<PAGE> 1
AS FILED WITH THE SECURITIES AND Exchange Commission on June 1, 1999
Securities Act registration no. 33-19228
Investment Company Act file no. 811-5443
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
- --------------------------------------------------------------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 20 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO.23 [X]
- --------------------------------------------------------------------------------
CALAMOS INVESTMENT TRUST
(Registrant)
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Telephone number: 630-245-7200
- --------------------------------------------------------------------------------
James S. Hamman, Jr., Secretary Cameron S. Avery
Calamos Asset Management, Inc. Bell, Boyd, & Lloyd
1111 East Warrenville Road 70 West Madison Street, Suite 3300
Naperville, Illinois 60563-1493 Chicago, Illinois 60602-4207
(Agents for service)
- --------------------------------------------------------------------------------
it is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of rule 485
_____ on _____ pursuant to paragraph (b) of rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of rule 485
_____ on _____ pursuant to paragraph (a)(1) of rule 485
__X__ 75 days after filing pursuant to paragraph (a)(2) of rule 485
_____ on _____ pursuant to paragraph (a)(2) of rule 485
_____ on _____ pursuant to paragraph (a)(3) of rule 485
- --------------------------------------------------------------------------------
Amending Parts A, B and C and filing exhibits, and adding a new series.
- --------------------------------------------------------------------------------
<PAGE> 2
CALAMOS(R) FAMILY OF FUNDS
PROSPECTUS
AUGUST 1, 1999
CONVERTIBLE FUND
GROWTH AND INCOME FUND
MARKET NEUTRAL INCOME FUND*
GROWTH FUND
GLOBAL GROWTH AND INCOME FUND
HIGH YIELD FUND
*Formerly named Strategic Income Fund
An investment in the Funds is not a bank deposit, is not FDIC-insured, and may
lose value. The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus is accurate
or complete. If anyone tells you otherwise, they are committing a crime.
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<S> <C>
THE FUNDS ..................................................................... 3
CONVERTIBLE FUND .............................................................. 4
GROWTH AND INCOME FUND ........................................................ 10
MARKET NEUTRAL INCOME FUND .................................................... 16
GROWTH FUND.................................................................... 23
GLOBAL GROWTH AND INCOME FUND.................................................. 27
HIGH YIELD FUND ............................................................... 33
WHO MANAGES THE FUNDS? ........................................................ 38
HOW CAN I BUY SHARES? ......................................................... 40
HOW CAN I SELL SHARES? ........................................................ 43
TRANSACTION INFORMATION ....................................................... 43
DISTRIBUTIONS AND TAXES ....................................................... 45
FINANCIAL HIGHLIGHTS .......................................................... 46
FOR MORE INFORMATION .......................................................... 54
</TABLE>
2
<PAGE> 4
THE FUNDS
WHAT ARE THE INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES COMMON TO THE FUNDS?
Each Fund described in this prospectus has a different investment objective and
may invest in different securities. The Funds differ principally in (i) how
important growth potential and current income is considered when selecting
investments and (ii) the types of securities selected as investments.
The investment objectives of a Fund may not be changed without the approval of a
"majority of the outstanding" shares of that Fund, as defined in the Investment
Company Act of 1940. There can be no assurance that a Fund will achieve its
objectives.
WHAT ARE THE PRINCIPAL RISKS COMMON TO THE FUNDS?
A WORD ABOUT RISK. This prospectus describes the risks you may face as an
investor in the CALAMOS Family of Funds. It is important to keep in mind that
generally investments with a higher potential reward also have a higher risk of
losing money. The reverse is also commonly true: the lower the risk, the lower
the potential reward. However, as you consider an investment in the Funds, you
should also take into account your tolerance for the daily fluctuations of the
financial markets and whether you can afford to leave your money in this
investment for long periods of time to ride out down periods.
As with any security, there are market and investment risks associated with your
investment in the Funds. The value of your investment will fluctuate over time
and it is possible to lose money.
MARKET RISK. The risk that the securities markets will increase or decrease in
value is considered market risk and applies to any security. If there is a
general decline in the stock market, it is possible your investment may lose
value regardless of the individual results of the companies in which a Fund
invests.
INVESTMENT MANAGEMENT. Whether a Fund achieves its investment objective is
significantly impacted by whether we at CALAMOS(R) ASSET MANAGEMENT, INC., as
each Fund's investment adviser, are able to choose suitable investments for the
Funds.
FOREIGN MARKET RISK. There are special risks associated with investing in
foreign securities that are not typically associated with investing in U. S.
companies. These risks include fluctuations in the exchange rates foreign
currencies that may affect the U.S. dollar value of a security, and the
possibility of substantial price volatility as a result of political and
economic instability in the foreign country. Other risks of investing in foreign
securities include: less public information about issuers of securities,
different accounting, auditing and financial reporting standards, and less
liquidity in foreign markets than in U.S. markets.
RULE 144A SECURITIES. Each Fund may purchase securities that have been privately
placed but are eligible for purchase and sale by certain qualified institutional
buyers such as the Funds under Rule 144A under the Securities Act of 1933. Under
the supervision of the Funds' board of trustees, we will determine whether
securities purchased under Rule 144A are illiquid. The Funds are restricted to
investing a specific percentage of their assets in securities that are illiquid,
that is, not readily marketable. If qualified institutional buyers are unwilling
to purchase these Rule 144A Securities, the percent of the Fund's assets
invested in illiquid securities would increase.
3
<PAGE> 5
CONVERTIBLE FUND
WHAT IS THE INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES OF THE FUND?
The primary objective of the Convertible Fund is current income with growth as
its secondary objective.
The Fund invests mainly in a diversified portfolio of convertible securities
issued by both U.S. and foreign companies. These convertible securities may be
either debt securities or preferred stocks that can be exchanged for common
stock. Under normal market conditions, we invest at least 65% of the Fund's
total assets in convertible securities.
The Fund may invest without limit in high yield bonds, and may invest up to 25%
of its net assets in foreign securities. The Fund's assets may also be invested
in securities that have not been registered for public sale, but that are
eligible for purchase and sale by certain qualified institutional buyers (Rule
144A securities).
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
DEFAULT RISK. Default risk refers to the risk that a company who issues a debt
security will be unable to fulfill its obligation to repay principal and
interest. The lower a bond is rated, the greater its default risk.
INTEREST RATE RISK. Interest rate risk is the risk that the Fund's investments
will decrease in value as a result of an increase in interest rates. Generally,
there is an inverse relationship between the value of a debt security and
interest rates. Therefore, the value of the bonds held by the Fund generally
decrease in periods when interest rates are rising. In addition, interest rate
changes normally have a greater effect on prices of longer-term bonds than
shorter-term bonds.
CONVERTIBLE SECURITIES. A convertible security may lose all of its value if the
value of the underlying common stock falls below the conversion price of the
security. The conversion price is the predetermined price at which the
convertible security may be exchanged for the common stock of the issuer.
FOREIGN SECURITIES. The Fund's investments in foreign securities involve risk
considerations unlike those associated with investing in U.S. companies. Please
refer to the discussion of Foreign Market Risk under "The Funds" at the
beginning of this prospectus.
HIGH YIELD FIXED-INCOME SECURITIES. The Fund's investment in high yield
fixed-income securities (often referred to as "junk bonds") entails a greater
risk than an investment in higher-rated securities. Although high yield bonds
typically pay higher interest rates than investment-grade bonds, there is a
greater likelihood that the company issuing the high yield bond will default on
interest and principal payments. In the event of an issuer's bankruptcy, claims
of other creditors may have priority over the claims of high yield bond holders,
leaving few or no assets to repay them. High yield bonds are also more sensitive
to adverse economic changes or individual corporate developments than higher
quality bonds. During a period of adverse economic changes, including a period
of rising interest rates, companies issuing high yield bonds may be unable to
make principal and interest payments.
4
<PAGE> 6
HOW HAS THE FUND PERFORMED IN THE PAST?
The bar chart and table below provide some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from calendar year to
calendar year and how the Fund's average annual total returns compare with those
of a broad measure of market performance. As always, please note that how the
Fund has performed in the past cannot predict how it will perform in the future.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
[Bar Chart 1989 - 1998]
For the period included in the bar chart, the Fund's highest return for a
calendar quarter was __% (the ____ quarter of ____ ), and the Fund's lowest
return for a calendar quarter was - ___% (the ____ quarter of ____).
The Fund's year-to-date total return as of June 30, 1999 was ___%.
Average Annual Total Returns
<TABLE>
<CAPTION>
For periods ended Value Line
December 31, 1998 Class A Class C Convertible Index+
- ----------------- ------- ------- ------------------
<S> <C> <C> <C>
One Year 6.35% 11.14% -5.31%
Five Years 12.48% -- 9.56%
Ten Years 13.28% -- 11.20%
Since Class Inception 16.37% 7.09%**
</TABLE>
* Inception Date for C shares is 7/5/96.
** Index returns for the life of Class C shares are from 7/1/96.
+ The Value Line Convertible Index is an unmanaged index considered
representative of the convertible securities market. The index includes 585
convertible bonds and preferred stocks. Selection is based on issue size
and trading statistics. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges.
WHAT ARE THE FEES AND EXPENSES OF THE FUND?
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are shareholder fees which are subtracted
directly from the amount you invest and there are annual operating expenses
which are subtracted each year from the assets in the Fund. Please refer to the
"How Can I Buy Shares?" section of this prospectus for information regarding fee
discounts and waivers.
5
<PAGE> 7
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None(1) 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
- ----------------
(1) The redemption of Class A shares purchased at net asset value under the
$1,000,000 purchase order privilege may be subject to a contingent deferred
sales charge of 1% during the first year.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Management Fees .75% .75%
Distribution (12b-1) Fees .50% 1.00%
Other Expenses --% --%
Total Annual Operating Expenses --% --%
</TABLE>
EXAMPLES: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
This example shows an investment made and held for one year, three years, five
years and ten years. In each case, we assume that you invest $10,000 in the Fund
for the time periods indicated, and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class C $ $ $ $
</TABLE>
HOW DOES THE FUND INVEST?
The primary investment objective of the Fund is current income with growth as
its secondary objective. The Fund invests primarily in a diversified portfolio
of convertible securities; and under normal market conditions, invests at least
65% of its total assets in convertible securities.
6
<PAGE> 8
We believe there are various advantages to buying convertible securities which
include:
- - the potential for capital appreciation if the value of the underlying
common stock increases the relatively high yield received from dividend
- - or interest payments as compared to common stock dividends
- - the relatively lower price volatility as compared to common stock
The Fund seeks to profit from this strategy by receiving interest on the
convertible security and through an increase in the convertible's value. The
convertible's value goes up when the market value of the underlying common stock
increases above the conversion price.
HOW DO WE SELECT SECURITIES?
We typically apply a four-step approach when selecting convertible
securities for the Fund, which includes:
1. Evaluating the default risk of the convertible security using traditional
credit analysis
2. Analyzing the convertible's underlying common stock to determine its capital
appreciation potential
3. Assessing the risk/return potential of the convertible security
4. Evaluating the convertible security's impact on the overall composition of
the Fund and it's diversification strategy
In the equity and credit analysis, we generally consider the issuer's:
- financial soundness
- ability to make interest and dividend payments
- earnings and cash-flow forecast
- quality of management
WHAT ARE THE TYPES OF SECURITIES THE FUND INVESTS IN?
CONVERTIBLE SECURITIES. Convertible securities include debt obligations and
preferred stock of the company issuing the security, which may be exchanged
for a predetermined price (the conversion price) into the common stock of the
issuer. Convertible securities generally offer lower interest or dividend
yields than non-convertible securities of similar quality.
Many convertible securities are issued with a "call" feature that allows the
issuer of the security to choose when to redeem the security. If a
convertible security held by the Fund is called for redemption, the Fund will
be required to redeem the security, convert it into the underlying common
stock, or sell it to a third party at a time that may be unfavorable to the
Fund. Conversely, certain convertible debt securities may provide a "put
option" which entitles the Fund to make the issuer redeem the security at a
premium over the stated principal amount of the debt security.
We may also create a "synthetic" convertible security by combining separate
securities that possess the two principal characteristics of a true
convertible security, i.e., fixed-income securities ("fixed-income
7
<PAGE> 9
component") and the right to acquire equity securities ("convertible
component"). The fixed-income component is achieved by investing in
non-convertible, fixed-income securities such as bonds, preferred stocks and
money market instruments. The convertible component is achieved by investing
in warrants or options to buy common stock at a certain exercise price, or
options on a stock index.
The Fund may also purchase synthetic securities manufactured by other
parties, typically investment banks, including convertible structured notes.
Purchasing synthetic convertible securities may offer more flexibility than
purchasing a convertible security. Different companies may issue the
fixed-income and convertible components which may be purchased separately,
and at different times. Synthetic convertible securities are not considered
convertible securities for purposes of the Fund's policy to invest at least
65% of its total assets in convertible securities. Additional information
regarding synthetic securities appears below.
EQUITY SECURITIES. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and
depository receipts. An investment in the equity securities of a company
represents a proportionate ownership interest in that company. Therefore, the
Fund participates in the financial success or failure of any company in which
we have an equity interest. Compared with other asset classes, equity
investments have a greater potential for gain.
RULE 144A SECURITIES. We may invest the Fund's assets in securities that are
not publicly traded, but that are eligible for purchase and sale by certain
qualified institutional buyers pursuant to Rule 144A under the Securities Act
of 1933.
HIGH YIELD FIXED-INCOME SECURITIES. The Fund may invest without limit in
convertible and non-convertible debt securities rated BB or lower by Standard
& Poor's Corporation, or Ba or lower by Moody's Investor Services, Inc., and
in securities that are not rated but are considered by us to be of similar
quality (commonly called "junk" bonds). The Fund will not, however, acquire a
security rated below C and expects to maintain, over the long-term, an
average credit quality rating of investment grade, which is BBB or Baa or
greater.
DEFENSIVE INVESTING. We may depart from the Fund's principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions without limitation in all types of money
market and short term debt securities, and repurchase agreements. In a
repurchase agreement, the Fund purchases a security and the seller (a bank or
securities dealer) simultaneously agrees to buy back (repurchase) the
security at the same price plus an amount equal to an agreed-upon interest
rate, on a specified date. During periods when we have assumed a temporary
defensive position, the Fund may not be able to achieve its investment
objective.
WHAT OTHER INVESTMENT RISKS ARE ASSOCIATED WITH THE FUND?
All investments, including those in mutual funds, have risks. We designed the
Fund for long-term investors who can accept fluctuations in the total value of
their portfolio and other risks associated with the Fund. We cannot guarantee
the Fund will achieve its objective.
CONVERTIBLE SECURITIES. As with all fixed-income securities, the market value of
convertible securities tends to decline as interest rates increase. Conversely,
a convertible's market value increases as interest rates decline. However, the
convertible's market value tends to reflect the market price of the common
8
<PAGE> 10
stock of the issuing company when that stock price is greater than the
convertible's "conversion price". The conversion price is defined as the
predetermined price at which the convertible could be exchanged for the
associated stock.
As the market price of the underlying common stock declines, the price of the
convertible security tends to be influenced more by the yield of the convertible
security. Thus, it may not decline in price to the same extent as the underlying
common stock.
In the event of a liquidation of the issuing company, holders of convertible
securities would be paid before the company's common stock holders.
Consequently, the issuer's convertible securities entail less risk than their
common stock.
EQUITY INVESTMENTS. Equity investments are subject to greater fluctuations in
market value than other asset classes as a result of such factors as a company's
business performance, investor perceptions, stock market trends and general
economic conditions. Smaller companies are especially sensitive to these
factors, and therefore may experience more price volatility than larger
companies.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible security
will respond differently to market fluctuations than a convertible security
because a synthetic convertible is composed of two or more separate securities,
each with its own market value. In addition, if the value of the underlying
common stock or the level of the index involved in the convertible component
falls below the exercise price of the warrant or option, the warrant or option
may lose all value.
OTHER SECURITIES.While not the principal investments or strategies of the Fund,
we may utilize other investments and investment techniques which may impact
performance, including options, warrants, futures and other strategic
transactions. More information about Fund investments and strategies is provided
in the Statement of Additional Information.
9
<PAGE> 11
GROWTH AND INCOME FUND
WHAT IS THE INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES OF THE FUND?
The primary objective of the Growth and Income Fund is high long-term total
return through growth and current income. Under normal market conditions the
Fund invests at least 65% of its total assets in a diversified portfolio of
convertible, equity and fixed-income securities, with equal emphasis on capital
appreciation and current income.
The Fund may invest without limit in high yield bonds. The Fund's assets may
also be invested in securities that have not been registered for public sale,
but that are eligible for purchase and sale by certain qualified institutional
buyers (Rule 144A securities).
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
DEFAULT RISK. Default risk refers to the risk that a company who issues a debt
security will be unable to fulfill its obligation to repay principal and
interest. The lower a bond is rated, the greater its default risk.
INTEREST RATE RISK. Interest rate risk is the risk that the Fund's investments
will decrease in value as a result of an increase in interest rates. Generally,
there is an inverse relationship between the value of a debt security and
interest rates. Therefore, the value of the bonds held by the Fund generally
decrease in periods when interest rates are rising. In addition, interest rate
changes normally have a greater effect on prices of longer-term bonds than
shorter-term bonds.
CONVERTIBLE SECURITIES. A convertible security may lose all of its value if the
value of the underlying common stock falls below the conversion price of the
security. The conversion price is the predetermined price at which the
convertible security may be exchanged for the common stock of the issuer.
EQUITY INVESTMENTS. Equity investments are subject to greater fluctuations in
market value than other asset classes as a result of such factors as a company's
business performance, investor perceptions, stock market trends and general
economic conditions. Smaller companies are especially sensitive to these
factors, and therefore may experience more price volatility than larger
companies.
HIGH YIELD FIXED-INCOME SECURITIES The Fund's investment in high yield
fixed-income securities (often referred to as "junk bonds") entails a greater
risk than an investment in higher-rated securities. Although high yield bonds
typically pay higher interest rates than investment-grade bonds, there is a
greater likelihood that the company issuing the high yield bond will default on
interest and principal payments. In the event of an issuer's bankruptcy, claims
of other creditors may have priority over the claims of high yield bond holders,
leaving few or no assets to repay them. High yield bonds are also more sensitive
to adverse economic changes or individual corporate developments than higher
quality bonds. During a period of adverse economic changes, including a period
of rising interest rates, companies issuing high yield bonds may be unable to
make principal and interest payments.
10
<PAGE> 12
HOW HAS THE FUND PERFORMED IN THE PAST?
The bar chart and table below provide some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from calendar year to
calendar year and how the Fund's average annual total returns compare with those
of a broad measure of market performance. As always, please note that how the
Fund has performed in the past cannot predict how it will perform in the future.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
[Bar Chart 1989 - 1998]
For the period included in the bar chart, the Fund's highest return for a
calendar quarter was __% (the ____ quarter of ____ ), and the Fund's lowest
return for a calendar quarter was - ___% (the ____ quarter of ____).
The Fund's year-to-date total return as of June 30, 1999 was ___%.
Average Annual Total Returns
<TABLE>
<CAPTION>
For periods ended Value Line
December 31, 1998 Class A Class C Convertible Index+
- ----------------- ------- ------- ------------------
<S> <C> <C> <C>
One Year 12.02% 17.14% -5.31%
Five Years 15.03% -- 9.56%
Ten Years 14.93% -- 11.55%
Since Class Inception* 20.96% 8.80%**
</TABLE>
* Inception Date for Class C shares is 8/5/96.
** Index returns for the life of Class C shares are from 8/1/96.
+ The Value Line Convertible Index is an unmanaged index considered
representative of the convertible securities market. The index includes 585
convertible bonds and preferred stocks. Selection is based on issue size
and trading statistics. Index returns assume reinvestment of dividends and,
unlike Fund returns, do not reflect any fees, expenses or sales charges.
WHAT ARE THE FEES AND EXPENSES OF THE FUND?
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are shareholder fees which are subtracted
directly from the amount you invest and there are annual operating expenses
which are subtracted each year from the assets in the Fund. Please refer to the
"How Can I Buy Shares?" section of this prospectus for information regarding fee
discounts and waivers.
11
<PAGE> 13
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None(1) 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
- ----------------
(1) The redemption of Class A shares purchased at net asset value under the
$1,000,000 purchase order privilege may be subject to a contingent deferred
sales charge of 1% during the first year.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Management Fees .75% .75%
Distribution (12b-1) Fees .50% 1.00%
Other Expenses --% --%
Total Annual Operating Expenses* --% --%
</TABLE>
- -------------
* Calamos Asset Management, Inc. has voluntarily decided to waive fees and/or
reimburse fund expense so that the Total Annual Operating Expenses are
limited to 2.00% for Class A shares and 2.50% for Class C shares through
August 31, 2000. The information contained in the table above and the
example below reflects the expenses of the Fund without taking into account
any applicable fee waivers and/or reimbursements.
EXAMPLES: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
This example shows an investment made and held for one year, three years, five
years and ten years. In each case, we assume that you invest $10,000 in the Fund
for the time periods indicated, and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class C $ $ $ $
</TABLE>
12
<PAGE> 14
HOW DOES THE FUND INVEST?
The primary investment objective of the Fund is high long-term total return
through growth and current income. Under normal market conditions, the Fund
invests at least 65% of its total assets in convertible, equity and fixed-income
securities, with equal emphasis on capital appreciation and current income.
We believe there are various advantages to buying convertible securities which
include:
- - the potential for capital appreciation if the value of the underlying
common stock increases
- - the relatively high yield received from dividend or interest payments as
compared to common stock dividends
- - the relatively lower price volatility as compared to common stock
The Fund seeks to profit from this strategy by receiving interest on the
convertible security and through an increase in the convertible's value. The
convertible's value goes up when the market value of the underlying common stock
increases above the conversion price.
HOW DO WE SELECT SECURITIES?
We typically apply a four-step approach when selecting convertible
securities for the Fund, which includes:
1. Evaluating the default risk of the convertible security using traditional
credit analysis
2. Analyzing the convertible's underlying common stock to determine its
capital appreciation potential
3. Assessing the risk/return potential of the convertible security
4. Evaluating the convertible security's impact on the overall composition of
the Fund and it's diversification strategy
In the equity and credit analysis, we generally consider the issuer's:
- financial soundness
- ability to make interest and dividend payments
- earnings and cash-flow forecast
- quality of management
The Fund's assets not invested in convertible securities are invested in common
stocks that, in our judgment, provide opportunities for long-term capital
appreciation, or in other securities as described below.
The Fund generally invests in smaller and medium-sized companies, the securities
of which tend to be more volatile and less liquid than the securities of larger
companies.
WHAT ARE THE TYPES OF SECURITIES THE FUND INVESTS IN?
CONVERTIBLE SECURITIES. We expect that a significant portion of the Fund's
assets will be invested in convertible securities. Convertible securities
include debt obligations and preferred stock of the
13
<PAGE> 15
company issuing the security, which may be exchanged for a predetermined
price (the conversion price) into the common stock of the issuer.
Convertible securities generally offer lower interest or dividend yields
than non-convertible securities of similar quality.
Many convertible securities are issued with a "call" feature that allows
the issuer of the security to choose when to redeem the security. If a
convertible security held by the Fund is called for redemption, the Fund
will be required to redeem the security, convert it into the underlying
common stock, or sell it to a third party at a time that may be unfavorable
to the Fund. Conversely, certain convertible debt securities may provide a
"put option" which entitles the Fund to make the issuer redeem the security
at a premium over the stated principal amount of the debt security.
We may also create a "synthetic" convertible security by combining separate
securities that possess the two principal characteristics of a true
convertible security, i.e., fixed-income securities ("fixed-income
component") and the right to acquire equity securities ("convertible
component"). The fixed-income component is achieved by investing in
non-convertible, fixed-income securities such as bonds, preferred stocks
and money market instruments. The convertible component is achieved by
investing in warrants or options to buy common stock at a certain exercise
price, or options on a stock index.
The Fund may also purchase synthetic securities manufactured by other
parties, typically investment banks, including convertible structured
notes. Purchasing synthetic convertible securities may offer more
flexibility than purchasing a convertible security. Different companies may
issue the fixed-income and convertible components which may be purchased
separately, and at different times. Additional information regarding
synthetic securities appears below.
EQUITY SECURITIES. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and
depository receipts. An investment in the equity securities of a company
represents a proportionate ownership interest in that company. Therefore,
the Fund participates in the financial success or failure of any company in
which we have an equity interest. Compared with other asset classes, equity
investments have a greater potential for gain.
FOREIGN SECURITIES. We may invest up to 25% of the Fund's net assets in
securities of foreign issuers. A foreign issuer is a company organized
under the laws of a foreign country that is principally traded in the
financial markets of a foreign country. For purposes of the 25% limitation,
foreign securities do not include securities represented by American
Depository Receipts (ADRs) or securities guaranteed by a U.S. person. ADRs
are traded on U.S. exchanges and represent an ownership interest in a
foreign security. They are generally issued by a U.S. bank as a substitute
for direct ownership of the foreign security. International investing
allows the Fund to achieve greater diversification and to take advantage of
changes in foreign economies and market conditions.
RULE 144A SECURITIES. We may invest the Fund's assets in securities that
are not publicly traded, but that are eligible for purchase and sale by
certain qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933.
HIGH YIELD FIXED-INCOME SECURITIES. The Fund may invest without limit in
convertible and non-convertible debt securities rated BB or lower by
Standard & Poor's Corporation, or Ba or lower by Moody's Investor Services,
Inc., and in securities that are not rated but are considered by us to be
of
14
<PAGE> 16
similar quality (commonly called "junk" bonds). The Fund will not, however,
acquire a security rated below C.
DEFENSIVE INVESTING. We may depart from the Fund's principal investment
strategies in response to adverse market, economic or political conditions
by taking temporary defensive positions without limitation in all types of
money market and short term debt securities, and repurchase agreements. In
a repurchase agreement, the Fund purchases a security and the seller (a
bank or securities dealer) simultaneously agrees to buy back (repurchase)
the security at the same price plus an amount equal to an agreed-upon
interest rate, on a specified date. During periods when we have assumed a
temporary defensive position, the Fund may not be able to achieve its
investment objective.
WHAT OTHER INVESTMENT RISKS ARE ASSOCIATED WITH THE FUND?
All investments, including those in mutual funds, have risks. We
designed the Fund for long-term investors who can accept fluctuations in
the total value of their portfolio and other risks associated with the
Fund. We cannot guarantee the Fund will achieve its objective.
CONVERTIBLE SECURITIES. As with all fixed-income securities, the market
value of convertible securities tends to decline as interest rates
increase. Conversely, a convertible's market value increases as interest
rates decline. However, the convertible's market value tends to reflect the
market price of the common stock of the issuing company when that stock
price is greater than the convertible's "conversion price". The conversion
price is defined as the predetermined price at which the convertible could
be exchanged for the associated stock.
As the market price of the underlying common stock declines, the price of
the convertible security tends to be influenced more by the yield of the
convertible security. Thus, it may not decline in price to the same extent
as the underlying common stock.
In the event of a liquidation of the issuing company, holders of
convertible securities would be paid before the company's common stock
holders. Consequently, the issuer's convertible securities entail less risk
than their common stock.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible
security will respond differently to market fluctuations than a convertible
security because a synthetic convertible is composed of two or more
separate securities, each with its own market value. In addition, if the
value of the underlying common stock or the level of the index involved in
the convertible component falls below the exercise price of the warrant or
option, the warrant or option may lose all value.
FOREIGN SECURITIES. The Fund's investments in foreign securities involve
risk considerations unlike those associated with investing in U.S.
companies. Please refer to the discussion of Foreign Market Risk under "The
Funds" at the beginning of this prospectus.
OTHER SECURITIES.While not the principal investments or strategies of the
Fund, we may utilize other investments and investment techniques which may
impact performance, including options, warrants, futures and other
strategic transactions. More information about Fund investments and
strategies is provided in the Statement of Additional Information.
15
<PAGE> 17
MARKET NEUTRAL INCOME FUND (FORMERLY NAMED STRATEGIC INCOME FUND)
WHAT IS THE INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES OF THE FUND?
The primary objective of the Market Neutral Income Fund is high current income
consistent with stability of principal.
The Fund invests mainly in convertible securities and employs short selling to
enhance income and hedge against market risk. These convertible securities may
be either debt securities or preferred stocks that can be exchanged for common
stock. Under normal market conditions, we invest at least 65% of the Fund's
total assets in income-producing securities.
The Fund's strategy employs short sales to a significant degree. In a short
sale, the Fund borrows securities from a broker and sells the borrowed
securities. The proceeds of the sale are generally used to secure the Fund's
obligation to the lending broker and are invested in liquid securities.
The Fund may invest without limit in high yield bonds, and may invest up to 25%
of its net assets in foreign securities. The Fund's assets may also be invested
in securities that have not been registered for public sale, but that are
eligible for purchase and sale by certain qualified institutional buyers (Rule
144A Securities).
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
DEFAULT RISK. Default risk refers to the risk that a company who issues a debt
security will be unable to fulfill its obligation to repay principal and
interest. The lower a bond is rated, the greater its default risk.
INTEREST RATE RISK. Interest rate risk is the risk that the Fund's investments
will decrease in value as a result of an increase in interest rates. Generally,
there is an inverse relationship between the value of a debt security and
interest rates. Therefore, the value of the bonds held by the Fund generally
decrease in periods when interest rates are rising. In addition, interest rate
changes normally have a greater effect on prices of longer-term bonds than
shorter-term bonds.
CONVERTIBLE SECURITIES. A convertible security may lose all of its value if the
value of the underlying common stock falls below the conversion price of the
security. The conversion price is the predetermined price at which the
convertible security may be exchanged for the common stock of the issuer.
SHORT SALES. Short sales are a key component of the Fund's strategy. Short sales
involve risks, including:
- - The Fund may incur a loss as a result of a short sale if the market value
of the borrowed security increases between the date of the short sale and
the date the Fund replaces the security.
- - The Fund may be unable to repurchase the borrowed security at a particular
time or at an acceptable price. When the Fund is short a security, the
lender may terminate the loan at a time when the Fund is unable to borrow
the same security from another lender. When this happens the Fund is
required to close out its short position at the current market price.
- - Although the Fund's gain is limited to the amount received upon selling a
security short, its potential loss is unlimited.
- - The Fund might be unable to implement these strategies because of the lack
of attractive short sale opportunities.
16
<PAGE> 18
HIGH YIELD FIXED-INCOME SECURITIES. The Fund's investment in high yield
fixed-income securities (often referred to as "junk bonds") entails a greater
risk than an investment in higher-rated securities. Although high yield bonds
typically pay higher interest rates than investment-grade bonds, there is a
greater likelihood that the company issuing the high yield bond will default on
interest and principal payments. In the event of an issuer's bankruptcy, claims
of other creditors may have priority over the claims of high yield bond holders,
leaving few or no assets to repay them. High yield bonds are also more sensitive
to adverse economic changes or individual corporate developments than higher
quality bonds. During a period of adverse economic changes, including a period
of rising interest rates, companies issuing high yield bonds may be unable to
make principal and interest payments.
HOW HAS THE FUND PERFORMED IN THE PAST?
The bar chart and table below provide some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from calendar year to
calendar year and how the Fund's average annual total returns compare with those
of a broad measure of market performance. As always, please note that how the
Fund has performed in the past cannot predict how it will perform in the future.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
[Bar Chart 1991 - 1998]
For the period included in the bar chart, the Fund's highest return for a
calendar quarter was __% (the ____ quarter of ____ ), and the Fund's lowest
return for a calendar quarter was - ___% (the ____ quarter of ____).
The Fund's year-to-date total return as of June 30, 1999 was ___%.
Average Annual Total Returns
<TABLE>
<CAPTION>
For periods ended Salomon Brothers 30-Day Lehman Brothers Govt.
December 31, 1998 Class A Treasury Bills Index+ /Corp.Bond Index+
- ----------------- ------- ----------------------- ----------------------
<S> <C> <C> <C>
One Year 4.82% 4.77% 9.47%
Five Years 6.50% 4.76% 7.30%
Since Class Inception* 8.79% 4.47%** 9.26%**
</TABLE>
* Inception Date for A shares is 9/4/90.
** Index returns are from 9/1/90
+ The Salomon Brothers 30-Day Treasury Bills Index is an unmanaged index
generally considered representative of the performance of short-term money
investments. U.S. Treasury bills are backed by the full faith and credit of
the U.S. Government and offer a guarantee as to the repayment of principal
and interest at maturity. The Lehman Brothers Government/Corporation Bond
Index is an unmanaged index comprising intermediate and long-term
government and investment-grade corporate debt securities. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect
any fees, expenses or sales charges.
17
<PAGE> 19
WHAT ARE THE FEES AND EXPENSES OF THE FUND?
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are shareholder fees which are subtracted
directly from the amount you invest and there are annual operating expenses
which are subtracted each year from the assets in the Fund. Please refer to the
"How Can I Buy Shares?" section of this prospectus for information regarding fee
discounts and waivers.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None(1) 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
- ----------------
(1) The redemption of Class A shares purchased at net asset value under the
$1,000,000 purchase order privilege may be subject to a contingent deferred
sales charge of 1% during the first year.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
Class A Class C
Management Fees .75% .75%
Distribution (12b-1) Fees .50% 1.00%
Other Expenses --% --%
Total Annual Operating Expenses* --% --%
- -------------
* Calamos Asset Management, Inc. has voluntarily decided to waive fees and/or
reimburse fund expense so that the Total Annual Operating Expenses are
limited to 2.00% for Class A shares and 2.50% for Class C shares through
August 31, 2000. The information contained in the table above and the
example below reflects the expenses of the Fund without taking into account
any applicable fee waivers and/or reimbursements.
EXAMPLES: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
This example shows an investment made and held for one year, three years, five
years and ten years. In each case, we assume that you invest $10,000 in the Fund
for the time periods indicated, and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
18
<PAGE> 20
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class C $ $ $ $
</TABLE>
HOW DOES THE FUND INVEST?
The primary investment objective of the Fund is high current income consistent
with stability of principal. The Fund invests primarily in convertible
securities, and employs short selling to enhance income and hedge against market
risk. Under normal market conditions, we invest at least 65% of the Fund's total
assets in income-producing securities.
We believe there are various advantages to buying convertible securities which
include:
- - the potential for capital appreciation if the value of the underlying
common stock increases
- - the relatively high yield received from dividend or interest payments as
compared to common stock dividends
- - the relatively lower price volatility as compared to common stock
The Fund seeks to enhance income and protect against market risk by hedging a
portion of the equity risk inherent in the convertible securities purchased for
the Fund. This hedging is achieved by selling short some or all of the common
stock issuable upon exercise of the convertible security. If the market price of
the common stock increases above the conversion price on the convertible
security, the price of the convertible security will increase. The Fund's
increased liability on the short position would, in whole or in part, reduce
this gain. If the price of the common stock declines, any decline in the price
of the convertible security would offset the Fund's gain on the short position.
The Fund profits from this strategy by receiving interest and/or dividends on
the convertible security and by adjusting the amount of equity risk that is
hedged by short sales.
HOW DO WE SELECT SECURITIES?
We typically apply a four-step approach when selecting convertible
securities for the Fund, which includes:
1. Evaluating the default risk of the convertible security using traditional
credit analysis
2. Analyzing the convertible's underlying common stock to determine its
capital appreciation potential
3. Assessing the risk/return potential of the convertible security
4. Evaluating the convertible security's impact on the overall composition of
the Fund and it's diversification strategy
In the equity and credit analysis, we generally consider the issuer's:
- financial soundness
- ability to make interest and dividend payments
- earnings and cash-flow forecast
- quality of management
19
<PAGE> 21
In determining the appropriate portion of the Fund's equity exposure to
hedge, we may consider:
- the general outlook for interest rates and equity markets
- the availability of stock to sell short
- expected returns and volatility
WHAT ARE THE TYPES OF SECURITIES THE FUND INVESTS IN?
CONVERTIBLE SECURITIES. Convertible securities include debt obligations
and preferred stock of the company issuing the security, which may be
exchanged for a predetermined price (the conversion price) into the
common stock of the issuer. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of
similar quality.
Many convertible securities are issued with a "call" feature that
allows the issuer of the security to choose when to redeem the
security. If a convertible security held by the Fund is called for
redemption, the Fund will be required to redeem the security, convert
it into the underlying common stock, or sell it to a third party at a
time that may be unfavorable to the Fund. Conversely, certain
convertible debt securities may provide a "put option" which entitles
the Fund to make the issuer redeem the security at a premium over the
stated principal amount of the debt security.
We may also create a "synthetic" convertible security by combining
separate securities that possess the two principal characteristics of a
true convertible security, i.e., fixed-income securities ("fixed-income
component") and the right to acquire equity securities ("convertible
component"). The fixed-income component is achieved by investing in
non-convertible, fixed-income securities such as bonds, preferred
stocks and money market instruments. The convertible component is
achieved by investing in warrants or options to buy common stock at a
certain exercise price, or options on a stock index.
The Fund may also purchase synthetic securities manufactured by other
parties, typically investment banks, including convertible structured
notes. Purchasing synthetic convertible securities may offer more
flexibility than purchasing a convertible security. Different companies
may issue the fixed-income and convertible components which may be
purchased separately, and at different times. Additional information
regarding synthetic securities appears below.
HIGH YIELD FIXED-INCOME SECURITIES. The Fund may invest without limit
in convertible and non-convertible debt securities rated BB or lower by
Standard & Poor's Corporation, or Ba or lower by Moody's Investor
Services, Inc., and in securities that are not rated but are considered
by us to be of similar quality (commonly called "junk" bonds). The Fund
will not, however, acquire a security rated below C.
RULE 144A SECURITIES. We may invest the Fund's assets in securities
that are not publicly traded, but that are eligible for purchase and
sale by certain qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933.
20
<PAGE> 22
EQUITY SECURITIES. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and
depository receipts. An investment in the equity securities of a
company represents a proportionate ownership interest in that company.
Therefore, the Fund participates in the financial success or failure of
any company in which we have an equity interest. Compared with other
asset classes, equity investments have a greater potential for gain.
FOREIGN SECURITIES. We may invest up to 25% of the Fund's net assets in
securities of foreign issuers. A foreign issuer is a company organized
under the laws of a foreign country that is principally traded in the
financial markets of a foreign country. For purposes of the 25%
limitation, foreign securities do not include securities represented by
American Depository Receipts (ADRs) or securities guaranteed by a U.S.
person. ADRs are traded on U.S. exchanges and represent an ownership
interest in a foreign security. They are generally issued by a U.S.
bank as a substitute for direct ownership of the foreign security.
International investing allows the Fund to achieve greater
diversification and to take advantage of changes in foreign economies
and market conditions.
DEFENSIVE INVESTING. We may depart from the Fund's principal investment
strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions without limitation
in all types of money market and short term debt securities, and
repurchase agreements. In a repurchase agreement, the Fund purchases a
security and the seller (a bank or securities dealer) simultaneously
agrees to buy back (repurchase) the security at the same price plus an
amount equal to an agreed-upon interest rate, on a specified date.
During periods when we have assumed a temporary defensive position, the
Fund may not be able to achieve its investment objective.
WHAT OTHER INVESTMENT RISKS ARE ASSOCIATED WITH THE FUND?
All investments, including those in mutual funds, have risks. We
designed the Fund for long-term investors who can accept fluctuations in
the total value of their portfolio and other risks associated with the
Fund. We cannot guarantee the Fund will achieve its objective.
CONVERTIBLE SECURITIES. As with all fixed-income securities, the market
value of convertible securities tends to decline as interest rates
increase. Conversely, a convertible's market value increases as interest
rates decline. However, the convertible's market value tends to reflect the
market price of the common stock of the issuing company when that stock
price is greater than the convertible's "conversion price". The conversion
price is defined as the predetermined price at which the convertible could
be exchanged for the associated stock.
As the market price of the underlying common stock declines, the price of
the convertible security tends to be influenced more by the yield of the
convertible security. Thus, it may not decline in price to the same extent
as the underlying common stock.
In the event of a liquidation of the issuing company, holders of
convertible securities would be paid before the company's common stock
holders. Consequently, the issuer's convertible securities entail less risk
than their common stock.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible
security will respond differently to market fluctuations than a convertible
security because a synthetic convertible is composed of two or more
21
<PAGE> 23
separate securities, each with its own market value. In addition, if the
value of the underlying common stock or the level of the index involved in
the convertible component falls below the exercise price of the warrant or
option, the warrant or option may lose all value.
EQUITY INVESTMENTS. Equity investments are subject to greater fluctuations
in market value than other asset classes as a result of such factors as a
company's business performance, investor perceptions, stock market trends
and general economic conditions. Smaller companies are especially sensitive
to these factors, and therefore may experience more price volatility than
larger companies.
FOREIGN SECURITIES. The Fund's investments in foreign securities involve
risk considerations unlike those associated with investing in U.S.
companies. Please refer to the discussion of Foreign Market Risk under "The
Funds" at the beginning of this prospectus.
OTHER SECURITIES.While not the principal investments or strategies of the
Fund, we may utilize other investments and investment techniques which may
impact performance, including options, warrants, futures and other
strategic transactions. More information about Fund investments and
strategies is provided in the Statement of Additional Information.
22
<PAGE> 24
GROWTH FUND
WHAT IS THE INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES OF THE FUND?
The primary objective of the Growth Fund is long-term capital growth.
In pursuing the Fund's investment objective, we seek out securities that, in our
opinion, are undervalued and offer above-average potential for earnings growth.
The selection process emphasizes earnings growth potential coupled with
financial strength and stability.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The Fund's principal risks include market risk and investment management risk.
Please refer to the discussion of those risks under "The Funds" at the front of
this prospectus.
EQUITY INVESTMENTS. A substantial portion of the Fund's assets will be invested
in equity securities. Equity investments are subject to greater fluctuations in
market value than other asset classes as a result of such factors as a company's
business performance, investor perceptions, stock market trends and general
economic conditions. Smaller companies are especially sensitive to these
factors, and therefore may experience more price volatility than larger
companies.
HOW HAS THE FUND PERFORMED IN THE PAST?
The bar chart and table below provide some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from calendar year to
calendar year and how the Fund's average annual total returns compare with those
of a broad measure of market performance. As always, please note that how the
Fund has performed in the past cannot predict how it will perform in the future.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
[Bar Chart 1991 - 1998]
For the period included in the bar chart, the Fund's highest return for a
calendar quarter was __% (the ____ quarter of ____ ), and the Fund's lowest
return for a calendar quarter was - ___% (the ____ quarter of ____).
The Fund's year-to-date total return as of June 30, 1999 was ___%.
Average Annual Total Returns
<TABLE>
<CAPTION>
For periods ended S & P 500
December 31, 1998 Class A Class C Index+
- ----------------- ------- ------- ----------
<S> <C> <C> <C>
One Year 21.25% 26.80% 28.57%
Five Years 20.07% -- 24.06%
Since Class Inception* 17.99% 27.47% **
</TABLE>
* Inception Date for class A and C shares is 9/4/90 and 9/3/96, respectively.
23
<PAGE> 25
** Index returns for the life of each class: 20.43% (9/1/90) for Class A
shares and 33.49% (9/1/96) for Class C shares.
+ The S & P 500 Index is an unmanaged index generally considered
representative of the U.S. stock market. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees, expenses or
sales charges.
WHAT ARE THE FEES AND EXPENSES OF THE FUND?
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are shareholder fees which are subtracted
directly from the amount you invest and there are annual operating expenses
which are subtracted each year from the assets in the Fund. Please refer to the
"How Can I Buy Shares?" section of this prospectus for information regarding fee
discounts and waivers.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None(1) 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
- ----------------
(1) The redemption of Class A shares purchased at net asset value under the
$1,000,000 purchase order privilege may be subject to a contingent deferred
sales charge of 1% during the first year.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Management Fees .75% .75%
Distribution (12b-1) Fees .50% 1.00%
Other Expenses --% --%
Total Annual Operating Expenses* --% --%
</TABLE>
- -------------
* Calamos Asset Management, Inc. has voluntarily decided to waive fees and/or
reimburse fund expense so that the Total Annual Operating Expenses are
limited to 2.00% for Class A shares and 2.50% for Class C shares through
August 31, 2000. The information contained in the table above and the
example below reflects the expenses of the Fund without taking into account
any applicable fee waivers and/or reimbursements.
EXAMPLES: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
24
<PAGE> 26
This example shows an investment made and held for one year, three years, five
years and ten years. In each case, we assume that you invest $10,000 in the Fund
for the time periods indicated, and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class C $ $ $ $
</TABLE>
HOW DOES THE FUND INVEST?
The primary investment objective of the Fund is long-term capital growth. The
Fund invests primarily in securities that, in our opinion, are undervalued and
offer above-average earnings growth potential. We anticipate that common stocks
will generally afford the best opportunity for capital growth.
The Fund's portfolio may include securities of well-established companies with
large market capitalizations as well as small, unseasoned companies. Although we
anticipate that the Fund will invest primarily in equity securities, the Fund
may invest in convertible securities, preferred stocks and obligations such as
bonds, debentures and notes that, in our opinion, present opportunities for
capital appreciation.
HOW DO WE SELECT SECURITIES?
The selection process for the Fund emphasizes earnings growth potential coupled
with financial strength and stability. We perform our own fundamental analysis,
in addition to depending upon recognized rating agencies and other sources.
In our analysis, we typically consider the issuer's:
- - financial soundness
- - ability to make interest and dividend payments
- - earnings and cash-flow forecast
- - quality of management
WHAT ARE THE TYPES OF SECURITIES THE FUND INVESTS IN?
EQUITY SECURITIES. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and
depository receipts. An investment in the equity securities of a
company represents a proportionate ownership interest in that company.
Therefore, the Fund participates in the financial success or failure of
any company in which we have an equity interest. Compared with other
asset classes, equity investments have a greater potential for gain.
25
<PAGE> 27
FOREIGN SECURITIES. Although not a focus of the Fund, we may invest up
to 25% of the Fund's net assets in securities of foreign issuers. A
foreign issuer is a company organized under the laws of a foreign
country that is principally traded in the financial markets of a
foreign country. For purposes of the 25% limitation, foreign securities
do not include securities represented by American Depository Receipts
(ADRs) or securities guaranteed by a U.S. person.
HIGH YIELD FIXED-INCOME SECURITIES. Although not a focus of the Fund,
the Fund may invest without limit in convertible and non-convertible
debt securities rated BB or lower by Standard & Poor's Corporation, or
Ba or lower by Moody's Investor Services, Inc., and in securities that
are not rated but are considered by us to be of similar quality
(commonly called "junk" bonds). The Fund will not, however, acquire a
security rated below C.
DEFENSIVE INVESTING. We may depart from the Fund's principal investment
strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions without limitation
in all types of money market and short term debt securities, and
repurchase agreements. In a repurchase agreement, the Fund purchases a
security and the seller (a bank or securities dealer) simultaneously
agrees to buy back (repurchase) the security at the same price plus an
amount equal to an agreed-upon interest rate, on a specified date.
During periods when we have assumed a temporary defensive position, the
Fund may not be able to achieve its investment objective.
WHAT OTHER INVESTMENT RISKS ARE ASSOCIATED WITH THE FUND?
All investments, including those in mutual funds, have risks. We
designed the Fund for long-term investors who can accept fluctuations in
the total value of their portfolio and other risks associated with the
Fund. We cannot guarantee the Fund will achieve its objective.
FOREIGN SECURITIES. The Fund's investments in foreign securities involve
risk considerations unlike those associated with investing in U.S.
companies. Please refer to the discussion of Foreign Market Risk under "The
Funds" at the beginning of this prospectus.
OTHER SECURITIES.While not the principal investments or strategies of the
Fund, we may utilize other investments and investment techniques which may
impact performance, including options, warrants, futures and other
strategic transactions. More information about Fund investments and
strategies is provided in the Statement of Additional Information.
26
<PAGE> 28
GLOBAL GROWTH AND INCOME FUND
WHAT IS THE INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES OF THE FUND?
The primary objective of the Global Growth and Income Fund is high long-term
total return through capital appreciation and current income.
Under normal market conditions the Fund invests at least 65% of its total assets
in a globally diversified portfolio of convertible, equity and fixed-income
securities with equal emphasis on capital appreciation and current income.
Normally the Fund invests in the securities markets of at least three countries,
which may include the United States.
A significant portion of the Fund's assets will be invested in foreign
securities, and the Fund may invest without limit in high yield bonds. The
Fund's assets may also be invested in securities that have not been registered
for public sale, but that are eligible for purchase and sale by certain
qualified institutional buyers (Rule 144A securities).
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
FOREIGN SECURITIES. The Fund's investments in foreign securities involve risk
considerations unlike those associated with investing in U.S. companies. Please
refer to the discussion of Foreign Market Risk under "The Funds" at the
beginning of this prospectus.
DEFAULT RISK. Default risk refers to the risk that a company who issues a debt
security will be unable to fulfill its obligation to repay principal and
interest. The lower a bond is rated, the greater its default risk.
INTEREST RATE RISK. Interest rate risk is the risk that the Fund's investments
will decrease in value as a result of an increase in interest rates. Generally,
there is an inverse relationship between the value of a debt security and
interest rates. Therefore, the value of the bonds held by the Fund generally
decrease in periods when interest rates are rising. In addition, interest rate
changes normally have a greater effect on prices of longer-term bonds than
shorter-term bonds.
CONVERTIBLE SECURITIES. A convertible security may lose all of its value if the
value of the underlying common stock falls below the conversion price of the
security. The conversion price is the predetermined price at which the
convertible security may be exchanged for the common stock of the issuer.
EQUITY INVESTMENTS. Equity investments are subject to greater fluctuations in
market value than other asset classes as a result of such factors as a company's
business performance, investor perceptions, stock market trends and general
economic conditions. Smaller companies are especially sensitive to these
factors, and therefore may experience more price volatility than larger
companies.
HIGH YIELD FIXED-INCOME SECURITIES. The Fund's investment in high yield
fixed-income securities (often referred to as "junk bonds") entails a greater
risk than an investment in higher-rated securities. Although high yield bonds
typically pay higher interest rates than investment-grade bonds, there is a
greater likelihood that the company issuing the high yield bond will default on
interest and principal payments. In the event of an issuer's bankruptcy, claims
of other creditors may have priority over the claims of high yield bond holders,
leaving few or no assets to repay them. High yield bonds are also more sensitive
to adverse economic changes or individual
27
<PAGE> 29
corporate developments than higher quality bonds. During a period of adverse
economic changes, including a period of rising interest rates, companies issuing
high yield bonds may be unable to make principal and interest payments.
HOW HAS THE FUND PERFORMED IN THE PAST?
The bar chart and table below provide some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from calendar year to
calendar year and how the Fund's average annual total returns compare with those
of a broad measure of market performance. As always, please note that how the
Fund has performed in the past cannot predict how it will perform in the future.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
[Bar Chart 1997 - 1998]
For the period included in the bar chart, the Fund's highest return for a
calendar quarter was __% (the ____ quarter of ____ ), and the Fund's lowest
return for a calendar quarter was - ___% (the ____ quarter of ____).
The Fund's year-to-date total return as of June 30, 1999 was ___%.
Average Annual Total Returns
<TABLE>
<CAPTION>
For periods ended Morgan Stanley Capital
December 31, 1998 Class A Class C International World+
- ----------------- ------- ------- ---------------------
<S> <C> <C> <C>
One Year 8.59% 13.51% 24.80%
Since Class Inception* 14.09% 16.29% **
</TABLE>
* Inception Date for class A and C shares is 9/9/96 and 9/24/96,
respectively.
** Index returns for the life of each class: 21.6% (9/1/96) for Class A shares
and 20.40% (10/1/96) for Class C shares.
+ The Morgan Stanley Capital International World Index is an unmanaged equity
index that is an arithmetic, market value-weighted average of the
performance of over 1,460 securities listed on stock exchanges around the
world. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees, expenses or sales charges.
WHAT ARE THE FEES AND EXPENSES OF THE FUND?
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are shareholder fees which are subtracted
directly from the amount you invest and there are annual operating expenses
which are subtracted each year from the assets in the Fund. Please refer to the
"How Can I Buy Shares?" section of this prospectus for information regarding fee
discounts and waivers.
28
<PAGE> 30
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None(1) 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
- ----------------
(1) The redemption of Class A shares purchased at net asset value under the
$1,000,000 purchase order privilege may be subject to a contingent deferred
sales charge of 1% during the first year.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Management Fees .75% .75%
Distribution (12b-1) Fees .50% 1.00%
Other Expenses --% --%
Total Annual Operating Expenses* --% --%
</TABLE>
- -------------
* Calamos Asset Management, Inc. has voluntarily decided to waive fees and/or
reimburse fund expense so that the Total Annual Operating Expenses are
limited to 2.00% for Class A shares and 2.50% for Class C shares through
August 31, 2000. The information contained in the table above and the
example below reflects the expenses of the Fund without taking into account
any applicable fee waivers and/or reimbursements.
EXAMPLES: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
This example shows an investment made and held for one year, three years, five
years and ten years. In each case, we assume that you invest $10,000 in the Fund
for the time periods indicated, and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class C $ $ $ $
</TABLE>
HOW DOES THE FUND INVEST?
The primary investment objective of the Fund is high long-term total return
through capital appreciation and current income.
29
<PAGE> 31
We believe there are various advantages to buying convertible securities which
include:
- - The potential for capital appreciation if the value of the underlying
common stock increases
- - The relatively high yield received from dividend or interest payments as
compared to common stock dividends
- - The relatively lower price volatility as compared to common stock
The Fund seeks to profit from this strategy by receiving interest on the
convertible security and through an increase in the convertible's value. The
convertible's value goes up when the market value of the underlying common stock
increases above the conversion price.
HOW DO WE SELECT SECURITIES?
We typically apply a four-step approach when selecting convertible
securities convertible for the Fund, which includes:
1. Evaluating the default risk of the convertible security using traditional
credit analysis
2. Analyzing the convertible's underlying common stock to determine its
capital appreciation potential
3. Assessing the risk/return potential of the convertible security
4. Evaluating the convertible security's impact on the overall composition of
the Fund and it's diversification strategy
In the equity and credit analysis, we generally consider the issuer's:
- financial soundness
- ability to make interest and dividend payments
- earnings and cash-flow forecast
- quality of management
The Fund's assets not invested in convertible securities are invested in common
stocks that, in our judgment, provide opportunities for long-term capital
appreciation, or in other securities as described below. The Fund generally
invests in securities of companies that are medium-sized and larger relative to
the securities markets of the countries in which those securities are traded. A
significant portion of its assets will be invested in securities of foreign
issuers.
WHAT ARE THE TYPES OF SECURITIES THE FUND INVESTS IN?
FOREIGN SECURITIES. We may invest up to 100% of the Fund's net assets
in securities of foreign issuers. A foreign issuer is a company
organized under the laws of a foreign country that is principally
traded in the financial markets of a foreign country. Foreign
securities do not include securities represented by American Depository
Receipts (ADRs) or securities guaranteed by a U.S. person. ADRs are
traded on U.S. exchanges and represent an ownership interest in a
foreign security. They are generally issued by a U.S. bank as a
substitute for direct ownership of the foreign security. International
investing allows the
30
<PAGE> 32
Fund to achieve greater diversification and to take advantage of
changes in foreign economies and market conditions.
CONVERTIBLE SECURITIES. Convertible securities include debt obligations
and preferred stock of the company issuing the security, which may be
exchanged for a predetermined price (the conversion price) into the
common stock of the issuer. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of
similar quality.
Many convertible securities are issued with a "call" feature that
allows the issuer of the security to choose when to redeem the
security. If a convertible security held by the Fund is called for
redemption, the Fund will be required to redeem the security, convert
it into the underlying common stock, or sell it to a third party at a
time that may be unfavorable to the Fund. Conversely, certain
convertible debt securities may provide a "put option" which entitles
the Fund to make the issuer redeem the security at a premium over the
stated principal amount of the debt security.
We may also create a "synthetic" convertible security by combining
separate securities that possess the two principal characteristics of a
true convertible security, i.e., fixed-income securities ("fixed-income
component") and the right to acquire equity securities ("convertible
component"). The fixed-income component is achieved by investing in
non-convertible, fixed-income securities such as bonds, preferred
stocks and money market instruments. The convertible component is
achieved by investing in warrants or options to buy common stock at a
certain exercise price, or options on a stock index.
The Fund may also purchase synthetic securities manufactured by other
parties, typically investment banks, including convertible structured
notes. Purchasing synthetic convertible securities may offer more
flexibility than purchasing a convertible security. Different companies
may issue the fixed-income and convertible components which may be
purchased separately, and at different times. Additional information
regarding synthetic securities appears below.
EQUITY SECURITIES. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and
depository receipts. An investment in the equity securities of a
company represents a proportionate ownership interest in that company.
Therefore, the Fund participates in the financial success or failure of
any company in which we have an equity interest. Compared with other
asset classes, equity investments have a greater potential for gain.
RULE 144A SECURITIES. We may invest the Fund's assets in securities
that are not publicly traded, but that are eligible for purchase and
sale by certain qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933.
HIGH YIELD FIXED-INCOME SECURITIES The Fund may invest without limit in
convertible and non-convertible debt securities rated BB or lower by
Standard & Poor's Corporation, or Ba or lower by Moody's Investor
Services, Inc., and in securities that are not rated but are considered
by us to be of similar quality (commonly called "junk" bonds). The Fund
will not, however, acquire a security rated below C.
DEFENSIVE INVESTING. We may depart from the Fund's principal investment
strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions without limitation
in all types of money market and short term debt securities, and
repurchase agreements. In a
31
<PAGE> 33
repurchase agreement, the Fund purchases a security and the seller (a
bank or securities dealer) simultaneously agrees to buy back
(repurchase) the security at the same price plus an amount equal to an
agreed-upon interest rate, on a specified date. During periods when we
have assumed a temporary defensive position, the Fund may not be able
to achieve its investment objective.
WHAT OTHER INVESTMENT RISKS ARE ASSOCIATED WITH THE FUND?
All investments, including those in mutual funds, have risks. We
designed the Fund for long-term investors who can accept fluctuations in
the total value of their portfolio and other risks associated with the
Fund. We cannot guarantee the Fund will achieve its objective.
CONVERTIBLE SECURITIES. As with all fixed-income securities, the market
value of convertible securities tends to decline as interest rates
increase. Conversely, a convertible's market value increases as interest
rates decline. However, the convertible's market value tends to reflect the
market price of the common stock of the issuing company when that stock
price is greater than the convertible's "conversion price". The conversion
price is defined as the predetermined price at which the convertible could
be exchanged for the associated stock.
As the market price of the underlying common stock declines, the price of
the convertible security tends to be influenced more by the yield of the
convertible security. Thus, it may not decline in price to the same extent
as the underlying common stock.
In the event of a liquidation of the issuing company, holders of
convertible securities would be paid before the company's common stock
holders. Consequently, the issuer's convertible securities entail less risk
than their common stock.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible
security will respond differently to market fluctuations than a convertible
security because a synthetic convertible is composed of two or more
separate securities, each with its own market value. In addition, if the
value of the underlying common stock or the level of the index involved in
the convertible component falls below the exercise price of the warrant or
option, the warrant or option may lose all value.
OTHER SECURITIES.While not the principal investments or strategies of the
Fund, we may utilize other investments and investment techniques which may
impact performance, including options, warrants, futures and other
strategic transactions. More information about Fund investments and
strategies is provided in the Statement of Additional Information.
32
<PAGE> 34
HIGH YIELD FUND
WHAT IS THE INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES OF THE FUND?
The primary objective of the High Yield Fund is the highest level of current
income obtainable with reasonable risk. Its secondary objective is capital gain
where consistent with the Fund's primary objective.
The Fund invests mainly in a diversified portfolio of high yield, fixed-income
securities issued by both U.S. and foreign companies. Under normal market
conditions, we invest at least 65% of the Fund's total assets in high yield,
fixed-income securities.
The Fund may invest without limit in high yield bonds, and may invest up to 25%
of its net assets in foreign securities. The Fund's assets may also be invested
in securities that have not been registered for public sale, but that are
eligible for purchase and sale by certain qualified institutional buyers (Rule
144A Securities).
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
DEFAULT RISK. Default risk refers to the risk that a company who issues a debt
security will be unable to fulfill its obligation to repay principal and
interest. The lower a bond is rated, the greater its default risk.
INTEREST RATE RISK. Interest rate risk is the risk that the Fund's investments
will decrease in value as a result of an increase in interest rates. Generally,
there is an inverse relationship between the value of a debt security and
interest rates. Therefore, the value of the bonds held by the Fund generally
decrease in periods when interest rates are rising. In addition, interest rate
changes normally have a greater effect on prices of longer-term bonds than
shorter-term bonds.
HIGH YIELD FIXED-INCOME SECURITIES. The Fund's investment in high yield
fixed-income securities (often referred to as "junk bonds") entails a greater
risk than an investment in higher-rated securities. Although high yield bonds
typically pay higher interest rates than investment-grade bonds, there is a
greater likelihood that the company issuing the high yield bond will default on
interest and principal payments. In the event of an issuer's bankruptcy, claims
of other creditors may have priority over the claims of high yield bond holders,
leaving few or no assets to repay them. High yield bonds are also more sensitive
to adverse economic changes or individual corporate developments than higher
quality bonds. During a period of adverse economic changes, including a period
of rising interest rates, companies issuing high yield bonds may be unable to
make principal and interest payments.
FOREIGN SECURITIES. The Fund's investments in foreign securities involve risk
considerations unlike those associated with investing in U.S. companies. Please
refer to the discussion of Foreign Market Risk under "The Funds" at the
beginning of this prospectus.
WHAT ARE THE FEES AND EXPENSES OF THE FUND?
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. There are shareholder fees which are subtracted
directly from the amount you invest and there are annual operating expenses
which are subtracted each year from the assets in the Fund. Please refer to the
"How Can I Buy Shares?" section of this prospectus for information regarding fee
discounts and waivers.
33
<PAGE> 35
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None(1) 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
- ----------------
(1) The redemption of Class A shares purchased at net asset value under the
$1,000,000 purchase order privilege may be subject to a contingent deferred
sales charge of 1% during the first year.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Management Fees .75% .75%
Distribution (12b-1) Fees .50% 1.00%
Other Expenses * __% __%
Total Annual Operating Expenses ** __% __%
</TABLE>
- --------------
- - "Other Expenses" are based on estimated accounts for the current fiscal year.
** Calamos Asset Management, Inc. has voluntarily decided to waive fees and/or
reimburse fund expense so that the Total Annual Operating Expenses are limited
to 2.00% for Class A shares and 2.50% for Class C shares through August 31,
2000. The information contained in the table above and the example below
reflects the expenses of the Fund without taking into account any applicable fee
waivers and/or reimbursements.
EXAMPLES: These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
This example shows an investment made and held for one year, three years, five
years and ten years. In each case, we assume that you invest $10,000 in the Fund
for the time periods indicated, and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
1 year* 3 years*
Class A $ $
Class C $ $
- ------------
* The example is based on Total Annual Operating Expenses, as described in the
Annual Fund Operating Expenses table above. If the expenses had been computed
based on the net expenses (Total Annual Operating Expenses less fee waivers
and/or expense reimbursements), your costs would have been: $____for 1 year and
$____ for 3 years for Class A shares; and $____ for 1 years and $____ for 3
years for Class C shares.
34
<PAGE> 36
HOW DOES THE FUND INVEST?
The primary investment objective of the Fund is the highest level of current
income obtainable with reasonable risk. Its secondary objective is capital gain
where consistent with its primary objective. The Fund invests primarily in a
diversified portfolio of high yield, fixed-income securities; and under normal
market conditions, invests at least 65% of its total assets in high yield,
fixed-income securities.
The high yield, fixed-income securities ("junk bonds") in which the Fund intends
to invest typically offer a significantly higher yield, as well as greater
risks, than investment grade securities [those rated BBB or higher by Standard
and Poor's Corporation ("S & P") or Baa or higher by Moody's Investors Service,
Inc. ("Moody's")]. The Fund may invest in both convertible and non-convertible
high yield bonds. Convertible debt securities are exchangeable for equity
securities of the issuer at a predetermined price, and typically offer greater
appreciation potential than non-convertible debt securities.
The ratings of S & P and Moody's are used only as preliminary indicators of
investment quality. We also use our own credit research and analysis.
Achievement of the Fund's investment objectives will be more dependent on our
credit analysis than would be the case if the Fund were investing in
higher-quality debt securities. Our analyses may take into consideration such
quantitative factors as an issuer's present and potential liquidity,
profitability, internal capability to generate funds, debt/equity ratio and debt
servicing capabilities, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology, and foreign
business exposure.
The portion of the Fund's assets that is not invested in junk bonds may be
invested in equity securities, higher rated fixed-income securities, and other
securities as described below.
WHAT ARE THE TYPES OF SECURITIES THE FUND INVESTS IN?
HIGH YIELD FIXED-INCOME SECURITIES. As discussed above, the Fund may
invest without limit in convertible and non-convertible debt securities
rated BB or lower by S & P, or Ba or lower by Moody's, and in
securities that are not rated but are considered by us to be of similar
quality.
CONVERTIBLE SECURITIES. Convertible securities include debt obligations
and preferred stock of the company issuing the security, which may be
exchanged for a predetermined price (the conversion price) into the
common stock of the issuer. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of
similar quality. Many convertible securities are issued with a "call"
feature that allows the issuer of the security to choose when to redeem
the security. If a convertible security held by the Fund is called for
redemption, the Fund will be required to redeem the security; convert
it into the underlying common stock; or sell it to a third party at a
time that may be unfavorable to the Fund. Conversely, certain
convertible debt securities may provide a "put option" which entitle
the Fund to make the issuer redeem the security at a premium over the
stated principal amount of the debt security.
We may also create a "synthetic" convertible security by combining
separate securities that possess the two principal characteristics of a
true convertible security, i.e., fixed-income securities ("fixed-income
component") and the right to acquire equity securities ("convertible
component"). The fixed-income component is achieved by investing in
non-convertible, fixed-income securities such as bonds,
35
<PAGE> 37
preferred stocks and money market instruments. The convertible
component is achieved by investing in warrants or options to buy common
stock at a certain exercise price, or options on a stock index. The
Fund may also purchase synthetic securities manufactured by other
parties, typically investment banks, including convertible structured
notes. Purchasing synthetic convertible securities may offer more
flexibility than purchasing a convertible security. Different companies
may issue the fixed-income and convertible components which may be
purchased separately, and at different times. Additional information
regarding synthetic securities appears below.
FOREIGN SECURITIES. We may invest up to 25% of the Fund's net assets in
securities of foreign issuers. A foreign issuer is a company organized
under the laws of a foreign country that is principally traded in the
financial markets of a foreign country. For purposes of the 25%
limitation, foreign securities do not include securities represented by
American Depository Receipts (ADRs) or securities guaranteed by a U.S.
person. ADRs are traded on U.S. exchanges and represent an ownership
interest in a foreign security. They are generally issued by a U.S.
bank as a substitute for direct ownership of the foreign security.
International investing allows the Fund to achieve greater
diversification and to take advantage of changes in foreign economies
and market conditions.
RULE 144A SECURITIES. We may invest the Fund's assets in securities
that are not publicly traded, but that are eligible for purchase and
sale by certain qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933.
EQUITY SECURITIES. Equity securities include exchange-traded and
over-the-counter common and preferred stocks, warrants, rights, and
depository receipts. An investment in the equity securities of a
company represents a proportionate ownership interest in that company.
Therefore, the Fund participates in the financial success or failure of
any company in which we have an equity interest. Compared with other
asset classes, equity investments have a greater potential for gain.
DEFENSIVE INVESTING. We may depart from the Fund's principal investment
strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions without limitation
in all types of money market and short term debt securities, and
repurchase agreements. In a repurchase agreement, the Fund purchases a
security and the seller (a bank or securities dealer) simultaneously
agrees to buy back (repurchase) the security at the same price plus an
amount equal to an agreed-upon interest rate, on a specified date.
During periods when we have assumed a temporary defensive position, the
Fund may not be able to achieve its investment objective.
WHAT OTHER INVESTMENT RISKS ARE ASSOCIATED WITH THE FUND?
All investments, including those in mutual funds, have risks. We
designed the Fund for long-term investors who can accept fluctuations in
the total value of their portfolio and other risks associated with the
Fund. We cannot guarantee the Fund will achieve its objective.
CONVERTIBLE SECURITIES. As with all fixed-income securities, the market
value of convertible securities tends to decline as interest rates
increase. Conversely, a convertible's market value increases as interest
rates decline. However, the convertible's market value tends to reflect the
market price of the common stock of the issuing company when that stock
price is greater than the convertible's "conversion price". The conversion
price is defined as the predetermined price at which the convertible could
be exchanged for the associated stock.
36
<PAGE> 38
As the market price of the underlying common stock declines, the price of
the convertible security tends to be influenced more by the yield of the
convertible security. Thus, it may not decline in price to the same extent
as the underlying common stock.
In the event of a liquidation of the issuing company, holders of
convertible securities would be paid before the company's common stock
holders. Consequently, the issuer's convertible securities entail less risk
than their common stock.
EQUITY INVESTMENTS. Equity investments are subject to greater fluctuations
in market value than other asset classes as a result of such factors as a
company's business performance, investor perceptions, stock market trends
and general economic conditions. Smaller companies are especially sensitive
to these factors, and therefore may experience more price volatility than
larger companies.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible
security will respond differently to market fluctuations than a convertible
security because a synthetic convertible is composed of two or more
separate securities, each with its own market value. In addition, if the
value of the underlying common stock or the level of the index involved in
the convertible component falls below the exercise price of the warrant or
option, the warrant or option may lose all value.
OTHER SECURITIES.While not the principal investments or strategies of the
Fund, we may utilize other investments and investment techniques which may
impact performance, including options, warrants, futures and other
strategic transactions. More information about Fund investments and
strategies is provided in the Statement of Additional Information.
37
<PAGE> 39
WHO MANAGES THE FUNDS?
The Fund's investments are managed by CALAMOS ASSET MANAGEMENT, INC. ("CAM"),
1111 E. Warrenville Road, Naperville, IL. On March 31, 1999, CAM managed
approximately $3.6 billion in assets of individuals and institutions. CAM is
controlled by John P. Calamos, who has been engaged in the investment advisory
business since 1977.
Subject to the overall authority of the board of trustees, CAM provides
continuous investment supervision and management to the Funds under a management
agreement and also furnishes office space, equipment and management personnel.
For these services, each Fund pays CAM a fee based on average daily net assets
that is accrued daily and paid on a monthly basis. The fee paid by Growth Fund
is at the annual rate of 1% of the first $150 million of average net assets and
.75% of average net assets in excess of $150 million. The fee paid by Global
Growth and Income Fund is at the annual rate of 1% of average net assets. The
fee paid by High Yield Fund is at the annual rate of .75% of average net assets.
The fee paid by each other Fund is at the annual rate of .75% of the first $150
million of average net assets and .50% of average net assets in excess of $150
million.
CAM has voluntarily limited the annual ordinary operating expenses of each
Fund, as a percentage of the average net assets of the particular class of
shares, to 2.00% for Class A shares and 2.50% for Class C shares through August
31, 2000. This expense limitation is voluntary and may be revised by CAM at any
time.
John P. Calamos and Nick P. Calamos are responsible for managing the
portfolios of Convertible Fund, Growth and Income Fund, Global Growth and Income
Fund and High Yield Fund; John P. Calamos and John P. Calamos Jr. are primarily
responsible for the day-to-day management of the portfolios of Market Neutral
Income Fund and Growth Fund. During the past five years, John P. Calamos has
been president and a trustee of the Trust and president of CAM and CFS; John P.
Calamos, Jr. has been an employee of CAM; and Nick P. Calamos has been vice
president of the Trust, a trustee of the Trust since 1997 and a managing
director of CAM and CFS.
YEAR 2000 COMPLIANCE
Like other investment companies, financial and business organizations and
individuals around the world, if the computer systems that we and other service
providers use do not properly process and calculate date-related information and
data from and after January 1, 2000, the Funds could be adversely affected. This
is commonly known as the "Year 2000 Problem." As investment manager, we are
taking steps that we believe are reasonably designed to address the Year 2000
Problem for the computer systems we use. We are also obtaining reasonable
assurances that comparable steps are being taken by the Funds' major service
providers. At this time, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund. In addition, there can be no
assurances that the Year 2000 Problem will not have an adverse effect on global
markets or economies, or on the companies whose securities are held by the Fund.
Although we may consider the Year 2000 Problem when evaluating investment
opportunities, there can be no assurance that improperly functioning computers
will not affect specific issuers or broad markets.
EURO CONVERSION
The introduction of the Economic and Monetary Union (EMU) in Europe
occurred on January 1, 1999, when eleven European countries adopted a single
currency - the euro. The full conversion to the euro is being phased in over a
three-year period. During this time, valuation systems and other operational
problems may
38
<PAGE> 40
occur in connection with the Fund's investments quoted in the euro. We are
actively working to address euro-related issues and understand that other key
service providers are taking similar steps. A number of economic benefits are
expected from the EMU's implementation such as: lower transaction costs, reduced
exchange risk, greater competition, and a broadening and deepening of European
financial markets. However, there are a number of significant risks associated
with the EMU. Monetary and economic union on this scale has never been attempted
before. In addition, there is a significant degree of uncertainty as to whether
participating countries will remain committed to EMU in the face of changing
economic conditions. This uncertainty may increase the volatility of the
international markets in which we invest.
39
<PAGE> 41
HOW CAN I BUY SHARES?
This prospectus offers two classes of shares, Class A and C. The different
classes of shares are investments in the same portfolio of securities, but each
class of shares has different expenses and will likely have different share
prices.
You may purchase Fund shares in either of the following ways:
Class A Shares The offering price of a Class A share is the net
asset value plus an initial sales charge. The
maximum sales charge is 4.75% of the offering
price. Reduced sales charges are available for
purchases of $50,000 or more. A distribution fee
(Rule 12b-1, explained below) is also applied to
Class A shares.
Class C Shares The offering price of a Class C share is the net
asset value with no initial sales charge. A
distribution fee (Rule 12b-1, explained below) and
a 1% contingent deferred sales charge on shares
sold within one year of purchase are applied to
Class C shares. The change will not be applied to
the purchase of shares from the reinvestment of
dividends or capital gains distributions.
You may buy shares of the Funds by contacting the securities broker-dealer or
other financial services firm who gave you this prospectus. When you buy shares,
be sure to specify whether you want Class A or Class C shares.
The table above summarizes the main differences between Class A and Class C
shares, which lie primarily in their initial and contingent deferred sales
charge structures and their distribution fees. Each class has distinct
advantages and disadvantages for different investors, and you may choose the
class that best suits your circumstances and objectives.
DISTRIBUTION AND SERVICE (RULE 12b-1) PLAN
The Funds have a Distribution and Service Plan or "12b-1 Plan". Under the plan,
both Class A and C shares pay a service fee of .25% of the average daily net
assets of their respective class. Each Fund also pays a distribution fee of .25%
for Class A shares and .75% for class C shares.
Since the Fund's assets are used to pay 12b-1 fees on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than other types of sales charges. Consequently, long-term shareholders
eventually may pay more than the economic equivalent of the maximum initial
charges permitted by the National Association of Securities Dealers (NASD).
HOW MUCH DOES IT COST TO BUY CLASS A SHARES?
Class A shares are sold at the net asset value per share plus an initial sales
charge. The sales charge varies depending on the amount of your purchase, as
follows:
40
<PAGE> 42
<TABLE>
<CAPTION>
Sales Charge
----------------------------------------
As a % of As a % of
Net Amount Invested Offering Price
------------------- --------------
<S> <C> <C>
Less than $50,000 .................................. 4.99% 4.75%
$50,000 but less than $100,000 ..................... 4.44 4.25
$100,000 but less than $250,00 ..................... 3.63 3.50
$250,000 but less than $500,000 .................... 2.56 2.50
$500,000 but less than $1,000,000 .................. 2.04 2.00
$1,000,000 or more ................................. None* None*
</TABLE>
* Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
HOW CAN I REDUCE SALES CHARGES FOR CLASS A PURCHASES?
RIGHTS OF ACCUMULATION. If you already own shares in a Fund, you may add the
value of those shares to the value of any new investment. Then, the sales charge
for the new shares will be figured at the rate in the table above that applies
to the combined value of your current and new investment. To determine the value
of the shares of your current investment, you can use either the current public
offering price or the actual price you paid, whichever is greater.
STATEMENT OF INTENTION. You can purchase additional Class A shares of any of the
Funds over a 13-month period and receive the same sales charge as if you had
purchased all the shares at once under a Letter of Intent. A Letter of Intent
does not obligate you to purchase or sell additional Class A shares. A price
adjustment is made according to the actual amount purchased within the 13-month
period.
$1,000,000 PURCHASE ORDER. You may purchase Class A shares of a Fund at net
asset value without a sales charge provided that the total amount invested in
the Fund or other Funds totals at least $1,000,000. With a $1,000,000 purchase
order, you will pay a contingent deferred sales charge of 1% on shares that are
sold within one year after purchase, excluding shares purchased from the
reinvestment of dividends or capital gains distributions.
EXCHANGE PRIVILEGE. You may exchange Class A shares of a Fund for Class A shares
of another Fund with no sales charge. Class C shares of a Fund can also be
exchanged for Class C share of another Fund with no contingent deferred sales
charge. YOU MAY NOT MAKE MORE THAN FOUR EXCHANGES FROM ANY FUND DURING ANY
CALENDAR YEAR. AN EXCHANGE TRANSACTION IS CONSIDERED A SALE AND PURCHASE OF
SHARES FOR FEDERAL INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS.
HOW CAN I PURCHASE CLASS A SHARES WITHOUT A SALES CHARGE?
Class A shares of a Fund may be purchased at net asset value, with no initial
sales charge, under the following scenarios:
(a) any investor buying shares that have been recommended by an investment
consultant to whom you pay a fee for services relating to investment selection;
41
<PAGE> 43
(b) any investor buying shares through an investment advisory account with
CALAMOS ASSET MANAGEMENT, INC. or through a brokerage account with CALAMOS
FINANCIAL SERVICES, INC. (CFS) over which CFS has investment discretion;
(c) any investor buying shares in a non-discretionary, non-advisory,
asset-based-fee brokerage account of a broker-dealer having a selling group
agreement with CFS;
(d) any investor buying shares by exchange of Cash Account Shares or Summit Fund
Shares previously purchased through use of the exchange privilege;
(e) any employee benefit plan having more than 200 eligible employees or a
minimum of $1 million of plan assets invested in the Funds;
(f) any employee benefit plan buying shares through an intermediary that has
signed a participation agreement with CFS specifying certain asset minimums and
qualifications, and marketing, program and trading restrictions;
(g) any insurance company separate account used to fund annuity contracts for
employee benefit plans having a total of more than 200 eligible employees or a
minimum of $1 million of plan assets invested in the Funds;
(h) any employee or registered representative of CFS, one of its affiliates or a
broker-dealer with a selling group agreement with CFS;
(i) any trustee of the Trust;
(j) any member of the immediate family of a person qualifying under (h) or (i),
including a spouse, child, stepchild, sibling, parent, stepparent, grandchild
and grandparent, in each case including in-law and adoptive relationships;
(k) any trust, pension, profit sharing, or other benefit plan in which any
person qualifying under (h) is a participant;
(l) any 401(k) plan (cash or deferred arrangement intended to qualify under
section 401(k) of the Internal Revenue Code) or other qualified retirement plan
to which a person qualifying under (h), (i) or (j) makes voluntary contributions
into his or her own account, investing with self direction
(m) any company exchanging shares with a Fund pursuant to a merger, acquisition
or exchange offer;
(n) Any investor buying shares with the proceeds of shares sold in the prior 12
months from a mutual fund on which an initial sales charge or contingent
deferred sales charge was paid.
In addition, Class A shares of the Convertible Fund may be bought without an
initial sales charge by any shareholder of the Convertible Fund who has been a
shareholder since April 30, 1992.
42
<PAGE> 44
HOW CAN I SELL SHARES?
THROUGH YOUR BROKER-DEALER (CERTAIN CHANGES MAY APPLY)
Shares held for you in your broker-dealer's name must be sold through the
broker-dealer.
WRITING TO THE FUND'S TRANSFER AGENT
As a shareholder, you may request a Fund to redeem your shares. When the shares
are held for you by the Funds' transfer agent, you may sell your shares by
sending a written request with signatures guaranteed to: First Data Investor
Services Group, P.O. Box 61503, King of Prussia, PA 19406-0903. If you hold
physical certificates for your shares , they must be endorsed and mailed to or
deposited with First Data Investor Services Group along with a written request
for redemption. Under certain circumstances, before shares can be sold,
additional documents may be required in order to verify the authority of the
person who is selling the shares.
A check for the proceeds from the sale will not be sent to you until the check
used to purchase the shares has cleared , which is usually no more than 15 days
after purchase. You may avoid this delay by buying shares with a wire transfer
of funds. A Fund may suspend the right of redemption under certain extraordinary
circumstances in accordance with the rules of the Securities and Exchange
Commission. Due to the relatively high cost of handling small accounts, each
Fund may give you 30 days' written notice that it intends to buy your shares, at
net asset value, if your account has a value of less than $500. This would not
apply if your account value declined to less than $500 as a result of market
fluctuation.
ONCE YOUR INSTRUCTIONS TO SELL SHARES OF THE FUNDS HAVE BEEN RECEIVED, YOU MAY
NOT CANCEL OR REVOKE YOUR REQUEST. IT IS THEREFORE, VERY IMPORTANT THAT YOU CALL
US IF YOU HAVE ANY QUESTIONS ABOUT THE REQUIREMENTS FOR SELLING SHARES BEFORE
SUBMITTING YOUR REQUEST.
TRANSACTION INFORMATION
SHARE PRICE
Each Fund's share price, or net asset value (NAV) is determined as of the close
of regular session trading on the New York Stock Exchange (NYSE) (currently 4:00
p.m. Eastern Time) each day that the Exchange is open. The NYSE is regularly
closed on New Year's Day, the third Monday in January and February, Good Friday,
the last Monday in May, Independence Day, Labor Day, Thanksgiving and Christmas.
The NAV per share is calculated by dividing the value of all of the securities
and other assets of the Fund, less its liabilities, by the number of Fund shares
outstanding. When shares are purchased or sold, the order is processed at the
next NAV that is calculated on any day the NYSE is open for trading, after
receiving a purchase or sale order in good form. The values of the securities in
the Fund are based on market prices from the primary market in which they are
traded. As a general rule, equity securities listed on a U.S. securities
exchange or NASDAQ National Market are valued at the last quoted sale price on
the day the valuation is made. Bonds and other fixed-income securities that are
traded over the counter and on an exchange will be valued according to the
broadest and most representative market, and it is expected this will ordinarily
be the over-the-counter market.
43
<PAGE> 45
The foreign securities held by a Fund are traded on exchanges throughout the
world. Trading on these foreign securities exchanges is completed at various
times throughout the day and often does not coincide with the close of trading
on the NYSE. The value of foreign securities is determined at the close of
trading of the exchange on which the securities are traded or at the close of
trading on the NYSE, whichever is earlier. As a result, it is possible that
events affecting the value of such securities may occur that are not reflected
in the computation of the Fund's NAV, and the NAV may change on days when you
will not be able to buy or sell the Fund's shares.
If market prices are not readily available, securities and other assets are
priced at a fair value as determined by the board of trustees. Any fair value
pricing will be based on what the board believes is the current and true price
of the security rather than the last quoted price of the security.
WHERE CAN I HAVE MY SIGNATURE GUARANTEED?
With your written request to sell shares, each person signing must have their
signature guaranteed. You can obtain a signature guarantee from most brokerage
houses, including CFS, and financial institutions.
WHAT IS THE MINIMUM AMOUNT I CAN INVEST IN THE FUNDS?
The minimum initial investment for each Fund is $500. Additional minimum
investments can be made for $50 or more.
PURCHASE RESTRICTIONS
We reserve the right to reject any order for the purchase of shares in whole or
in part, and to suspend the sale of shares to the public in response to
conditions in the securities markets or otherwise.
BROKER TRANSACTIONS
If you buy and sell shares of a Fund through a member of the National
Association of Securities Dealers, Inc. other than the Funds' distributor CFS,
that member may charge a fee for that service. Please read this prospectus along
with any material describing fees and services that the member firm may charge.
44
<PAGE> 46
REDEMPTION-IN-KIND
The Funds reserve the right to honor any request for sales or repurchase by
paying you with readily marketable securities, either in whole or in part. This
is considered a "redemption-in-kind". The Fund will choose these securities and
value them in the same way as they are valued for purposes of computing the
Fund's net asset value. You may incur transaction expenses if you convert these
securities to cash.
DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
You may receive two kinds of distributions from a Fund: dividends and capital
gains distributions. Unless you requested on the account application or in
writing that distributions be made in cash, all dividends and capital gains
distributions are paid by crediting you with additional shares of the Fund of
the same class you already own. These shares are valued at the next net asset
value per share that is computed after the dividend or distribution date. There
is no sales charge applied. The Convertible Fund, Growth and Income Fund, Market
Neutral Income Fund, Global Growth and Income Fund, and High Yield Fund each
declare and pay dividends from net investment income quarterly; the Growth Fund
declares dividends annually. Net realized long-term capital gains, if any, are
paid to shareholders by each Fund at least annually.
If two consecutive dividend checks from a Fund are returned undeliverable, those
dividends will be invested in additional shares of that Fund at the current net
asset value and the account will be designated as a dividend reinvestment
account.
TAXES
You may realize a capital gain or capital loss when you sell (redeem) shares.
The federal tax treatment will depend, of course, on how long you owned the
shares and on your individual tax position. You may be subject to state and
local taxes on your investment in a Fund, depending on the laws of your home
state and locality.
The dividends and distributions paid by a Fund are subject to taxation as of the
date of payment, except for those distributions declared in October, November or
December. If you are a shareholder of record during one of those months, for tax
purposes, your distributions will be treated as though it were received on
December 31 of the year in which they are declared, provided they are paid prior
to February 1 of the next year.
You may be taxed for dividends from net investment income and capital gains
distributions at different rates depending on your tax situation. Annually, we
will advise you of the source of your distributions for tax purposes.
45
<PAGE> 47
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the Funds' financial
performance for the period shown below for both Class A and Class C shares,
except for Market Neutral Income Fund, which has no class C shares. Certain
information reflects financial results for a single Fund share. The Total Return
figures show what an investor in a Fund would have earned (or lost) if all
distributions had been reinvested. This information has been audited by Ernst &
Young LLP whose report, along with the Funds' financial statements, are included
in the Funds' annual report, which is available upon request.
CONVERTIBLE FUND
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------------------------------
Eleven
Year Ended March 31, Months
--------------------------------------- Ended
1999 1998 1997 1996 3/31/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.43 $14.68 $14.49 $12.41 $13.04
Income from investment operations:
Net investment income .41 .49 .36 .40 .38
Net realized and unrealized
gain (loss) on investments .09 3.92 1.39 3.06 (.01)
------
Total from investment
operations .50 4.41 1.75 3.46 .37
Less distributions:
Dividends from net
investment income (.41) (.61) (.45) (.31) (.32)
Dividends from net
realized capital gains (.38) (1.07) (.56) (1.46) (.10)
Dividends in excess of
net realized capital gains - - - - (.12)
Distributions from paid in
capital - (.10) - - -
------ ------ ------ ------ ------
Total distributions .79 (1.66) (1.56) (1.38) (1.00)
------ ------ ------ ------
Net asset value, end of period $17.14 $17.43 $14.68 $14.49 $12.41
====== ====== ====== ======
Total return (a) 3.2% 31.4% 12.9% 28.8% 3.2%
Ratios and supplemental data:
Net assets, end of period (000)$ $67,456 $62,157 $35,950 $24,460 $16,646
Ratio of expenses to average
net assets 1.4% 1.4% 1.5% 1.5% 1.6%*
Ratio of net investment income
to average net assets 2.6% 3.3% 2.8% 3.0% 3.3%*
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
Class C Shares
- --------------------------------------------------------------------------------------------------------------
Year Ended March 31 7/5/96
--------------------- through
1999 1998 3/31/97
---- ---- -------
<S> <C> <C> <C>
Net asset value, beginning of period $17.38 $14.63 $13.87
Net income from investment operations:
Net investment income .31 .40 .30
Net realized and unrealized gain on investments .11 3.92 1.21
------ ------ ------
Total from investment operations .42 4.32 1.51
------ ------
Less distributions:
Dividends from net investment income (.35) (.52) (.25)
Dividends from net realized capital gains (.38) (.95) (.50)
Distributions from paid in capital - (.10) -
------ ------
Total distributions (1.57) (.75)
------ ------
Net asset value, end of period $17.07 $17.38 $14.63
====== ======
Total return (a) 2.7 % 30.8% 11.1%
Ratios and supplemental data:
Net assets, end of period (000) $30,843 $14,358 $3,094
Ratio of expenses to average net assets 1.9% 2.0% 2.0%
Ratio of net investment income to
average net assets 2.1% 3.0% 2.7%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Eleven
Months
Year Ended March 31, Ended
1999 1998 1997 1996 3/31/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Portfolio turnover rate 78.2% 76.0% 52.3% 65.2% 42.1%
Average brokerage commission
paid per share $.0676 $.0786 $.0610 $.0633 $.0936
</TABLE>
- --------------
(a) Total return is not annualized and does not reflect the effect of sales
charges.
*Annualized
47
<PAGE> 49
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------------------------
Eleven
Year Ended March 31, Months
------------------------------------------ Ended
1999 1998 1997 1996 3/31/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.59 $15.52 $15.62 $12.68 $12.97
Net income from investment operations:
Net investment income .39 .34 .34 .37 .35
Net realized and unrealized
gain (loss) on investments .79 5.14 1.52 3.70 (.02)
------ ------ ------ ------ ------
Total from investment operations 1.18 5.48 1.86 4.07 0.33
------ ------ ------ ------
Less distributions:
Dividends from net
investment income (.39) (.41) (.28) (.42) (.32)
Dividends from net realized
capital gains (1.16) (2.00) (1.68) (.71) (.30)
------ ------ ------ ------ ------
Total distributions 1.55 (2.41) (1.96) (1.13) (.62)
------ ------ ------ ------
Net asset value, end of period $18.22 $18.59 $15.52 $15.6 $12.68
Total return (b) 6.9% 37.8% 12.9% 33.0% 2.8%
Ratios and supplemental data:
Net assets, end of period (000) $18,981 $13,119 $8,408 $5,813 $3,853
Ratio of expenses to average
net assets (a) 2.0% 2.0% 2.0% 2.0% 2.0%*
Ratio of net investment income
to average net assets (a)2.0 2.3% 2.0% 2.4% 2.6% 3.0%*
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
Class C Shares
- -------------------------------------------------------------------------------------------------
Year
Ended
March 31 8/5/96
---------------------- through
1999 1998 3/31/97
---- ---- -------
<S> <C> <C> <C>
Net asset value, beginning of period $18.48 $15.50 $14.52
Net income from investment operations:
Net investment income .28 .26 .26
Net realized and unrealized gain (loss)
on investments .82 5.11 1.30
------
Total from investment operations 1.10 5.37 1.56
Less distributions:
Dividends from net investment income (.34) (.39) (.25)
Dividends from net realized capital gains (1.17) (2.00) (.50)
------ ------ -----
Total distributions 1.51 (2.39) (.58)
------ -----
Net asset value, end of period $18.07 $18.48 $15.50
Total return (b) 6.5% 37.1% 10.8%
Ratios and supplemental data:
Net assets, end of period (000) $2,676 $1,379 $3,094
Ratio of expenses to average net assets (c) 2.4% 2.5% 2.0%
Ratio of net investment income to
average net assets (c) 1.9% 1.5% 2.4%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Eleven
Year Ended March 31, Months
---------------------------------- Ended
1999 1998 1997 1996 3/31/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Portfolio turnover rate 87.5% 111.5% 91.5% 86.4% 84.7%
Average brokerage
commission paid per share $.0742 $.0773 $.0609 $.0604 $.0924
</TABLE>
- --------------
(a) After reimbursement and waiver of expenses by CAM equivalent to 0.0% 0.0%,
0.1%, 0.1%, and 0.2%* of average net assets, respectively.
(b) Total return is not annualized and does not reflect the effect of sales
charges.
(c) After reimbursement and waiver of expenses by CAM equivalent to 0.0%, 0.0%
and 0.6%* of average net assets, respectively.
*Annualized
49
<PAGE> 51
MARKET NEUTRAL INCOME FUND
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------------------------
Eleven
Year Ended March 31, Months
--------------------------------------- Ended
1999 1998 1997 1996 3/31/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ $10.81 $11.07 $10.13 $10.71
Income from investment operations:
Net investment income .50 .50 .53 .40
Net realized and unrealized
gain (loss) on investments 1.19 .29 .83 (.43)
------ ------ ------ ------
Total from investment
operations 1.69 .79 1.36 (.03)
------ ------ ------ ------
Less distributions:
Dividends from net investment
income (.55) (.68) (.42) (.36)
Dividends from net realized
capital gains (.04) (.37) - (.19))
------ ------ ------ ------
Total distributions (.59) (1.05) (.42) (.55)
------ ------ ------ ------
Net asset value, end of period $ $11.91 $10.81 $11.07 $10.13
====== ====== ====== ======
Total return (c) % 15.7% 7.4% 13.6% (0.2%)
Ratios and supplemental data:
Net assets, end of period (000) $ $1l,123 $1,317 $1,620 $2,211
Ratio of expenses to average
net assets (a)(b) % 2.1% 2.1% 2.2% 2.4%*
Ratio of net investment
income to average net assets (a) % 3.9% 4.3% 4.6% 4.0%*
Portfolio turnover rate % 398.2% 152.5% 81.1% 59.9%
Average brokerage
commission paid per share $ $.0813 $.0711 $.0636 $.0966
</TABLE>
- ---------------
(a) After reimbursement and waiver of expenses by CAM equivalent to -% 4.1%,
3.0%, 1.6%, and 1.1%*, of average net assets, respectively.
(b) Includes %, 0.1%, 0.1%, 0.2%, and 0.4%,* respectively, related to dividend
expenses on short positions.
(c) Total return is not annualized and does not reflect the effect of sales
charges.
*Annualized.
50
<PAGE> 52
GROWTH FUND
<TABLE>
<CAPTION>
Class A Shares
- -----------------------------------------------------------------------------------------------------------
Eleven
Year Ended March 31, Months
---------------------------------------- Ended
1999 1998 1997 1996 3/31/95
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ $17.04 $15.74 $14.18 $14.57
Income from investment operations:
Net investment income (loss) (.01) (.09) (.09) .02
Net realized and unrealized
gain (loss) on investments 8.53 3.14 4.69 (.28)
---- ---- ---- -----
Total from investment operations 8.52 3.05 4.60 (.26)
---- ---- ---- -----
Less distributions:
Dividends from net investment income - - (.07) -
Dividends from net realized
capital gains (5.32) (1.75) (2.97) (.13)
Distributions from paid in capital (.18) - - -
------- ------ ------ ------
Total distributions 5.50 (1.75) (3.04) (.13)
---- ------ ------ -----
Net asset value, end of period $ $20.06 $17.04 $15.74 $14.18
====== ====== ====== ======
Total return (b) % 54.0% 19.1% 35.2% (1.8)%
Ratios and supplemental data:
Net assets, end of period (000) $ $10,374 $6,635 $2,866 $1,791
Ratio of expenses to
average net assets (a) % 2.0% 2.0% 2.0% 2.0%*
Ratio of net investment
income to average net assets (a) % (1.5)% (1.3)% (.08)% 0.2%*
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
Class C Shares
- -------------------------------------------------------------------------------------------
9/3/96
Year Ended March 31, through
------------------------ 3/31/97
1999 1998 ----------
------ -------
<S> <C> <C> <C>
Net asset value, beginning of period $ $16.98 $17.63
Net income from investment operations:
Net investment income .13) (.07)
Net realized and unrealized gain (loss)
on investments 8.50 1.07
---- ----
Total from investment operations 8.37 1.00
---- ----
Less distributions:
Dividends from net realized
capital gains (5.32) (1.65)
Distributions from paid in capital (.18) -
----- ------
Total distributions (5.50) (1.65)
------ ------
Net asset value, end of period $ $19.85 $16.98
====== ======
Total return (b) % 53.3% 5.4%
Ratios and supplemental data:
Net assets, end of period (000) $ $41 $8
Ratio of expenses to average net assets (c) % 2.5% 2.5%*
Ratio of net investment income to
average net assets (c) % (2.0)% (1.9)%*
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Eleven
Months
Year Ended March 31, Ended
---------------------------------------- ---------
1999 1998 1997 1996 3/31/95
------ -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Portfolio turnover rate % 206.1% 173.9% 252.4% 104.3%
Average brokerage commission
paid per share $ $.0662 $.0614 $.0608 $.0910
</TABLE>
- ---------------
(a) After reimbursement and waiver of expenses by CAM equivalent to -%, 0.3%,
0.7%, 1.2%, and 1.6%,* of average net assets, respectively.
(b) Total return is not annualized and does not reflect the effect of sales
charges.
(c) After reimbursement and waiver of expenses by CAM equivalent to __%, 0.4%
and 0.6% of average net assets, respectively.
*Annualized.
52
<PAGE> 54
GLOBAL GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Class A Shares Class C Shares
----------------------- ---------------------
Year Ended March 31, 9/9/96 Year Ended March 31, 9/24/96
----------------------- through --------------------- through
1999 1998 3/31/97 1999 1998 3/31/98
-------- ------- --------- ------- ------ --------
<S> <C> <C> <S> <C> <C> <C>
Net asset value, beginning of period $ $5.39 $5.00 $ $5.37 $5.00
Net income from investment operations:
Net investment income .17 .04 .15 .03
Net realized and unrealized gain
(loss) on investments 1.42 .36 1.41 .35
---- --- ---- ---
Total from investment operations 1.59 .40 1.56 .38
---- --- ---- ---
Less distributions:
Dividends from net investment income (.28) (.01) (.26) (.01)
Dividends from net realized
capital gains (.14) - (.14) -
----- --- ----- ---
Total distributions (.42) (.01) (.40) (.01)
----- ----- ----- -----
Net asset value, end of period $ $6.56 $5.39 $ $6.53 $5.37
===== ===== ===== =====
Total return (b) 30.3% 8.0% 29.8% 7.6%
Ratios and supplemental data:
Net assets, end of period (000) $ $5,678 $2,926 $ $671 $390
Ratio of expenses to average net assets (a) % 2.0% 2.0%* % 2.5% *2.5%*
Ratio of net investment income to
average net assets (a) % 1.4% 1.8%* % .9% 1.6%*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended
March 31, September 9, 1996
------------- through
1999 1998 March 31, 1997
---- ---- ------------------
<S> <C> <C> <C>
Portfolio turnover rate % 64% 160.4%*
Average brokerage commission paid per share $ $.0945 $.0758
</TABLE>
- --------------
(a) After reimbursement and waiver of expenses by CAM equivalent to __ %, 1.0%,
and 1.82%* of average net assets, respectively, for Class A shares and ___
%, 1.2% and 1.8%, respectively, for Class C shares.
(b) Total return is not annualized and does not reflect the effect of sales
charges.
*Annualized
53
<PAGE> 55
FOR MORE INFORMATION
If you would like more information about the Funds, the following resources are
available upon request, free of charge.
ANNUAL AND SEMIANNUAL REPORTS
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareholders. The reports contain a discussion
of the market conditions and investment strategies that significantly affected
the Funds' performance for the past six-month and twelve-month periods.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) provides more detailed information
about the Funds and is incorporated into this prospectus by reference.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by contacting Calamos Asset Management,
Inc. at:
CALAMOS(R) ASSET MANAGEMENT, INC.
1111 E. Warrenville Road
Naperville, Illinois 60563-1493
Telephone: 1-800-823-7386
Internet: http://www.calamos.com
----------------------
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies for free from
the Commission's Internet website at: http://www.sec.gov, or for a fee by
calling or writing to:
Public Reference Section of the Commission
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Investment Company Act file no.811-5443
54
<PAGE> 56
STATEMENT OF ADDITIONAL INFORMATION AUGUST 1, 1999
CALAMOS(R) FAMILY OF FUNDS
CONVERTIBLE FUND
GROWTH AND INCOME FUND
MARKET NEUTRAL INCOME FUND*
GROWTH FUND
GLOBAL GROWTH AND INCOME FUND
HIGH YIELD FUND
*FORMERLY NAMED STRATEGIC INCOME FUND
================================================================================
1111 East Warrenville Road
Naperville, Illinois 60563-1493
(630) 245-7200
Toll Free: (800) 8-CFS-FUND (800/823-7386)
This Statement of Additional Information relates to CALAMOS(R)
Convertible Fund, CALAMOS(R) Growth and Income Fund, CALAMOS(R) Market Neutral
Income Fund (formerly named Strategic Income Fund), CALAMOS(R) Growth Fund,
CALAMOS(R) Global Growth and Income Fund and Calamos(R) High Yield Fund (the
"Funds"), each of which is a series of Calamos Investment Trust (the "Trust").
It is not a prospectus, but provides information that should be read in
conjunction with the Funds' prospectus dated the same date as this Statement of
Additional Information and any supplements thereto. The prospectus may be
obtained without charge by writing or telephoning the Funds at the address or
telephone numbers set forth above.
TABLE OF CONTENTS
Page
The Trust and the Funds...............................2
Investment Practices..................................3
Investment Restrictions..............................19
Management...........................................21
Investment Advisory Services.........................23
Distribution Plan....................................25
Purchasing and Redeeming Shares......................26
Performance Information..............................34
Distributor..........................................37
Portfolio Transactions...............................38
Taxation.............................................40
Allocation Among Funds...............................41
Certain Shareholders.................................42
Custodian............................................44
Independent Auditors.................................45
General Information..................................45
Financial Statements.................................46
Appendix-Description of Bond Ratings.................47
B-1
<PAGE> 57
THE TRUST AND THE FUNDS
Each Fund is a series of Calamos Investment Trust (the "Trust") which was
organized as a Massachusetts business trust on December 21, 1987. Each Fund is
an open-end, diversified management investment company. Prior to June 23, 1997
the name of the trust was CFS Investment Trust. Market Neutral Income Fund was
named "Strategic Income Fund" prior to _____, 1999, and Growth and Income Fund
was called "Calamos Small/Mid Cap Convertible Fund" prior to April 29, 1994.
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.
MARKET NEUTRAL 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.
HIGH YIELD FUND seeks the highest level of current income obtainable
consistent with reasonable risk. As a secondary objective the Fund seeks capital
gain where consistent with its primary objective.
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.
B-2
<PAGE> 58
INVESTMENT PRACTICES
The prospectus contains information concerning each Fund's investment
objective and principal investment strategies and risks. This SAI provides
additional information concerning certain securities and strategies used by the
Funds and their associated risks.
In pursuing its investment objective, each Fund will invest as
described below and in the prospectus.
CONVERTIBLE SECURITIES
Convertible securities include any corporate debt security or preferred stock
that may be converted into underlying shares of common stock. The common stock
underlying convertible securities may be issued by a different entity than the
issuer of the convertible securities. Convertible securities entitle the holder
to receive interest payments paid on corporate debt securities or the dividend
preference on a preferred stock until such time as the convertible security
matures or is redeemed or until the holder elects to exercise the conversion
privilege. As a result of the conversion feature, however, the interest rate or
dividend preference on a convertible security is generally less than would be
the case if the securities were issued in non-convertible form.
The value of convertible securities is influenced by both the yield of
non-convertible securities of comparable issuers and by the value of the
underlying common stock. The value of a convertible security viewed without
regard to its conversion feature (i.e., strictly on the basis of its yield) is
sometimes referred to as its "investment value." The investment value of the
convertible security will typically fluctuate inversely with changes in
prevailing interest rates. However, at the same time, the convertible security
will be influenced by its "conversion value," which is the market value of the
underlying common stock that would be obtained if the convertible security were
converted. Conversion value fluctuates directly with the price of the underlying
common stock.
If, because of a low price of the common stock, the conversion value is
substantially below the investment value of the convertible security, the price
of the convertible security is governed principally by its investment value. If
the conversion value of a convertible security increases to a point that
approximates or exceeds its investment value, the value of the security will be
principally influenced by its conversion value. A convertible security will sell
at a premium over its conversion value to the extent investors place value on
the right to acquire the underlying common stock while holding a fixed income
security. Holders of convertible securities have a claim on the assets of the
issuer prior to the common stockholders, but may be subordinated to holders of
similar non-convertible securities of the same issuer.
SYNTHETIC CONVERTIBLE SECURITIES
The investment manager may create a "synthetic" convertible security by
combining fixed income securities with the right to acquire equity securities.
More flexibility is possible in the assembly of a synthetic convertible security
than in the purchase of a convertible security. Although synthetic convertible
securities may be selected where the two components are issued
B-3
<PAGE> 59
by a single issuer, thus making the synthetic convertible security similar to
the true convertible security, the character of a synthetic convertible security
allows the combination of components representing distinct issuers, when
management believes that such a combination would better promote the Fund's
investment objective. A synthetic convertible security also is a more flexible
investment in that its two components may be purchased separately. For example,
the Fund may purchase a warrant for inclusion in a synthetic convertible
security but temporarily hold short-term investments while postponing the
purchase of a corresponding bond pending development of more favorable market
conditions. The Convertible Fund's holdings of synthetic convertible securities
are not considered convertible securities for purposes of the Fund's policy to
invest at least 65% of its assets in convertible securities.
A holder of a synthetic convertible security faces the risk of a
decline in the price of the security or the level of the index involved in the
convertible component, causing a decline in the value of the call option or
warrant purchased to create the synthetic convertible security. Should the price
of the stock fall below the exercise price and remain there throughout the
exercise period, the entire amount paid for the call option or warrant would be
lost. Since a synthetic convertible security includes the fixed-income component
as well, the holder of a synthetic convertible security also faces the risk that
interest rates will rise, causing a decline in the value of the fixed-income
instrument.
The Funds may also purchase synthetic convertible securities
manufactured by other parties, including convertible structured notes.
Convertible structured notes are fixed income debentures linked to equity, and
are typically issued by investment banks. Convertible structured notes have the
attributes of a convertible security, however, the investment bank that issued
the convertible note assumes the credit risk associated with the investment,
rather than the issuer of the underlying common stock into which the note is
convertible.
DEBT SECURITIES
In pursuing its investment objective, each Fund may invest in
convertible and non-convertible debt securities, including lower-rated
securities (i.e., securities rated BB or lower by Standard & Poor's Corporation
or Ba or lower by Moody's Investor Services, Inc.) and securities that are not
rated but are considered by the investment manager to be of similar quality.
There are no restrictions as to the ratings of debt securities acquired by a
Fund or the portion of a Fund's assets that may be invested in debt securities
in a particular ratings category, except that no Fund other than the High Yield
Fund will acquire a security rated below C.
Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than
higher-quality instruments and generally are more sensitive to adverse economic
changes or individual corporate developments. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds may experience difficulty in servicing their principal and interest
payment obligations.
B-4
<PAGE> 60
Achievement by each Fund of its investment objectives will be more dependent on
the investment manager's credit analysis than would be the case if the Fund were
investing in higher-quality debt securities. Since the ratings of rating
services (which evaluate the safety of principal and interest payments, not
market risks) are used only as preliminary indicators of investment quality, the
investment manager employs its own credit research and analysis. These analyses
may take into consideration such quantitative factors as an issuer's present and
potential liquidity, profitability, internal capability to generate funds,
debt/equity ratio and debt servicing capabilities, and such qualitative factors
as an assessment of management, industry characteristics, accounting
methodology, and foreign business exposure.
Medium- and lower-quality debt securities may be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and the Fund may have greater difficulty selling its
portfolio securities. The market value of these securities and their liquidity
may be affected by adverse publicity and investor perceptions.
RULE 144A SECURITIES
Each Fund may purchase securities that have been privately placed but
that are eligible for purchase and sale by certain qualified institutional
buyers, such as the Funds, under Rule 144A under the Securities Act of 1933. The
investment manager, under the supervision of the Trust's board of trustees, will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to the Fund's restriction of investing no more than a specified
percentage of its net assets in illiquid securities. A determination of whether
a Rule 144A security is liquid or not is a question of fact. In making this
determination, the investment manger will consider the trading markets for the
specific security, taking into account the unregistered nature of a Rule 144A
security. In addition, the investment manager could consider the (1) frequency
of trades and quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market and (4) nature of a security and of marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities will be monitored and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than 10% of its assets in
illiquid securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the a Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
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.
B-5
<PAGE> 61
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.
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. However, each
Fund may invest in the securities of emerging countries. The securities markets
of emerging countries are substantially smaller, less developed, less liquid and
more volatile than the securities markets of the U.S. and other more developed
countries. Disclosure and regulatory standards in many respects are less
stringent than in the U.S. and other major markets. There also may be a lower
level of monitoring and regulation of emerging markets and the activities of
investors in such markets, and enforcement of existing regulations has been
extremely limited. Economies in individual emerging markets may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
domestic product, rates of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments positions. Many
emerging market countries have
B-6
<PAGE> 62
experienced high rates of inflation for many years, which has had and may
continue to have very negative effects on the economies and securities markets
of those countries.
CURRENCY EXCHANGE TRANSACTIONS. 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 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
B-7
<PAGE> 63
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.
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
B-8
<PAGE> 64
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 may pay
reasonable fees to persons unaffiliated with the Fund for services in arranging
these loans. 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
investment manager's judgment, a material event requiring a shareholder vote
would otherwise occur before the loan was repaid. In the event of bankruptcy or
other default of the borrower, the 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. In an
effort to reduce these risks, the investment manager will monitor the credit
worthiness of the firms to which the Fund lends securities.
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
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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 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.
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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 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 investment
manager correctly predicting changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should those
predictions be incorrect, the 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 investment manager might have taken portfolio actions in
anticipation of the same market movements with similar investment results, but,
presumably, at greater transaction costs.
________________________
(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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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.
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
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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 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
___________________
(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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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%].
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.
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
____________________
(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).
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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.
WARRANTS
Each Fund may invest in warrants. A warrant is a right to purchase
common stock at a specific price (usually at a premium above the market value of
the underlying common stock at time of issuance) during a specified period of
time. A warrant may have a life ranging from less than a year to twenty years or
longer, but a warrant becomes worthless unless it is exercised or sold before
expiration. In addition, if the market price of the common stock does not exceed
the warrant's exercise price during the life of the warrant, the warrant will
expire worthless. Warrants have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the value of a warrant may
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tend to be greater than the percentage increase or decrease in the value of the
underlying common stock.
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.
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 Market
Neutral Income Fund may make short sales of securities only if at all times when
a short position is open the Fund owns an equal amount of such securities or
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short.
In addition to selling short against the box, Market Neutral 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 Market Neutral 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
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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.
Market Neutral Income Fund will conduct its short sales so that no more
than 10% of the net assets of the Fund, when added together, will be (i)
deposited with brokers as collateral, and (ii) allocated to segregated accounts
in connection with short sales, at any time.
Short sales 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."
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.
The Taxpayer Relief Act of 1997 imposed constructive sale treatment for federal
income tax purposes on certain hedging strategies with respect to appreciated
securities. Under these rules taxpayers will recognize gain, but not loss, with
respect to securities if they enter into short sales
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or "offsetting notional principal contracts" (as defined by the Act), or futures
or "forward contracts" (as defined by the Act) with respect to the same or
substantially identical property, or if they enter into such transactions and
then acquire the same or substantially identical property. The Secretary of the
Treasury is authorized to promulgate regulations that will treat as constructive
sales certain transactions that have substantially the same effect as short
sales.
"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.
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TEMPORARY INVESTMENTS
Each Fund may make temporary investments without limitation when the
investment manager determines that a defensive position is warranted. Such
investments may be in money market instruments, consisting of obligations of, or
guaranteed as to principal and interest by, the U.S. Government or its agencies
or instrumentalities; certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million and
which are regulated by the U.S. Government, its agencies or instrumentalities;
commercial paper rated in the highest category by a recognized rating agency;
and repurchase agreements.
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;
B-19
<PAGE> 75
(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(1) and such borrowings will not exceed 10% of total assets,
and the Fund will not purchase securities when its borrowings exceed 5%
of total assets) and (b) enter into transactions in options;
(viii) invest in a security if more than 25% of its total assets (taken at
market value at the time of a particular purchase) would be invested in
the securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities; or
(ix) issue any senior security, except that the Market Neutral 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 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) Market Neutral
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
B-20
<PAGE> 76
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 25% of its net assets (valued at time of
purchase) in securities of foreign issuers (other than securities represented by
American Depositary Receipts and securities guaranteed by a U.S. person), except
that Global Growth and Income Fund may invest all of its assets in securities of
foreign issuers.
Restrictions (a) through (e) 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.
Name, Position(s) with Trust
and Age at March 31, 1999 Principal Occupation(s) During Past Five Years
- ---------------------------- ----------------------------------------------
John P. Calamos (1) President, Calamos Asset Management, Inc.
Trustee and President, 58 ("CAM"), an investment adviser and the
Funds' investment adviser; President,
Calamos Financial Services, Inc. ("CFS"),
a broker-dealer and the Funds'
distributor'.
Nick P. Calamos (1) Managing Director, CAM and CFS.
Trustee and Vice President, 38
Richard J. Dowen (2) Professor of Finance, Northern Illinois
Trustee, 54 University.
Robert Frost (2) Management Consultant, ECOM Consultants, Inc.
Trustee, 59
William A. Kaun (2) Principal, W.A. Kaun Co. (investment adviser
Trustee, 71 and publisher).
B-21
<PAGE> 77
Name, Position(s) with Trust
and Age at March 31, 1999 Principal Occupation(s) During Past Five Years
- ---------------------------- ----------------------------------------------
James W. Faulkner Treasurer and Chief Financial Officer, CAM, since 1998;
Assistant Secretary, __ ______________ prior thereto.
James S. Hamman, Jr. Vice President and General Counsel, CAM,
Secretary, 29 since 1998; Vice President and Associate
Counsel, Scudder Kemper Investments, Inc.
(investment manager), 1996 - 1998; attorney,
Vedder, Price, Kaufman & Kammholz, prior
thereto.
______________________
(1) John P. Calamos and Nick P. Calamos are trustees who are "interested
persons" of the Trust as defined in the Investment Company Act of 1940
(the "1940 Act") and are members of the executive committee of the
board of trustees, which has authority during intervals between
meetings of the board of trustees to exercise the powers of the board.
(2) Messrs. Dowen, Frost and Kaun are members of the audit committee of
the board of trustees, which makes recommendations regarding the
selection of the Trust's independent auditors and meets with
representatives of the independent auditors to determine the scope and
review the results of each audit.
The trustees of the Trust are also trustees of Calamos Advisors Trust, an
open-end investment company advised by Calamos Asset Management, Inc.
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, 1999 to each trustee who was not an "interested person" of
the Trust. The information in the last column is for the 1998 calendar year.
Aggregate Total Compensation
Compensation from Calamos
Name of Trustee from the Trust* Funds Complex
- --------------- --------------- -------------
Richard J. Dowen $ $
Robert Frost $
William A. Kaun $
- ----------------------
B-22
<PAGE> 78
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 --." 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. High Yield Fund
pays a fee at the annual rate of .75% 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 (other than the High Yield
Fund which commenced operations on August 1, 1999) paid total advisory fees and
were reimbursed by the Adviser for expenses in excess of applicable expense
limitations as follows:
B-23
<PAGE> 79
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
3/31/99 3/31/98 3/31/97
------------- ------------- -------------
<S> <C> <C> <C>
Convertible Fund $ $ 579,633 $ 230,573
Growth and Income Fund
Advisory fee $ $ 92,242 $ 54,520
Waiver or reimbursement 0 7,042
------ ------------ ------------
Net fee $ $ 92,242 $ 47,478
Market Neutral Income Fund
Advisory fee $ $ 9,079 $ 11,203
Waiver or reimbursement 49,904 45,456
------ ------------ ------------
Net fee $ $ (40,825) $ (34,253)
Growth Fund
Advisory fee $ $ 92,400 $ 47,557
Waiver or reimbursement 28,816 33,966
------ ------------ ------------
Net fee $ $ 63,584 $ 13,591
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 continues in effect with respect to each Fund from year
to year 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.
B-24
<PAGE> 80
The Adviser has voluntarily undertaken to reimburse each class of
shares for any annual operating expenses through August 31, 2000 in excess of
certain limits as described in the prospectus under "Management of the Funds
- --."
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.
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.
B-25
<PAGE> 81
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, 1999, each of the Funds (other than
High Yield Fund, which commenced operations on August 1, 1999) made payments to
CFS pursuant to the Plan in the following amounts:
Global
Convertible Growth and Strategic Growth and
Fund Income Fund Income Fund Growth Fund Income Fund
---- ----------- ----------- ----------- -----------
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Funds' prospectus under
the headings "How Can I Buy Shares?" and "How Can I Sell 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.
HOW TO PURCHASE SHARES
Shares of the Funds are sold through selected broker-dealers and banks that have
signed agreements with CFS, or may be purchased by check or wire as described
below. The minimum initial investment by a shareholder is $500 and $50
thereafter. Each Fund reserves the right to reject any order for the purchase of
its shares in whole or in part, and to suspend the sale of its shares to the
public in response to conditions in the securities markets or otherwise. Each
purchase of shares is confirmed by a written statement mailed to the
shareholder, without issuance of share certificates.
OFFERING PRICE
Class A shares of each Fund are sold to investors at net asset value plus a
sales charge, which may be reduced or waived as described below. Class C shares
of each Fund are sold without an initial
B-26
<PAGE> 82
sales charge but are subject to higher ongoing expenses than Class A shares of
the same Fund. When placing an order, you must specify whether the order is for
Class A or Class C shares.
The differences between Class A shares and Class C shares lie primarily in their
initial and contingent deferred sales charge structures and in their asset-based
sales charges in the form of Rule 12b-1 distribution fees. These differences are
summarized in the table below. See also "Expenses" and "How to Redeem Shares."
Each class has distinct advantages and disadvantages for different investors,
and you may choose the class that best suits your circumstances and objectives.
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average
Class Initial Sales Charge daily net assets)* Other Information
- ----- -------------------- ------------------ -----------------
<S> <C> <C> <C>
Class A Maximum initial sales charge .50% Initial sales charge waived or
of 4.75% of offering price reduced for certain purchases**
Class C None 1.00%*** 1% deferred sales charge on
shares redeemed within one year
</TABLE>
_________________
* Of this amount, .25% is for administrative services and the balance is
for distribution services.
** See the note to the following table.
*** The 12b-1 fee of 1% for the first year is advanced to the Selling
Dealer by CFS from its own resources at the time of investment.
Annual 12b-1 fees are paid quarterly in arrears beginning in the second
year.
____________________________________________________________________
The sales charges on sales of Class A shares of each Fund (except when waived as
described below under "How to Purchase Shares - Sales Charge Waiver") are as
follows:
<TABLE>
<CAPTION>
Sales Charge Paid by Investor on Purchase of Class A Shares
-----------------------------------------------------------
As a % of As a % of % of Offering Price
Net Amount Invested Offering Price Retained by Selling Dealer
-------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000..................... 4.99% 4.75% 4.00%
$50,000 but less than $100,000........ 4.44 4.25 3.50
$100,000 but less than $250,000....... 3.63 3.50 2.75
$250,000 but less than $500,000....... 2.56 2.50 2.00
$500,000 but less than $1,000,000..... 2.04 2.00 1.60
$1,000,000 or more.................... None None None
</TABLE>
_________________
* On an investment of $1 million or more, CFS from its own resources pays the
selling dealer a commission of .25% of the amount of the investment, subject
to repayment of the commission if the shares are redeemed within one year
after purchase. If you purchase such shares without a sales charge, a
contingent deferred sales charge of 1% will be imposed on shares that are
B-27
<PAGE> 83
redeemed within one year after purchase (other than by reinvestment of
dividends or distributions), determined on a first-in, first-out basis.
Each Fund receives the entire net asset value of all of its Class A shares sold.
CFS, the Funds' principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers. The normal discount to dealers is set
forth in the above table. Upon notice to all dealers with whom it has sales
agreements, CFS may follow up to the full applicable sales charge, as shown in
the above table, during periods and for transactions specified in such notice
and such reallowances may be based upon attainment of minimum sales levels.
Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the Securities Act of 1933. CFS retains the entire amount of
any deferred sales charge on Class C shares redeemed within one year of
purchase. CFS may from time to time conduct promotional campaigns in which
incentives would be offered to dealers meeting or exceeding stated target sales
of shares of a Fund. The cost of any such promotional campaign, including any
incentives offered, would be borne entirely by CFS and would have no effect on
either the public offering price of Fund shares or the percentage of the public
offering price retained by the selling dealer.
PURCHASES BY WIRE
You may also purchase shares by wiring funds from your bank. To insure proper
credit to your account, please call the Funds at (800) 823-7386 before sending
your wire. The wire should be sent to United Missouri Bank KC, N.A.; ABA
#10-10-00695; for First Data Corp. Investor Services Group, bank account no.
98703719; FBO Calamos [fund name] Fund; [shareholder name and account number].
The applicable offering price for a purchase by wire is the offering price per
share next determined after receipt of the wired funds. Receipt of a wire could
be delayed by delays on the Federal Reserve wire system. After you have wired
funds, you must complete the application form and send it to CFS. A Fund will
not honor redemption requests until the completed application has been received,
and failure to submit a completed application may result in backup withholding
as required by the Internal Revenue Code.
PURCHASES BY MAIL
You may also purchase shares of a Fund by sending to the Trust's transfer agent
at its address shown on the back cover of the prospectus a check payable to the
Fund, along with information identifying you and your account number. An initial
investment made by check must be accompanied by a completed application. A
subsequent investment may be made by detaching the stub from your account
statement and sending it with your check in the envelope provided with your
statement. All checks must be drawn on a U.S. bank in U.S. funds. A check
written by a third party will not be accepted. A charge ($20 minimum) may be
imposed if any check submitted for investment does not clear. If you purchase
shares by check, you will not be able to redeem the shares until the check has
been collected, which may take 15 days.
PURCHASES BY EXCHANGE
You may purchase shares of a Fund by exchange of shares from another Fund, by
exchange of shares of Money Market Portfolio, a portfolio of Cash Account Trust
(such shares are referred to as "Cash Account Shares") either by mail or by
instructing your broker-dealer or other sales agent, who will communicate your
order to the Trust's transfer agent. If you have a brokerage account with
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") that holds
shares of Summit Cash Reserves Fund, a series of Financial Institution Series
Trust (such shares
B-28
<PAGE> 84
are referred to as "Summit Fund Shares"), and the Summit Fund Shares were
purchased by exchange from a Fund, you may purchase shares of a Fund through
your Merrill Lynch broker by exchange of Summit Fund Shares. See "How to Redeem
Shares - Redemption by Exchange." YOU MAY NOT MAKE MORE THAN FOUR EXCHANGES FROM
ANY FUND DURING ANY CALENDAR YEAR. No sales charge is imposed on purchases of
Class A shares by exchange of Class A shares from another Fund or by exchange of
Cash Account Shares or Summit Fund Shares, previously purchased through use of
the exchange privilege. Please review the information under "How to Redeem
Shares - Redemption by Exchange."
SALES CHARGE WAIVER
Dividends and distributions paid by a Fund will be reinvested in shares of that
Fund at net asset value (without the payment of any sales charge) unless you
elect to receive dividends and distributions in cash. Proceeds of shares
redeemed by a Fund within the previous 60 days also may be reinvested in that
Fund's shares at net asset value without the payment of any sales charge.
In addition, the following persons or entities may purchase Class A shares of a
Fund at net asset value without payment of any sales charge, upon written
assurance that the purchase is made for investment purposes and that the shares
will not be sold except through redemption by the Fund: (a) any investor
purchasing shares upon the recommendation of an investment consultant to whom
the investor pays a fee for services relating to investment selection; (b) any
investor purchasing shares through an investment advisory account with the
Adviser or through a brokerage account with CFS over which CFS has investment
discretion; (c) any investor purchasing shares in a non-discretionary,
non-advisory, asset-based-fee brokerage account of a broker dealer having a
selling group agreement with CFS; (d) any investor purchasing shares by exchange
of Cash Account Shares or Summit Fund Shares previously purchased through use of
the exchange privilege; (e) any employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets invested in the
Funds; (f) any employee benefit plan purchasing shares through an intermediary
that has signed a participation agreement with CFS specifying certain asset
minimums and qualifications, and marketing, program and trading restrictions;
(g) any insurance company separate account used to fund annuity contracts for
employee benefit plans having in the aggregate more than 200 eligible employees
or a minimum of $1 million of plan assets invested in the Funds; (h) any
employee or registered representative of CFS, one of its affiliates or a
broker-dealer with a selling group agreement with CFS; (i) any trustee of the
Trust; (j) any member of the immediate family of a person qualifying under (h)
or (i), including a spouse, child, stepchild, sibling, parent, stepparent,
grandchild and grandparent, in each case including in-law and adoptive
relationships; (k) any trust, pension, profit sharing, or other benefit plan in
which any person qualifying under (h) is a participant; (l) any 401(k) plan
(cash or deferred arrangement intended to qualify under section 401(k) of the
Internal Revenue Code) or other qualified retirement plan to which a person
qualifying under (h), (i) or (j) makes voluntary contributions and has
investment self-direction, provided the purchase is for the account of such
person; and (m) any company exchanging shares with a Fund pursuant to a merger,
acquisition or exchange offer. Please note that, if you purchase or redeem
shares through a broker or dealer, the broker or dealer may charge a fee for
effecting the transaction.
Further, no sales charge will be imposed on the sale of Class A shares of a Fund
purchased and paid for with the proceeds of shares redeemed in the prior 12
months from a mutual fund on which an initial sales charge or contingent
deferred sales charge was paid, provided a waiver of
B-29
<PAGE> 85
the sales charge is requested when the purchase order for Fund shares is placed,
any requested evidence of eligibility for the sales charge waiver is furnished;
and any shareholder of Convertible Fund at April 30, 1992, the date on which
that Fund became a series of the Trust and sales of Fund shares became subject
to a sales charge, may continue to purchase Class A shares of Convertible Fund
without a sales charge if the Fund or participating broker is notified at the
time of each qualifying purchase.
RIGHTS OF ACCUMULATION
The sales charges described above also apply on a cumulative basis to Class A
shares of the Funds and any other series of the Trust as to which a sales charge
applies, and over any period of time. Therefore, the value of all your Class A
shares of a Fund and any other series of the Trust with respect to which a sales
charge was paid, taken at the current offering price or original cost, whichever
is greater, can be combined with a current purchase to determine the applicable
offering price of the current purchase. In order to receive the cumulative
quantity reduction, you must give CFS or your dealer notification of the prior
purchases at the time of the current purchase.
LETTER OF INTENT
You may reduce the sales charges you pay on the purchase of Class A shares by
making investments pursuant to a letter of intent. The applicable sales charge
then is based upon the indicated amount intended to be invested during a
thirteen-month period in shares of the Funds as to which a sales charge would be
imposed and any other series of the Trust. You may compute the thirteen-month
period starting up to ninety days before the date of execution of the letter of
intent. Your initial investment must be at least 5% of the amount your letter of
intent indicates you intend to invest. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the intended
investment. During the term of the letter of intent, shares representing 5% of
the indicated amount will be held in escrow. Shares held in escrow have full
dividend and voting privileges. The escrowed shares will be released when the
full amount indicated has been purchased. If the full indicated amount is not
purchased during the term of the letter of intent, you will be required to pay
CFS an amount equal to the difference between the dollar amount of the sales
charges actually paid and the amount of the sales charges which you would have
paid on your aggregate purchase if the total of such purchases had been made at
a single time, and CFS reserves the right to redeem shares from your account if
necessary to satisfy that obligation. A letter of intent does not obligate you
to buy or a Fund to sell the indicated amount of the shares but you should read
it carefully before signing. Additional information is contained in the letter
of intent included in the application.
HOW TO REDEEM SHARES
Shares of the Funds will be redeemed at the respective net asset value next
determined after receipt of a redemption request in good form on any day the New
York Stock Exchange is open for trading. Requests received after the time for
computation of a Fund's net asset value for that day will be processed the next
business day.
If Class C shares, or Class A shares for which the initial purchase price was $1
million or more, on which no initial sales charge was imposed are redeemed
within one year after purchase (other than by reinvestment of dividends or
distributions), determined on a first-in, first-out basis, a contingent deferred
sales charge of 1% of the purchase price will be imposed.
B-30
<PAGE> 86
REDEMPTION BY MAIL
A written request for redemption (and an endorsed share certificate, if issued)
must be received by the Trust's transfer agent at its address shown on the back
cover to constitute a valid redemption request.
Your redemption request must:
1. specify the Fund, your account number and the number of shares or dollar
amount to be redeemed, if less than all shares are to be redeemed;
2. be signed by all owners exactly as their names appear on the account; and
3. include a signature guarantee for each signature on the redemption request
by CFS, by a securities firm that is a member of the New York Stock
Exchange, or by a bank, savings bank, credit union, savings and loan
association or other entity that is authorized by applicable state law to
guarantee signatures.
In the case of shares held by a corporation, the redemption request must be
signed in the name of the corporation by an officer whose title must be stated,
and a certified bylaw provision or resolution of the board of directors
authorizing the officer to so act may be required. In the case of a trust or
partnership, the signature must include the name of the registered shareholder
and the title of the person signing on its behalf. Under certain circumstances,
before shares can be redeemed, additional documents may be required in order to
verify the authority of the person seeking to redeem.
REDEMPTION BY WIRE OR TELEPHONE
Broker-dealers or other sales agents may communicate redemption orders by wire
or telephone to the Trust's transfer agent. These firms may charge for their
services in connection with your redemption request but the Funds do not impose
any such charges.
EXPEDITED REDEMPTION
Unless share certificates have been issued to you, you may have redemption
proceeds of at least $5,000 wired directly to a domestic commercial bank account
or brokerage account that you have previously designated. Normally, such
payments will be transmitted no later than the second business day following
receipt of your redemption request (provided redemptions may be made under the
general criteria set forth below). A $9 service charge for payment of redemption
proceeds by wire will be deducted from the proceeds.
REDEMPTION BY EXCHANGE
You may redeem all or any portion of your shares of a Fund and use the proceeds
to purchase shares of any of the other Funds or Cash Account Shares (or Summit
Fund Shares if your Fund shares are held in a brokerage account with Merrill
Lynch and Merrill Lynch has commenced offering the exchange program for Summit
Fund Shares) if your signed, properly completed application is on file. AN
EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF SHARES FOR FEDERAL INCOME TAX
PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS. YOU MAY NOT MAKE MORE THAN FOUR
EXCHANGES FROM ANY FUND IN ANY CALENDAR YEAR. Before exchanging into Cash
Account Shares (or Summit Fund Shares), you should obtain the prospectus
relating to those shares from the Adviser (or from Merrill Lynch, in the case of
Summit Fund Shares) and read it carefully. The
B-31
<PAGE> 87
exchange privilege is not an offering or recommendation of Cash Account Shares
or Summit Fund Shares. The registration of the account to which you are making
an exchange must be exactly the same as that of the account from which the
exchange is made and the amount you exchange must meet any applicable minimum
investment of the fund being purchased. An exchange may be made by following the
redemption procedure described above under "Redemption by Mail" and indicating
the fund to be purchased, except that a signature guarantee normally is not
required. An exchange may also be made by instructing your broker-dealer or
other sales agent, who will communicate your instruction to CAM. No sales charge
is imposed on purchases by exchange.
GENERAL
A check for proceeds of a redemption will not be released until the check used
to purchase the shares has been collected, which is usually no more than 15 days
after purchase. You may avoid this delay by purchasing shares through a wire
transfer of funds. A Fund may suspend the right of redemption under certain
extraordinary circumstances in accordance with the rules of the Securities and
Exchange Commission. Due to the relatively high cost of handling small accounts,
each Fund reserves the right upon 30 days' written notice to involuntarily
redeem, at net asset value, the shares of any shareholder whose account has a
value of less than $500, unless the reduction in value to less than $500 was the
result of market fluctuation.
PLEASE TELEPHONE THE FUNDS IF YOU HAVE ANY QUESTIONS ABOUT REQUIREMENTS FOR A
REDEMPTION BEFORE SUBMITTING A REQUEST. YOU MAY NOT CANCEL OR REVOKE YOUR
REDEMPTION REQUEST ONCE YOUR INSTRUCTIONS HAVE BEEN RECEIVED AND ACCEPTED.
SHAREHOLDER SERVICES
SHAREHOLDER ACCOUNTS
Each shareholder of a Fund receives quarterly account statements showing
transactions in shares of the Fund and with a balance denominated in Fund
shares. A confirmation will be sent to the shareholder upon purchase,
redemption, dividend reinvestment, or change of shareholder address (sent to the
former address).
RETIREMENT PLANS
You may use the Funds as investments for your Individual Retirement Account
("IRA"), profit sharing or pension plan, Section 40l(k) plan, Section 403(b)(7)
plan in the case of employees of public school systems and certain non-profit
organizations, and certain other qualified plans. A master IRA plan and
information regarding plan administration, fees, and other details are available
from CFS and authorized broker-dealers.
SYSTEMATIC WITHDRAWAL PLAN
You may request that a Fund periodically redeem shares having a specified
redemption value and send you a check for the proceeds. In order to initiate the
Systematic Withdrawal Plan, call (800) 823-7826 and request a Systematic
Withdrawal form. Your account must have a share balance of $25,000 or more.
Withdrawal proceeds are likely to exceed dividends and distributions paid on
shares in your account and therefore may deplete and eventually exhaust your
account. The periodic payments are proceeds of redemption and are taxable as
such. Because a sales charge is imposed on purchases of shares of the Funds, you
should not purchase shares while participating in the Systematic Withdrawal
Plan. You may modify or terminate your Systematic Withdrawal Plan by written
notice to the transfer agent at least seven business days prior to the start of
the month in which the change is to be effective.
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<PAGE> 88
AUTOMATIC BANK DRAFT PLAN
If you own shares of a Fund, you may purchase additional shares of that Fund
through the Automatic Bank Draft Plan. Under the Plan, the Trust will
automatically debit your bank checking account on a monthly or semi-monthly
basis in an amount ($50 or more) specified by you and invest the specified
amount in additional shares of the Fund. To obtain an Automatic Bank Draft Plan
form, call (800) 823-7386. The Plan is not available to clients of service
organizations that offer similar investment services.
EXCHANGE PRIVILEGE
You may exchange shares of any Fund for shares of another Fund or for Cash
Account Shares (or for Summit Fund Shares if your Fund shares are held in a
brokerage account with Merrill Lynch) or exchange Cash Account Shares or Summit
Fund Shares for shares of a Fund, without payment of any sales charge as
described above under "How to Purchase Shares - Purchase by Exchange" and "How
to Redeem Shares - Redemption by Exchange."
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
B-33
<PAGE> 89
may not take place on every NYSE business day. In addition, trading may take
place in various foreign markets on Saturdays or on other days when the NYSE is
not open and on which the Fund's net asset value is not calculated. Therefore,
such calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such calculation and the
value of the Fund's portfolio may be significantly affected on days when shares
of the Fund may not be purchased or redeemed.
REDEMPTION IN KIND
The Funds have elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which they are obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of a Fund during any 90-day period for any one shareholder. Redemptions in
excess of these amounts will normally be paid in cash, but may be paid wholly or
partly by a distribution in kind of securities.
PERFORMANCE INFORMATION
TOTAL RETURN
From time to time the Funds may quote total return figures. "Total
Return" for a period is the percentage change in value during a period of an
investment in Fund shares, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.
Average Annual Total Return will be computed as follows:
n
ERV = P(1+T)
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
the period, at the end of the period (or
fractional portion thereof)
Total Return (taking into account the effect of the sales charge) and
Average Annual Total Return for each of the Funds (other than High Yield Fund,
which commenced operations on August 1, 1999) was as shown below for the
following periods ended March 31, 1999.
B-34
<PAGE> 90
<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..................................... N/A N/A
Five years................................... N/A N/A N/A N/A
Ten years.................................... N/A N/A N/A N/A
Life of Class (A Shares, 6/21/85; C Shares,
7/5/96; I Shares, 6/25/97)...............
Growth and Income Fund
One year..................................... N/A N/A
Five years................................... N/A N/A N/A N/A
Life of Class (A Shares, 9/22/88; C Shares,
7/5/96; I Shares, 6/25/97)...............
Strategic Income Fund
One year..................................... N/A N/A N/A N/A
Five years................................... N/A N/A N/A N/A
Life of Class................................ N/A N/A N/A N/A
Growth Fund
One year..................................... N/A N/A
Five years................................... N/A N/A N/A N/A
Life of Class (A Shares, 9/4/90; C Shares,
9/3/96; I Shares, 9/18/97)...............
Global Growth and Income Fund
One Year..................................... N/A N/A
Life of Class (A Shares, 9/9/96; C Shares,
9/24/96; I Shares, 9/18/97)..............
</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:
6
YIELD = 2[((a-b/cd)+1) -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
B-35
<PAGE> 91
The annualized yield of Class A shares of Market Neutral Income Fund
for the 30 days ended March 31, 1999 was %. 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.
In advertising and sales literature, the performance of a Fund may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, other accounts or
partnerships managed by Calamos Asset Management, Inc., and other competing
investment and deposit products available from or through other financial
institutions. The composition of these indexes, averages or accounts differs
from that of the Funds. Comparison of a Fund to an alternative investment should
consider differences in features and expected performance.
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Funds generally believe to be
accurate. A Fund may also note its mention (including performance or other
comparative rankings) in newspapers, magazines, or other media from time to
time. However, the Funds assume no responsibility for the accuracy of such data.
Newspapers and magazines which might mention the Funds include, but are not
limited to, the following:
Barron's Money
Business Week Mutual Fund Letter
Changing Times Mutual Fund Values (Morningstar)
Chicago Tribune Newsweek
Chicago Sun-Times The New York Times
Crain's Chicago Business Pensions and Investments
Consumer Reports Personal Investor
Consumer Digest Stanger Reports
Financial World Time
Forbes USA Today
Fortune U.S. News and World Report
Investor's Daily The Wall Street Journal
Los Angeles Times
Each Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.
The performance of a Fund may be compared to various indexes or
averages, including but not limited to, CONVERTIBLE FUND AND GROWTH AND INCOME
FUND - Standard & Poor's 500
B-36
<PAGE> 92
Stock Index, 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; MARKET NEUTRAL 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; HIGH YIELD FUND - Lehman Brothers
Government/Corporate Bond 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.
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 (other than High Yield Fund which commenced operations on
August 1, 1999) as shown below during the indicated periods:
B-37
<PAGE> 93
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
3/31/99 3/31/98 3/31/97
------- ------- -------
<S> <C> <C> <C>
Convertible Fund
Commissions received $ $ 282,787 $ 98,409
Commissions retained 49,045 40,972
Growth and Income Fund
Commissions received 9,268 6,485
Commissions retained 1,951 4,980
Market Neutral Income Fund
Commissions received 1,071 -
Commissions retained - -
Growth Fund
Commissions received 1,203 759
Commissions retained 756 401
Global Growth and Income Fund*
Commissions received 1,490 76
Commissions retained 250 36
</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.
PORTFOLIO TRANSACTIONS
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
B-38
<PAGE> 94
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.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable
combination of net price and execution available and such other policies as the
trustees may determine, the Adviser may consider sales of shares of a Fund as a
factor in the selection of broker-dealers to execute portfolio transactions for
that Fund.
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 (other than the High Yield
Fund, which commenced operations on August 1, 1999 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.
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<PAGE> 95
<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 3/31/99
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
Growth and Income Fund
Year ended 3/31/99
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
Market Neutral Income Fund
Year ended 3/31/99
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
Growth Fund
Year ended 3/31/99
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
Global Growth and Income Fund
Year ended 3/31/99
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,
1999, Convertible Fund, Growth and Income Fund, Market Neutral Income Fund,
Growth Fund and Global Growth and Income Fund paid commissions of and
respectively, to brokers who furnished research services. [Market Neutral Income
Fund did not pay 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.
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.
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<PAGE> 96
Foreign currency gains and losses, including the portion of gain or
loss on the sale of debt securities attributable to foreign exchange rate
fluctuations, are taxable as ordinary income. If the net effect to a Fund of
those transactions is a gain, the income dividend paid by the Fund will be
increased; if the result is a loss, the income dividend paid will be decreased.
Income received by a Fund from sources within various foreign countries
will be subject to foreign income taxes withheld at the source. Under the
Internal Revenue Code, if more than 50% of the value of a Fund's total assets at
the close of its taxable year comprises securities issued by foreign
corporations, the Fund may file an election with the Internal Revenue Service to
"pass through" to its shareholders the amount of foreign income taxes paid by
that fund. Pursuant to that election, shareholders would be required to: (i)
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes paid by the fund; (ii) treat their pro rata share of
foreign taxes as paid by them; and (iii) either deduct their pro rata share of
foreign taxes in computing their taxable income, or use it as a foreign tax
credit against U.S. income taxes (but not both). No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The High Yield Fund intends to qualify, and each other 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 federal income tax on its net investment income and
capital gains that it currently distributes to shareholders.
The Funds must meet several requirements to maintain its status as a
regulated investment company. These requirements include the following: (1) at
least 90% of the Fund's gross income must be derived from dividends, interest,
payments with respect to securities loaned, and gains from the sale or
disposition of securities; and (2) at the close of each quarter of the Fund's
taxable year, (a) at least 50% of the value of the Fund's total assets must
consist of cash, U.S. Government securities and other securities (no more than
5% of the value of the Fund may consist of such other securities of any one
issuer, and the Fund must not hold more than 10% of the outstanding voting stock
of any issuer), and (b) the Fund must not invest more than 25% of the value of
its total assets in the securities of any one issuer (other than U.S. Government
securities).
In order to maintain the qualification of the Fund's status as a
regulated investment company, the Trust may, in its business judgment, restrict
the Fund's ability to enter into stock index futures contracts or options on
such futures contracts or engage in short-term trading and transactions in
securities (including stock index futures contracts and options on such futures
contracts). For the same reason, the Trust may, in its business judgement,
require the Fund to defer the closing out of a contract beyond the time when it
might otherwise be advantageous to do so.
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
B-41
<PAGE> 97
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, 1999 were:
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- ------ ------------
<S> <C> <C>
MARKET NEUTRAL INCOME FUND
Lincoln Trust Company [12,558] [11.01]
Custodian Donald E. Lindley
P.O. Box 5831
Denver, Colorado 80217
Prudential Securities FBO Marjorie K. Flannery, [10,149] [8.90]
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
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
</TABLE>
B-42
<PAGE> 98
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding Shares
Shareholder Shares of the Funds
----------- ------ ------------
<S> <C> <C>
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
Merril 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-43
<PAGE> 99
<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, 1999 the trustees and officers of the Trust as a group
owned beneficially shares of the Funds as follows: shares (%) of Convertible
Fund; shares (%) of Growth and Income Fund; shares (%) of Market Neutral Income
Fund; shares (%) of Growth Fund; and shares (%) 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 Market Neutral 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.
B-44
<PAGE> 100
INDEPENDENT AUDITORS
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606,
audits and reports on the Funds' annual financial statements, reviews certain
regulatory reports and the Funds' federal income tax returns, and performs other
professional accounting, tax and advisory services when engaged to do so by the
Funds
GENERAL INFORMATION
SHAREHOLDER INFORMATION
Each Fund is a series of Calamos 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. Calamos Market Neutral Income Fund was named
Calamos Strategic Income Fund prior to _________,1999. Under the terms of the
Agreement and Declaration of Trust, the trustees may issue an unlimited number
of shares of beneficial interest without par value for each series of shares
authorized by the trustees and the trustees may divide the shares of any series
into two or more classes of shares of that series. Currently the Trust has six
series in operation. All Shares issued will be fully paid and non-assessable and
will have no preemptive or conversion rights. In the future, the board of
trustees may authorize the issuance of shares of additional series and
additional classes of shares of any series.
Each Fund's shares are entitled to participate pro rata in any
dividends and other distributions declared by the Fund's board of trustees with
respect to shares of the Fund. All shares of the Fund have equal rights in the
event of liquidation of the Fund.
Under Massachusetts law, the shareholders of the Trust may, under
certain circumstances, be held personally liable for the Trust's obligations.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, trustees, and officers of the Trust for acts or obligations of the
Funds, which are binding only on the assets and property of the Fund. The
Declaration of Trust requires that notice of such disclaimer be given in each
agreement, obligation, or contract entered into or executed by the Trust or the
board of trustees. The Declaration of Trust provides for indemnification out of
a Fund's assets of all losses and expenses of any Fund shareholder held
personally liable for the Fund's obligations. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is remote, since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself is unable to meet its obligations.
VOTING RIGHTS
Each share has one vote and fractional shares have fractional votes. As
a business trust, the Trust is not required to hold annual shareholder meetings.
However, special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies or approving an investment
advisory agreement.
B-45
<PAGE> 101
FINANCIAL STATEMENTS
The annual report of the Trust, a copy of which accompanies this Statement of
Additional Information, contains financial statements, notes thereto,
supplementary information entitled "Financial Highlights" for each of the Funds
and a report of independent auditors, all of which (but no other part of the
annual report) is incorporated herein by reference.
B-46
<PAGE> 102
APPENDIX--DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the creditworthiness
of an issuer. Consequently, the Portfolio's investment manager believes that the
quality of debt securities in which the Portfolio invests should be continuously
reviewed. A rating is not a recommendation to purchase, sell or hold a security,
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the ratings services
from other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings used
by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
MOODY'S RATINGS
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa bonds or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-47
<PAGE> 103
B--Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds rated Ca represent obligations which are speculative in a
high degree. Such bonds are often in default or have other marked shortcomings.
S&P RATINGS
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal
and interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and
interest and differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
B-48
<PAGE> 104
PART C OTHER INFORMATION
ITEM 23. Exhibits
(a)(1) Amended and Restated Agreement and Declaration of Trust (exhibit 1
to Post-Effective Amendment No. 18*)
(a)(2) Amendment to Declaration of Trust**
(b) Bylaws, as amended through March 25, 1997 (exhibit 2 to
Post-effective Amendment no. 18*)
(c) See Articles IV and V of Exhibit (a)(1), above.
(d)(1) Management agreement with Calamos Asset Management, Inc. dated July
5, 1988 - Calamos Growth and Income Fund (exhibit 5.1 to
Post-effective Amendment no. 18*)
(d)(2) Notification dated August 22, 1990 pursuant to section 1(b) of
management agreement for series designated Calamos Strategic Income
Fund and Calamos Growth Fund (exhibit 5.2 to Post-effective
Amendment no. 18*)
(d)(3) Notification dated April 30, 1992 pursuant to section 1(b) of
management agreement for series designated Calamos Convertible Fund
(exhibit 5.3 to Post-effective Amendment no. 18*)
(d)(4) Form of notification pursuant to section 1(b) of management
agreement for series designated Calamos Global Growth and Income
Fund (exhibit 5.4 to Post-effective Amendment no. 13*)
(d)(5) Form of notification pursuant to section 1(b) of management
agreement for series designated Calamos High Yield Fund**
(e)(1) Form of distribution agreement with Calamos Financial Services,
Inc. dated June 19, 1996 (exhibit 6.1 to Post-effective Amendment
no. 13 *)
(e)(2) Form of selling group agreement, revised 1996 (exhibit 6.2 to
Post-effective Amendment no. 13*)
(f) None
(g)(1) Custody agreement (for all series except Calamos Strategic Income
Fund) with Bank of New York dated October 16, 1997 (exhibit 8.1 to
Post-effective Amendment no. 19*)
(g)(2) First amendment to custody agreement with Bank of New York dated
October 16, 1998 (exhibit 8.2 to Post effective Amendment no. 19*)
(g)(3) Custody agreement (for Calamos Strategic Income Fund) with
Prudential-Bache Securities, Inc. dated April 20, 1990 (exhibit 8
to Post-effective Amendment no. 18*)
(h)(1) Investment company services agreement with First Data Investor
Services Group, Inc. dated October 1, 1998 (exhibit 9.1 to
Post-effective Amendment no. 19*)
(h)(2) Use of name agreement dated August 23, 1990 (exhibit 9.5 to
Post-effective Amendment no. 18*)
(i) Opinion of Bell, Boyd & Lloyd dated _____.**
(j) Consent of independent auditors**
(k) None
(1) Subscription agreement - Calamos High Yield Fund**
(m) Form of distribution plan dated June 24, 1996 (exhibit 15 to
Post-effective Amendment no. 13*)
<PAGE> 105
(n) Financial Data Schedule**
(o) Rule 18f-3 Plan**
*Incorporated herein by reference.
**To be filed by Amendment.
*
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The information in the prospectus under the captions "Who Manages the
Funds?", and in the Statement of Additional Information under the caption
"Management" and "Certain Shareholders" is incorporated by reference.
Item 25. INDEMNIFICATION
Article VI of the agreement and declaration of trust of registrant
(exhibit (a) to this registration statement which is incorporated herein by
reference) provides that the Trust shall indemnify (from the assets of the
Sub-Trust or Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a "Covered
Person"] against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, except with respect
to any matter as to which it has been determined in one of the manners described
below, that such covered Person (i) did not act in good faith in the reasonable
belief that such Covered Person's action was in or not opposed to the best
interests of the Trust or (ii) had acted with willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Covered Person's office (either and both of the conduct described in (i)
and (ii) being referred to hereafter as "Disabling Conduct").
A determination that the Covered Person is not entitled to
indemnification due to Disabling conduct may be made by (i) a final decision on
the merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding,
or (b) an independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time in advance of the final disposition
of any such action, suit or proceeding, provided that the Covered Person shall
have undertaken to repay the amounts so paid to the Sub-Trust in question if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Party ultimately will be found entitled to
indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court. of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE> 106
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The information in the statement of additional information under the
caption "Management - Trustees and Officers" is incorporated by reference.
Item 27. PRINCIPAL UNDERWRITERS
(a) Calamos Financial Services, Inc. ("CFS") serves as principal
underwriter for the Calamos Investment Trust and the Calamos Advisors
Trust.
(b) Information on the officers and directors of CFS is set forth below.
The principal business address is 1111 East Warrenville Road,
Naperville, Illinois 60563.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
<S> <C> <C>
John P. Calamos Director, President President
Nick P. Calamos Vice President Vice President
John P. Calamos, Jr. Vice President None
James W. Faulkner Treasurer None
James S. Hamman, Jr. Secretary Secretary
</TABLE>
Item 28. Location of Accounts and Records
All such accounts, books and other documents are maintained at the
offices of the Registrant, at the offices of the Registrant's investment
manager, Calamos Asset Management Inc., and Calamos Financial Services, Inc.,
the Registrant's principal underwriter, 1111 East Warrenville Road,
Naperville, Illinois 60563, at the offices of the custodians, Bank of New York,
90 Washington Street, New York, NY 10286, and Prudential Securities, One New
York Plaza, New York, NY 10292, or at the offices of the transfer agent, First
Data Investor Services Group, Inc., 3200 Horizon Drive, King of Prussia, PA
19406.
Item 29. Management Services
None
Item 30. UNDERTAKINGS
None.
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant certifies that it has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Naperville, Illinois on June 1, 1999.
CALAMOS INVESTMENT TRUST
By /s/ John P. Calamos
---------------------------------------
John P. Calamos
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement has been signed below on June 1, 1999, on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
/s/ John P. Calamos Trustee and President
- -------------------------------- (principal executive officer)
John P. Calamos
/s/ Nick P. Calamos Trustee
- --------------------------------
Nick P. Calamos
/s/ Richard J. Dowen* Trustee
- --------------------------------
Richard J. Dowen
/s/ Robert Frost* Trustee
- --------------------------------
Robert Frost
/s/ William Kaun* Trustee
- --------------------------------
William Kaun
</TABLE>
*James S. Hamman, Jr. signs this document pursuant to powers of attorney.
/s/ James S. Hamman, Jr.
----------------------------------
James S. Hamman, Jr.
