<PAGE>
As filed with the Securities and Exchange Commission on April 22, 1997
Securities Act registration no. 33-19228
Investment Company Act file no. 811-5443
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 17 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 20 [X]
- --------------------------------------------------------------------------------
CFS INVESTMENT TRUST
(Registrant)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Telephone number: 630/245-7200
- --------------------------------------------------------------------------------
John P. Calamos Cameron S. Avery
Calamos Asset Management, Inc. Bell, Boyd & Lloyd
1111 East Warrenville Road 70 West Madison Street, Suite 3300
Naperville, Illinois 60563-1493 Chicago, Illinois 60602-4207
(Agents for service)
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of rule 485
-----
on ________________ pursuant to paragraph (b) of rule 485
-----
X 60 days after filing pursuant to paragraph (a)(1) of rule 485
-----
on ________________ pursuant to paragraph (a)(1) of rule 485
-----
75 days after filing pursuant to paragraph (a)(2) of rule 485
-----
on _____________ pursuant to paragraph (a)(2) of rule 485
-----
this post-effective amendment designates a new effective date
----- for a previously filed post-effective amendment
Registrant has previously elected pursuant to Rule 24f-2 to register under the
Securities Act of 1933 an indefinite number of shares of beneficial interest,
without par value, of the series designated Calamos Strategic Income Fund,
Calamos Convertible Fund, Calamos Growth and Income Fund, Calamos Growth Fund
and Calamos Global Growth and Income Fund. Registrant's Rule 24f-2 Notice for
the fiscal year ended March 31, 1996 was filed on or about May 30, 1996.
- --------------------------------------------------------------------------------
Amending Parts A, B and C and filing exhibit.
- --------------------------------------------------------------------------------
<PAGE>
CFS INVESTMENT TRUST
Cross-reference sheet pursuant to rule 495(a) of Regulation C
Item Location or caption*
- ---- --------------------
Part A (prospectus)
-------------------
1(a) & (b) Front cover
2(a) Expenses
(b) & (c) Key Features
3(a) Financial Highlights
(b) Not applicable
(c) Performance Information
(d) Financial Highlights
4(a)(i) The Trust and Its Shares
(a)(ii)&(b) Investment Objectives and Policies; Common Investment Practices;
Investment Restrictions
(c) Common Investment Practices; Risk of Investment
5(a) Management of the Funds -- The Trustees
(b) Management of the Funds -- The Adviser; rear cover
(c) Management of the Funds -- The Adviser
(d) Not applicable
(e) Rear cover
(f) Expenses; Management of the Funds -- The Adviser
(g) Portfolio Transactions
5A The information called for is contained in the registrant's
annual report to shareholders
6(a) The Trust and Its Shares -- Shares
(b) The Trust and Its Shares -- Certain Shareholders
(c) & (d) Not applicable
(e) The Trust and Its Shares -- Shareholder Inquiries
(f) Dividends and Distributions
(g) Taxes
- -------------------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
2
<PAGE>
Item Location or caption*
- ---- --------------------
Part A (prospectus) continued
-----------------------------
7 How to Purchase Shares
(a) How to Purchase Shares; Management of the Funds -- The Adviser;
Rear Cover
(b) How to Purchase Shares
(c) How to Purchase Shares; Shareholder Services
(d) How to Purchase Shares
(e) & (f) Management of the Funds -- Distribution Plan
8(a)-(d) How to Redeem Shares
9 Not applicable
Part B (Statement of Additional Information)
--------------------------------------------
10(a) & (b) Front cover
11 Table of Contents
12 General Information
13(a)-(c) Investment Practices; Investment Restrictions
(d) Portfolio Transactions
14(a) & (b) Management
(c) Not applicable
15(a)-(c) Certain Shareholders
16(a) Management
(b) Management; Investment Advisory Services; Part A -
Management of the Funds -- The Adviser
(c) Distribution Plan
(d) & (e) Not applicable
(f) Distribution Plan
(g) Custodian
(h) Custodian; Independent Auditors
(i) Transfer Agent
17(a)-(c) Portfolio Transactions
(d) & (e) Not applicable
18 Not applicable
19(a) Purchasing and Redeeming Shares
(b) Purchasing and Redeeming Shares; Financial Statements
(c) Purchasing and Redeeming Shares
20 Taxation
3
<PAGE>
21(a)-(c) Distributor
22(a) Not applicable
(b) Performance Information
23 Financial Statements
Part C (Other Information)
--------------------------
24 Financial statements and exhibits
25 Persons controlled by or under common control with
registrant
26 Number of holders of securities
27 Indemnification
28 Business and other connections of investment adviser
29 Principal underwriters
30 Location of accounts and records
31 Management services
32 Undertakings
4
<PAGE>
Prospectus June __, 1997
Calamos Family of Funds(TM)
Institutional Shares
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<C> <S>
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 Seeks high long-term total return through capital
Income Fund 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 at the
address and telephone numbers set forth above.
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 OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Key Features
INVESTMENT OBJECTIVES
Calamos Convertible Fund(TM) seeks current income. Growth is a secondary
objective that the Fund also considers when consistent with its objective of
current income.
Calamos Growth and Income Fund(TM) seeks high long-term total return through
capital appreciation and current income derived from a diversified portfolio of
convertible, equity and fixed-income securities.
Calamos Strategic Income Fund(TM) seeks high current income consistent with
stability of principal, primarily through investment in convertible securities
and employing short selling to enhance income and hedge against market risk.
Calamos Growth Fund(TM) seeks long-term capital growth.
Calamos Global Growth and Income Fund(TM) 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.
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.(TM) ("CAM" or the "Adviser")
DISTRIBUTOR
Calamos Financial Services, Inc.(TM) ("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 and Strategic
Income Fund would be ___% and ___% for Growth and Income Fund; ___% and
___% for Growth Fund; and ___% and ___% 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 ___% of average
net assets.
(b) A service charge of $15 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 $ $ $ $
Growth and Income Fund
Strategic Income Fund
Growth Fund
Global Growth and Income Fund
</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.
4
<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
5
<PAGE>
"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.
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
6
<PAGE>
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 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
7
<PAGE>
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 Strategic Income Fund, Convertible Fund
and Growth and Income Fund. Growth Fund invested less than 2% of its assets in
debt securities rated below investment grade during that period.
<TABLE>
<CAPTION>
Percentage
--------------------------------------------------
Growth Global
and Strategic Growth and
Rating Convertible Income Income Income
Category Fund Fund Fund Fund
- ---------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C>
U.S. Govt. % % % %
AAA
AA
A
BBB
BB
B
CCC
not rated
</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
8
<PAGE>
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
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
9
<PAGE>
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
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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.
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
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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 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, Convertible Fund had invested __% of its net assets in
foreign securities.
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
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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,
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
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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 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
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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
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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 or wire sent to CFS. 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, 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
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 4:30 p.m., Chicago time, on that day. Orders received by dealers or
CFS after such time will be effective on the next business day. Neither CFS nor
the dealers are permitted to withhold placing orders to benefit themselves by a
price change.
PURCHASES BY WIRE
You may also purchase shares by wiring funds from your bank. Please call the
Funds at the numbers on the front cover of this prospectus for wiring
instructions. The applicable offering price for a purchase by wire is the
offering price per share next determined after receipt by the Fund of the wired
funds. After you have wired funds, you must complete the application form and
send it to CFS. A Fund will not honor redemption requests until the completed
application has been received.
PURCHASES BY MAIL
You may also purchase shares of a Fund by sending to CFS a check payable to the
Fund, along with information identifying you and your account number. An
initial investment made by check must be accompanied by a
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completed application. All checks should be drawn on a U.S. bank in U.S. funds
in order to avoid fees and delays. A charge may be imposed if any check
submitted for investment does not clear.
PURCHASES BY EXCHANGE
You may purchase shares of a Fund by exchange of shares from another Fund, by
exchange of shares of Money Market Portfolio, Government Securities Portfolio or
Tax-Exempt Portfolio, each a portfolio of Cash Account Trust (such shares are
referred to as "Cash Account Shares") either by mail or by instructing your
broker-dealer or other sales agent, who will communicate your order to CAM. 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, Calamos Asset Management, Inc.
("CAM"), to constitute a valid redemption request.
Your redemption request must:
1. specify the Fund and the number of shares or dollar amount to be redeemed,
if less than all shares are to be redeemed;
2. be signed by all owners exactly as their names appear on the account; and
3. include a signature guarantee for each signature on the redemption request
by CFS, by a securities firm that is a member of the New York Stock
Exchange, or by a bank, savings bank, credit union, savings and loan
association or other entity that is authorized by applicable state law to
guarantee signatures.
In the case of shares held by a corporation, the redemption request must be
signed in the
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name of the corporation by an officer whose title must be stated, and a
certified bylaw provision or resolution of the board of directors authorizing
the officer to so act may be required. In the case of a trust or partnership,
the signature must include the name of the registered shareholder and the title
of the person signing on its behalf. Under certain circumstances, before shares
can be redeemed, additional documents may be required in order to verify the
authority of the person seeking to redeem.
REDEMPTION BY WIRE OR TELEPHONE
Broker-dealers or other sales agents may communicate redemption orders by wire
or telephone to CAM. These firms may charge for their services in connection
with your redemption request but neither the Funds nor CAM impose any such
charges.
EXPEDITED REDEMPTION
Unless share certificates have been issued to you, you may have redemption
proceeds of at least $5,000 wired directly to a domestic commercial bank account
or brokerage account that you have previously designated. Normally, such
payments will be transmitted no later than the second business day following
receipt of your redemption request (provided redemptions may be made under the
general criteria set forth below). A $15 service charge for payment of
redemption proceeds by wire will be deducted from the proceeds.
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 CAM. 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 in such a way
that the Fund receives immediate payment for your purchase, such as by wire
transfer of funds or payment by a certified or cashier's check. A Fund may
suspend the right of redemption under certain extraordinary circumstances in
accordance with the rules of the Securities and Exchange Commission. 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
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$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.
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.
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. 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.
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 tax treatment will depend, of course, on how
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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 CFS Investment Trust has overall responsibility for the
conduct of the affairs of the Trust. The trustees serve indefinite terms of
unlimited duration. The trustees appoint their own successors, provided that at
least two-thirds of the trustees, after any such appointment, have been elected
by the shareholders. Shareholders may remove a trustee, with or without cause,
upon the declaration in writing or vote of two-thirds of the Trust's outstanding
shares. A trustee may be removed with or without cause upon the written
declaration of a majority of the trustees.
THE ADVISER
Each Fund's investments are managed by its investment adviser, Calamos Asset
Management, Inc. ("CAM"). At March 31, 1997, CAM managed approximately $___
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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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 also acts as transfer agent and dividend disbursing agent for the
Funds under a transfer agency agreement.
The management agreement also provides that the total ordinary expenses of a
Fund (exclusive of taxes, interest, extraordinary litigation expenses and
brokers' commissions and other charges relating to the purchase and sale of
securities but including fees paid to CAM and fees paid pursuant to the
Distribution Plan) shall not exceed the limits, if any, prescribed by any state
in which shares of the Fund are being sold or are qualified for sale, and CAM
has agreed to reimburse the Fund for any such expenses in excess of such limits.
In addition, CAM has voluntarily undertaken to limit the 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 trustee of
the Trust and president of CAM and CFS; John P. Calamos, Jr. has been an
employee of CAM; and Nick P. Calamos has been vice president of the Trust since
1992 and managing director of CAM and CFS.
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.
21
<PAGE>
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.
[Performance graphs may be inserted here.]
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 ___________, 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
22
<PAGE>
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 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, the Calamos Financial Services, Inc. 401(k) Profit Sharing Plan
and Trust, of which John P. Calamos and Nick P. Calamos are the trustees, owned
_______ Class A shares (____%) of Growth and Income Fund and _______ Class A
shares (____%) of Growth Fund. Messrs. John Calamos and Nick Calamos owned
beneficially an additional _______ Class A shares (_____%) and _______ Class A
shares (____%), respectively, of Growth and Income Fund, and John P. Calamos
owned beneficially an additional _______ Class A shares (____%) of Growth Fund.
No other person is known to own beneficially 25% or more of any Fund. Under the
1940 Act, a holder of more than 25% of a Fund's outstanding shares is presumed
to control the Fund. The address of Messrs. John Calamos and Nick Calamos is
1111 East Warrenville Road, Naperville, Illinois 60563-1493.
23
<PAGE>
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 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
24
<PAGE>
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.
25
<PAGE>
Table of Contents
Page
----
Key Features........................... 2
Expenses............................... 3
Financial Highlights................... 4
Investment Objectives and Policies..... 5
Common Investment Practices............ 7
Risk of Investment..................... 15
Investment Restrictions................ 15
How to Purchase Shares................. 16
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.. 24
Investment Adviser and
Transfer Agent:
Calamos Asset Management, Inc./TM/
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Distributor:
Calamos Financial Services, Inc./TM/
1111 East Warrenville Road
Naperville, Illinois 60563-1493
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/TM/
Convertible Fund
Growth And Income Fund
Strategic Income Fund
Growth Fund
Global Growth And Income Fund
Prospectus
June __, 1997
1111 East Warrenville Road
Naperville, Illinois 60563-1493
(708) 245-7200
(800) 823-7386
<PAGE>
Statement of Additional Information June __, 1997
CALAMOS FAMILY OF FUNDS(TM)
Convertible Fund
Growth and Income Fund
Strategic Income Fund
Growth Fund
Global Growth and Income Fund
===============================================================================
1111 East Warrenville Road
Naperville, Illinois 60563-1493
(708) 245-7200
Toll Free: (800) 8-CFS-FUND (800/823-7386)
This Statement of Additional Information relates to Calamos Convertible
Fund(TM), Calamos Growth and Income Fund(TM) Calamos Strategic Income Fund(TM),
Calamos Growth Fund(TM) and Calamos Global Growth and Income Fund(TM) (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
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
Transfer Agent...................................23
Distributor......................................23
Portfolio Transactions...........................24
Taxation.........................................26
Allocation Among Funds...........................28
Certain Shareholders.............................28
Custodian........................................30
Independent Auditors.............................30
General Information..............................30
Financial Statements.............................31
</TABLE>
B-1
<PAGE>
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 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 and Indexes
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.
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.
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<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). In addition, gains realized on the sale
or other disposition of securities held for less than three months must be
limited to less than 30% of the Fund's annual gross income. 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. In order to avoid realizing excessive gains on securities
held less than three months, the Fund may be required to defer the closing out
of certain positions beyond the time when it would otherwise be advantageous to
do so.
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
B-10
<PAGE>
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 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
B-11
<PAGE>
provisions of the Internal Revenue Code may limit the degree to which the Fund
is able to enter into short sales, which limitations might impair the Fund's
ability to achieve its investment objective. See "Taxation."
In addition to enabling a Fund to hedge against market risk, short sales
may afford a Fund an opportunity to earn additional current income to the extent
the Fund is able to enter into arrangements with broker-dealers through which
the short sales are executed to receive income with respect to the proceeds of
the short sales during the period the Fund's short positions remain open.
Unseasoned Issuers
Each Fund may invest up to 5% of its total assets in the securities of
unseasoned issuers, that is, issuers that, together with predecessors, have been
in operation less than three years. The Adviser believes that investment in
securities of unseasoned issuers may provide opportunities for long-term capital
growth, although the risks of investing in such securities are greater than with
common stocks of more established companies because unseasoned issuers have only
a brief operating history and may have more limited markets and financial
resources. 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
<TABLE>
<CAPTION>
Trustees and Officers
Set forth below is information about the trustees and officers of CFS
Investment Trust (the "Trust").
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, Inc.
Trustee and President, 56 ("CAM"), an investment adviser and the
Funds' investment adviser; President,
Calamos Financial Services, Inc. ("CFS"),
a broker-dealer and the Funds'
distributor.
Richard J. Dowen (2) Professor of Finance, Northern Illinois
Trustee, 52 University.
</TABLE>
B-15
<PAGE>
Name, Position(s) with Trust Principal Occupation(s)
and Age at March 31, 1997 During Past Five Years
- ---------------------------- -----------------------
Robert Frost (2) Management Consultant, ECOM Consultants, Inc.
Trustee, 57
Dennis A. Wallestad (1) Chief Administrative and Compliance Officer,
Trustee and Vice President, 34 CAM and CFS since 1996; Vice President of
Operations and Compliance Officer, Firstar
Investment Research and Management Company,
1994-1996; certified public accountant, Arthur
Andersen & Co., prior thereto.
William A. Kaun (2) Principal, W.A. Kaun Co. (investment adviser
Trustee, 69 and publisher).
Nick P. Calamos Managing Director, CAM and CFS.
Vice President, 37
Helen L. Callaghan Controller, CAM and CFS.
Secretary and Treasurer, 33
- ----------------------
(1) John P. Calamos and Dennis A. Wallestad are trustees who are "interested
persons" of the Trust as defined in the Investment Company Act of 1940 (the
"1940 Act") and are members of the executive committee of the board of
trustees, which has authority during intervals between meetings of the
board of trustees to exercise the powers of the board.
(2) Messrs. Dowen, Frost and Kaun are members of the audit committee of the
board of trustees, which makes recommendations regarding the selection of
the Trust's independent auditors and meets with representatives of the
independent auditors to determine the scope and review the results of each
audit.
The address of Mr. Dowen is Department of Finance, Northern Illinois
University, DeKalb, Illinois 60115; that of Mr. Frost is 475 Park Avenue South,
New York, New York 10016; and that of Mr. Kaun is 1750 Grandstand Place, Elgin,
Illinois 60123. The address of the officers of the Trust is 1111 East
Warrenville Road, Naperville, Illinois 60563-1493. 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 ------
Robert Frost ------
William A. Kaun ------
</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
3/31/97 3/31/96 3/31/95
------- ------- --------
<S> <C> <C> <C>
Convertible Fund $ $148,187 $113,445
Growth and Income Fund
Advisory fee $ 32,870 $ 27,059
Waiver or reimbursement 4,132 6,006
------- -------- --------
Net fee $ $ 28,738 $ 21,053
Strategic Income Fund
Advisory fee $ $ 14,092 $ 17,684
Waiver or reimbursement 29,705 25,683
------- -------- --------
Net fee $ $(15,613) $ (7,999)
Growth Fund
Advisory fee $ $ 23,290 $ 17,037
Waiver or reimbursement 27,383 27,587
------- -------- --------
Net fee $ $ (4,093) $(10,550)
Global Growth and Income Fund*
Advisory Fee $ $ -- $ --
Waiver or reimbursement -- --
------- -------- --------
Net Fee $ $ -- $ --
</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."
In connection with the exchange privilege, the Adviser provides
subaccounting and other services to Money Market Portfolio, Government
Securities Portfolio and Tax-Exempt Portfolio, which are portfolios of Cash
Account Trust. For its services it receives from the portfolios or their
affiliates a fee of .15% in the case of Money Market Portfolio, and .10% in the
case of the other two portfolios, of the average annual net assets of each
account in those portfolios established through the exchange privilege.
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.
B-18
<PAGE>
Neither the Plan nor any distribution or service agreement may be amended
to increase materially the amount spent for distribution or service expenses or
in any other material way without approval by a majority of the outstanding
shares of the affected Fund, and all such material amendments to the Plan or any
distribution or service agreement must also be approved by the non-interested
trustees, in person, at a meeting called for the purpose of voting on any such
amendment.
CFS is required to report in writing to the board of trustees at least
quarterly on the amounts and purpose of any payments made under the Plan and any
distribution or service agreement, as well as to furnish the board with such
other information as may reasonably be requested in order to enable the board to
make an informed determination of whether the Plan should be continued. Payments
by a Fund pursuant to the Plan are not intended to finance distribution of
shares of the other Funds.
During the year ended March 31, 1997, each of the Funds made payments to
CFS pursuant to the Plan in the following amounts, and CFS incurred the
following distribution expenses:
<TABLE>
<CAPTION>
Global
Growth and Strategic Growth and
Convertible Income Income Growth Income
Fund Fund Fund Fund Fund Total
----------- ---------- --------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Payments by Fund to CFS
Distribution expenses
incurred by CFS:
Reallowance to
outside brokers
Prospectuses and reports
Other printed materials
Sales representative travel
Other marketing expenses
Overhead allocation for
personnel
Total expenses
</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
B-19
<PAGE>
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
Monday in February, Good Friday, the last Monday in May, Independence Day, Labor
Day, Thanksgiving and Christmas. If one of these holidays falls on a Saturday
or Sunday, the NYSE will be closed on the preceding Friday or the following
Monday, respectively.
Securities that are principally traded in a foreign market are valued as of
the close of the appropriate exchange or other designated time. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed at various times before the close of business on
each day on which the NYSE is open. Trading of these securities may not take
place on every NYSE business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the NYSE is not open
and on which the 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:
ERV = P(1+T)n
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the period,
at the end of the period (or fractional portion
thereof)
Total Return (taking into account the effect of the sales charge) and
Average Annual Total Return for 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............................
Five years..........................
Ten years...........................
Life of Fund (June 21, 1985)........
Growth and Income Fund
One year............................
Five years..........................
Life of Fund (September 22, 1988)...
Strategic Income Fund
One year............................
Five years..........................
Life of Fund (September 4, 1990)....
Growth Fund
One year............................
Five years..........................
Life of Fund (September 4, 1990)....
Global Growth and Income Fund
Life of Fund (September 9, 1996)....
</TABLE>
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 yields of Class A shares and Class C shares of Strategic
Income Fund for the 30 days ended March 31, 1997 were ___% and ___%,
respectively.
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
B-21
<PAGE>
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 (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.
B-22
<PAGE>
To illustrate the historical returns on various types of financial assets,
the Portfolios may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for common stocks, small company stocks,
long-term corporate bonds, long-term government bonds, intermediate-term
government bonds, U.S. Treasury bills and Consumer Price Index.
TRANSFER AGENT
For its services as transfer agent and dividend disbursing agent for the
Trust, Calamos Asset Management, Inc. ("CAM") receives from each Fund an annual
fee of $16.00 for each shareholder account of that Fund. The board of trustees
believes the charges by CAM to the Funds are comparable to those of others
performing similar services.
CAM records all sales, transfers and redemptions of shares of each Fund,
disburses dividends of the Funds and performs other recordkeeping functions.
CAM is responsible for all personnel, office space and equipment expenses
related to the performance of these services for the Funds. The Funds pay all
other out-of-pocket expenses, including postage, mailing and stationery
expenses.
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:
B-23
<PAGE>
<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 $ $150,460 $5,191
Commissions retained 25,675 1,015
Growth and Income Fund
Commissions received 15,718 7,324
Commissions retained 2,741 1,264
Strategic Income Fund
Commissions received 1,605 3,505
Commissions retained 394 698
Growth Fund
Commissions received 706 2,539
Commissions retained 706 1,607
Global Growth and Income Fund
Commissions received
Commissions retained
</TABLE>
-------------------------------
* Global Growth and Income Fund commenced operation on September 9, 1996.
CFS has the exclusive right to distribute shares of the Funds through
affiliated and unaffiliated dealers. The obligation of CFS is an agency or "best
efforts" arrangement, which does not obligate CFS to sell any stated number of
shares.
In connection with the exchange privilege, CFS acts as a service
organization for the Money Market Portfolio, Government Securities Portfolio and
Tax-Exempt Portfolio, which are portfolios of Cash Account Trust. For its
services it receives from the portfolios or their affiliates fees at a rate of
up to .50% in the case of Tax-Exempt Portfolio, and .60% in the case of the
other two portfolios, of the average annual net assets of each account in those
portfolios established through the exchange plan.
CFS from its own resources may pay additional compensation to persons who
sell Fund shares or provide subaccounting and shareholder servicing. Such
additional compensation may amount to as much as 25% of the offering price,
depending on the volume of sales or anticipated volume of sales attributable to
the recipient of the commission, and up to .10% of the annual average value of
shares held in such accounts.
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.
B-24
<PAGE>
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.
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 $ % $ % $ $ %
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
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
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
</TABLE>
B-25
<PAGE>
<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>
Growth Fund
Year ended 3/31/97
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
</TABLE>
Of the aggregate brokerage commissions paid during the year ended March 31,
1997, Convertible Fund, Growth and Income Fund and Global Growth and Income Fund
paid commissions of $______, _____ and $______, 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"). As a regulated investment company, a Fund will
be exempt from federal income tax on its net investment income and capital gains
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (net investment income and the excess
of net short-term capital gain over net long-term capital loss) for the year
(the "Distribution Requirement") and satisfies certain other requirements of the
Code described below. Distributions of investment company taxable income made
during the taxable year or, under certain specified circumstances, after the
close of the taxable year will satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement, a Fund must
(1) derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities and other income derived with respect to its
business of investing in such stock or securities (the "Income Requirement");
and (2) derive less than 30% of its gross income (exclusive of certain
offsetting gains from "designated hedge" transactions that are described below)
from the sale or other disposition of stock, securities (as defined in Section
2(a)(36) of the 1940 Act) or options held for less than three months (the
"Short-Short Test"). There is currently pending in Congress a proposal to
repeal the Short-Short Test.
In addition, a Fund must diversify its holdings so that, at the close of
each quarter of its taxable year, at least 50% of the value of its assets
consists of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which the
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer), and no more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or of two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses (the
"Diversification Requirement").
B-26
<PAGE>
Because of the Short-Short Test, a Fund may have to limit the sale of
appreciated (but not depreciated) securities that it has held for less than
three months. The short sale of (including for this purpose the acquisition of
a put option) (1) stock or securities held on the date of the short sale or
acquired after the short sale and on or before the date of closing thereof or
(2) stock or securities which are "substantially identical" to stock or
securities held on the date of the short sale or acquired after the short sale
and on or before the date of the closing thereof may reduce the holding period
of such stock or securities for purposes of the Short-Short Test. Where
preferred stock or bonds are convertible into common stock of the same
corporation, the relative values, price changes and other circumstances may be
such as to cause the bonds or preferred stock and the common stock to be treated
as "substantially identical" for this purpose.
Any increase in value of a position that is part of a "designated hedge"
will be offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of such hedge for purposes of the
Short-Short Test. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of the Short-Short Test. Each
Fund anticipates engaging in hedging transactions that qualify as designated
hedges. However, because of the failure of the U.S. Treasury to promulgate
regulations as authorized by the Code, it is not clear at the present time
whether this treatment will be available to all of a Fund's hedging
transactions. To the extent a Fund's transactions do not qualify as designated
hedges, the Fund's investments in short sales, options or other transactions may
be limited.
A Fund's option and hedging activities are subject to special provisions of
the Code that may, among other things, limit the use of losses of the Fund and
affect the holding period of the securities held by the Fund and the nature of
the income realized by the Fund. These provisions may also require a Fund to
mark-to-market some of the positions in its portfolio (i.e., treat them as if
they were closed out), which may cause a Fund to recognize income without the
cash to distribute such income. A Fund and its shareholders may recognize
taxable income as a result of the Fund's hedging activities, a portion of which
may be treated as long-term capital gains. Each Fund will monitor its
transactions and may make certain tax elections in order to mitigate the effect
of these rules and prevent disqualification of the Fund as a regulated
investment company.
Taxation of Distributions
Each Fund distributes substantially all of its net investment income and
net short-term capital gains for any taxable (i.e., fiscal) year. Distributions
will be taxable to shareholders as described below, regardless of whether such
distributions are paid in cash or are reinvested in shares. Shareholders
receiving a distribution from a Fund in the form of additional shares will
generally be treated as receiving a taxable distribution in an amount equal to
the fair market value of the shares received on the distribution date and will
take a tax basis for such shares equivalent to the amount deemed to have been
distributed to them. Each Fund intends to distribute to shareholders its excess
of net long-term capital gain over net short-term capital loss ("net capital
gain") for each taxable year as a capital gain dividend. A capital gain
dividend will be taxable to shareholders as long-term capital gain, regardless
of the length of time the shareholder has held his shares, whether the net
capital gain distributed by the Fund was recognized prior to the date on which a
shareholder acquired shares and whether the distribution was paid in cash or
reinvested in shares. The aggregate amount of distributions designated by the
Fund as capital gain dividends may not exceed the net capital gain of the Fund
for any taxable year, determined by excluding any net capital loss or net long-
term capital loss attributable to transactions occurring after October 31 of
such year and by treating any such loss as if it arose on the first day of the
following taxable year.
Dividends (whether received in cash or reinvested in shares) will generally
be subject to taxation when received. Dividends declared in October, November
or December of any year payable to shareholders of record on a specified date in
such a month, however, will be deemed to have been received by the shareholders
and paid by the Fund on December 31 of such year, if such dividends are paid
during January of the following year.
B-27
<PAGE>
Each Fund is required in certain cases to withhold and remit to the United
States Treasury a portion of dividends paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that such shareholder is not subject to backup
withholding or that such shareholder is an "exempt recipient."
Shareholders will be advised annually as to the U.S. federal income tax
consequences of distributions made during the year.
Corporate Investors. In the case of corporate shareholders, Fund
distributions (other than capital gain dividends) for any taxable year generally
will qualify for the 70% dividends received deduction for regular federal income
tax purposes to the extent of the gross amount of eligible dividends received by
the Fund for the year with respect to stock that has been held for more than 45
days (more than 90 days in the case of certain preferred stock). Legislation
has been introduced from time to time to reduce the percentage of dividends
entitled to the dividends received deduction; however, it is not known whether
Congress will consider any such legislation in the near future. A Fund's
investment policies may affect the availability of the dividends received
deduction with respect to dividends paid on certain stocks in that Fund's
portfolio. For example, the holding period of any dividend paying stock will
not be deemed to include any day more than 45 days (or more than 90 days in the
case of certain preferred stock) after the date on which the stock becomes ex-
dividend or any period in which a Fund holds a put option on, has contracted to
sell, or has made but not closed a short sale of, "substantially identical"
stock or securities. Convertible bonds or convertible preferred stock may be
deemed "substantially identical" to common stock for purposes of this rule.
Each Fund will provide a statement annually to shareholders of the amount of
dividends eligible for the dividends received deduction.
Corporate investors should also note that although the dividends received
deduction is available to reduce regular corporate federal income tax liability,
any amount so deducted may increase the tax base upon which the corporate
alternative minimum tax and environmental tax is imposed.
ALLOCATION AMONG FUNDS
The assets received by the Trust from the sale of shares of each Fund, and
all income, earnings, profits and proceeds thereof, subject only to the rights
of creditors, are specifically allocated to that Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund are required
to be segregated on the books of account, and are to be charged with the expense
in respect to that Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust not readily identifiable as belonging to a
particular Fund shall be allocated by or under the direction of the trustees in
such manner as the trustees determine to be fair and equitable. Each share of
each Fund represents an equal proportionate interest in that Fund with each
other share and is entitled to such dividends and distributions out of the
income belonging to that Fund as are declared by the trustees. Upon any
liquidation of a Fund, shareholders thereof are entitled to share pro rata in
the net assets belonging to that Fund available for distribution.
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:
B-28
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Class A Outstanding Shares
Shareholder Shares of the Funds
----------- --------- ------------------
<S> <C> <C>
GROWTH AND INCOME FUND
Calamos Financial Services, Inc.
401(k) Profit Sharing Plan
and Trust*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
John P. Calamos*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Nick P. Calamos*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
GROWTH FUND
Calamos Financial Services, Inc.
401(k) Profit Sharing Plan
and Trust*
Calamos Financial Services, Inc.*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
John P. Calamos*
</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 Class A shares of the Funds as follows: ___ shares (___%) of
Convertible Fund; ____ shares (___%) of Growth and Income Fund; ___ shares
(___%) of Strategic Income Fund; _____ shares (___%) of Growth Fund; and ___
shares (___%) of Global Growth and Income Fund.
CUSTODIAN
Prudential Securities, Inc., One New York Plaza, New York, New York 10292,
is the custodian for the assets of the Funds. The custodian is responsible for
holding all cash and securities of the Funds,
B-29
<PAGE>
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-30
<PAGE>
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements:
---------------------
(i) Financial statements included in Part A of this registration
statement:
Financial Highlights
(ii) Financial statements included in Part B of this registration
statement:
The following schedule and statements of each of Calamos
Convertible Fund, Calamos Strategic Income Fund, Calamos
Growth and Income Fund and Calamos Growth Fund:
Schedule of investments - March 31, 1996
Statement of assets and liabilities - March 31, 1996
Statement of operations - year ended March 31, 1996
Statement of changes in net assets - year ended
March 31, 1996 and eleven months ended March 31, 1995
as well as the report of independent auditors and notes to
financial statements, all of which are incorporated by
reference to registrant's annual report to shareholders for
the year ended March 31, 1996. (A copy of that annual report
was filed with the Commission but, except for those portions
incorporated by reference, is not deemed to be filed as part
of this registration statement.)
The following unaudited schedule and statements of Calamos
Convertible Fund, Calamos Strategic Income Fund, Calamos
Growth and Income Fund, Calamos Growth Fund and Calamos
Global Growth and Income Fund:
Schedule of investments - September 30, 1996
Statement of assets and liabilities - September 30,
1996
Statement of operations - six months ended
September 30, 1996
Statement of changes in net assets - six months ended
September 30, 1996 and (except for Calamos Global
Growth and Income Fund) year ended March 31, 1996
and notes to financial statements, all of which are
incorporated by reference to registrant's semi-annual report
to shareholders for the year ended September 30, 1996. (A
copy of that report was filed with the Commission but,
except for those portions incorporated by reference, is not
deemed to be filed as part of this registration statement.)
(iii) Financial Statements included in Part C of this amendment:
None
C-1
<PAGE>
(b) Exhibits:
---------
As used herein, the term "Registration Statement" means the
registration statement of registrant on form N-1A under the
Securities Act of 1933, registration No. 33-19228, and the terms
"Pre-effective Amendment" and "Post-effective Amendment" refer to
a pre-effective and post-effective amendment to the Registration
Statement.
1.1 Agreement and Declaration of Trust (exhibit 1 to Registration
Statement*)
1.2 Amendment no. 1 to Agreement and Declaration of Trust (exhibit
1.2 to Pre-effective Amendment No. 3*)
1.3 Amendment no. 2 to Agreement and Declaration of Trust (exhibit
1.3 to Post-effective Amendment No. 4*)
1.4 Amendment no. 3 to Agreement and Declaration of Trust (exhibit
1.4 to Post-effective Amendment No. 8*)
1.5 Amendment no. 4 to Agreement and Declaration of Trust (exhibit
1.5 to Post-effective Amendment No. 13*)
1.6 Amendment no. 5 to Agreement and Declaration of Trust (exhibit
1.6 to Post-effective Amendment No. 13*)
1.7 Amendment no. 6 to Agreement and Declaration of Trust (exhibit
1.7 to Post-effective Amendment No. 13*)
2 Bylaws (exhibit 2 to Registration Statement*)
3 None
4 None
5.1 Form of management agreement with Calamos Asset Management, Inc.
dated July 5, 1988 - Calamos Growth and Income Fund (exhibit 5 to
Pre-effective Amendment No. 3*)
5.2 Notification dated August 22, 1990 pursuant to section 1(b) of
management agreement for series designated Calamos Strategic
Income Fund and Calamos Growth Fund (exhibit 5.1 to Post-
effective Amendment No. 5*)
5.3 Form of notification pursuant to section 1(b) of management
agreement for series designated Calamos Convertible Fund (exhibit
5.2 to Post-effective Amendment No. 8*)
5.4 Form of notification pursuant to section 1(b) of management
agreement for series designated Calamos Global Growth and Income
Fund (exhibit 5.4 to Post-effective Amendment No. 13*)
6.1 Form of distribution agreement with Calamos Financial Services,
Inc. dated June 19, 1996 (exhibit 6.1 to Post-effective Amendment
No. 13*)
6.2 Form of selling group agreement, revised 1996 (exhibit 6.2 to
Post-effective Amendment No. 15*)
C-2
<PAGE>
7 None
8 Custody agreement with Prudential-Bache Securities, Inc. dated
April 20, 1990 (exhibit 8 to Post-Effective Amendment No. 4*)
9.1 Form of transfer agency agreement with Calamos Asset Management,
Inc. (exhibit 9 to Registration Statement*)
9.2 Form of appointment of transfer agent - Calamos Strategic Income
Fund and Calamos Growth Fund (exhibit 9.1 to Post-effective
Amendment No. 4*)
9.3 Form of appointment of transfer agent - Calamos Convertible Fund
(exhibit 9.3 to Post-effective Amendment No. 8*)
9.4 Form of appointment of transfer agent dated June 19, 1996 -
Calamos Global Growth and Income Fund (exhibit 9.4 to Post-
effective Amendment No. 13*)
9.5 Use of name agreement dated August 23, 1990 (exhibit 9.2 to Post-
effective Amendment No. 5*)
10 Opinion of Goodwin, Procter & Hoar dated April 12, 1996 (exhibit
10 to Post-effective Amendment No. 13*)
11 Consent of independent auditors
12 None
13.1 Subscription agreement - Calamos Growth and Income Fund (exhibit
13.1 to Pre-effective Amendment No. 3*)
13.2 Organizational expense agreement - Calamos Growth and Income Fund
(exhibit 13.2 to Pre-effective Amendment No. 2*)
13.3 Form of subscription agreement - Calamos Strategic Income Fund
and Calamos Growth Fund (exhibit 13.3 to Post-effective Amendment
No. 4*)
13.4 Form of organizational expense agreement - Calamos Strategic
Income Fund and Calamos Growth Fund (exhibit 13.4 to Post-
effective Amendment No. 4*)
13.5 Form of subscription agreement - Calamos Global Growth and Income
Fund (exhibit 13.5 to Post-effective Amendment No. 4*)
13.6 Form of organizational expense agreement dated June __, 1996 -
Calamos Global Growth and Income Fund (exhibit 13.5 to Post-
effective Amendment No. 13*)
14 CFS Investment Trust Individual Retirement Account Prototype
Plan, disclosure statement and application (exhibit 14 to Post-
effective Amendment No. 8*)
15 Form of distribution plan dated June 24, 1996 (exhibit 15 to
Post-effective Amendment No. 13*)
16 Schedule of computation of performance quotations (exhibit 16 to
Post-effective Amendment No. 8*)
C-3
<PAGE>
17 Not applicable
18.1 Application forms and redemption request (exhibit 17 to Post-
effective Amendment No. 8*)
18.2 Form of automatic investment plan application (exhibit 17.1 to
Post-effective Amendment No. 4*)
18.3 Form of systematic withdrawal application (exhibit 17.2 to Post-
effective Amendment No. 4*)
18.4 Form of redemption request (exhibit 17.3 to Post-effective
Amendment No. 4*)
- --------------------
* Incorporated by reference.
Item 25. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
The information in the prospectuses under the captions
"Management of the Funds - Adviser" and "The Trust and Its Shares - Certain
Shareholders" and in the Statement of Additional Information under the caption
"Management" and "Certain Shareholders" is incorporated by reference.
Item 26. Number of Holders of Securities
-------------------------------
As of March 31, 1997 the respective series of registrant had the
following numbers of record holders:
<TABLE>
<CAPTION>
Series Record Holders
------ --------------
<S> <C>
Calamos Strategic Income Fund 55
Calamos Convertible Fund 747
Calamos Growth and Income Fund 252
Calamos Growth Fund 120
Calamos Global Growth and Income Fund 114
</TABLE>
Item 27. Indemnification
---------------
Article VI of the agreement and declaration of trust of
registrant (exhibit 1 to this registration statement which is incorporated
herein by reference) provides that the Trust shall indemnify (from the assets of
the Sub-Trust or Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a "Covered
Person"]) against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, except with respect
to any matter as to which it has been determined in one of the manners described
below, that such covered Person (i) did not act in good faith in the reasonable
belief that such Covered Person's action was in or not opposed to the best
interests of the Trust or (ii) had acted with willful misfeasance, bad faith,
gross negligence or reckless disregard of
C-4
<PAGE>
the duties involved in the conduct of such Covered Person's office (either and
both of the conduct described in (i) and (ii) being referred to hereafter as
"Disabling Conduct").
A determination that the Covered Person is not entitled to
indemnification due to Disabling Conduct may be made by (i) a final decision on
the merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding, or
(b) an independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time in advance of the final disposition
of any such action, suit or proceeding, provided that the Covered Person shall
have undertaken to repay the amounts so paid to the Sub-Trust in question if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Party ultimately will be found entitled to
indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The information in the prospectus in the first two paragraphs
under the caption "Management of the Funds -- The Adviser" is incorporated by
reference.
Item 29. Principal Underwriters
----------------------
(a) Calamos Financial Services, Inc., distributor of
registrant's shares, also acts as distributor of the shares
of Calamos Investment Trust.
(b) The information in the statement of additional information
under the caption "Management -- Trustees and Officers" is
incorporated by reference.
(c) Not applicable
Item 30. Location of Accounts and Records
--------------------------------
John P. Calamos, President
CFS Investment Trust
C-5
<PAGE>
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Item 31. Management Services
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None
Item 32. Undertakings
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(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a
prospectus is delivered, upon request and without charge, a
copy of its latest annual report to shareholders.
(d) Registrant undertakes, if required to do so by the holders
of at least 10% of the Registrant's outstanding shares, to
call a meeting of shareholders for the purpose of voting
upon the question of removal of a director or directors and
to assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of
1940.
C-6
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant certifies that it has duly caused this
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Naperville, Illinois on April 22,
1997.
CFS INVESTMENT TRUST
By /s/ John P. Calamos
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John P. Calamos, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ John P. Calamos Trustee and President )
- ------------------------- (principal executive officer )
John P. Calamos and principal financial and )
accounting officer) )
)
/s/ Richard J. Dowen Trustee )
- ------------------------- )
Richard J. Dowen )
) April 22, 1997
/s/ Robert Frost Trustee )
- ------------------------- )
Robert Frost )
)
/s/ William A. Kaun Trustee )
- ------------------------- )
William A. Kaun )
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Exhibit Index
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Exhibit
- -------
11 Consent of independent auditors
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Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We consent the reference to our firm under the caption "Independent Auditors"
and to the incorporation by reference of our report dated May 10, 1996 in the
Registration Statement (Form N-1A) and in the related Prospectus of CFS
Investment Trust, filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 17 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-19228) and in this Amendment No. 20
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-5443).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
April 17, 1997
