8.04%/1/ 2.89%/1/
C Shares--
Inception: 9/24/96 NA NA NA NA NA NA 7.64%/1/ NA
</TABLE>
This chart provides performance return numbers for the five Funds and shows
both non-load-adjusted and load-adjusted returns, taking into consideration
the maximum 4.75% sales charge on A shares. Total return and average annual
total return performance measure net investment income and capital gain or
loss from portfolio investments and reflect changes in share price,
reinvestment of income and capital gain distributions. Returns for periods of
less than one year are not annualized.
Performance has not been adjusted for the sales charge in the UNSHADED area of
the chart.
Performance has been adjusted for the 4.75% sales charge in the SHADED area of
the chart.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed may
be worth more or less than their original cost.
/1/Total return is not annualized.
32
<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 Calamos 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. Prior to June 23, 1997 the
name of the Trust was CFS Investment Trust. Growth and Income Fund was named
"Calamos Small/Mid Cap Convertible Fund" prior to April 29, 1994.
SHARES
Under the terms of the Agreement and Declaration of Trust, the trustees may
issue an unlimited number of shares of beneficial interest without par value
for each series of shares authorized by the trustees and the trustees may
divide the shares of any series into two or more classes of shares of that
series. Currently the Trust has five series in operation, and each series
offers three classes of shares (Class A, Class C and Class I). All shares
issued will be fully paid and non-assessable and will have no preemptive or
conversion rights.
Class I shares of the Funds, which are offered only with a minimum initial
investment of $5 million, do not bear any sales, marketing or distribution
expenses. In the future, the board of trustees may authorize the issuance of
shares of additional series and additional classes of shares of any series.
Different classes of shares of a single series may bear different sales
charges and other expenses which may affect their relative performance.
Information regarding other classes of shares may be obtained by calling the
Distributor at the telephone number shown on the back cover page of this
prospectus or from any institution that makes available shares of the Funds.
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.
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
33
<PAGE>
fundamental policies or approving an investment advisory agreement. On any
matters submitted to a vote of shareholders, shares are voted by individual
series or class 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, 1997, John P. Calamos had the power to vote and dispose of 206,908
shares (50.2%) of Growth Fund. Of these shares, 85,442 shares (20.8%) were
held by CFS 401(k) Profit Sharing Plan and Trust, of which Mr. Calamos is
trustee and in which Mr. Calamos and other employees of Calamos Financial
Services, Inc. and Calamos Asset Management, Inc. are participants. 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 Mr. John Calamos is 1111 East Warrenville
Road, Naperville, Illinois 60563-1493.
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.
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
34
<PAGE>
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.
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.
35
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Key Features............................................................... 2
Expenses................................................................... 3
Financial Highlights....................................................... 5
Investment Objectives and Policies......................................... 11
Common Investment Practices................................................ 12
Risk of Investment......................................................... 19
Investment Restrictions.................................................... 19
How to Purchase Shares..................................................... 20
How to Redeem Shares....................................................... 24
Shareholder Services....................................................... 25
Dividends and Distributions................................................ 26
Taxes...................................................................... 26
Management of the Funds.................................................... 27
Performance Information.................................................... 28
Portfolio Transactions..................................................... 33
The Trust and Its Shares................................................... 33
Appendix--Description of Bond Ratings...................................... 34
</TABLE>
INVESTMENT ADVISER:
Calamos Asset Management, Inc.(R)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
DISTRIBUTOR:
Calamos Financial Services, Inc.(R)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
TRANSFER AGENT:
FPS Services, Inc.
P.O. Box 61503
King of Prussia, Pennsylvania 19406-0903
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 CALAMOS 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 CALAMOS 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.
LOGO
Convertible Fund
Growth And Income Fund
Strategic Income Fund
Growth Fund
Global Growth And Income Fund
PROSPECTUS
September 30, 1997
- --------------------------------------------------------------------------------
Calamos Investment Trust . 1111 East Warrenville Road
Naperville, Illinois 60563-1493
(630) 245-7200 . (800) 823-7386
<PAGE>
Prospectus September 30, 1997
Calamos Family of Funds/(R)/
Institutional Shares
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
Convertible Fund Seeks current income. Growth is a secondary
objective that the Fund also considers when
consistent with its objective of current income.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
Growth Fund Seeks long-term capital growth.
- -------------------------------------------------------------------------------
Global Growth and Income Fund Seeks high long-term total return through capital
appreciation and current income derived from a
globally diversified portfolio of convertible,
equity and fixed-income securities.
- -------------------------------------------------------------------------------
</TABLE>
Minimum initial investment: $5 million
-----------------------
Although each Fund is permitted to invest without limit in debt securities rated
below investment grade, commonly known as "junk bonds," only Strategic Income
Fund intends to invest as much as 35% or more of its net assets in such
securities. Those securities entail greater risks, including default risks,
than those found in higher rated securities. Investors should carefully
consider those risks before investing. See "Debt Securities."
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 by calling
the Trust at (800) 823-7386. You may also obtain the statement of additional
information and other information that has been electronically filed from the
SEC's web site (www.sec.gov).
Shares of the Funds are neither insured nor guaranteed by the U.S. Government or
any government agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
Key Features
Investment Objectives
The investment objectives of the Funds are stated on the cover of this
prospectus. 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
Growth Fund pays income dividends annually. Each other Fund pays income
dividends quarterly. 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."
Purchases and Redemptions
Class I shares of each Fund (referred to in this prospectus as "Institutional
Shares") are offered without any sales charge and are not subject to any 12b-1
charges. Each Fund also offers shares of two other classes of shares that bear
certain expenses not borne by the Institutional Shares.
Each class of shares of a Fund represents interests in the same portfolio of
investments of the Fund. The minimum initial investment in Institutional Shares
is $5 million. Shares are redeemable at net asset value, which may be more or
less than original cost. See "How to Purchase Shares" and "How to Redeem
Shares."
Investment Adviser
Calamos Asset Management, Inc./(R)/ ("CAM" or the "Adviser").
Distributor
Calamos Financial Services, Inc./(R)/ ("CFS" or the "Distributor").
2
<PAGE>
Expenses
The following tables show certain information concerning shareholder transaction
expenses and projected annual fund operating expenses for Institutional Shares
of the Funds:
<TABLE>
<CAPTION>
Global
Growth and Strategic Growth and
Convertible Income Income Growth Income
Fund Fund Fund Fund Fund
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge on purchases
(as a percentage of offering price)......... None None None None None
Maximum sales charge on reinvested
dividends................................... None None None None None
Deferred sales charge......................... None None None None None
Exchange fee.................................. None None None None None
Redemption fees (b)........................... None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees............................... .75% .75% .75% 1.00% 1.00%
12b-1 fees.................................... None None None None None
Other expenses (after expense reimbursement).. .25 .75(a) .75(a) .50(a) .50(a)
---- ---- ---- ---- ----
Total Fund operating expenses
(after expense reimbursement)............... 1.00% 1.50% 1.50% 1.50% 1.50%
</TABLE>
- ----------------
(a) Because Global Growth and Income Fund is newly organized, its "Other
expenses" reflect an estimate. The Adviser has voluntarily undertaken to
limit the annual ordinary operating expenses of Institutional Shares of each
Fund, as a percentage of the average net assets of the class, to 1.50%, and
the percentages shown for "Other expenses" take into account expected
expense reimbursements. Absent that limitation, the "Other expenses" and
"Total Fund operating expenses," respectively, for Institutional Shares of
the Funds other than Convertible Fund would be .85% and 1.60% for Growth and
Income Fund; 3.85% and 4.60% for Strategic Income Fund; 1.20% and 2.20% for
Growth Fund; and 2.30% and 3.30% for Global Growth and Income Fund. See
"Management of the Funds - The Adviser." Each Fund may incur expenses for
dividends paid on short positions that are not subject to the Adviser's
expense limitation and that are not included in "Other expenses." Only
Strategic Income Fund had such expenses, which amounted to .10% of average
net assets.
(b) A service charge of $9 is deducted from proceeds of redemption paid by wire.
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:
3
<PAGE>
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Convertible Fund $10 $32 $55 $122
Growth and Income Fund 15 47 82 179
Strategic Income Fund 16 50 87 190
Growth Fund 15 47 82 179
Global Growth and Income Fund 15 47 N/A N/A
</TABLE>
The purpose of these tables and the examples is to assist you in understanding
the various costs and expenses that an investor in a Fund bears, directly or
indirectly. The examples assume 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 examples should not be considered a representation of past or future
expenses; the actual expenses of the Funds and the annual rates 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.
Financial Highlights
Institutional Shares of the Funds have not previously been offered. However, the
Funds' annual report, which may be obtained from the Trust upon request at no
charge, contains financial and performance information for the Class A shares
and Class C shares of the Funds.
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.
Convertible Fund
Convertible Fund seeks current income. Growth is a secondary objective that the
Fund also considers when consistent with its objective of current income.
The 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 the 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. The Fund's
investments are concentrated in investment grade securities, and the Fund
expects to maintain, over the
4
<PAGE>
long-term, an average credit quality of BBB or better. However, debt securities
acquired by the 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 the Fund's past
investments in debt securities.
The 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 the Fund's
assets ordinarily is invested in "true" convertibles. Any portion of the 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
Growth and Income Fund seeks high long-term total return through capital
appreciation and current income. Under normal market conditions the Fund invests
at least 65% of its total assets in a diversified portfolio of convertible,
equity and fixed-income securities, with equal emphasis on capital appreciation
and current income. 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."
The 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
the 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 the Fund's past investment in debt
securities.
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, the Fund will invest at least 65% of its assets in income-
producing securities. In furtherance of its objective, the 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 the 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.
Growth Fund
Growth Fund seeks long-term capital growth.
5
<PAGE>
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. The 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, the 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."
Global Growth and Income Fund
Global Growth and Income Fund seeks high long-term total return through capital
appreciation and current income. Under normal market conditions the Fund invests
at least 65% of its total assets in a globally diversified portfolio of
convertible, equity and fixed-income securities with equal emphasis on capital
appreciation and current income. Normally the Fund invests in the securities
markets of at least three countries, which may include the United States.
The Fund generally invests in securities of companies that are medium-sized and
larger relative to the securities markets of the countries in which those
securities are traded. A significant portion of its assets will be invested in
securities of foreign issuers, which may be more volatile and less liquid than
the securities of United States companies. See "Common Investment Practices -
Foreign Securities" for more information.
The Fund's convertible and fixed-income investments are concentrated in
investment grade securities, and the Fund expects to maintain, over the long
term, an average credit quality of BBB or better or, in the case of unrated
securities, of comparable quality as determined by the Adviser. The debt
securities of foreign issuers are less likely to be rated by United States
rating agencies.
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
6
<PAGE>
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. Occasionally securities may be purchased on a when-
issued or delayed-delivery basis.
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, in which Strategic
Income Fund intends to invest as much as 35% or more of its assets, 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.
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 year ended
7
<PAGE>
March 31, 1997 for each Fund other than Growth Fund, which did not invest in
debt securities rated below investment grade during that period.
<TABLE>
<CAPTION>
Growth Global
and Strategic Growth and
Rating Convertible Income Income Income
Category Fund Fund Fund Fund
- ------------ ------------ ------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Govt. 15% 17% 0% 8
AAA - 0 0 0
AA 3 2 0 0
A 10 4 9 7
BBB 15 11 24 12
BB 3 7 6 0
B 3 10 32 1
CCC - 0 0 0
not rated 7 3 9 12
</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
Although each Fund may invest in convertible securities, only Convertible Fund
has a policy of investing at least 65% of its assets in convertible securities
under normal circumstances. Growth and Income Fund and Strategic Income Fund
expect that a significant portion of their respective assets will be invested in
convertible securities, but there is no minimum percentage of their 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.
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
8
<PAGE>
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.
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 composed 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.
9
<PAGE>
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.
Foreign Securities
Global Growth and Income Fund may invest all of its assets, and each other 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.
International investing allows you to achieve greater diversification and to
take advantage of changes in foreign economies and market conditions. Many
foreign economies have, from time to time, grown faster than the U.S. economy,
and the returns on investments in those countries have exceeded those of similar
U.S. investments, although there can be no assurance that these conditions will
continue.
You should understand and consider carefully the greater risks involved in
investing internationally. Investing in securities of non-U.S. issuers,
positions in which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts involve both
opportunities and risks not typically associated with investing in U.S.
securities. These 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; different
accounting, auditing and financial reporting standards; different settlement
periods and trading practices; less liquidity and frequently greater price
volatility in foreign markets than in the United States; imposition of foreign
taxes; and sometimes less advantageous legal, operational and financial
protections applicable to foreign subcustodial arrangements.
Although the Funds try to invest in companies and governments of countries
having stable political environments, there is the possibility of restriction of
foreign investment, expropriation of assets, 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 those countries.
10
<PAGE>
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the U.S. and other major
markets. There also may be a lower level of monitoring and regulation of
emerging markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited. Economies in
individual emerging markets may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Many emerging market countries
have experienced high rates of inflation for many years, which has had and may
continue to have very negative effects on the economies and securities markets
of those countries.
Any Fund may invest in ADRs that are not sponsored by the issuer of the
underlying security. To the extent it does so, the Fund would probably bear its
proportionate share of the expenses of the depository and might have greater
difficulty in receiving copies of the issuer's shareholder communications than
would be the case with a sponsored ADR.
When a Fund enters into a contract for the purchase or sale of a foreign
portfolio security, it usually is required to settle the purchase transaction in
the relevant foreign currency or receive the proceeds of the sale in that
currency. In either event, the Fund is obliged to acquire or dispose of an
appropriate amount of foreign currency by selling or buying an equivalent amount
of U.S. dollars. The Fund may wish to "lock-in" the U.S. dollar value of a
transaction at or near the time of the purchase or sale of the foreign portfolio
security at the exchange rate or rates then prevailing between the U.S. dollar
and the currency in which the security is denominated. The Fund may accomplish
such "transaction hedging" by purchasing or selling such foreign currencies on a
"spot" (i.e., cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt or delivery at a specified date or at any time within a
specified time period. In so doing, the Fund will attempt to insulate itself
against possible losses and gains resulting from a change in the relationship
between the U.S. dollar and the foreign currency during the period between the
date the security is purchased or sold and the date on which payment is made or
received. Similar transactions may be entered into by using other currencies if
the Fund seeks to move investments denominated in one currency to investments
denominated in another.
When a Fund invests in foreign securities, in addition to the risk of change in
the market value of portfolio securities, the value of the portfolio in U.S.
dollars is subject to fluctuations in the exchange rate between the foreign
currencies and the U.S. dollar. When, in the opinion of the Adviser, it is
desirable to limit or reduce exposure in a foreign currency in order to moderate
potential changes in the U.S. dollar value of the portfolio, the Fund may enter
into a forward currency exchange contract to sell or buy such foreign currency
(or another foreign currency that acts as a proxy for that currency) by which
the U.S. dollar value of certain underlying foreign portfolio securities can be
approximately matched by
11
<PAGE>
an equivalent U.S. dollar liability. This technique is known as "currency
hedging" and, by locking in a rate of exchange, is intended to moderate or
reduce the risk of change in the U.S. dollar value of the Fund's portfolio only
during the period of the forward 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. 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.
Neither type of foreign currency transaction will eliminate fluctuations in the
prices of the Fund's portfolio securities or prevent loss if the price of such
securities should decline. In addition, such forward foreign currency exchange
contracts will diminish the benefit of the appreciation in the U.S. dollar value
of that foreign currency. For further information on forward foreign currency
exchange transactions, see the Statement of Additional Information.
At March 31, 1997, Global Growth and Income Fund had invested 17% of its net
assets in foreign securities. No other Fund had as much as 1% of its net assets
so invested.
Warrants
Each Fund may invest up to 5% 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 2% of its net assets in warrants the underlying
common stock of which is not listed on the New York or American stock exchange
or, in the case of Global Growth and Income Fund, a recognized foreign exchange.
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.
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 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. Each 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.
12
<PAGE>
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.
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.
13
<PAGE>
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.
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 when the Adviser
determines that a defensive position is warranted. Such investments may be in
money market instruments, consisting of obligations of, or guaranteed as to
principal and interest by, the U.S. Government or its agencies or
instrumentalities; certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million and
which are regulated by the U.S. Government, its agencies or instrumentalities;
commercial paper rated in the highest category by a recognized rating agency;
and repurchase agreements. 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.
14
<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 any Fund may be greater than 100%. The portfolio turnover rate
of Global Growth and Income Fund is not expected to exceed 100% under normal
circumstances. A higher 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.
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.
How to Purchase Shares
Shares of the Funds are sold by Calamos Financial Services, Inc. ("CFS"), the
Funds' distributor, and may be purchased by check
15
<PAGE>
or wire sent as described below. Shares may also be purchased through selected
broker-dealers and banks that have signed agreements with CFS. The minimum
initial investment by a shareholder in Institutional Shares is $5 million. Each
Fund reserves the right to reject any order for the purchase of its shares in
whole or in part, to suspend the sale of its shares to the public in response to
conditions in the securities markets or otherwise or to reduce the minimum
initial investment applicable to certain purchases. Each purchase of shares is
confirmed by a written statement mailed to the shareholder, without issuance of
share certificates.
Offering Price
Institutional Shares of each Fund are sold without any sales charge. When
placing an order, you must specify that your order is for Institutional Shares.
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 5:00 p.m., Eastern 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. To insure proper
credit to your account, please call the Funds at (800) 823-7386 before sending
your wire. The wire should be sent to United Missouri Bank KC, N.A.; ABA #10-10-
00695; for FPS Services, Inc. bank account no. 98703719; FBO Calamos [fund name]
Fund; [shareholder name and account number]. The applicable offering price for a
purchase by wire is the offering price per share next determined after receipt
of the wired funds. Receipt of a wire could be delayed by delays on the Federal
Reserve Wire System. After you have wired funds, you must complete the
application form and send it to the Trust's transfer agent. A Fund will not
honor redemption requests until the completed application has been received, and
failure to submit a completed application may result in backup withholding as
required by the Internal Revenue Code.
Purchases by Mail
You may also purchase shares of a Fund by sending to the Trust's transfer agent
at its address shown on the back cover, 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. A subsequent investment
may be made by detaching the stub from your account statement and sending it
with your check in the envelope provided with your statement. All checks must be
drawn on a U.S. bank in U.S. funds. A check written by a third party will not be
accepted. A charge ($20 minimum) may be imposed if any check submitted for
investment does not clear. If you purchase shares by check, you will not be able
to redeem the shares until the check has been collected, which may take 15 days.
Purchases by Exchange
You may purchase shares of a Fund by exchange of shares from another Fund, by
exchange of shares of Money Market Portfolio, a portfolio of Cash Account Trust
(such shares are referred to as "Cash Account Shares") either by mail
16
<PAGE>
or by instructing your broker-dealer or other sales agent, who will communicate
your order to the Trust's transfer agent. See "How to Redeem Shares - Redemption
by Exchange." You may not make more than four exchanges from any Fund during any
calendar year. No sales charge is imposed on purchases of Institutional Shares
by exchange of Institutional Shares from another Fund or by exchange of Cash
Account Shares provided the aggregate value of your Institutional Shares of all
Funds is at least $5 million. Please review the information under "How to Redeem
Shares -Redemption by Exchange."
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, currently 3:00 p.m.
Chicago time, 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.
Redemption by Mail
A written request for redemption (and an endorsed share certificate, if issued)
must be received by the Fund's transfer agent to constitute a valid redemption
request.
Your redemption request must:
1. specify the Fund, your account number 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.
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<PAGE>
Redemption by Wire or Telephone
Broker-dealers or other sales agents may communicate redemption orders by wire
or telephone to the Trust's transfer agent. These firms may charge for their
services in connection with your redemption request but the Funds do not 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 $9 service charge for payment of redemption
proceeds by wire will be deducted from the proceeds.
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 those 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 the Trust's transfer agent. No
sales charge is imposed on purchases by exchange.
General
A check for proceeds of a redemption will not be released 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 through a wire
transfer of funds. A Fund may suspend the right of redemption under certain
extraordinary circumstances in accordance with the rules of the Securities and
Exchange Commission. Each Fund reserves the right upon 30 days' written notice
to involuntarily redeem, at net asset value, the shares of any shareholder whose
Institutional Class Shares of all Funds have an aggregate value of less than $5
million, unless the reduction in value to less than $5 million 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.
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<PAGE>
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 (sent to the
former address).
Systematic Withdrawal Plan
You may request that a Fund periodically redeem Institutional Shares having a
specified redemption value and send you a check for the proceeds. In order to
initiate the Systematic Withdrawal Plan, call (800) 823-7826 and request a
Systematic Withdrawal form. The periodic payments are proceeds of redemption and
are taxable as such.
Automatic Bank Draft Plan
If you own shares of a Fund, you may purchase additional shares of that Fund
through the Automatic Bank Draft Plan. Under the Plan, the Trust will
automatically debit your bank checking account on a monthly or semi-monthly
basis in an amount ($50 or more) specified by you and invest the specified
amount in additional shares of the Fund. To obtain an Automatic Bank Draft Plan
form, call (800) 823-7386. The Plan is not available to clients of Service
Organizations that offer similar investment services.
Exchange Privilege
You may exchange shares of any Fund for shares of another Fund or for Cash
Account Shares or exchange Cash Account Shares for shares of a Fund, without
payment of any sales charge 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 of the same class 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. Convertible Fund, Growth and Income Fund, Strategic Income Fund and Global
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.
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
19
<PAGE>
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.
Management of the Funds
The Trustees
The board of trustees of CALAMOS Investment Trust (the "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 March 31, 1997, CAM managed approximately $1.9
billion in assets of individuals and institutions. CAM is controlled by John P.
Calamos, who has been engaged in the investment advisory business since 1977.
Mr. Calamos is also the controlling 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 each Fund pays CAM a fee based on average daily net assets
that is accrued daily and paid monthly. The fee paid by Growth Fund is at the
annual rate of 1% of the first $150 million of average net assets and .75% of
average net assets in excess of $150 million. The fee paid by Global
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<PAGE>
Growth and Income Fund is at the annual rate of 1% of average net assets. The
fee paid by each other Fund is at the annual rate of .75% of the first $150
million of average net assets and .50% of average net assets in excess of $150
million.
CAM has voluntarily undertaken to limit the annual ordinary operating expenses
of shares of each Fund, as a percentage of the average net assets of the
particular class of shares, to 1.50% for Institutional Shares, 2.00% for Class A
shares and 2.50% for Class C shares through August 31, 1998. Subject to those
expense limitations, each Fund pays all of its operating expenses not
specifically assumed by CAM.
John P. Calamos and Nick P. Calamos are responsible for managing the portfolios
of Convertible Fund, Growth and Income Fund and Global Growth and Income Fund;
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.
During the past five years, John P. Calamos has been president and a 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, a trustee of the Trust since 1997 and a managing director of CAM and CFS.
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 the investment performance of its
classes of shares from time to time in advertisements, sales literature and
otherwise. Convertible Fund, Growth and Income Fund and Strategic 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" for each class of shares.
Total Return for a class of shares of a Fund for a period is the percentage
change in value during a period of an investment in those 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 same class. 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
21
<PAGE>
investments using different reinvestment assumptions or time periods.
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 Calamos 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. Prior to June 23, 1997 the name
of the Trust was CFS Investment Trust. Growth and Income Fund was named "Calamos
Small/Mid Cap Convertible Fund" prior to April 29, 1994.
Shares
Under the terms of the Agreement and Declaration of Trust, the trustees may
issue an unlimited number of shares of beneficial interest without par value for
each series of shares authorized by the trustees and the trustees may divide the
shares of any series into two or more classes of shares of that series.
Currently the Trust has five series in operation, and each series offers three
classes of shares (Class A, Class C and Class I). All shares issued will be
fully paid and non-assessable and will have no preemptive or conversion rights.
Class A shares of each Fund are offered at net asset value plus a sales charge
of up to 4.75% of the offering price and are subject to an annual .25% service
fee and a .25% distribution fee. Class C shares of each Fund are offered at net
asset value without an initial or contingent deferred sales charge if held for
at least one year but are subject to an annual .25% service fee and a .75%
distribution fee and, in the case of shares redeemed within one year, a 1%
contingent deferred sales charge. In the future, the board of trustees may
authorize the issuance of shares of additional series and additional classes of
shares of any series. Different classes of shares of a single series may bear
different sales charges and other expenses which may affect their relative
performance. Information regarding other classes of shares may be obtained by
calling the Distributor at the telephone number shown on the back cover page of
this prospectus or from any institution that makes available shares of the
Funds.
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
22
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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.
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 or class 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, 1997, John P. Calamos had the power to vote and dispose of 206,908
shares (50.2%) of Growth Fund. Of these shares, 85,442 shares (20.8%) were held
by CFS 401(k) Profit Sharing Plan and Trust, of which Mr. Calamos is trustee and
in which Mr. Calamos and other employees of Calamos Financial Services, Inc. and
Calamos Asset Management, Inc. are participants. 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 Mr. John Calamos is 1111 East Warrenville Road, Naperville, Illinois 60563-
1493.
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
23
<PAGE>
evaluated independently. Ratings are based on current information furnished by
the issuer or obtained by the ratings services from other sources which they
consider reliable. Ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information, or for other reasons.
The following is a description of the characteristics of ratings used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
Moody's Ratings
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt-edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards. Together with
the Aaa group they comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa bonds or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long term risk
appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba--Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B--Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or there
may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high degree.
Such bonds are often in default or have other marked shortcomings.
S&P Ratings
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
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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.
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Table of Contents
Page
----
Key Features............................................................. 2
Expenses................................................................. 3
Financial Highlights..................................................... 4
Investment Objectives and Policies....................................... 4
Common Investment Practices.............................................. 6
Risk of Investment....................................................... 15
Investment Restrictions.................................................. 15
How to Purchase Shares................................................... 15
How to Redeem Shares..................................................... 17
Shareholder Services..................................................... 19
Dividends and Distributions.............................................. 19
Taxes.................................................................... 19
Management of the Funds.................................................. 20
Performance Information.................................................. 21
Portfolio Transactions................................................... 22
The Trust and Its Shares................................................. 22
Appendix--Description of Bond Ratings.................................... 23
Investment Adviser:
Calamos Asset Management, Inc.(R)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Distributor:
Calamos Financial Services, Inc.(R)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Transfer Agent:
FPS Services, Inc.
P.O. BOX 61503
King of Prussia, Pennsylvania 19406-0903
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 Calamos 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 Calamos 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.
Calamos Family of Funds(R)
Convertible Fund
Growth And Income Fund
Strategic Income Fund
Growth Fund
Global Growth And Income Fund
Prospectus
September 30, 1997
1111 East Warrenville Road
Naperville, Illinois 60563-1493
(630) 245-7200
(800) 823-7386
<PAGE>
Statement of Additional Information September 30, 1997
CALAMOS FAMILY OF FUNDS(R)
Convertible Fund
Growth and Income Fund
Strategic Income Fund
Growth Fund
Global Growth and Income Fund
================================================================================
1111 East Warrenville Road
Naperville, Illinois 60563-1493
(630) 245-7200
Toll Free: (800) 8-CFS-FUND (800/823-7386)
This Statement of Additional Information relates to Calamos Convertible
Fund(R), Calamos Growth and Income Fund(R), Calamos Strategic Income Fund(R),
Calamos Growth Fund(R) and Calamos Global Growth and Income Fund(R) (the
"Funds"), each of which is a series of Calamos Investment Trust (the "Trust"),
formerly named CFS Investment Trust. It is not a prospectus, but provides
information that should be read in conjunction with the Funds' prospectus dated
the same date as this Statement of Additional Information and any supplements
thereto. The prospectus may be obtained without charge by writing or telephoning
the Funds at the address or telephone numbers set forth above.
TABLE OF CONTENTS
Page
----
Investment Objectives..................................... 2
Investment Practices...................................... 2
Investment Restrictions................................... 13
Management................................................ 15
Investment Advisory Services.............................. 17
Distribution Plan......................................... 18
Purchasing and Redeeming Shares........................... 19
Performance Information................................... 20
Distributor............................................... 23
Portfolio Transactions.................................... 24
Taxation.................................................. 25
Allocation Among Funds.................................... 26
Certain Shareholders...................................... 26
Custodian................................................. 28
Independent Auditors...................................... 28
General Information....................................... 28
Financial Statements...................................... 28
B-1
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INVESTMENT OBJECTIVES
Each Fund's investment objective is shown below:
Convertible Fund seeks current income. Growth is a secondary objective that
the Fund also considers when consistent with its objective of current income.
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.
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.
Growth Fund seeks long-term capital growth.
Global Growth and Income Fund seeks high long-term total return through
capital appreciation and current income derived from a globally diversified
portfolio of convertible, equity and fixed-income securities.
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.
INVESTMENT PRACTICES
In pursuing its investment objective, each Fund will invest as described
below and in the prospectus.
Foreign Securities
Global Growth and Income Fund may invest all of its assets, and each other
Fund may invest up to 25% of its net assets, in securities of foreign issuers.
Foreign securities may entail a greater degree of risk (including risks 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 Depositary Receipts (ADRs) or
securities guaranteed by a United States person.
Each Fund may also purchase foreign securities in the form of European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) or other
securities representing underlying shares of foreign issuers. Positions in those
securities are not necessarily denominated in the same currency as the common
stocks into which they may be converted. ADRs are receipts typically issued by
an American bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts listed on the Luxembourg Stock Exchange
evidencing a similar arrangement. GDRs are U.S. dollar-denominated receipts
evidencing ownership of foreign securities. Generally, ADRs, in registered form,
are designed for the U.S. securities markets and EDRs and GDRs, in bearer form,
are designed for use in foreign securities markets. Each Fund may invest in
sponsored or unsponsored ADRs. In the case of an unsponsored ADR, the Fund is
likely to bear its proportionate share of the expenses of the depository and it
may have greater difficulty in receiving shareholder communications than it
would have with a sponsored ADR.
B-2
<PAGE>
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 those currencies. For example, if the dollar
falls in value relative to the Japanese yen, the dollar value of a Japanese
stock held in the portfolio will rise even though the price of the stock remains
unchanged. Conversely, if the dollar rises in value relative to the yen, the
dollar value of the Japanese stock will fall. (See discussion of transaction
hedging and portfolio hedging below under "Currency Exchange Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; and sometimes less advantageous legal, operational
and financial protections applicable to foreign sub-custodial arrangements.
Although the 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
other than Global Growth and Income Fund expects that substantially all of its
investments 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, foreign
exchange dealers and broker-dealers, are not exchange traded, and are usually
for less than one year, but may be renewed.
Forward currency exchange transactions may involve currencies of the
different countries in which the Funds may invest and serve as hedges against
possible variations in the exchange rate between these currencies. Currency
exchange transactions are limited to transaction hedging and portfolio hedging
involving either specific transactions or portfolio positions, except to the
extent described below under "Synthetic Foreign Money Market Positions."
Transaction hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of 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 foreign
currency. Portfolio hedging allows the Fund to limit or reduce its exposure in a
foreign currency by entering into a forward contract to sell such foreign
currency (or another foreign currency that acts as a proxy for that currency) at
a future date for a price payable in U.S. dollars so that the value of the
foreign denominated portfolio securities can be approximately matched by a
foreign denominated liability. The 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, except that
the Fund may hedge all or part of its foreign currency exposure through the use
of a basket of currencies or a proxy currency where such currencies or currency
act as an effective proxy for other currencies. In such a case, the Fund may
enter into a forward contract where the amount of the foreign currency to be
sold exceeds the value of the securities denominated in such currency. The use
of this basket hedging
B-3
<PAGE>
technique may be more efficient and economical than entering into separate
forward contracts for each currency held in the Fund. The Fund may not 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
to deliver a particular currency, the Fund may either sell the portfolio
security related to the contract and make delivery of the currency, or it may
retain the security and either acquire the currency on the spot market or
terminate its contractual obligation to deliver the currency by purchasing an
offsetting contract with the same currency trader obligating it to purchase on
the same maturity date the same amount of the currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for 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 the Fund is obligated to deliver.
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.
Synthetic Foreign Money Market Positions. Each Fund may invest in money
market instruments denominated in foreign currencies. In addition to, or in lieu
of, such direct investment, a Fund may construct a synthetic foreign money
market position by (a) purchasing a money market instrument denominated in one
currency, generally U.S. dollars, and (b) concurrently entering into a forward
contract to deliver a corresponding amount of that currency in exchange for a
different currency on a future date and at a specified rate of exchange. For
example, a synthetic money market position in Japanese yen could be constructed
by purchasing a U.S. dollar money market instrument, and entering concurrently
into a forward contract to deliver a corresponding amount of U.S. dollars in
exchange for Japanese yen on a specified date and at a specified rate of
exchange. Because of the availability of a variety of highly liquid short-term
U.S. dollar money market instruments, a synthetic money market position
utilizing such U.S. dollar instruments may offer greater liquidity than direct
investment in foreign currency and a concurrent construction of a synthetic
position in such foreign currency, in terms of both income yield and gain or
loss from changes in currency exchange rates, in general should be similar, but
would not be identical because the components of the alternative investments
would not be identical.
B-4
<PAGE>
Lending of Portfolio Securities
Each Fund may lend its portfolio securities to broker-dealers and banks.
Any such loan must be continuously secured by collateral in cash or cash
equivalents maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The Fund would have
the right to call the loan and obtain the securities loaned at any time on
notice of not more than five business days. The Fund would not have the right to
vote the securities during the existence of the loan but would call the loan to
permit voting of the securities, if, in the Adviser's judgment, a material event
requiring a shareholder vote would otherwise occur before the loan was repaid.
In the event of bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or recovering the
loaned securities and losses, including (a) possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c) expenses of
enforcing its rights.
Repurchase Agreements
Each Fund may invest in repurchase agreements, provided that Global Growth
and Income Fund may not invest more than 15%, and each other Fund may not invest
more than 10%, of its net assets in repurchase agreements maturing in more than
seven days and any other illiquid securities. A repurchase agreement is a sale
of securities to the Fund in which the seller agrees to repurchase the
securities at a higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of bankruptcy of the
seller, the Fund could experience both losses and delays in liquidating its
collateral.
Options on Securities, Indexes and Currencies
Each Fund may purchase and sell put options and call options on securities,
indexes or foreign currencies in standardized contracts traded on recognized
securities exchanges, boards of trade, or similar entities, or quoted on NASDAQ.
A Fund may purchase agreements, sometimes called cash puts, that may accompany
the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign currency has the
obligation upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference between the
cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
A Fund will write call options and put options only if they are "covered."
For example, in the case of a call option on a security, the option is "covered"
if the Fund owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or, if additional cash consideration is required, cash or cash equivalents in
such amount are held in a segregated account by its custodian) upon conversion
or exchange of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price and
B-5
<PAGE>
expiration). There can be no assurance, however, that a closing purchase or sale
transaction can be effected when the Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or
index, and the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by the Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.
Risks Associated with Options. There are several risks associated with
transactions in options. For example, there are significant differences between
the securities markets, the currency markets and the options markets that could
result in an imperfect correlation among these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If the Fund were unable to close out an option
that it has purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
the 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 until the option
expired. As the writer of a covered call option on a security, the 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. As the writer of a covered call
option on a foreign currency, the Fund foregoes, during the option's life, the
opportunity to profit from currency appreciation.
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 not be able to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
Each Fund may use interest rate futures contracts, index futures contracts
and foreign currency futures contracts. An interest rate, index or foreign
currency futures contract provides for the future sale by one party and purchase
by another party of a specified quantity of a financial instrument or the cash
value of an index/1/ at a specified price and time. A public market exists in
futures contracts covering a number of indexes (including, but not limited to:
the Standard & Poor's 500 Index, the Russell 2000 Index, the Value Line
Composite Index, and the New York Stock Exchange Composite Index) as well as
financial instruments (including, but not limited to: U.S. Treasury bonds, U.S.
Treasury notes, Eurodollar
- ----------------------------
/1/ A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was
originally written. Although the value of a securities index is a function
of the value of certain specified securities, no physical delivery of
those securities is made.
B-6
<PAGE>
certificates of deposit and foreign currencies). Other index and financial
instrument futures contracts are available and it is expected that additional
futures contracts will be developed and traded.
Each Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option, the
opposite is true. The Fund might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of stock prices,
anticipated changes in interest rates or currency fluctuations that might
adversely affect either the value of the Fund's securities or the price of the
securities that the Fund intends to purchase. Although other techniques could be
used to reduce or increase the Fund's exposure to stock price, interest rate and
currency fluctuations, the Fund may be able to achieve its desired exposure more
effectively and perhaps at a lower cost by using futures contracts and futures
options.
A Fund will only enter into futures contracts and futures options that are
standardized and traded on an exchange, board of trade or similar entity, or
quoted on an automated quotation system.
The success of any futures transaction depends on the Adviser correctly
predicting changes in the level and direction of stock prices, interest rates,
currency exchange rates and other factors. Should those predictions be
incorrect, the Fund's return might have been better had the transaction not been
attempted; however, in the absence of the ability to use futures contracts, the
Adviser might have taken portfolio actions in anticipation of the same market
movements with similar investment results, but, presumably, at greater
transaction costs.
When a purchase or sale of a futures contract is made by a Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin required for a futures
contract is set by the exchange on which the contract is traded and may be
modified during the term of the contract, although a Fund's broker may require
margin deposits in excess of the minimum required by the exchange. The initial
margin is in the nature of a performance bond or good faith deposit on the
futures contract, which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been satisfied. The Fund
expects to earn interest income on its initial margin deposits. A futures
contract held by the Fund is valued daily at the official settlement price of
the exchange on which it is traded. Each day the Fund pays or receives cash,
called "variation margin," equal to the daily change in value of the futures
contract. This process is known as "marking-to-market." Variation margin paid or
received by the Fund does not represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of the amount one would owe
the other if the futures contract had expired at the close of the previous day.
In computing daily net asset value, the Fund will mark-to-market its open
futures positions.
The Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option and
other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund engaging in the
transaction realizes a capital gain, or if it is more, the Fund realizes a
capital loss. Conversely, if an offsetting sale price is more than the original
purchase price, the Fund engaging in the transaction realizes a capital gain, or
if it less, the Fund realizes a capital loss. The transaction costs must also be
included in these calculations.
B-7
<PAGE>
Risks Associated with Futures. There are several risks associated with the
use of futures contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. In trying to increase or reduce market exposure, there can be no
guarantee that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as: variations in speculative market
demand for futures, futures options and the related securities, including
technical influences in futures and futures options trading and differences
between the securities markets and the securities underlying the standard
contracts available for trading. For example, in the case of index futures
contracts, the composition of the index, including the issuers and the weighing
of each issue, may differ from the composition of the Fund's portfolio, and, in
the case of interest rate futures contracts, the interest rate levels,
maturities and creditworthiness of the issues underlying the futures contract
may differ from the financial instruments held in the Fund's portfolio. A
decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected stock price
or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses. Stock index
futures contracts are not normally subject to such daily price change
limitations.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or futures option position. 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, many of the contracts discussed above are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.
Limitations on Options and Futures
If other options, futures contracts or futures options of types other than
those described herein are traded in the future, a Fund may also use those
investment vehicles, provided the board of trustees determines that their use is
consistent with the Fund's investment objective.
A Fund will not enter into a futures contract or purchase an option thereon
if, immediately thereafter, the initial margin deposits for futures contracts
held by the Fund plus premiums paid by it for open futures option positions,
less the amount by which any such positions are "in-the-money,"/2/ would exceed
5% of the Fund's total assets.
When purchasing a futures contract or writing a put option on a futures
contract, a Fund must maintain with its custodian (or broker, if legally
permitted) cash or cash equivalents (including any margin) equal to the market
value of such contract. When writing a call option on a futures contract, the
Fund
- --------------------------------
/2/ A call option is "in-the-money" if the value of the futures contract that
is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures
contract that is the subject of the option.
B-8
<PAGE>
similarly will maintain with its custodian cash or cash equivalents (including
any margin) equal to the amount by which such option is in-the-money until the
option expires or is closed by the Fund.
A Fund may not maintain open short positions in futures contracts, call
options written on futures contracts or call options written on indexes if, in
the aggregate, the market value of all such open positions exceeds the current
value of the securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative volatility of
the relationship between the portfolio and the positions. For this purpose, to
the extent the Fund has written call options on specific securities in its
portfolio, the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," a Fund will use
commodity futures or commodity options contracts solely for bona fide hedging
purposes within the meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts that do not come
within the meaning and intent of 1.3(z), the aggregate initial margin and
premiums required to establish such positions will not exceed 5% of the fair
market value of the assets of the Fund, after taking into account unrealized
profits and unrealized losses on any such contracts it has entered into [in the
case of an option that is in-the-money at the time of purchase, the in-the-money
amount (as defined in Section 190.01(x) of the Commission Regulations) may be
excluded in computing such 5%].
As long as a Fund continues to sell its shares in certain states, the
Fund's options and futures transactions will also be subject to certain non-
fundamental investment restrictions set forth under "Investment Restrictions" in
this Statement of Additional Information.
Taxation of Options and Futures
If a Fund exercises a call or put option that it holds, the premium paid
for the option is added to the cost basis of the security purchased (call) or
deducted from the proceeds of the security sold (put). For cash settlement
options and futures options exercised by the Fund, the difference between the
cash received at exercise and the premium paid is a capital gain or loss.
If a call or put option written by a Fund is exercised, the premium is
included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by the Fund, the difference between the cash
paid at exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain or
loss. If an option written by a Fund was in-the-money at the time it was written
and the security covering the option was held for more than the long-term
holding period prior to the writing of the option, any loss realized as a result
of a closing purchase transaction will be long-term. The holding period of the
securities covering an in-the-money option will not include the period of time
the option is outstanding.
If a Fund writes an equity call option/3/ other than a "qualified covered
call option," as defined in the Internal Revenue Code, any loss on such option
transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.
- ---------------------
/3/ An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel-casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).
B-9
<PAGE>
A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If the Fund delivers securities under a futures contract, the
Fund also realizes a capital gain or loss on those securities.
For federal income tax purposes, a Fund generally is required to recognize
as income for each taxable year its net unrealized gains and losses as of the
end of the year on futures, futures options and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual closing of the
positions) is considered to be 60% long-term and 40% short-term, without regard
to the holding periods of the contracts. However, in the case of positions
classified as part of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options positions, the related
securities and certain successor positions thereto) may be deferred to a later
taxable year. Sale of futures contracts or writing of call options (or futures
call options) or buying put options (or futures put options) that are intended
to hedge against a change in the value of securities held by the Fund: (1) will
affect the holding period of the hedged securities; and (2) may cause unrealized
gain or loss on such securities to be recognized upon entry into the hedge.
If a Fund were to enter into a short index future, short index futures
option or short index option position and the Fund's portfolio were deemed to
"mimic" the performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions would be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for a Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends, interest,
income derived from loans of securities and gains from the sale of securities or
foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts). Any net gain realized from futures (or
futures options) contracts will be considered gain from the sale of securities
and therefore be qualifying income for purposes of the 90% requirement.
Each Fund distributes to shareholders annually any net capital gains that
have been recognized for federal income tax purposes (including year-end mark-
to-market gains) on options and futures transactions. Such distributions are
combined with distributions of capital gains realized on the Fund's other
investments, and shareholders are advised of the nature of the payments.
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 calls for redemption, general conditions in the securities markets,
more favorable investment opportunities in other securities, or other factors
relating to the desirability of holding or changing a portfolio investment. The
portfolio turnover rates may vary greatly from year to year. A high rate of
portfolio turnover in 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. Each Fund other than Strategic
Income Fund
B-10
<PAGE>
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.
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.
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."
B-11
<PAGE>
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. No Fund other than Global Growth and Income Fund and Growth Fund
currently intends to invest in securities of unseasoned issuers.
"When-Issued" and Delayed Delivery Securities and Reverse Repurchase Agreements
Each Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The Fund makes such commitments only with the intention
of actually acquiring the securities, but may sell the securities before
settlement date if the Adviser deems it advisable for investment reasons. The
Fund may utilize spot and forward foreign currency exchange transactions to
reduce the risk inherent in fluctuations in the exchange rate between one
currency and another when securities are purchased or sold on a when-issued or
delayed-delivery basis.
Each Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
At the time when a Fund enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse repurchase agreement,
liquid assets (cash, U.S. Government securities or other "high-grade" debt
obligations) of the Fund having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books of the Fund
and held by the custodian throughout the period of the obligation. The use of
these investment strategies, as well as borrowing under a line of credit as
described below, may increase net asset value fluctuation.
Illiquid Securities
Global Growth and Income Fund may invest up to 15% of its total assets, and
each other 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 are subject to restrictions on resale because
they have not been registered for sale under the Securities Act of 1933. A
position in restricted securities might adversely affect the liquidity and
marketability of a portion of the 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 percentage 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.
B-12
<PAGE>
Rule 144A Securities
If the Trust is a qualified institution, each Fund may purchase securities
that have been privately placed but that are eligible for purchase and sale
under Rule 144A under the 1933 Act. That Rule permits certain qualified
institutional buyers to trade in privately placed securities that have not been
registered for sale under the 1933 Act. The Adviser, under the supervision of
the board of trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Fund's restriction of investing no
more than a specified percentage of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is a question of
fact. In making this determination, the Adviser will consider the trading
markets for the specific security, taking into account the unregistered nature
of a Rule 144A security. In addition, the Adviser could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market and (4) nature of a security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than the specified
percentage of its assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of a Fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities. No Fund expects to invest as much as 5% of its net
assets in Rule 144A securities.
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.
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;
B-13
<PAGE>
(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% (or 15% in the case of Global Growth and Income
Fund) 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 agreements/4/
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.
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, 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
- ----------------------------
/4/ No Fund currently intends to enter into reverse repurchase agreements.
B-14
<PAGE>
as collateral or allocated to segregated accounts in connection with short sales
other than those described in clause (i);
(e) invest more than 5% of the Fund's net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in warrants that are
not listed on the New York or American stock exchange or a recognized foreign
exchange;
(f) write an option on a security unless the option is issued by the
Options Clearing Corporation, an exchange or similar entity;
(g) buy or sell an option on a security, a futures contract or an option
on a futures contract, unless the option, 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;
(h) purchase a put or call option if the aggregate premiums paid for all
put and call options exceed 20% of its net assets (less the amount by which any
such positions are in-the-money), excluding put and call options purchased as
closing transactions;
(i) invest more than 25% of its net assets (valued at time of purchase) in
securities of foreign issuers (other than securities represented by American
Depositary Receipts and securities guaranteed by a U.S. person), except that
Global Growth and Income Fund may invest all of its assets in securities of
foreign issuers.
Restrictions (a) through (i) may be changed by the board of trustees
without shareholder approval.
Notwithstanding the foregoing investment restrictions, a Fund may purchase
securities pursuant to the exercise of subscription rights, subject to the
condition that such purchase will not result in the Fund's ceasing to be a
diversified investment company. Far Eastern and European corporations frequently
issue additional capital stock by means of subscription rights offerings to
existing shareholders at a price substantially below the market price of the
shares. The failure to exercise such rights would result in the Fund's interest
in the issuing company being diluted. The market for such rights is not well
developed in all cases and, accordingly, the Fund may not always realize full
value on the sale of rights. The exception applies in cases where the limits set
forth in the investment restrictions would otherwise be exceeded by exercising
rights or would have already been exceeded as a result of fluctuations in the
market value of the Fund's portfolio securities with the result that the Fund
would be forced either to sell securities at a time when it might not otherwise
have done so, to forego exercising the rights.
MANAGEMENT
Trustees and Officers
Set forth below is information about the trustees and officers of CFS
Investment Trust (the "Trust").
<TABLE>
<CAPTION>
Name, Position(s) with Trust Principal Occupation(s)
and Age at March 31, 1997 During Past Five Years
- ----------------------------------------- -------------------------------------
<S> <C>
John P. Calamos (1) President, Calamos Asset Management,
Trustee and President, 56 Inc. ("CAM"), an investment adviser
and the Funds' investment adviser;
President, Calamos Financial
Services, Inc. ("CFS"), a broker-
dealer and the Funds' distributor.
Nick P. Calamos Managing Director, CAM and CFS.
Trustee and Vice President, 37
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
Name, Position(s) with Trust Principal Occupation(s)
and Age at March 31, 1997 During Past Five Years
- ---------------------------- -----------------------
<S> <C>
Richard J. Dowen (2) Professor of Finance, Northern Illinois
Trustee, 52 University.
Robert Frost (2) Management Consultant, ECOM Consultants, Inc.
Trustee, 57
William A. Kaun (2) Principal, W.A. Kaun Co. (investment adviser
Trustee, 69 and publisher).
Helen L. Callaghan Controller, CAM and CFS.
Treasurer, 33
Nancy B. Lynn Vice president, compliance officer of CAM
Secretary, 39 and CFS since 1997; vice president,
Heitman/PRA Advisors, Inc. (investment
adviser), prior thereto.
</TABLE>
______________________
(1) John P. Calamos and Nick P. Calamos are trustees who are "interested
persons" of the Trust as defined in the Investment Company Act of 1940 (the
"1940 Act") and are members of the executive committee of the board of
trustees, which has authority during intervals between meetings of the
board of trustees to exercise the powers of the board.
(2) Messrs. Dowen, Frost and Kaun are members of the audit committee of the
board of trustees, which makes recommendations regarding the selection of
the Trust's independent auditors and meets with representatives of the
independent auditors to determine the scope and review the results of each
audit.
The address of Mr. Dowen is Department of Finance, Northern Illinois
University, DeKalb, Illinois 60115; that of Mr. Frost is 53 Ward Drive, New
Rochelle, New York 10804; and that of Mr. Kaun is 1750 Grandstand Place, Elgin,
Illinois 60123. The address of the officers of the Trust is 1111 East
Warrenville Road, Naperville, Illinois 60563-1493. Nick Calamos is a nephew of
John Calamos.
The following table shows the compensation paid by the Trust for the year
ended March 31, 1997 to each trustee who was not an "interested person" of the
Trust:
<TABLE>
<CAPTION>
Aggregate
Compensation
Name of Trustee from the Trust*
--------------- ---------------
<S> <C>
Richard J. Dowen $6,700
Robert Frost 6,700
William A. Kaun 6,700
</TABLE>
---------------------------
*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.
B-16
<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 Fund pays the Adviser a fee
accrued daily and paid monthly. Growth Fund pays a fee at the annual rate of 1%
of the first $150 million of the Fund's average daily net assets and .75% of
average daily net assets in excess of $150 million. Global Growth and Income
Fund pays a fee at the annual rate of 1% of average net assets. Each other Fund
pays a fee at the annual rate of .75% of the first $150 million of average net
assets and .50% 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
Year Year Months
Ended Ended Ended
<S> <C> <C> <C>
3/31/97 3/31/96 3/31/95
-------- -------- --------
Convertible Fund $230,573 $148,187 $113,445
Growth and Income Fund
Advisory fee $ 54,520 $ 32,870 $ 27,059
Waiver or reimbursement 7,042 4,132 6,006
-------- -------- --------
Net fee $ 47,478 $ 28,738 $ 21,053
Strategic Income Fund
Advisory fee $ 11,203 $ 14,092 $ 17,684
Waiver or reimbursement 45,456 29,705 25,683
-------- -------- --------
Net fee $(34,253) $(15,613) $ (7,999)
Growth Fund
Advisory fee $ 47,557 $ 23,290 $ 17,037
Waiver or reimbursement 33,966 27,383 27,587
-------- -------- --------
Net fee $ 13,591 $ (4,093) $(10,550)
Global Growth and Income Fund*
Advisory Fee $ 13,646 $ -- $ --
Waiver or reimbursement 24,597 -- --
-------- -------- --------
Net Fee $(10,951) $ -- $ --
</TABLE>
- ---------------------------------
* Global Growth and Income Fund commenced operations on September 9,
1996.
The Agreement will remain in effect with respect to each Fund until July 5,
1998, 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 "Calamos" in the name of the Trust and 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
B-17
<PAGE>
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.
The Adviser has voluntarily undertaken to reimburse each class of shares
for any annual operating expenses through August 31, 1998 in excess of certain
limits as described in the prospectus under "Management of the Funds -- The
Adviser."
DISTRIBUTION PLAN
The Trust has adopted a plan pursuant to rule 12b-1 under the Investment
Company Act of 1940 (the "Plans"), whereby Class A shares and Class C shares of
each Fund pay to Calamos Financial Services, Inc., the Funds' distributor
("CFS"), service and distribution fees as described in the prospectus under
"Management of the Funds -- Distribution Plan."
The board of trustees of the Trust has determined that a continuous cash
flow resulting from the sale of new Class A shares and Class C 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
substance of the Plan has also been approved by the vote of a majority of the
outstanding shares of each of the Funds. 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.
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
B-18
<PAGE>
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 year ended March 31, 1997, each of the Funds made payments to
CFS pursuant to the Plan in the following amounts:
<TABLE>
<CAPTION>
Global
Convertible Growth and Strategic Growth and
Fund Income Fund Income Fund Growth Fund Income Fund
---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$160,037 $36,700 $7,469 $23,787 $7,384
</TABLE>
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
In computing the net asset value of each Fund, 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 (the "NYSE") is open for trading. That Exchange is regularly
closed on Saturdays and Sundays and on New Year's Day, the third Mondays in
January and February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving and Christmas. If one of these holidays falls on a
Saturday or Sunday, the NYSE will be closed on the preceding Friday or the
following Monday, respectively.
Securities that are principally traded in a foreign market are valued as of
the close of the appropriate exchange or other designated time. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed at various times before the
B-19
<PAGE>
close of business on each day on which the NYSE is open. Trading of these
securities may not take place on every NYSE business day. In addition, trading
may take place in various foreign markets on Saturdays or on other days when the
NYSE is not open and on which the Fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the Fund's portfolio may be significantly affected
on days when shares of the Fund may not be purchased or redeemed.
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.
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ERV = P(1+T)n
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment made at the beginning of the
period, at the end of the period (or fractional portion thereof)
</TABLE>
Total Return (taking into account the effect of the sales charge) and
Average Annual Total Return for Class A shares of each of the Funds (other than
Global Growth and Income Fund, which had not commenced operations) was as shown
below for the following periods ended March 31, 1997. As of that date, no Class
I shares of any Fund had been issued.
B-20
<PAGE>
<TABLE>
<CAPTION>
Average Annual
Total Return Total Return
------------- --------------
Class A Class C Class A Class C
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Convertible Fund
One year...................................... 7.59% NA 7.59% NA
Five years.................................... 71.50 NA 11.39 NA
Ten years..................................... 142.29 NA 9.25 NA
Life of Fund (June 21, 1985 - A Shares,
July 5, 1996 - C Shares)................. 231.57 11.12% 10.71 NA
Growth and Income Fund
One year...................................... 7.49 NA 7.49 NA
Five years.................................... 78.26 NA 12.25 NA
Life of Fund (September 22, 1988 - A Shares,
August 5, 1996 - C Shares)............... 182.41 10.83 12.95 NA
Strategic Income Fund
One year...................................... 2.34 NA 2.34 NA
Five years.................................... 35.17 NA 6.21 NA
Life of Fund (September 4, 1990).............. 63.76 NA 7.79 NA
Growth Fund
One year...................................... 13.46 NA 13.46 NA
Five years.................................... 60.85 NA 9.97 NA
Life of Fund (September 4, 1990 - A Shares,
September 3, 1996 - C Shares)............ 135.66 5.35 13.92 NA
Global Growth and Income Fund
Life of Fund (September 9, 1996 - A Shares,
September 24, 1996 - C Shares)........... 2.89 7.64 NA NA
</TABLE>
- ----------------------
*Not annualized
Yield
Each Fund other than Growth 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.
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 Class A shares of Strategic Income Fund for the 30
days ended March 31, 1997 was 3.53%. No Class C shares or Class I shares of that
Fund were outstanding.
B-21
<PAGE>
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.
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 Money
Business Week Mutual Fund Letter
Changing Times Mutual Fund Values (Morningstar)
Chicago Tribune Newsweek
Chicago Sun-Times The New York Times
Crain's Chicago Business Pensions and Investments
Consumer Reports Personal Investor
Consumer Digest Stanger Reports
Financial World Time
Forbes USA Today
Fortune U.S. News and World Report
Investor's Daily The Wall Street Journal
Los Angeles Times
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;
Global Growth and Income Fund - Morgan Stanley Capital International World
Index. 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
B-22
<PAGE>
(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.
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
60563-1493. 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
Year Year Months
Ended Ended Ended
3/31/97 3/31/96 3/31/95
-------- -------- --------
<S> <C> <C> <C>
Convertible Fund
Commissions received $ 98,409 $150,460 $ 5,191
Commissions retained 40,972 25,675 1,015
Growth and Income Fund
Commissions received 6,485 15,718 7,324
Commissions retained 4,980 2,741 1,264
Strategic Income Fund
Commissions received -- 1,605 3,505
Commissions retained -- 394 698
Growth Fund
Commissions received 759 706 2,539
Commissions retained 401 706 1,607
Global Growth and Income Fund*
Commissions received 76 N/A N/A
Commissions retained 36 N/A N/A
</TABLE>
- -----------------------------------
* Global Growth and Income Fund commenced operation on September 9, 1996.
B-23
<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, which is a portfolio of Cash
Account Trust. For its services it receives from the portfolios or their
affiliates fees at a rate of .60% of the average annual net assets of each
account in the portfolio 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.
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.
B-24
<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>
Convertible Fund
Year ended 3/31/97 $42,848,432 29% $16,460,059 76% $38,540 $30,227 78%
Year ended 3/31/96 27,314,393 36 12,402,558 80 21,060 14,829 70
11 mos. ended 3/31/95 13,968,604 34 4,979,389 97 16,754 15,702 94
Growth and Income Fund
Year ended 3/31/97 14,964,889 32 5,344,755 91 12,005 11,414 95
Year ended 3/31/96 7,311,519 45 3,615,330 91 7,032 6,735 96
11 mos. ended 3/31/95 5,481,305 44 2,544,532 95 6,155 5,949 97
Strategic Income Fund
Year ended 3/31/97 5,870,089 24 1,639,136 85 3,897 3,521 90
Year ended 3/31/96 5,325,874 36 1,877,281 100 3,999 3,999 100
11 mos. ended 3/31/95 4,367,420 44 1,924,842 100 7,090 7,010 99
Growth Fund
Year ended 3/31/97 18,832,387 90 18,516,353 91 41,099 37,360 91
Year ended 3/31/96 11,228,653 98 10,920,952 100 23,240 23,240 100
11 mos. ended 3/31/95 3,485,833 95 3,353,543 100 13,668 13,668 100
Global Growth and Income Fund
Year ended 3/31/97 7,350,637 13 1,557,089 63 3,477 2,429 70
</TABLE>
Of the aggregate brokerage commissions paid during the year ended March 31,
1997, Convertible Fund, Growth and Income Fund, Strategic Income Fund, Growth
Fund and Global Growth and Income Fund paid commissions of $5,138, $36, $353,
$3,739 and $781, respectively, to brokers who furnished research services.
Neither Strategic Income Fund nor Growth Fund paid any commissions to brokers
furnishing research.
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") so as to be relieved of from federal income tax on
its net investment income and capital gains that it currently distributes to
shareholders.
At the time of your purchase, a Fund's net asset value may reflect
undistributed income, capital gains, or net unrealized appreciation of
securities held by that Fund. A subsequent distribution to you of
B-25
<PAGE>
such amounts, although constituting a return of your investment, would be
taxable either as a dividend or capital gain distribution.
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate fluctuations,
are taxable as ordinary income. If the net effect to a Fund of those
transactions is a gain, the income dividend paid by the Fund will be increased;
if the result is a loss, the income dividend paid will be decreased.
Income received by a Fund from sources within various foreign countries
will be subject to foreign income taxes withheld at the source. Under the
Internal Revenue Code, if more than 50% of the value of a Fund's total assets at
the close of its taxable year comprises securities issued by foreign
corporations, the Fund may file an election with the Internal Revenue Service to
"pass through" to its shareholders the amount of foreign income taxes paid by
that fund. Pursuant to that election, shareholders would be required to: (i)
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes paid by the fund; (ii) treat their pro rata share of
foreign taxes as paid by them; and (iii) either deduct their pro rata share of
foreign taxes in computing their taxable income, or use it as a foreign tax
credit against U.S. income taxes (but not both). No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions.
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.
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, 1997 were:
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- --------- -----------------
<S> <C> <C>
Strategic Income Fund
Vernon B. Marquez Testamentary Trust u/w
Caryl Broome Marquez 19,108 15.69
Jefferson Guaranty Bank, Trustee
P.O. Box 8527, Suite 301
Metairie, Louisiana 70011
Lincoln Trust Company 11,904 9.78
Custodian Donald E. Lindley
P.O. Box 5831
Denver, Colorado 80217
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- --------- ------------------
<S> <C> <C>
Lincoln Trust Company 6,681 5.49
Custodian Ralph E. Lassa
P.O. Box 5831
Denver, Colorado 80217
Prudential Securities FBO Marjorie K.
Flannery, Trustee of Marjorie K. Flannery 9,621 7.90
Revocable Trust dtd 3/28/84
1365 Elmhurst Drive, N.E.
Cedar Rapids, Iowa 52402-4771
Bernice Slotky and Brian E. Slotky, JT TEN 8,146 6.69
671 South Hollybrook Drive, #109
Pembroke Pines, Florida 33025
GROWTH AND INCOME FUND
John P. Calamos* 189,772 6.58
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Nick P. Calamos* 120,992 4.19
1111 East Warrenville Road
Naperville, Illinois 60563-1493
GROWTH FUND
Calamos Financial Services, Inc. 85,442 20.75
401(k) Profit Sharing Plan and Trust*
Calamos Financial Services, Inc.* 30,345 7.37
1111 East Warrenville Road
Naperville, Illinois 60563-1493
John P. Calamos* 206,908 50.25
GLOBAL GROWTH AND INCOME FUND
Calamos Financial Services, Inc. 89,477 12.64
401(k) Profit Sharing Plan and Trust*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
John P. Calamos* 144,857 20.46
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Nick P. Calamos* 89,477 12.64
1111 East Warrenville Road
Naperville, Illinois 60563-1493
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- --------- ------------------
<S> <C> <C>
Rosanah M. Sather 40,577 5.73
529 Meadow Wood Drive
Joliet, Illinois 60431
</TABLE>
__________________
* 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, 1997 the trustees and officers of the Trust as a group owned
beneficially shares of the Funds as follows: 60,250 shares (2%) of Convertible
Fund; 70,040 shares (11%) of Growth and Income Fund; 655 shares (1%) of
Strategic Income Fund; 121,466 shares (29%) of Growth Fund; and 55,569 shares
(8%) of Global Growth and Income Fund.
CUSTODIAN
The Bank of New York, 48 Wall Street, New York, New York 10286, 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 Calamos Investment Trust (formerly named CFS
Investment Trust). Calamos Growth and Income Fund was named Calamos Small/Mid
Cap Convertible Fund prior to April 30, 1994. As of March 18, 1996 all shares
of each Fund then outstanding were re-designated as Class A shares of that Fund.
FINANCIAL STATEMENTS
The 1997 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.
B-28
