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Statement of Additional Information
August 1, 1998,
as supplemented
August 10, 1998
CALAMOS FAMILY OF FUNDS(R)
Convertible Fund
Growth and Income Fund
Strategic Income Fund
Growth Fund
Global Growth and Income Fund
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1111 East Warrenville Road
Naperville, Illinois 60563-1493
(630) 245-7200
Toll Free: (800) 8-CFS-FUND (800/823-7386)
This Statement of Additional Information relates to Calamos Convertible
Fund(R), Calamos Growth and Income Fund(R), Calamos Strategic Income Fund(R),
Calamos Growth Fund(R) and Calamos Global Growth and Income Fund(R) (the
"Funds"), each of which is a series of Calamos Investment Trust (the "Trust"),
formerly named CFS Investment Trust. It is not a prospectus, but provides
information that should be read in conjunction with the Funds' prospectus dated
the same date as this Statement of Additional Information and any supplements
thereto. The prospectus may be obtained without charge by writing or
telephoning the Funds at the address or telephone numbers set forth above.
TABLE OF CONTENTS
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Investment Practices............. 2
Investment Restrictions.......... 13
Management....................... 15
Investment Advisory Services..... 16
Distribution Plan................ 18
Purchasing and Redeeming Shares.. 19
Performance Information.......... 20
Distributor...................... 23
Portfolio Transactions........... 24
Taxation......................... 25
Allocation Among Funds........... 26
Certain Shareholders............. 26
Custodian........................ 28
Independent Auditors............. 28
General Information.............. 29
Financial Statements............. 29
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INVESTMENT OBJECTIVES
Each Fund's investment objective is shown below:
Convertible Fund seeks current income. Growth is a secondary objective
that the Fund also considers when consistent with its objective of current
income.
Growth and Income Fund seeks high long-term total return through capital
appreciation and current income derived from a diversified portfolio of
convertible, equity and fixed-income securities.
Strategic Income Fund seeks high current income consistent with stability
of principal, primarily through investment in convertible securities and
employing short selling to enhance income and hedge against market risk.
Growth Fund seeks long-term capital growth.
Global Growth and Income Fund seeks high long-term total return through
capital appreciation and current income derived from a globally diversified
portfolio of convertible, equity and fixed-income securities.
The investment objective of each Fund is "fundamental," which means that a
Fund's objective cannot be changed without the approval of the holders of a
"majority of the outstanding voting securities" of that Fund, as defined in the
Investment Company Act of 1940.
INVESTMENT PRACTICES
In pursuing its investment objective, each Fund will invest as described
below and in the prospectus.
Foreign Securities
Global Growth and Income Fund may invest all of its assets, and each other
Fund may invest up to 25% of its net assets, in securities of foreign issuers.
For this purpose, foreign securities do not include American Depositary Receipts
(ADRs) or securities guaranteed by a United States person, but may include
foreign securities in the form of European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs) or other securities representing underlying shares of
foreign issuers. Positions in those securities are not necessarily denominated
in the same currency as the common stocks into which they may be converted.
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.
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To the extent positions in portfolio securities are denominated in foreign
currencies, a Fund's investment performance is affected by the strength or
weakness of the U.S. dollar against those currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall. (See discussion of
transaction hedging and portfolio hedging below under "Currency Exchange
Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; and sometimes less advantageous legal, operational
and financial protections applicable to foreign sub-custodial arrangements.
Although the Funds intend to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations. Each
Fund other than Global Growth and Income Fund expects that substantially all of
its investments will be in developed nations.
Currency Exchange Transactions. Currency exchange transactions may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks, foreign
exchange dealers and broker-dealers, are not exchange traded, and are usually
for less than one year, but may be renewed.
Forward currency exchange transactions may involve currencies of the
different countries in which the Funds may invest and serve as hedges against
possible variations in the exchange rate between these currencies. Currency
exchange transactions are limited to transaction hedging and portfolio hedging
involving either specific transactions or portfolio positions, except to the
extent described below under "Synthetic Foreign Money Market Positions."
Transaction hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of a Fund accruing in connection with the
purchase and sale of its portfolio securities or the receipt of dividends or
interest thereon. Portfolio hedging is the use of forward contracts with
respect to portfolio security positions denominated or quoted in a particular
foreign currency. Portfolio hedging allows the Fund to limit or reduce its
exposure in a foreign currency by entering into a forward contract to sell such
foreign currency (or another foreign currency that acts as a proxy for that
currency) at a future date for a price payable in U.S. dollars so that the value
of the foreign denominated portfolio securities can be approximately matched by
a foreign denominated liability. The Fund may not engage in portfolio hedging
with respect to the currency of a particular country to an extent greater than
the aggregate market value (at the time of making such sale) of the securities
held in its portfolio denominated or quoted in that particular currency, except
that the Fund may hedge all or part of its foreign currency exposure through the
use of a basket of currencies or a proxy currency where such currencies or
currency act as an effective proxy for other currencies. In such a case, the
Fund may enter into a forward contract where the amount of the foreign currency
to be sold exceeds the value of the securities denominated in such currency.
The use of this basket hedging
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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.
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Lending of Portfolio Securities
Each Fund may lend its portfolio securities to broker-dealers and banks.
Any such loan must be continuously secured by collateral in cash or cash
equivalents maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The Fund would have
the right to call the loan and obtain the securities loaned at any time on
notice of not more than five business days. The Fund would not have the right
to vote the securities during the existence of the loan but would call the loan
to permit voting of the securities, if, in the Adviser's judgment, a material
event requiring a shareholder vote would otherwise occur before the loan was
repaid. In the event of bankruptcy or other default of the borrower, the Fund
could experience both delays in liquidating the loan collateral or recovering
the loaned securities and losses, including (a) possible decline in the value of
the collateral or in the value of the securities loaned during the period while
the Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c) expenses of
enforcing its rights.
Repurchase Agreements
Each Fund may invest in repurchase agreements, provided that Global Growth
and Income Fund may not invest more than 15%, and each other Fund may not invest
more than 10%, of its net assets in repurchase agreements maturing in more than
seven days and any other illiquid securities. A repurchase agreement is a sale
of securities to the Fund in which the seller agrees to repurchase the
securities at a higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of bankruptcy of the
seller, the Fund could experience both losses and delays in liquidating its
collateral.
Options on Securities, Indexes and Currencies
Each Fund may purchase and sell put options and call options on securities,
indexes or foreign currencies in standardized contracts traded on recognized
securities exchanges, boards of trade, or similar entities, or quoted on NASDAQ.
A Fund may purchase agreements, sometimes called cash puts, that may accompany
the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign currency has the
obligation upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise,
the writer of an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
A Fund will write call options and put options only if they are "covered."
For example, in the case of a call option on a security, the option is "covered"
if the Fund owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or, if additional cash consideration is required, cash or cash equivalents in
such amount are held in a segregated account by its custodian) upon conversion
or exchange of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price and
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expiration). There can be no assurance, however, that a closing purchase or sale
transaction can be effected when the Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price of the underlying security or index in relation
to the exercise price of the option, the volatility of the underlying security
or index, and the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an
option written by the Fund is recorded as a deferred credit. The value of an
option purchased or written is marked-to-market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid and
asked prices.
Risks Associated with Options. There are several risks associated with
transactions in options. For example, there are significant differences between
the securities markets, the currency markets and the options markets that could
result in an imperfect correlation among these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If the Fund were unable to close out an option
that it has purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
the Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, the Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call. As the writer of a covered call
option on a foreign currency, the Fund foregoes, during the option's life, the
opportunity to profit from currency appreciation.
If trading were suspended in an option purchased or written by a Fund, the
Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might not be able to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
Each Fund may use interest rate futures contracts, index futures contracts
and foreign currency futures contracts. An interest rate, index or foreign
currency futures contract provides for the future sale by one party and purchase
by another party of a specified quantity of a financial instrument or the cash
value of an index/1/ at a specified price and time. A public market exists in
futures contracts covering a number of indexes (including, but not limited to:
the Standard & Poor's 500 Index, the Russell 2000 Index, the Value Line
Composite Index, and the New York Stock Exchange Composite Index) as well as
financial instruments (including, but not limited to: U.S. Treasury bonds, U.S.
Treasury notes, Eurodollar
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/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.
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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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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
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/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.
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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.
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/3/ An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel-casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).
B-9
<PAGE>
A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If the Fund delivers securities under a futures contract, the
Fund also realizes a capital gain or loss on those securities.
For federal income tax purposes, a Fund generally is required to recognize
as income for each taxable year its net unrealized gains and losses as of the
end of the year on futures, futures options and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized with
respect to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and 40% short-term,
without regard to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the recognition of losses on
certain positions (including options, futures and futures options positions, the
related securities and certain successor positions thereto) may be deferred to a
later taxable year. Sale of futures contracts or writing of call options (or
futures call options) or buying put options (or futures put options) that are
intended to hedge against a change in the value of securities held by the Fund:
(1) will affect the holding period of the hedged securities; and (2) may cause
unrealized gain or loss on such securities to be recognized upon entry into the
hedge.
If a Fund were to enter into a short index future, short index futures
option or short index option position and the Fund's portfolio were deemed to
"mimic" the performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions would be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for a Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends, interest,
income derived from loans of securities and gains from the sale of securities or
foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts). Any net gain realized from futures (or
futures options) contracts will be considered gain from the sale of securities
and therefore be qualifying income for purposes of the 90% requirement.
Each Fund distributes to shareholders annually any net capital gains that
have been recognized for federal income tax purposes (including year-end mark-
to-market gains) on options and futures transactions. Such distributions are
combined with distributions of capital gains realized on the Fund's other
investments, and shareholders are advised of the nature of the payments.
Portfolio Turnover
Although the Funds do not purchase securities with a view to rapid
turnover, there are no limitations on the length of time that portfolio
securities must be held. Portfolio turnover can occur for a number of reasons,
including calls for redemption, general conditions in the securities markets,
more favorable investment opportunities in other securities, or other factors
relating to the desirability of holding or changing a portfolio investment. The
portfolio turnover rates may vary greatly from year to year. A high rate of
portfolio turnover in a Fund would result in increased transaction expense,
which must be borne by that Fund. High portfolio turnover may also result in
the realization of capital gains or losses and, to the extent net short-term
capital gains are realized, any distributions resulting from such gains will be
considered ordinary income for federal income tax purposes. See "Risk of
Investment" and "Dividends and Distributions" in the Prospectus.
Short Sales
Each Fund may attempt to hedge against market risk and to enhance income by
selling short "against the box," that is: (1) entering into short sales of
securities that it currently has the right to acquire through the conversion or
exchange of other securities that it owns, or to a lesser extent, entering into
short sales of securities that it currently owns; and (2) entering into
arrangements with the broker-dealers through which such securities are sold
short to receive income with respect to the proceeds of short sales during the
period the Fund's short positions remain open. Each Fund other than Strategic
Income Fund
B-10
<PAGE>
may make short sales of securities only if at all times when a short position is
open the Fund owns an equal amount of such securities or securities convertible
into or exchangeable for, without payment of any further consideration,
securities of the same issue as, and equal in amount to, the securities sold
short.
In addition to selling short against the box, Strategic Income Fund may
sell short securities that it currently has the right to acquire upon payment of
additional consideration, for instance, upon exercise of a warrant or option.
This technique would be used by Strategic Income Fund to hedge against market
risk in connection with a synthetic convertible security in the same way selling
short against the box hedges against market risk in connection with a true
convertible security.
In a short sale against the box, a Fund does not deliver from its portfolio
the securities sold and does not receive immediately the proceeds from the short
sale. Instead, the Fund borrows the securities sold short from a broker-dealer
through which the short sale is executed, and the broker-dealer delivers such
securities, on behalf of the Fund, to the purchaser of such securities. Such
broker-dealer is entitled to retain the proceeds from the short sale until the
Fund delivers to such broker-dealer the securities sold short. In addition, the
Fund is required to pay to the broker-dealer the amount of any dividends paid on
shares sold short. Finally, to secure its obligation to deliver to such broker-
dealer the securities sold short, the Fund must deposit and continuously
maintain in a separate account with the Fund's custodian an equivalent amount of
the securities sold short or securities convertible into or exchangeable for
such securities without the payment of additional consideration. The Fund is
said to have a short position in the securities sold until it delivers to the
broker-dealer the securities sold, at which time the Fund receives the proceeds
of the sale. Because the Fund ordinarily will want to continue to hold
securities in its portfolio that are sold short, the Fund will normally close
out a short position by purchasing on the open market and delivering to the
broker-dealer an equal amount of the securities sold short, rather than by
delivering portfolio securities.
A short sale works the same way, except that the Fund places in the
segregated account cash or U.S. government securities equal in value to the
difference between (i) the market value of the securities sold short at the time
they were sold short and (ii) any cash or U.S. government securities required to
be deposited with the broker as collateral. In addition, so long as the short
position is open, the Fund must daily adjust the value of the segregated account
so that the amount deposited in it, plus any amount deposited with the broker as
collateral, will equal the current market value of the security sold short.
However, the value of the segregated account may not be reduced below the point
at which the segregated account, plus any amount deposited with the broker, is
equal to the market value of the securities sold short at the time they were
sold short.
Short sales may protect a Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium.
Short sale transactions of a Fund involve certain risks. In particular, the
imperfect correlation between the price movements of the convertible securities
and the price movements of the underlying common stock being sold short creates
the possibility that losses on the short sale hedge position may be greater than
gains in the value of the portfolio securities being hedged. In addition, to the
extent that a Fund pays a conversion premium for a convertible security, the
Fund is generally unable to protect against a loss of such premium pursuant to a
short sale hedge. In determining the number of shares to be sold short against a
Fund's position in the convertible securities, the anticipated fluctuation in
the conversion premiums is considered. A Fund will also incur transaction costs
in connection with short sales. Certain provisions of the Internal Revenue Code
may limit the degree to which the Fund is able to enter into short sales, which
limitations might impair the Fund's ability to achieve its investment objective.
See "Taxation."
B-11
<PAGE>
In addition to enabling a Fund to hedge against market risk, short sales
may afford a Fund an opportunity to earn additional current income to the extent
the Fund is able to enter into arrangements with broker-dealers through which
the short sales are executed to receive income with respect to the proceeds of
the short sales during the period the Fund's short positions remain open.
Unseasoned Issuers
Each Fund may invest up to 5% of its total assets in the securities of
unseasoned issuers, that is, issuers that, together with predecessors, have been
in operation less than three years. The Adviser believes that investment in
securities of unseasoned issuers may provide opportunities for long-term capital
growth, although the risks of investing in such securities are greater than with
common stocks of more established companies because unseasoned issuers have only
a brief operating history and may have more limited markets and financial
resources. No Fund other than Global Growth and Income Fund and Growth Fund
currently intends to invest in securities of unseasoned issuers.
"When-Issued" and Delayed Delivery Securities and Reverse Repurchase Agreements
Each Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The Fund makes such commitments only with the intention
of actually acquiring the securities, but may sell the securities before
settlement date if the Adviser deems it advisable for investment reasons. The
Fund may utilize spot and forward foreign currency exchange transactions to
reduce the risk inherent in fluctuations in the exchange rate between one
currency and another when securities are purchased or sold on a when-issued or
delayed-delivery basis.
Each Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
At the time when a Fund enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse repurchase agreement,
liquid assets (cash, U.S. Government securities or other "high-grade" debt
obligations) of the Fund having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books of the Fund
and held by the custodian throughout the period of the obligation. The use of
these investment strategies, as well as borrowing under a line of credit as
described below, may increase net asset value fluctuation.
Illiquid Securities
Global Growth and Income Fund may invest up to 15% of its total assets, and
each other Fund may invest up to 10% of its total assets, taken at market value,
in illiquid securities, including any securities that are not readily marketable
either because they are restricted securities or for other reasons. Restricted
securities are securities that are subject to restrictions on resale because
they have not been registered for sale under the Securities Act of 1933. A
position in restricted securities might adversely affect the liquidity and
marketability of a portion of the Fund's portfolio, and the Fund might not be
able to dispose of its holdings in such securities promptly or at reasonable
prices. In those instances where a Fund is required to have restricted
securities held by it registered prior to sale by the Fund and the Fund does not
have a contractual commitment from the issuer or seller to pay the costs of such
registration, the gross proceeds from the sale of securities would be reduced by
the registration costs and underwriting discounts. Any such registration costs
are not included in the percentage limitation on a Fund's investment in
restricted securities. The Funds do not intend to invest in illiquid securities
during the next fiscal year, except that the Funds may invest in options traded
on the NASDAQ National Market System.
B-12
<PAGE>
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;
(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
- ---------------------
/4/ No Fund currently intends to enter into reverse repurchase agreements.
B-13
<PAGE>
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 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
B-14
<PAGE>
a U.S. person), except that Global Growth and Income Fund may invest all of its
assets in securities of foreign issuers.
Restrictions (a) through (i) may be changed by the board of trustees
without shareholder approval.
Notwithstanding the foregoing investment restrictions, a Fund may purchase
securities pursuant to the exercise of subscription rights, subject to the
condition that such purchase will not result in the Fund's ceasing to be a
diversified investment company. Far Eastern and European corporations frequently
issue additional capital stock by means of subscription rights offerings to
existing shareholders at a price substantially below the market price of the
shares. The failure to exercise such rights would result in the Fund's interest
in the issuing company being diluted. The market for such rights is not well
developed in all cases and, accordingly, the Fund may not always realize full
value on the sale of rights. The exception applies in cases where the limits set
forth in the investment restrictions would otherwise be exceeded by exercising
rights or would have already been exceeded as a result of fluctuations in the
market value of the Fund's portfolio securities with the result that the Fund
would be forced either to sell securities at a time when it might not otherwise
have done so, to forego exercising the rights.
MANAGEMENT
Trustees and Officers
Set forth below is information about the trustees and officers of the
Trust.
<TABLE>
<CAPTION>
Name, Position(s) with Trust
and Age at March 31, 1998 Principal Occupation(s) During Past Five Years
- ---------------------------- ----------------------------------------------
<S> <C>
John P. Calamos (1) President, Calamos Asset Management, Inc. ("CAM"), an investment
Trustee and President, 57 adviser and the Funds' investment adviser; President, Calamos
Financial Services, Inc. ("CFS"), a broker-dealer and the Funds'
distributor.
Nick P. Calamos (1) Managing Director, CAM and CFS.
Trustee and Vice President, 38
Richard J. Dowen (2) Professor of Finance, Northern Illinois University.
Trustee, 53
Robert Frost (2) Management Consultant, ECOM Consultants, Inc.
Trustee, 58
William A. Kaun (2) Principal, W.A. Kaun Co. (investment adviser and publisher).
Trustee, 70
John P. Salmon Vice President - Mutual Fund Operations, CAM, since 1997; Manager and
Treasurer and Assistant Secretary, 52 Assistant Vice President, Collective Investment Fund Accounting
Group, First National Bank of Chicago, prior thereto.
James S. Hamman, Jr. Vice President and General Counsel, CAM, since 1998; Vice President
Secretary, 28 and Associate Counsel, Scudder Kemper Investments, Inc. (investment
manager), 1996 - 1998; attorney, Vedder, Price, Kaufman & Kammholz,
prior thereto.
</TABLE>
B-15
<PAGE>
______________________
(1) John P. Calamos and Nick P. Calamos are trustees who are "interested
persons" of the Trust as defined in the Investment Company Act of 1940 (the
"1940 Act") and are members of the executive committee of the board of
trustees, which has authority during intervals between meetings of the
board of trustees to exercise the powers of the board.
(2) Messrs. Dowen, Frost and Kaun are members of the audit committee of the
board of trustees, which makes recommendations regarding the selection of
the Trust's independent auditors and meets with representatives of the
independent auditors to determine the scope and review the results of each
audit.
The address of Mr. Dowen is Department of Finance, Northern Illinois
University, DeKalb, Illinois 60115; that of Mr. Frost is 53 Ward Drive, New
Rochelle, New York 10804; and that of Mr. Kaun is 1750 Grandstand Place, Elgin,
Illinois 60123. The address of the officers of the Trust is 1111 East
Warrenville Road, Naperville, Illinois 60563-1493. Nick Calamos is a nephew of
John Calamos.
The following table shows the compensation paid by the Trust for the year
ended March 31, 1998 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 $7500
Robert Frost 7500
William A. Kaun 7500
</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.
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:
B-16
<PAGE>
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
<S> <C> <C> <C>
3/31/98 3/31/97 3/31/96
-------- -------- --------
Convertible Fund $579,633 $230,573 $148,187
Growth and Income Fund
Advisory fee $ 92,242 $ 54,520 $ 32,870
Waiver or reimbursement 0 7,042 4,132
-------- -------- --------
Net fee $ 92,242 $ 47,478 $ 28,738
Strategic Income Fund
Advisory fee $ 9,079 $ 11,203 $ 14,092
Waiver or reimbursement 49,904 45,456 29,705
-------- -------- --------
Net fee $(40,825) $(34,253) $(15,613)
Growth Fund
Advisory fee $ 92,400 $ 47,557 $ 23,290
Waiver or reimbursement 28,816 33,966 27,383
-------- -------- --------
Net fee $ 63,584 $ 13,591 $ (4,093)
Global Growth and Income Fund*
Advisory Fee $ 49,105 $ 13,646 $ --
Waiver or reimbursement 51,658 24,597 --
-------- -------- --------
Net Fee $ (2,553) $(10,951) $ --
- ---------------------------
</TABLE>
* Global Growth and Income Fund commenced operations on September 9, 1996.
The Agreement will remain in effect with respect to each Fund until July 5,
1999, 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
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, 1999 in excess of certain
limits as described in the prospectus under "Management of the Funds -- The
Adviser."
B-17
<PAGE>
DISTRIBUTION PLAN
The Trust has adopted a plan pursuant to rule 12b-1 under the Investment
Company Act of 1940 (the "Plans"), whereby Class A shares and Class C shares of
each Fund pay to Calamos Financial Services, Inc., the Funds' distributor
("CFS"), service and distribution fees as described in the prospectus under
"Management of the Funds -- Distribution Plan."
The board of trustees of the Trust has determined that a continuous cash
flow resulting from the sale of new Class A shares and Class C shares is
necessary and appropriate to meet redemptions and to take advantage of buying
opportunities without having to make unwarranted liquidations of portfolio
securities. The board also considered that continuing growth in the size of the
Funds would be in the best interests of shareholders because increased size
would allow the Funds to realize certain economies of scale in their operations
and would likely reduce the proportionate share of expenses borne by each
shareholder. The board of trustees therefore determined that it would benefit
each of the Funds to have monies available for the direct distribution and
service activities of CFS, as the Funds' distributor, in promoting the
continuous sale of the Funds' shares. The board of trustees, including the non-
interested trustees, concluded, in the exercise of their reasonable business
judgment and in light of their fiduciary duties, that there is a reasonable
likelihood that the Plans will benefit the Funds and their shareholders.
The Plan has been approved by the board of trustees, including all of the
trustees who are non-interested persons as defined in the 1940 Act. The
substance of the Plan has also been approved by the vote of a majority of the
outstanding shares of each of the Funds. The Plan must be reviewed annually and
may be continued from year to year by vote of the board of trustees, including a
majority of the trustees who are non-interested persons of the Funds and who
have no direct or indirect financial interest in the operation of the Plan
("non-interested trustees"), cast in person at a meeting called for that
purpose. It is also required that the selection and nomination of non-interested
trustees be done by non-interested trustees. The Plan and any distribution or
service agreement may be terminated at any time, without any penalty, by such
trustees, by any act that terminates the distribution agreement between the
Trust and CFS, or, as to any Fund, by vote of a majority of that Fund's
outstanding shares. Any agreement related to the Plan, including any
distribution or service agreement, may be terminated in the same manner, except
that termination by a majority of the outstanding shares must be on not more
than 60 days' written notice to any other party to such agreement. Any
distributor, dealer or institution may also terminate its distribution or
service agreement at any time upon written notice.
Neither the Plan nor any distribution or service agreement may be amended
to increase materially the amount spent for distribution or service expenses or
in any other material way without approval by a 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, 1998, each of the Funds made payments to
CFS pursuant to the Plan in the following amounts:
<TABLE>
<CAPTION>
Global
Convertible Growth and Strategic Growth and
Fund Income Fund Income Fund Growth Fund Income Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$306,657 $60,669 $6,053 $42,406 $26,116
</TABLE>
B-18
<PAGE>
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Funds' prospectus under the
headings "How to Purchase Shares" and "How to Redeem Shares." All of that
information is incorporated herein by reference.
You may purchase or redeem shares of the Funds through certain investment
dealers, banks or other intermediaries ("Intermediaries"). These Intermediaries
may charge for their services. Any such charges could constitute a substantial
portion of a smaller account, and may not be in your best interest. You may
purchase or redeem shares of the Funds directly from or with the Trust without
any charges other than those described in the prospectus.
An Intermediary, who accepts orders that are processed at the net asset
value next determined after receipt of the order by the Intermediary, accepts
such orders as agent of the Trust. The Intermediary is required to segregate any
orders received on a business day after the close of regular session trading on
the New York Stock Exchange and transmit those orders separately for execution
at the net asset value next determined after that business day.
Net Asset Value
In computing the net asset value of each Fund, portfolio securities,
including options, that are traded on a national securities exchange and
securities reported on the NASDAQ National Market System are valued at the last
reported sales price. Securities traded in the over-the-counter market and
listed securities for which no sales were reported are valued at the mean of the
most recently quoted bid and asked prices. Each outstanding futures contract is
valued at the official settlement price for the contract on the exchange on
which the contract is traded, except that if the market price of the contract
has increased or decreased by the maximum amount permitted on the valuation date
("up or down the limit"), the contract is valued at a fair value as described
below. Short-term obligations with maturities of 60 days or less are valued at
amortized cost.
When market quotations are not readily available for a Fund's securities,
such securities are valued at a fair value following procedures approved by the
board of trustees. These procedures include determining fair value on the basis
of valuations furnished by pricing services approved by the board of trustees,
which include market transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders, as well as on the basis of appraisals received from a pricing service
using a computerized matrix system, or appraisals derived from information
concerning the securities or similar securities received from recognized dealers
in those securities.
Each Fund's net asset value is determined only on days on which the New
York Stock Exchange (the "NYSE") is open for trading. That Exchange is regularly
closed on Saturdays and Sundays and on New Year's Day, the third Mondays in
January and February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving and Christmas. If one of these holidays falls on a
Saturday or Sunday, the NYSE will be closed on the preceding Friday or the
following Monday, respectively.
Securities that are principally traded in a foreign market are valued as of
the close of the appropriate exchange or other designated time. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed at various times before the 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.
B-19
<PAGE>
Redemption in Kind
The Funds have elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which they are obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of a Fund
during any 90-day period for any one shareholder. Redemptions in excess of these
amounts will normally be paid in cash, but may be paid wholly or partly by a
distribution in kind of securities.
PERFORMANCE INFORMATION
Total Return
From time to time the Funds may quote total return figures. "Total Return"
for a period is the percentage change in value during a period of an investment
in Fund shares, including the value of shares acquired through reinvestment of
all dividends and capital gains distributions. "Average Annual Total Return" is
the average annual compounded rate of change in value represented by the Total
Return for the period.
Average Annual Total Return will be computed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
ERV = P(1+T)n
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
the period, at the end of the period (or
fractional portion thereof)
</TABLE>
Total Return (taking into account the effect of the sales charge) and
Average Annual Total Return for each of the Funds was as shown below for the
following periods ended March 31, 1998.
<TABLE>
<CAPTION>
Average Annual
Total Return Total Return
--------------------------- -------------------------
Class A Class C Class I Class A Class C Class I
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Convertible Fund
One year................................... 25.21 30.84 N/A 25.21 30.84 N/A
Five years................................. 99.32 N/A N/A 14.78 N/A N/A
Ten years.................................. 245.42 N/A N/A 13.19 N/A N/A
Life of Class (A Shares, 6/21/85;
C Shares, 7/5/96; I Shares, 6/25/97)... 335.79 45.39 18.84 12.20 24.04 25.33
Growth and Income Fund
One year................................... 31.31 37.13 N/A 31.31 37.13 N/A
Five years................................. 109.69 N/A N/A 15.95 N/A N/A
Life of Class (A Shares, 9/22/88;
C Shares, 7/5/96; I Shares, 6/25/97)... 289.25 51.97 14.39 15.33 28.83 28.79
</TABLE>
B-20
<PAGE>
<TABLE>
<CAPTION>
Strategic Income Fund
<S> <C> <C> <C> <C> <C> <C>
One year.................................... 10.24 N/A N/A 10.24 N/A N/A
Five years.................................. 40.26 N/A N/A 7.00 N/A N/A
Life of Class............................... 89.53 N/A N/A 8.81 N/A N/A
Growth Fund
One year.................................... 46.72 53.29 N/A 46.72 53.29 N/A
Five years.................................. 138.85 N/A N/A 19.01 N/A N/A
Life of Class (A Shares, 9/4/90;
C Shares, 9/3/96; I Shares, 9/18/97)...... 263.02 61.48 6.40 18.55 35.63 12.38
Global Growth and Income Fund
One Year.................................... 24.10 29.80 N/A 24.10 29.80 N/A
Life of Class (A Shares, 9/9/96;
C Shares, 9/24/96; I Shares, 9/18/97)..... 34.09 39.71 10.85 20.74 24.70 21.39
</TABLE>
________________
*Not annualized
Yield
Each Fund other than Growth Fund may also quote yield figures. The yield of
a Fund is calculated by dividing its net investment income per share (a
hypothetical figure as defined in SEC rules) during a 30-day period by the net
asset value per share on the last day of the period. The yield formula provides
for semiannual compounding, which assumes that net investment income is earned
and reinvested at a constant rate and annualized at the end of a six-month
period. The yield is not based on actual dividends paid.
Yield will be computed as follows:
YIELD = 2[((a-b/cd)+1)/6/-1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The annualized yield of Class A shares of Strategic Income Fund for the 30
days ended March 31, 1998 was 3.54%. No Class C shares or Class I shares of that
Fund were outstanding.
The figures quoted assume reinvestment of all dividends and distributions.
Quotations of Average Annual Total Return take into account the effect of any
sales charge on the amount available for investment or redemption; quotations of
Total Return will indicate whether or not the effect of the sales charge is
included. Income taxes are not taken into account. The figures will not
necessarily be indicative of future performance. The performance of a Fund is a
result of conditions in the securities markets, portfolio management, and
operating expenses. Although information such as yield and total return is
useful in reviewing a Fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be used for
comparison with other investments using different reinvestment assumptions or
time periods.
B-21
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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.
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.
B-22
<PAGE>
DISTRIBUTOR
Calamos Financial Services, Inc. ("CFS"), a broker-dealer whose sole
shareholder and principal officer is John P. Calamos, serves as distributor for
the Funds, subject to change by a majority of the "non-interested" trustees at
any time. CFS is located at 1111 East Warrenville Road, Naperville, Illinois
60563-1493. CFS is responsible for all purchases, sales, redemptions and other
transfers of shares of the Funds without any charge to the Funds except the fees
paid to CFS under the Distribution Plans. CFS is also responsible for all
expenses incurred in connection with its performance of services for the Funds,
including, but not limited to, personnel, office space and equipment, telephone,
postage and stationery expenses. CFS receives commissions from sales of shares
of the Funds that are not expenses of the Funds but represent sales commissions
added to the net asset value of shares purchased from the Funds. See "How to
Purchase Shares -- Offering Price" in the prospectus. CFS also receives
brokerage commissions for executing portfolio transactions for the Funds. See
"Portfolio Transactions." CFS received and retained commissions on the sale of
shares of the Funds as shown below during the indicated periods:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
3/31/98 3/31/97 3/31/96
-------- -------- --------
<S> <C> <C> <C>
Convertible Fund
Commissions received $282,787 $ 98,409 $150,460
Commissions retained 49,045 40,972 25,675
Growth and Income Fund
Commissions received 9,268 6,485 15,718
Commissions retained 1,951 4,980 2,741
Strategic Income Fund
Commissions received 1,071 -- 1,605
Commissions retained -- -- 394
Growth Fund
Commissions received 1,203 759 706
Commissions retained 756 401 706
Global Growth and Income Fund*
Commissions received 1,490 76 N/A
Commissions retained 250 36 N/A
</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, which is a portfolio of Cash
Account Trust. For its services it receives from the portfolios or their
affiliates fees at a rate of .60% of the average annual net assets of each
account in the portfolio established through the exchange plan.
CFS from its own resources may pay additional compensation to persons who
sell Fund shares or provide subaccounting and shareholder servicing. Such
additional compensation may amount to as much as .25% of the offering price,
depending on the volume of sales or anticipated volume of sales attributable to
the recipient of the commission, and up to .10% of the annual average value of
shares held in such accounts.
B-23
<PAGE>
PORTFOLIO TRANSACTIONS
See "Management of the Funds -- The Adviser" and "Portfolio Transactions"
in the prospectus.
Portfolio transactions on behalf of the Funds effected on stock exchanges
involve the payment of negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the over-the-counter
markets, but the price paid by the Funds usually includes an undisclosed dealer
commission or mark-up. In underwritten offerings, the price paid by the Funds
includes a disclosed, fixed commission or discount retained by the underwriter
or dealer.
In executing portfolio transactions, the Adviser uses its best efforts to
obtain for the Funds the most favorable price and execution available. In
seeking the most favorable price and execution, the Adviser considers all
factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of commission, the timing of
the transaction taking into account market prices and trends, the execution
capability of the broker-dealer and the quality of service rendered by the
broker-dealer in other transactions.
The trustees have determined that portfolio transactions for the Funds may
be executed through CFS if, in the judgment of the Adviser, the use of CFS is
likely to result in prices and execution at least as favorable to the Funds as
those available from other qualified brokers and if, in such transactions, CFS
charges the Funds commission rates consistent with those charged by CFS to
comparable unaffiliated customers in similar transactions. The board of
trustees, including a majority of the trustees who are not "interested"
trustees, has adopted procedures that are reasonably designed to provide that
any commissions, fees or other remuneration paid to CFS are consistent with the
foregoing standard. The Funds will not effect principal transactions with CFS.
In allocating the Funds' portfolio brokerage transactions to unaffiliated
broker-dealers, the Adviser may take into consideration the research,
analytical, statistical and other information and services provided by the
broker-dealer, such as general economic reports and information, reports or
analyses of particular companies or industry groups, market timing and technical
information, and the availability of the brokerage firm's analysts for
consultation. Although the Adviser believes these services have substantial
value, they are considered supplemental to the Adviser's own efforts in the
performance of its duties under the management agreement. As permitted by
Section 28(e) of the Securities Exchange Act of 1934 ("1934 Act"), the Adviser
may pay a broker-dealer that provides brokerage and research services an amount
of commission for effecting a securities transaction for a Fund in excess of the
commission that another broker-dealer would have charged for effecting that
transaction if the amount is believed by the Adviser to be reasonable in
relation to the value of the overall quality of the brokerage and research
services provided. Other clients of the Adviser may indirectly benefit from the
availability of these services to the Adviser, and the Funds may indirectly
benefit from services available to the Adviser as a result of transactions for
other clients.
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.
B-24
<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>
Convertible Fund
Year ended 3/31/98 $161,650,678 12% $40,998,753 48% $65,900 $37,442 57%
Year ended 3/31/97 42,848,432 29 16,460,059 76 38,540 30,227 78
Year ended 3/31/96 27,314,393 36 12,402,558 80 21,060 14,829 70
Growth and Income Fund
Year ended 3/31/98 31,113,883 21 9,700,909 68 19,770 14,334 73
Year ended 3/31/97 14,964,889 32 5,344,755 91 12,005 11,414 95
Year ended 3/31/96 7,311,519 45 3,615,330 91 7,032 6,735 96
Strategic Income Fund
Year ended 3/31/98 11,244,554 7 2,057,079 38 5,168 2,958 57
Year ended 3/31/97 5,870,089 24 1,639,136 85 3,897 3,521 90
Year ended 3/31/96 5,325,874 36 1,877,281 100 3,999 3,999 100
Growth Fund
Year ended 3/31/98 37,327,107 44 33,389,620 49 69,831 28,916 41
Year ended 3/31/97 18,832,387 90 18,516,353 91 41,099 37,360 91
Year ended 3/31/96 11,228,653 98 10,920,952 100 23,240 23,240 100
Global Growth and Income Fund
Year ended 3/31/98 8,159,394 19 1,837,679 84 4,195 3,657 87
Year ended 3/31/97 7,350,637 13 1,557,089 63 3,477 2,429 70
</TABLE>
Of the aggregate brokerage commissions paid during the year ended March 31,
1998, Convertible Fund, Growth and Income Fund, Strategic Income Fund, Growth
Fund and Global Growth and Income Fund paid commissions of $13,419, $2,526,
$1,200, $40,915 and $291, respectively, to brokers who furnished research
services. Neither Strategic Income Fund nor Growth Fund paid any commissions to
brokers furnishing research.
TAXATION
The following is only a summary of certain tax considerations affecting the
Funds and their shareholders. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Investors are urged to consult their tax advisers with specific reference to
their own tax situations.
Qualification as a Regulated Investment Company
Each Fund intends to continue to qualify and elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code") so as to be relieved of from federal income tax on
its net investment income and capital gains that it currently distributes to
shareholders.
At the time of your purchase, a Fund's net asset value may reflect
undistributed income, capital gains, or net unrealized appreciation of
securities held by that Fund. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be taxable either as a
dividend or capital gain distribution.
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate fluctuations,
are taxable as ordinary income. If the net effect to a Fund of those
transactions is a gain, the income dividend paid by the Fund will be increased;
if the result is a loss, the income dividend paid will be decreased.
B-25
<PAGE>
Income received by a Fund from sources within various foreign countries
will be subject to foreign income taxes withheld at the source. Under the
Internal Revenue Code, if more than 50% of the value of a Fund's total assets at
the close of its taxable year comprises securities issued by foreign
corporations, the Fund may file an election with the Internal Revenue Service to
"pass through" to its shareholders the amount of foreign income taxes paid by
that fund. Pursuant to that election, shareholders would be required to: (i)
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes paid by the fund; (ii) treat their pro rata share of
foreign taxes as paid by them; and (iii) either deduct their pro rata share of
foreign taxes in computing their taxable income, or use it as a foreign tax
credit against U.S. income taxes (but not both). No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions.
ALLOCATION AMONG FUNDS
The assets received by the Trust from the sale of shares of each Fund, and
all income, earnings, profits and proceeds thereof, subject only to the rights
of creditors, are specifically allocated to that Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund are required
to be segregated on the books of account, and are to be charged with the expense
in respect to that Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust not readily identifiable as belonging to a
particular Fund shall be allocated by or under the direction of the trustees in
such manner as the trustees determine to be fair and equitable. Each share of
each Fund represents an equal proportionate interest in that Fund with each
other share and is entitled to such dividends and distributions out of the
income belonging to that Fund as are declared by the trustees. Upon any
liquidation of a Fund, shareholders thereof are entitled to share pro rata in
the net assets belonging to that Fund available for distribution.
CERTAIN SHAREHOLDERS
The only persons known to own beneficially (as determined in accordance
with rule 13d-3 under the 1934 Act) 5% or more of the outstanding shares of any
Fund at June 30, 1998 were:
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- ------ ------------
STRATEGIC INCOME FUND
<S> <C> <C>
Lincoln Trust Company 12,558 11.01
Custodian Donald E. Lindley
P.O. Box 5831
Denver, Colorado 80217
Prudential Securities FBO Marjorie K. 10,149 8.90
Flannery, Trustee of Marjorie K. Flannery
Revocable Trust dtd 3/28/84
1365 Elmhurst Drive, N.E.
Cedar Rapids, Iowa 52402-4771
Bernice Slotky and Brian E. Slotky, JT TEN 8,893 7.80
671 South Hollybrook Drive, #109
Pembroke Pines, Florida 33025
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- ------ ------------
<S> <C> <C>
Lincoln Trust Company 6,848 6.01
Custodian Ralph E. Lassa
P.O. Box 5831
Denver, Colorado 80217
Florence Azot 6,050 5.31
7 Tanglewood Court
Indian Head Park, Illinois 60525
GROWTH AND INCOME FUND
John P. Calamos* 128,984 13.22
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Nick P. Calamos* 104,395 10.70
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Merrill Lynch & Co., Inc. 101,883 10.44
Global Headquarters
World Financial Center
North Tower
250 Verey Street
New York, New York 10281
Calamos Financial Services, Inc. 99,087 10.15
401(k) Profit Sharing Plan and Trust*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
GROWTH FUND
John P. Calamos* 271,060 43.30
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Nick P. Calamos* 105,691 16.88
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Calamos Financial Services, Inc. 70,824 11.31
401(k) Profit Sharing Plan and Trust*
Calamos Financial Services, Inc.* 39,708 6.34
1111 East Warrenville Road
Naperville, Illinois 60563-1493
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- ------ ------------
<S> <C> <C>
GLOBAL GROWTH AND INCOME FUND
John P. Calamos* 99,344 8.79
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Nick P. Calamos* 79,490 7.03
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Calamos Financial Services, Inc. 70,446 6.23
401(k) Profit Sharing Plan and Trust*
1111 East Warrenville Road
Naperville, Illinois 60563-1493
</TABLE>
__________________
* John P. Calamos and Nick P. Calamos are the trustees of the Calamos
Financial Services, Inc. 401(k) Profit Sharing Plan and Trust and the
Calamos Financial Services, Inc. 401(k) Employee 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 and the Calamos Financial Services,
Inc. 401(k) Employee 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 June 30, 1998 the trustees and officers of the Trust as a group owned
beneficially shares of the Funds as follows: 21,999 shares (.30%) of Convertible
Fund; 234,162 shares (23.99%) of Growth and Income Fund; 643 shares (.56%) of
Strategic Income Fund; 376,782 shares (60.19%) of Growth Fund; and 179,351
shares (15.87%) of Global Growth and Income Fund.
CUSTODIAN
The Bank of New York, 48 Wall Street, New York, New York 10286, is the
custodian for the assets of each Fund other than Strategic Income Fund, for whom
Prudential Securities, Inc., One New York Plaza, New York, New York 10292, is
the custodian. The custodian is responsible for holding all cash and securities
of the Funds, directly or through a book entry system, delivering and receiving
payment for securities sold by the Funds, receiving and paying for securities
purchased by the Funds, collecting income from investments of the Funds and
performing other duties, all as directed by authorized persons of the Trust. The
custodian does not exercise any supervisory functions in such matters as the
purchase and sale of securities by a Fund, payment of dividends or payment of
expenses of a Fund.
INDEPENDENT AUDITORS
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606, audits and reports on the Funds' annual financial statements, reviews
certain regulatory reports and the Funds' federal income tax returns, and
performs other professional accounting, tax and advisory services when engaged
to do so by the Funds.
B-28
<PAGE>
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 1998 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.
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