AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 2002
1933 Act File No. 333-86678
[X] PRE-EFFECTIVE AMENDMENT NO. 2
[ ] POST-EFFECTIVE AMENDMENT NO.
and/or
[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 2
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
Exact Name of Registrant as Specified in Charter
1111 East Warrenville Road, Naperville, Illinois 60563-1493
Address of Principal Executive Offices (Number, Street, City, State, ZIP Code)
(630) 245-7200
Registrant's Telephone Number, including Area Code
James S. Hamman, Jr.,
Secretary
Calamos Asset Management, Inc.
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Name and Address (Number, Street, City, State, ZIP Code) of Agent for Service
COPIES OF COMMUNICATIONS TO:
David A. Sturms Cameron S. Avery Leonard B. Mackey, Jr.
Vedder, Price, Kaufman & Bell, Boyd & Lloyd LLC Clifford Chance Rogers & Wells
Kammholz 70 West Madison Street, Suite LLP
222 North LaSalle Street 3300 200 Park Avenue
Chicago, Illinois 60601-1003 Chicago, Illinois 60602-4207 New York, New York 10166
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement
If any of the securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered in connection with a dividend or interest reinvestment plans, check the following box. [ ]
It is proposed that this filing will become effective (check appropriate box)
[X] when declared effective pursuant to Section 8(c).
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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PROPOSED MAXIMUM
TITLE OF SECURITIES PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF REGISTRATION
BEING REGISTERED AMOUNT BEING REGISTERED OFFERING PRICE PER UNIT PRICE(1) FEE(2)
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Common Shares (no par
value)............. 4,000,000 $15.00 $60,000,000 $5,520.00
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 21, 2002
PROSPECTUS
Investment Objective. Calamos Convertible Opportunities and Income Fund (the "Fund") is a newly organized, diversified, closed-end management investment company. The Fund's investment objective is to provide total return, through a combination of capital appreciation and current income.
Portfolio Contents. Under normal circumstances, the Fund will invest at least 80% of its managed assets in a diversified portfolio of convertible securities and non-convertible income securities. The portion of the Fund's assets invested in convertible securities and non-convertible income securities will vary from time to time consistent with the Fund's investment objective, changes in equity prices and changes in interest rates and other economic and market factors, although, under normal circumstances, the Fund will invest at least 50% of its managed assets in convertible securities. "Managed assets" means the total assets of the Fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). A substantial portion of the Fund's assets may be invested in below investment grade (high yield, high risk) securities. Below investment grade (high yield, high risk) securities are rated Ba or lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower by Standard & Poor's Ratings Group, a division of The McGraw Hill Companies ("Standard & Poor's") or are unrated securities of comparable quality as determined by the Fund's investment adviser. Below investment grade securities are commonly referred to as "junk bonds" and are considered speculative with respect to the issuer's capacity to pay interest and repay principal. They involve greater risk of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher rated debt securities. There can be no assurance that the Fund will achieve its investment objective.
Investment Adviser. Calamos Asset Management, Inc. ("Calamos") is the Fund's investment adviser. See "Management of the Fund."
No Prior History. Because the Fund is newly organized, its common shares have no history of public trading. Shares of closed-end funds frequently trade at a discount from their net asset value. The risk of loss due to a market discount may be greater for initial investors expecting to sell their shares in a relatively short period after completion of the public offering. The Fund has applied to list its common shares on the New York Stock Exchange under the symbol "CHI," subject to official notice of issuance.
Leverage. The Fund may, but is not required to, issue preferred shares, borrow money or issue debt securities. This practice is known as leverage. The Fund currently anticipates that it will issue cumulative preferred shares, as soon as practicable after the closing of this offering, with an aggregate liquidation preference of up to 25% of the Fund's total assets. The use of preferred shares or borrowing to leverage the common shares creates risks.
PER SHARE TOTAL
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Public offering price....................................... $15.00 $
Sales load.................................................. $.675 $
Proceeds, before expenses, to the Fund(1)................... $14.325 $
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(1) Total expenses of issuance and distribution are estimated to be $ .
The underwriters may also purchase up to an additional common shares at the public offering price, less the sales load, within 45 days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any State Securities Commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The common shares will be ready for delivery on or about , 2002.
----------------------
MERRILL LYNCH & CO.
UBS WARBURG ADVEST, INC.
JANNEY MONTGOMERY SCOTT LLC LEGG MASON WOOD WALKER
INCORPORATED
STEPHENS INC. TD WATERHOUSE WEDBUSH MORGAN SECURITIES
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The date of this prospectus is , 2002.
(continued from previous page)
You should read the prospectus, which contains important information about the Fund, before deciding whether to invest in the Fund's common shares and retain it for future reference. A statement of additional information, dated , 2002, containing additional information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this prospectus. You may request a free copy of the statement of additional information, the table of contents of which is on page 39 of this prospectus, by calling 1-800-582-6959 or by writing to the Fund. You can review and copy documents the Fund has filed at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information. The Commission charges a fee for copies. You can get the same information free from the Commission's EDGAR database on the Internet (http://www.sec.gov). You may also e-mail requests for these documents to publicinfo@sec.gov or make a request in writing to the Commission's Public Reference Section, Washington, D.C. 20549-0102.
The Fund's common shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................... 1
Summary of Fund Expenses.................................... 11
The Fund.................................................... 12
Use of Proceeds............................................. 12
Investment Objective and Principal Investment Strategies.... 13
Leverage.................................................... 16
Risk Factors................................................ 19
Management of the Fund...................................... 24
Dividends and Distributions; Automatic Dividend Reinvestment
Plan...................................................... 26
Closed-End Fund Structure................................... 29
U.S. Federal Income Tax Matters............................. 29
Net Asset Value............................................. 31
Description of Shares....................................... 32
Certain Provisions of the Agreement and Declaration of Trust
and By-Laws............................................... 34
Underwriting................................................ 36
Custodian, Transfer Agent, Dividend Disbursing Agent and
Registrar................................................. 38
Legal Opinions.............................................. 38
Table of Contents for Statement of Additional Information... 39
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
Through and including , 2002 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade the common shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as underwriter and with respect to their unsold allotments or subscriptions.
PROSPECTUS SUMMARY
This is only a summary. This summary may not contain all of the information that you should consider before investing in the Fund's common shares. You should review the more detailed information contained in this prospectus and in the statement of additional information, especially the information set forth under the heading "Risk Factors."
THE FUND...................... Calamos Convertible Opportunities and Income
Fund is a newly organized, diversified,
closed-end management investment company.
Throughout the prospectus, we refer to Calamos
Convertible Opportunities and Income Fund as
the "Fund" or as "we," "us," or "our." See "The
Fund."
THE OFFERING.................. The Fund is offering common shares of
beneficial interest ("common shares") at an
initial offering price of $15.00 per share. The
common shares are being offered by a group of
underwriters led by Merrill Lynch, Pierce,
Fenner & Smith Incorporated. You must purchase
at least 100 common shares ($1,500) in order to
participate in the offering. The Fund has
granted the underwriters the right to purchase
up to an additional common shares at
the public offering price, less the sales load,
within 45 days from the date of this prospectus
to cover over-allotments. Calamos has agreed to
pay organizational expenses and offering costs
(other than sales load) that exceed $0.03 per
share. See "Underwriting."
INVESTMENT OBJECTIVE.......... The Fund's investment objective is to provide
total return, through a combination of capital
appreciation and current income. There can be
no assurance that the Fund will achieve its
investment objective. See "Investment Objective
and Principal Investment
Strategies -- Investment Objective."
INVESTMENT POLICIES........... Primary Investments. Under normal
circumstances, the Fund invests at least 80% of
its managed assets in a diversified portfolio
of convertible securities and non-convertible
income securities. The portion of the Fund's
assets invested in convertible securities and
non-convertible income securities will vary
from time to time consistent with the Fund's
investment objective, changes in equity prices
and changes in interest rates and other
economic and market factors, although, under
normal circumstances, the Fund will invest at
least 50% of its managed assets in convertible
securities. "Managed assets" means the total
assets of the Fund (including any assets
attributable to any leverage that may be
outstanding) minus the sum of accrued
liabilities (other than debt representing
financial leverage). For this purpose, the
liquidation preference on any preferred shares
will not constitute a liability. The Fund
invests in securities with a broad range of
maturities. The average term to maturity of the
Fund's securities will typically range from
five to ten years. See "Investment Objective
and Principal Investment
Strategies -- Principal Investment Strategies."
Convertible Securities. The Fund is not
limited in the percentage of its assets
invested in convertible securities and
investment in convertible securities forms an
important part of the Fund's investment
strategies. Under normal circumstances,
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the Fund will invest at least 50% of its managed assets in convertible securities. A convertible security is a debt security or preferred stock that is exchangeable for an equity security of the issuer at a predetermined price (the "conversion price"). Depending upon the relationship of the conversion price to the market value of the underlying security, a convertible security may trade more like an equity security than a debt instrument. See "Investment Objective and Principal Investment Strategies -- Principal Investment Strategies -- Convertible Securities."
Synthetic Convertible Securities. Calamos may also create a "synthetic" convertible security by combining separate securities that possess the two principal characteristics of a true convertible security, i.e., a fixed-income security ("fixed-income component") and the right to acquire an equity security ("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 created by other parties, typically investment banks, including convertible structured notes. Different companies may issue the fixed-income and convertible components which may be purchased separately, and at different times. The Fund's holdings of synthetic convertible securities are considered convertible securities for purposes of the Fund's policy to invest at least 50% of its managed assets in convertible securities and 80% of its managed assets in a diversified portfolio of convertible securities and non-convertible income securities. See "Investment Objective and Principal Investment Strategies -- Principal Investment Strategies -- Synthetic Convertible Securities."
Non-Convertible Income Securities. The Fund will also invest in non-convertible income securities. The Fund's investments in non- convertible income securities may have fixed or variable principal payments and all types of interest rate and dividend payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features. See "Investment Objective and Principal Investment Strategies -- Principal Investment Strategies -- Non-Convertible Income Securities."
High Yield Securities. A substantial portion of the Fund's assets may be invested in below investment grade (high yield, high risk) securities. These securities are rated Ba or lower by Moody's or BB or lower by Standard & Poor's or are unrated securities of comparable quality as determined by Calamos, the Fund's investment adviser. The Fund may invest in high yield securities of any rating. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative with respect to the issuer's capacity to pay
interest and repay principal. They involve greater risk of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher rated debt securities. See "Investment Objective and Principal Investment Strategies -- Principal Investment Strategies -- High Yield Securities."
Foreign Issuers. Although the Fund primarily invests in securities of U.S. issuers, the Fund may invest up to 25% of its net assets in securities of foreign issuers, including debt and equity securities of corporate issuers and debt securities of government issuers in developed and emerging markets. 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. See "Investment Objective and Principal Investment Strategies -- Principal Investment Strategies -- Foreign Issuers."
Rule 144A Securities. The Fund may invest
without limit 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"). See "Investment Objective and
Principal Investment Strategies -- Principal
Investment Strategies -- Rule 144A Securities."
Other Securities. Normally, the Fund invests
substantially all of its assets to meet its
investment objective. The Fund may invest the
remainder of its assets in other securities of
various types. For temporary defensive
purposes, the Fund may depart from its
principal investment strategies and invest part
or all of its assets in securities with
remaining maturities of less than one year,
cash equivalents, or may hold cash. During such
periods, the Fund may not be able to achieve
its investment objective. See "Investment
Objective and Principal Investment
Strategies -- Principal Investment Strategies."
USE OF LEVERAGE BY THE FUND... The Fund may, but is not required to, issue
preferred shares, borrow money or issue debt
securities. This practice is known as leverage.
The Fund currently anticipates that it will
issue cumulative preferred shares, as soon as
practicable after the closing of this offering,
with an aggregate liquidation preference of
approximately 25% of the Fund's total assets.
As a non-fundamental policy, such preferred
shares or borrowing may not exceed 33 1/3% of
the Fund's total assets. The Fund may not be
leveraged at all times and the amount of
borrowing or leverage, if any, may vary
depending upon a variety of factors, including
Calamos's outlook for the market and the costs
that the Fund would incur as a result of such
leverage. Leverage involves greater risks. The
Fund's leveraging strategy may not be
successful. By leveraging its investment
portfolio, the Fund creates an opportunity for
increased net income or capital appreciation.
However, the use of leverage also involves
risks,
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which can be significant. These risks include the possibility that the value of the assets acquired with such borrowing decreases although the Fund's liability is fixed, greater volatility in the Fund's net asset value and the market price of the Fund's common shares and higher expenses. In addition, the rights of lenders and the holders of preferred shares and debt securities issued by the Fund will be senior to the rights of the holders of common shares with respect to the payment of dividends or upon liquidation. Since Calamos's fee is based upon a percentage of the Fund's managed assets, which include assets attributable to any outstanding leverage, the investment management fee will be higher if the Fund is leveraged and Calamos will have an incentive to be more aggressive and leverage the Fund. Calamos intends only to leverage the Fund when it believes that the potential return on such additional investments is likely to exceed the costs incurred in connection with the borrowing or issuance of preferred shares. See "Leverage" and "Risk Factors -- Leverage."
INVESTMENT ADVISER............ Calamos is the Fund's investment adviser.
Calamos is responsible on a day-to-day basis
for investment of the Fund's portfolio in
accordance with its investment objective and
policies. Calamos makes all investment
decisions for the Fund and places purchase and
sale orders for the Fund's portfolio
securities. As of April 1, 2002, Calamos
managed approximately $10.5 billion in assets
of individuals and institutions. Calamos is a
wholly-owned subsidiary of Calamos Holdings,
Inc. ("Holdings"). Holdings is controlled by
John P. Calamos, who has been engaged in the
investment advisory business since 1977.
The Fund pays Calamos an annual fee, payable
monthly, for its investment management services
equal to 0.80% of the Fund's average weekly
managed assets. "Managed assets" means the
total assets of the Fund (including any assets
attributable to any leverage that may be
outstanding) minus the sum of accrued
liabilities (other than debt representing
financial leverage). Calamos has contractually
agreed to waive its management fee in the
amount of 0.25% of the average weekly managed
assets of the Fund for the first five full
years of the Fund's operations (through June
30, 2007), and to waive a declining amount for
an additional three years (through June 30,
2010). See "Management of the Fund."
PORTFOLIO MANAGER............. John P. Calamos and Nick P. Calamos are
responsible for managing the portfolio of the
Fund. During the past five years, John P.
Calamos has been president of Calamos and
Calamos Financial Services, Inc. ("CFS"), an
affiliate of Calamos, and Nick P. Calamos has
been senior executive vice president of Calamos
and CFS.
LISTING....................... The Fund has applied to list its common shares
on the New York Stock Exchange under the symbol
"CHI," subject to official notice of issuance.
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CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT... The Bank of New York will serve as the Fund's
custodian, transfer agent and dividend
disbursing agent. See "Custodian, Transfer
Agent, Dividend Disbursing Agent and
Registrar."
ADMINISTRATOR................. Princeton Administrators, L.P., an affiliate of
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, will serve as administrator for
the Fund. Calamos (and not the Fund) will pay
the administrator a monthly fee computed at an
annual rate of 0.125% of the Fund's average
weekly managed assets, subject to a minimum
monthly fee of $12,500.
MARKET PRICE OF COMMON
SHARES........................ Common shares of closed-end investment
companies frequently trade at prices lower than
their net asset value. The Fund's net asset
value will be reduced immediately following
this offering by the sales load and the amount
of the organization and offering expenses paid
by the Fund. See "Use of Proceeds." In addition
to net asset value, the market price of the
Fund's common shares may be affected by such
factors as the Fund's use of leverage, dividend
stability, portfolio credit quality, liquidity,
market supply and demand and the Fund's
dividends paid (which are, in turn, affected by
expenses), call protection for portfolio
securities and interest rate movements. See
"Leverage," "Risk Factors" and "Description of
Shares." The Fund's common shares are designed
primarily for long-term investors, and you
should not purchase common shares if you intend
to sell them shortly after purchase.
DISTRIBUTIONS................. The Fund intends to distribute to common
shareholders all or a portion of its net
investment income monthly and net realized
capital gains, if any, at least annually. The
Fund expects to declare the initial monthly
dividend on the common shares within
approximately 45 days of the completion of this
offering and to pay that initial monthly
dividend approximately 60 to 90 days after the
completion of this offering. At times, in order
to maintain a stable level of distributions,
the Fund may pay out less than all of its net
investment income or pay out accumulated
undistributed income in addition to current net
investment income.
Pursuant to the Fund's Automatic Dividend
Reinvestment Plan, unless a shareholder is
ineligible or elects otherwise, all dividends
and capital gains distributions are
automatically reinvested in additional common
shares of the Fund. However, an investor can
choose to receive distributions in cash. Since
not all investors can participate in the
automatic dividend reinvestment plan, you
should contact your broker or nominee to
confirm that you are eligible to participate in
the plan. See "Dividends and Distributions;
Automatic Dividend Reinvestment Plan."
RISKS......................... No Operating History. The Fund is a newly
organized closed-end management investment
company and has no operating history or history
of public trading. See "Risk Factors -- No
Operating History."
5
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Market Discount Risk. Shares of closed-end
funds frequently trade at a market price that
is below their net asset value. This is
commonly referred to as "trading at a
discount." This characteristic of shares of
closed-end funds is a risk separate and
distinct from the risk that the Fund's net
asset value may decrease. Investors who sell
their shares within a relatively short period
after completion of the public offering are
likely to be exposed to this risk. Accordingly,
the Fund is designed primarily for long-term
investors and should not be considered a
vehicle for trading purposes. Net asset value
will be reduced following the offering by the
underwriting discount and the amount of
offering expenses paid by the Fund. See "Risk
Factors -- Market Price of Shares."
Convertible Securities. The Fund is not
limited in the percentage of its assets
invested in convertible securities and
investment in convertible securities forms an
important part of the Fund's investment
strategies. Under normal circumstances, the
Fund will invest at least 50% of its managed
assets in convertible securities. Convertible
securities generally offer lower interest or
dividend yields than non-convertible securities
of similar quality. The market values of
convertible securities tend to decline as
interest rates increase and, conversely, to
increase 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 stockholders. Consequently, the issuer's
convertible securities generally entail less
risk than its common stock. See "Risk
Factors -- Convertible Securities."
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. See "Risk Factors --
Synthetic Convertible Securities."
High Yield Securities. Investment in high
yield securities involves substantial risk of
loss. Below investment grade securities or
comparable unrated securities are commonly
referred to as "junk bonds" and are considered
predominantly speculative with respect to the
issuer's ability to pay interest and
6
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principal and are susceptible to default or
decline in market value due to adverse economic
and business developments. The market values
for high yield securities tend to be very
volatile, and these securities are less liquid
than investment grade debt securities. For
these reasons, your investment in the Fund is
subject to the following specific risks:
- increased price sensitivity to changing
interest rates and to a deteriorating
economic environment;
- greater risk of loss due to default or
declining credit quality;
- adverse company specific events are more
likely to render the issuer unable to make
interest and/or principal payments; and
- if a negative perception of the high yield
market develops, the price and liquidity of
high yield securities may be depressed. This
negative perception could last for a
significant period of time.
Adverse changes in economic conditions are more
likely to lead to a weakened capacity of a high
yield issuer to make principal payments and
interest payments than an investment grade
issuer. The principal amount of high yield
securities outstanding has proliferated in the
past decade as an increasing number of issuers
have used high yield securities for corporate
financing. An economic downturn could severely
affect the ability of highly leveraged issuers
to service their debt obligations or to repay
their obligations upon maturity.
The secondary market for high yield securities
may not be as liquid as the secondary market
for more highly rated securities, a factor
which may have an adverse effect on the Fund's
ability to dispose of a particular security.
There are fewer dealers in the market for high
yield securities than for investment grade
obligations. The prices quoted by different
dealers may vary significantly and the spread
between the bid and asked price is generally
much larger than for higher quality
instruments. Under adverse market or economic
conditions, the secondary market for high yield
securities could contract further, independent
of any specific adverse changes in the
condition of a particular issuer, and these
instruments may become illiquid. As a result,
the Fund could find it more difficult to sell
these securities or may be able to sell the
securities only at prices lower than if such
securities were widely traded. Prices realized
upon the sale of such lower rated or unrated
securities, under these circumstances, may be
less than the prices used in calculating the
Fund's net asset value. See "Risk
Factors -- High Yield Securities."
Interest Rate Risk. In addition to the risks
discussed above, debt securities are subject to
certain risks, including:
- if interest rates go up, the value of debt
securities in the Fund's portfolio generally
will decline;
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- during periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. High yield securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. An issuer may redeem a high yield obligation if the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer; and
- during periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security's duration (the estimated period until the security is paid in full) and reduce he value of the security. This is known as extension risk. See "Risk Factors -- Interest Rate Risks."
Illiquid Investments. The Fund may invest without limit in illiquid securities. The Fund may also invest without limit in securities that have not been registered for public sale, but that are eligible for purchase and sale by certain qualified institutional buyers. Although many of the Rule 144A Securities in which the Fund invests may be, in the view of Calamos, liquid, if qualified institutional buyers are unwilling to purchase these Rule 144A Securities, they may be illiquid. Illiquid securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund pays for or recovers upon the sale of illiquid securities. Illiquid securities are also more difficult to value and Calamos's judgment may play a greater role in the valuation process. Investment of the Fund's assets in illiquid securities may restrict the Fund's ability to take advantage of market opportunities. The risks associated with illiquid securities may be particularly acute in situations in which the Fund's operations require cash and could result in the Fund borrowing to meet its short-term needs or incurring losses on the sale of illiquid securities. See "Risk Factors -- Illiquid Investments."
Foreign Securities. Investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks are more pronounced to the extent that the Fund invests a significant portion of its non-U.S investments in one region or in the securities of emerging market issuers. These risks may include:
- less information about non-U.S. issuers or markets may be available due to less rigorous disclosure or accounting standards or regulatory practices;
- many non-U.S. markets are smaller, less liquid and more volatile. In a changing market, Calamos may not be able to
sell the Fund's portfolio securities at times, in amounts and at prices it considers reasonable;
- an adverse effect of currency exchange rates or controls on the value of the Fund's investments;
- the economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession;
- economic, political and social developments may adversely affect the securities markets; and
- withholding and other non-U.S. taxes may decrease the Fund's return. See "Risk Factors -- Foreign Securities."
Leverage. The Fund may issue preferred shares, borrow money or issue debt securities. The Fund currently anticipates that it will issue cumulative preferred shares, as soon as practicable after the closing of this offering, with an aggregate liquidation preference of up to 25% of the Fund's total assets. As a non-fundamental policy, such preferred shares or borrowing may not exceed 33 1/3% of the Fund's total assets. Leverage creates risks which may adversely affect the return for the holders of common shares, including:
- the likelihood of greater volatility of net asset value and market price of the Fund's common shares;
- fluctuations in the dividend rates on any preferred shares or in interest rates on borrowings and short-term debt;
- increased operating costs, which may reduce the Fund's total return; and
- the potential for a decline in the value of an investment acquired with borrowed funds, while the Fund's obligations under such borrowing remain fixed.
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund's return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such funds is not sufficient to cover the cost of leverage or if the Fund incurs capital losses, the return of the Fund will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders as dividends and other distributions will be reduced or potentially eliminated.
Certain types of borrowings may result in the Fund being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the Fund's ability to pay dividends and distributions on common shares in certain instances. The Fund may also be required to pledge its assets to the lenders in connection with certain types of borrowing. The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more nationally
recognized rating organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the Fund. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the Investment Company Act of 1940 (the "1940 Act"). See "Risk Factors -- Leverage."
Management Risk. Calamos's judgment about the attractiveness, relative value or potential appreciation of a particular sector, security or investment strategy may prove to be incorrect. See "Risk Factors -- Management Risk."
Antitakeover Provisions. The Fund's Agreement and Declaration of Trust and By-laws include provisions that could limit the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board of Trustees. Such provisions could limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. These provisions include staggered terms of office for the Trustees, advance notice requirements for shareholder proposals, and super-majority voting requirements for open-ending the Fund or a merger, asset sale or similar transaction.
See "Risk Factors -- Antitakeover Provisions."
Recent Developments. As a result of the terrorist attacks on the World Trade Center and the Pentagon on September 11, 2001, some of the U.S. securities markets were closed for a four-day period. These terrorist attacks and related events have led to increased short-term market volatility and may have long-term effects on U.S. and world economics and markets. A similar disruption of the financial markets could impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to securities or other financial interests. See "Risk Factors -- Recent Developments."
SUMMARY OF FUND EXPENSES
The following table shows the Fund's estimated expenses as a percentage of net assets attributable to common shares assuming the Fund issues preferred shares in an amount equal to 25% of the Fund's managed assets. "Managed assets" means the total assets of the Fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). The liquidation preference of the preferred shares is not a liability.
SHAREHOLDER TRANSACTION FEES: Sales Load (as a percentage of offering price)............ 4.50% Dividend Reinvestment Plan Fees........................... None(1) |
PERCENTAGE OF
NET ASSETS
ATTRIBUTABLE
TO COMMON
SHARES(2)
-------------
ANNUAL EXPENSES
Management Fee............................................ 1.07 %(3)
Other Expenses............................................ .26 %
Total Annual Expenses..................................... 1.33 %
Fee Waiver (years 1-5).................................... (.33)%(3)
Total Net Annual Expenses (years 1-5)..................... 1.00 %(3)
|
(1) A shareholder that directs the plan agent to sell shares held in a dividend reinvestment account will pay brokerage charges.
(2) The table above shows the estimated expenses you will bear as a holder of common shares, assuming the Trust issues preferred shares in an amount equal to 25% of the Trust's total managed assets, stated as a percentage of the Trust's net assets attributable to common shares. Calamos estimates that the offering costs of issuing the preferred shares (other than the underwriting fees) will be approximately $182,000. If the Fund does not issue preferred shares, or otherwise use leverage, the Fund's expenses would be estimated as set out in the table below.
PERCENTAGE OF
NET ASSETS
ATTRIBUTABLE
TO COMMON
SHARES
-------------
ANNUAL EXPENSES
Management Fee............................................ 0.80 %(3)
Other Expenses............................................ 0.16 %
Total Annual Expenses..................................... 0.96 %
Fee Waiver (years 1-5).................................... (0.25)%(3)
Total Net Annual Expenses (years 1-5)..................... 0.71 %(3)
|
(3) Calamos has contractually agreed to waive management fees in the amount of 0.25% of average weekly managed assets for the first full five years of the Fund's operations, 0.18% of the average weekly managed assets in year 6, 0.11% of the average weekly managed assets in year 7 and 0.04% in year 8. Calamos has agreed to pay organizational expenses and offering costs (other than sales load) that exceed $0.03 per share.
The purpose of the table above is to help you understand all fees and expenses that you, as a common shareholder, would bear directly or indirectly. As of the date of this prospectus, the Fund has not commenced investment operations. The amount set forth under other expenses is based upon estimates for the current year, assuming no exercise of the over-allotment option granted to the underwriters. The table
assumes that the Fund issues 13,990,906 common shares and issues preferred shares as a means of leverage. If the Fund issues fewer common shares, all other things being equal, these expenses would increase. If the Fund leverages through borrowing, the Fund would incur interest expense. For additional information with respect to the Fund's expenses, see "Management of the Fund." Other expenses include custodial and transfer agency fees, legal and accounting expenses, and listing fees.
The following example illustrates the expenses (including the sales load of
$45) that you would pay on a $1,000 investment in common shares, assuming (1)
total annual expenses of 1.00% of net assets attributable to common shares in
years 1 through 5, increasing to 1.33% in year 10 and (2) a 5% annual return and
(3) the Fund issues preferred shares in an amount equal to 25% of the Fund's
total assets:(1)
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Total Expenses Incurred(2).......................... $55 $75 $98 $178
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(1) THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. The example assumes that the estimated other expenses set forth in the fee table are accurate and that all dividends and distributions are reinvested at net asset value. Actual expenses may be greater or less than those assumed. Moreover, the Fund's actual rate of return may be greater or less than the hypothetical 5% return shown in the example. The expenses you would pay, based on the Fund's expenses stated as a percentage of the Fund's net assets assuming the Fund does not issue preferred shares, or otherwise uses leverage and otherwise on the assumptions in the example would be: 1 year, $52; 3 years, $67; 5 years, $83; and 10 years, $141.
(2) Assumes waiver of fees of 0.25% of average weekly managed assets for the first full 5 years, 0.18% in year 6, 0.11% in year 7 and 0.04% in year 8. Calamos has not agreed to waive any portion of its fees and expenses beyond June 30, 2010. See "Management of the Fund -- Investment Management Agreement."
THE FUND
Calamos Convertible Opportunities and Income Fund is a newly organized, diversified, closed-end management investment company. The Fund was organized under the laws of the state of Delaware on April 17, 2002, and has registered under the 1940 Act. As a recently organized entity, the Fund has no operating history. The Fund's principal office is located at 1111 East Warrenville Road, Naperville, Illinois 60563-1493, and its telephone number is 1-800-582-6959.
USE OF PROCEEDS
The net proceeds of this offering will be approximately $ (or approximately $ assuming the underwriters exercise the over-allotment option in full) after payment of offering costs estimated to be approximately $ and the deduction of the sales load. Calamos has agreed to pay organizational expenses and offering costs (other than sales load) that exceed $0.03 per share.
The Fund will invest the net proceeds of the offering in accordance with the Fund's investment objective and policies as stated below. It is presently anticipated that the Fund will be able to invest substantially all of the net proceeds in securities that meet these investment objectives and policies within three months after completion of this offering. Pending such investment, the Fund anticipates that all or a portion of the proceeds will be invested in U.S. government securities or high grade, short-term money market instruments. If necessary, the Fund may also purchase, as temporary investments, securities of other open- or closed-end investment companies that invest primarily in the types of securities in which the Fund may invest directly. See "Investment Objective and Principal Investment Strategies."
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide total return, through a combination of capital appreciation and current income. The Fund makes no assurance that it will realize its objective. An investment in the Fund may be speculative in that it involves a high degree of risk and should not constitute a complete investment program. See "Risk Factors."
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund will invest at least 80% of its managed assets in a diversified portfolio of convertible securities and non-convertible income securities. This is a non-fundamental policy and may be changed by the Board of Trustees of the Fund provided that shareholders are provided with at least 60 days' prior written notice of any change as required by the rules under the 1940 Act. The portion of the Fund's assets invested in convertible securities and non-convertible income securities will vary from time to time consistent with the Fund's investment objective, changes in equity prices and changes in interest rates and other economic and market factors, although, under normal circumstances, the Fund will invest at least 50% of its managed assets in convertible securities. The Fund invests in securities with a broad range of maturities. The average term to maturity of the Fund's securities typically will range from five to ten years.
Convertible Securities. The Fund is not limited in the percentage of its assets invested in convertible securities, and investment in convertible securities forms an important part of the Fund's investment strategies. A convertible security is a debt security or preferred stock that is exchangeable for an equity security of the issuer at a predetermined price. Depending upon the relationship of the conversion price to the market value of the underlying security, a convertible security may trade more like an equity security than a debt instrument.
Calamos typically applies a four-step approach when buying and selling 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; and
4. Evaluating the convertible security's impact on the overall composition of the Fund and its diversification strategy.
In analyzing the appreciation potential of the underlying common stock and the default risk of the convertible security, Calamos generally considers the issuer's:
- financial soundness;
- ability to make interest and dividend payments;
- earnings and cash-flow forecast; and
- quality of management.
Synthetic Convertible Securities. Calamos may also create a "synthetic" convertible security by combining separate securities that possess the two principal characteristics of a true convertible security, i.e., a fixed-income security ("fixed-income component") and the right to acquire an equity security ("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 created by other parties, typically investment banks, including convertible structured notes. Different companies may issue the fixed-income and convertible components, which may be purchased separately and at different times. The Fund's holdings of synthetic convertible securities are considered convertible securities for purposes of the Fund's policy to invest at least 50% of its managed assets in convertible securities and 80% of its managed assets in a diversified portfolio of convertible securities and non-convertible income securities.
Non-Convertible Income Securities. The Fund will also invest in non-convertible income securities. The Fund's investments in non-convertible income securities may have fixed or variable principal payments and all types of interest rate and dividend payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features.
High Yield Securities. A substantial portion of the Fund's assets may be invested in below investment grade (high yield, high risk) securities. The high yield securities in which the Fund invests are rated Ba or lower by Moody's or BB or lower by Standard & Poor's or are unrated but determined by Calamos to be of comparable quality. The Fund may, but currently does not intend to, purchase distressed securities that are in default or the issuers of which are in bankruptcy. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative with respect to the issuer's capacity to pay interest and repay principal. Below investment grade debt securities involve greater risk of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher rated debt securities.
Preferred Shares. The Fund may invest in preferred shares. The preferred shares in which the Fund typically will invest will be convertible securities. Preferred shares are equity securities, but they have many characteristics of fixed income securities, such as a fixed dividend payment rate and/or a liquidity preference over the issuer's common shares. However, because preferred shares are equity securities, they may be more susceptible to risks traditionally associated with equity investments than the Fund's fixed income securities.
Foreign Securities. Although the Fund primarily invests in securities of U.S. issuers, the Fund may invest up to 25% of its net assets in securities of foreign issuers, including debt and equity securities of corporate issuers and debt securities of government issuers in developed and emerging markets. 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.
Rule 144A Securities. The Fund may invest without limit 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").
REITs. The Fund may invest in real estate investment trusts ("REITs"). REITs primarily invest in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund will indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in addition to the expenses paid by the Fund. Debt securities issued by REITs are, for the most part, general and unsecured obligations and are subject to risks associated with REITs.
U.S. Government Securities. U.S. government securities in which the Fund invests include debt obligations of varying maturities issued by the U.S. Treasury or issued or guaranteed by an agency or instrumentality of the U.S. government, including the Federal Housing Administration, Federal Financing Bank, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association ("GNMA"), General Services Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA"), Maritime Administration, Tennessee Valley Authority, District of Columbia Armory Board, Student Loan Marketing Association, Resolution Fund Corporation and various institutions that previously were or currently are part of the Farm Credit System (which has been undergoing reorganization since
1987). Some U.S. government securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ only in their interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others are supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home Loan Banks; (ii) the discretionary authority of the U.S. government to purchase the agency's obligations, such as securities of the FNMA; or (iii) only the credit of the issuer. No assurance can be given that the U.S. government will provide financial support in the future to U.S. government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the United States. Securities guaranteed as to principal and interest by the U.S. government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government or any of its agencies, authorities or instrumentalities; and (ii) participations in loans made to non-U.S. governments or other entities that are so guaranteed. The secondary market for certain of these participations is limited and, therefore, may be regarded as illiquid.
Zero Coupon Securities. The securities in which the Fund invests may include zero coupon securities, which are debt obligations that are issued or purchased at a significant discount from face value. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity or the particular interest payment date at a rate of interest reflecting the market rate of the security at the time of issuance. Zero coupon securities do not require the periodic payment of interest. These investments benefit the issuer by mitigating its need for cash to meet debt service, but generally require a higher rate of return to attract investors who are willing to defer receipt of cash. These investments may experience greater volatility in market value than U.S. government securities that make regular payments of interest. The Fund accrues income on these investments for tax and accounting purposes, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the Fund's distribution obligations, in which case the Fund will forgo the purchase of additional income producing assets with these funds. Zero coupon U.S. government securities include STRIPS and CUBES, which are issued by the U.S. Treasury as component parts of U.S. Treasury bonds and represent scheduled interest and principal payments on the bonds.
Investments in Equity Securities. Consistent with its objective, the Fund may invest in equity securities. Equity securities, such as common stock, generally represent an ownership interest in a company. Although equity securities have historically generated higher average returns than fixed income securities, equity securities have also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of a particular equity security held by the Fund. Also, the price of equity securities, particularly common stocks, are sensitive to general movements in the stock market. A drop in the stock market may depress the price of equity securities held by the Fund.
Other Investment Companies. The Fund may invest in the securities of other investment companies to the extent that such investments are consistent with the Fund's investment objective and policies and permissible under the 1940 Act. Under the 1940 Act, the Fund may not acquire the securities of other domestic or non-U.S. investment companies if, as a result, (1) more than 10% of the Fund's total assets would be invested in securities of other investment companies, (2) such purchase would result in more than 3% of the total outstanding voting securities of any one investment company being held by the Fund, or (3) more than 5% of the Fund's total assets would be invested in any one investment company. These limitations do not apply to the purchase of shares of any investment company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company.
The Fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies' expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund's own operations.
Defensive and Temporary Investments. Under unusual market or economic conditions or for temporary defensive purposes, the Fund may invest up to 100% of its total assets in securities issued or guaranteed by the U.S. government or its instrumentalities or agencies, certificates of deposit, bankers'
acceptances and other bank obligations, commercial paper rated in the highest category by a nationally recognized statistical rating organization or other fixed income securities deemed by Calamos to be consistent with a defensive posture, or may hold cash. The yield on such securities may be lower than the yield on lower rated fixed income securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with broker-dealers, member banks of the Federal Reserve System and other financial institutions. Repurchase agreements are arrangements under which the Fund purchases securities and the seller agrees to repurchase the securities within a specific time and at a specific price. The repurchase price is generally higher than the Fund's purchase price, with the difference being income to the Fund. The counterparty's obligations under the repurchase agreement are collateralized with U.S. Treasury and/or agency obligations with a market value of not less than 100% of the obligations, valued daily. Collateral is held by the Fund's custodian in a segregated, safekeeping account for the benefit of the Fund. Repurchase agreements afford the Fund an opportunity to earn income on temporarily available cash at low risk. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, the Fund may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. If the court characterizes the transaction as a loan and the Fund has not perfected a security interest in the security, the Fund may be required to return the security to the seller's estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, the Fund would be at risk of losing some or all of the principal and interest involved in the transaction.
Lending of Portfolio Securities. The Fund may lend portfolio securities to registered broker-dealers or other institutional investors deemed by Calamos to be of good standing under agreements which require that the loans be secured continuously by collateral in cash, cash equivalents or U.S. Treasury bills maintained on a current basis at an amount at least equal to the market value of the securities loaned. The Fund continues to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned as well as the benefit of an increase and the detriment of any decrease in the market value of the securities loaned and would also receive compensation based on investment of the collateral. The Fund would not, however, have the right to vote any securities having voting rights during the existence of the loan, but would call the loan in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of consent on a material matter affecting the investment.
As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At no time would the value of the securities loaned exceed 33 1/3% of the value of the Fund's total assets.
Portfolio Turnover. It is the policy of the Fund not to engage in trading for short-term profits although portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for the Fund.
LEVERAGE
The Fund may issue preferred shares or borrow or issue short-term debt
securities to increase its assets available for investment. The Fund is
authorized to issue preferred shares, borrow or issue debt obligations. The Fund
currently anticipates that it will issue, as soon as practicable after the
closing of this offering, cumulative preferred shares with an aggregate
liquidation preference of up to 25% of the Fund's total assets. It is
anticipated that the preferred shares will have a liquidation preference of
$25,000 per share plus an amount equal to accumulated but unpaid dividends. As a
non-fundamental policy, such preferred shares or borrowing may not exceed
33 1/3% of the Fund's total assets. The Fund generally will not issue preferred
shares or borrow unless Calamos expects that the Fund will achieve a greater
return on such borrowed funds than the additional costs the Fund incurs as a
result of such borrowing. The Fund also may borrow money as a temporary measure
for extraordinary or emergency purposes, including the payment of dividends and
the settlement of securities transactions which otherwise might require untimely
dispositions of the Fund's holdings. When the Fund leverages its assets, the
fees paid to Calamos for
investment management services will be higher than if the Fund did not borrow because Calamos's fees are calculated based on the Fund's managed assets, which include the proceeds of the issuance of preferred shares or any outstanding borrowings. Consequently, the Fund and Calamos may have differing interests in determining whether to leverage the Fund's assets.
The Fund's use of leverage is premised upon the expectation that the Fund's preferred share dividends or borrowing cost will be lower than the return the Fund achieves on its investments with the proceeds of the issuance of preferred shares or borrowing. Such difference in return may result from the Fund's higher credit rating or the short-term nature of its borrowing compared to the long-term nature of its investments. Since the total assets of the Fund (including the assets obtained from leverage) will be invested in the higher yielding portfolio investments or portfolio investments with the potential for capital appreciation, the holders of common shares will be the beneficiaries of the incremental return. Should the differential between the underlying assets and cost of leverage narrow, the incremental return "pick up" will be reduced. Furthermore, if long-term rates rise or the Fund otherwise incurs losses on its investments, the Fund's net asset value attributable to its common shares will reflect the decline in the value of portfolio holdings resulting therefrom.
Leverage creates risks which may adversely affect the return for the holders of common shares, including:
- the likelihood of greater volatility of net asset value and market price of common shares;
- fluctuations in the dividend rates on any preferred shares or in interest rates on borrowings and short-term debt;
- increased operating costs, which may reduce the Fund's total return; and
- the potential for a decline in the value of an investment acquired with borrowed funds, while the Fund's obligations under such borrowing remains fixed.
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund's return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such funds is not sufficient to cover the cost of leverage or if the Fund incurs capital losses, the return of the Fund will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders as dividends and other distributions will be reduced or potentially eliminated. Calamos may determine to maintain the Fund's leveraged position if it expects that the long-term benefits to the Fund's shareholders of maintaining the leveraged position will outweigh the current reduced return. Capital raised through the issuance of preferred shares or borrowing will be subject to dividend payments or interest costs that may or may not exceed the income and appreciation on the assets purchased. The issuance of additional classes of preferred shares involves offering expenses and other costs and may limit the Fund's freedom to pay dividends on shares or common shares or to engage in other activities. The Fund also may be required to maintain minimum average balances in connection with borrowings or to pay a commitment or other fee to maintain a line of credit; either of these requirements will increase the cost of borrowing over the stated interest rate.
The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more nationally recognized rating organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the Fund. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. Certain types of borrowings may result in the Fund being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the Fund's ability to pay dividends and distributions on common shares in certain instances. The Fund may also be required to pledge its assets to the lenders in connection with certain types of borrowing. Calamos does not anticipate that these covenants or restrictions will adversely affect its ability to manage the Fund's portfolio in accordance with the Fund's investment objective and policies. Due to these covenants or restrictions, the Fund may be forced to liquidate investments at times and at prices that are
not favorable to the Fund, or the Fund may be forced to forgo investments that Calamos otherwise views as favorable.
Under the 1940 Act, the Fund is not permitted to issue preferred shares unless immediately after such issuance the net asset value of the Fund's portfolio is at least 200% of the liquidation value of the outstanding preferred shares (i.e., such liquidation value may not exceed 50% of the value of the Fund's total assets). In addition, the Fund is not permitted to declare any cash dividend or other distribution on its common shares unless, at the time of such declaration, the net asset value of the Fund's portfolio (determined after deducting the amount of such dividend or distribution) is at least 200% of such liquidation value. In the event preferred shares are issued, the Fund intends, to the extent possible, to purchase or redeem preferred shares from time to time to maintain coverage of any preferred shares of at least 200%. Under the 1940 Act, the Fund is not permitted to incur indebtedness unless immediately after such borrowing the Fund has an asset coverage of at least 300% of the aggregate outstanding principal balance of indebtedness (i.e., such indebtedness may not exceed 33 1/3% of the value of the Fund's total assets). Additionally, under the 1940 Act, the Fund may not declare any dividend or other distribution upon any class of its shares, or purchase any such shares, unless the aggregate indebtedness of the Fund has, at the time of the declaration of any such dividend or distribution or at the time of any such purchase, an asset coverage of at least 300% after deducting the amount of such dividend, distribution, or purchase price, as the case may be.
If and to the extent that the Fund employs leverage will depend on many factors, the most important of which are investment outlook, market conditions and interest rates. Successful use of a leveraging strategy depends on Calamos's ability to predict correctly interest rates and market movements. There is no assurance that a leveraging strategy will be successful during any period in which it is employed. None of the other investment companies managed by Calamos uses leverage to a material extent or as part of a systematic investment program.
EFFECTS OF LEVERAGE
Assuming the Fund issues preferred shares with a liquidation preference equal to approximately 25% of the Fund's total assets and an annual dividend rate of 3.00% of such liquidation preference (which rate is approximately the current rate which Calamos expects the Fund to pay, based on market rates as of May 1, 2002), income generated by the Fund's portfolio (net of estimated expenses) would need to exceed 0.75% in order to cover such dividend payments on the preferred shares. Actual dividend rates may vary and may be significantly higher or lower than the rate estimated above.
The following table illustrates the hypothetical effect on the return to a holder of the Fund's common shares of the leverage obtained by issuing preferred shares with a liquidation value equal to 25% of the Fund's total assets, assuming hypothetical annual returns of the Fund's portfolio of minus 10% to plus 10% and dividends on preferred shares at an annual dividend rate of 3.00%. As the table shows, leverage generally increases the return to shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table.
Assumed Portfolio Return (Net of Expenses)......... (10)% (5)% 0% 5% 10% Corresponding Common Share Return.................. (14.33)% (7.67)% (1.00)% 5.67% 12.33% |
Until the Fund issues preferred shares or borrows, the Fund's common shares will not be leveraged, and the risks and special considerations related to leverage described in this prospectus will not apply. Such leveraging of the common shares cannot be fully achieved until the proceeds resulting from the use of leverage have been invested in longer term debt instruments in accordance with the Fund's investment objective and policies.
RISK FACTORS
General. The Fund is a newly organized, diversified, closed-end management investment company designed primarily as a long-term investment and not as a trading tool. The Fund invests in a diversified portfolio of convertible securities and non-convertible income securities. An investment in the Fund's common shares may be speculative and it involves a high degree of risk. The Fund should not constitute a complete investment program. Due to the uncertainty in all investments, there can be no assurance that the Fund will achieve its investment objective.
No Operating History. The Fund is a newly organized closed-end management investment company and has no operating history or history of public trading.
Convertible Securities. The Fund is not limited in the percentage of its assets invested in convertible securities, and investment in convertible securities form an important part of the Fund's investment strategies. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase 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 stockholders. Consequently, the issuer's convertible securities generally entail less risk than its 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.
High Yield Securities. Investment in high yield securities involves substantial risk of loss. Below investment grade debt securities or comparable unrated securities are commonly referred to as "junk bonds" and are considered predominantly speculative with respect to the issuer's ability to pay interest and principal and are susceptible to default or decline in market value due to adverse economic and business developments. The market values for high yield securities tend to be very volatile, and these securities are less liquid than investment grade debt securities. For these reasons, your investment in the Fund is subject to the following specific risks:
- increased price sensitivity to changing interest rates and to a deteriorating economic environment;
- greater risk of loss due to default or declining credit quality;
- adverse company specific events are more likely to render the issuer unable to make interest and/or principal payments; and
- if a negative perception of the high yield market develops, the price and liquidity of high yield securities may be depressed. This negative perception could last for a significant period of time.
Debt securities rated below investment grade are speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of such securities. A rating of C from Moody's means that the issue so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Standard & Poor's assigns a rating of C to issues that are currently highly vulnerable to nonpayment, and the C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on the obligation are being continued (a C rating is also assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently
paying). See the statement of additional information for a description of Moody's and Standard & Poor's ratings.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a high yield issuer to make principal payments and interest payments than an investment grade issuer. The principal amount of high yield securities outstanding has proliferated in the past decade as an increasing number of issuers have used high yield securities for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. Similarly, down-turns in profitability in specific industries could adversely affect the ability of high yield issuers in those industries to meet their obligations. The market values of lower quality debt securities tend to reflect individual developments of the issuer to a greater extent that do higher quality securities, which react primarily to fluctuations in the general level of interest rates. Factors having an adverse impact on the market value of lower quality securities may have an adverse effect on the Fund's net asset value and the market value of its common shares. In addition, the Fund may incur additional expenses to the extent it is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings. In certain circumstances, the Fund may be required to foreclose on an issuer's assets and take possession of its property or operations. In such circumstances, the Fund would incur additional costs in disposing of such assets and potential liabilities from operating any business acquired.
The secondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the Fund's ability to dispose of a particular security when necessary to meet its liquidity needs. There are fewer dealers in the market for high yield securities than investment grade obligations. The prices quoted by different dealers may vary significantly and the spread between the bid and asked price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market for high yield securities could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become illiquid. As a result, the Fund could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the Fund's net asset value.
Since investors generally perceive that there are greater risks associated with lower quality debt securities of the type in which the Fund may invest a portion of its assets, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the debt securities market, changes in perceptions of issuers' creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the debt securities market, resulting in greater yield and price volatility.
If the Fund invests in high yield securities that are rated C or below, the Fund will incur significant risk in addition to the risks associated with investments in high yield securities and corporate loans. Distressed securities frequently do not produce income while they are outstanding. The Fund may purchase distressed securities that are in default or the issuers of which are in bankruptcy. The Fund may be required to bear certain extraordinary expenses in order to protect and recover its investment.
Leverage. The Fund may issue preferred shares, borrow money or issue debt securities. The Fund currently anticipates that it will issue cumulative preferred shares, as soon as practicable after the closing of this offering, with an aggregate liquidation preference of approximately 25% of the Fund's total assets. As a non-fundamental policy, such preferred shares, borrowing or debt securities may not exceed 33 1/3% of the Fund's total assets. Leverage creates risks which may adversely affect the return for the holders of common shares, including:
- the likelihood of greater volatility of net asset value and market price of common shares;
- fluctuations in the dividend rates on any preferred shares or in interest rates on borrowings and short-term debt;
- increased operating costs, which may reduce the Fund's total return; and
- the potential for a decline in the value of an investment acquired with borrowed funds, while the Fund's obligations under such borrowing remain fixed.
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund's return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such funds is not sufficient to cover the cost of leverage or if the Fund incurs capital losses, the return of the Fund will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders as dividends and other distributions will be reduced or potentially eliminated.
Certain types of borrowings may result in the Fund being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the Fund's ability to pay dividends and distributions on common shares in certain instances. The Fund may also be required to pledge its assets to the lenders in connection with certain types of borrowing. The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more nationally recognized rating organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the Fund. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act.
Since Calamos's investment management fee is a percentage of the Fund's managed assets, Calamos's fee will be higher if the Fund is leveraged and Calamos will have an incentive to be more aggressive and leverage the Fund.
Interest Rate Risk. Fixed income securities, including high yield securities, are subject to certain common risks, including:
- if interest rates go up, the value of debt securities in the Fund's portfolio generally will decline;
- during periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. Debt securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. An issuer may redeem an obligation if the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer; and
- during periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security's duration (the estimated period until the security is paid in full) and reduce the value of the security. This is known as extension risk.
REITS. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated with such industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to
decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REIT's investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources, may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, REITs have been more volatile in price than the larger capitalization stocks included in Standard & Poor's 500 Stock Index.
Illiquid Investments. The Fund may invest without limit in illiquid securities. The Fund may also invest without limitation in securities that have not been registered for public sale, but that are eligible for purchase and sale by certain qualified institutional buyers. Although many of the Rule 144A Securities in which the Fund invests may be, in the view of Calamos, liquid, if qualified institutional buyers are unwilling to purchase these Rule 144A Securities, they may be illiquid. Illiquid securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund pays for or recovers upon the sale of illiquid securities. Illiquid securities are also more difficult to value and Calamos's judgment may play a greater role in the valuation process. Investment of the Fund's assets in illiquid securities may restrict the Fund's ability to take advantage of market opportunities. The risks associated with illiquid securities may be particularly acute in situations in which the Fund's operations require cash and could result in the Fund borrowing to meet its short-term needs or incurring losses on the sale of illiquid securities.
Foreign Securities. Investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks are more pronounced to the extent that the Fund invests a significant portion of its non-U.S. investments in one region or in the securities of emerging market issuers. These risks may include:
- less information about non-U.S. issuers or markets may be available due to less rigorous disclosure or accounting standards or regulatory practices;
- many non-U.S. markets are smaller, less liquid and more volatile. In a changing market, Calamos may not be able to sell the Fund's portfolio securities at times, in amounts and at prices it considers reasonable;
- adverse effect of currency exchange rates or controls on the value of the Fund's investments;
- the economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession;
- economic, political and social developments may adversely affect the securities markets; and
- withholding and other non-U.S. taxes may decrease the Fund's return.
There may be less publicly available information about non-U.S. markets and issuers than is available with respect to U.S. securities and issuers. Non-U.S. companies generally are not subject to accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies. The trading markets for most non-U.S. securities are generally less liquid and subject to greater price volatility than the markets for comparable securities in the United States. The markets for securities in certain emerging markets are in the earliest stages of their development. Even the markets for relatively widely traded securities in certain non-U.S. markets, including emerging market countries, may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the United States. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity.
Economies and social and political climate in individual countries may differ unfavorably from the United States. Non-U.S. economies may have less favorable rates of growth of gross domestic product, rates of inflation, currency valuation, capital reinvestment, resource self-sufficiency and balance of payments positions. Many countries have experienced substantial, and in some cases extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, very negative effects on the economies and securities markets of certain emerging countries. Unanticipated political or social developments may also affect the values of the Fund's investments and the availability to the Fund of additional investments in such countries.
Currency Risks. The value of the securities denominated or quoted in foreign currencies may be adversely affected by fluctuations in the relative currency exchange rates and by exchange control regulations. The Fund's investment performance may be negatively affected by a devaluation of a currency in which the Fund's investments are denominated or quoted. Further, the Fund's investment performance may be significantly affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities denominated or quoted in another currency will increase or decrease in response to changes in the value of such currency in relation to the U.S. dollar.
Market Price of Shares. Shares of closed-end funds frequently trade at a market price that is below their net asset value. This is commonly referred to as "trading at a discount." This characteristic of shares of closed-end funds is a risk separate and distinct from the risk that the Fund's net asset value may decrease. Investors who sell their shares within a relatively short period after completion of the public offering are likely to be exposed to this risk. Accordingly, the Fund is designed primarily for long-term investors and should not be considered a vehicle for trading purposes. Net asset value will be reduced following the offering by the underwriting discount and the amount of offering expenses paid by the Fund.
Whether investors will realize a gain or loss upon the sale of the Fund's common shares will depend upon whether the market value of the shares at the time of sale is above or below the price the investor paid, taking into account transaction costs, for the shares and is not directly dependent upon the Fund's net asset value. Because the market value of the Fund's shares will be determined by factors such as the relative demand for and supply of the shares in the market, general market conditions and other factors beyond the control of the Fund, the Fund cannot predict whether its common shares will trade at, below or above net asset value, or below or above the initial offering price for the shares.
Management Risks. Calamos's judgment about the attractiveness, relative value or potential appreciation of a particular sector, security or investment strategy may prove to be incorrect.
Antitakeover Provisions. The Fund's Agreement and Declaration of Trust and By-laws include provisions that could limit the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board of Trustees. Such provisions could limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. These provisions include staggered terms of office for the Trustees, advance notice requirements for shareholder proposals, and super-majority voting requirements for certain transaction with affiliates, open-ending the Fund or a merger, asset sale or similar transaction.
Recent Developments. As a result of the terrorist attacks on the World Trade Center and the Pentagon on September 11, 2001, some of the U.S. securities markets were closed for a four-day period. These terrorist attacks and related events have led to increased short-term market volatility and may have long-term effects on U.S. and world economics and markets. A similar disruption of the financial markets could impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to securities or other financial interests.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Fund's Board of Trustees provides broad supervision over the affairs of the Fund. The officers of the Fund are responsible for the Fund's operations. There are seven Trustees of the Fund, three of whom are "interested persons" of the Trust (as defined in the 1940 Act) and four of whom are not "interested persons." The names and business addresses of the trustees and officers of the Fund and their principal occupations and other affiliations during the past five years are set forth under "Management of the Fund" in the statement of additional information.
INVESTMENT ADVISER
The Fund's investments are managed by Calamos, 1111 E. Warrenville Road, Naperville, IL. On April 1, 2002 Calamos managed approximately $10.5 billion in assets of individuals and institutions. Calamos is a wholly-owned subsidiary of Holdings. Holdings is controlled by John P. Calamos, who has been engaged in the investment advisory business since 1977.
INVESTMENT MANAGEMENT AGREEMENT
Subject to the overall authority of the Board of Trustees, Calamos
regularly provides the Fund with investment research, advice and supervision and
furnishes continuously an investment program for the Fund. In addition, Calamos
furnishes for use of the Fund such office space and facilities as the Fund may
require for its reasonable needs and supervises the business and affairs of the
Fund and provides the following other services on behalf of the Fund and not
provided by persons not a party to the investment management agreement: (a)
preparing or assisting in the preparation of reports to and meeting materials
for the Trustees; (b) supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
(c) assisting in the preparation and making of filings with the Commission and
other regulatory and self-regulatory organizations, including, but not limited
to, preliminary and definitive proxy materials, amendments to the Fund's
registration statement on Form N-2 and semi-annual reports on Form N-SAR; (d)
overseeing the tabulation of proxies by the Fund's transfer agent; (e) assisting
in the preparation and filing of the Fund's federal, state and local tax
returns; (f) assisting in the preparation and filing of the Fund's federal
excise tax return pursuant to Section 4982 of the Code; (g) providing assistance
with investor and public relations matters; (h) monitoring the valuation of
portfolio securities and the calculation of net asset value; (i) monitoring the
registration of shares of beneficial interest of the Fund under applicable
federal and state securities laws; (j) maintaining or causing to be maintained
for the Fund all books, records and reports and any other information required
under the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; (k) assisting in establishing the accounting policies of the Fund; (l)
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
(m) reviewing the Fund's bills; (n) assisting the Fund in determining the amount
of dividends and distributions available to be paid by the Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required for
such parties to effect the payment of dividends and distributions; and (o)
otherwise assisting the Fund as it may reasonably request in the conduct of the
Fund's business, subject to the direction and control of the Trustees.
Under the investment management agreement, the Fund will pay to Calamos a fee based on the average weekly managed assets that is accrued daily and paid on a monthly basis. The fee paid by the Fund is at the annual rate of 0.80% of managed assets. Because the fees paid to Calamos are determined
on the basis of the Fund's managed assets, Calamos's interest in determining whether to leverage the Fund may differ from the interests of the Fund and its common shareholders.
Under the terms of its investment management agreement, except for the
services and facilities provided by Calamos as set forth therein, the Fund shall
assume and pay all expenses for all other Fund operations and activities and
shall reimburse Calamos for any such expenses incurred by Calamos. The expenses
borne by the Fund shall include, without limitation: (a) organization expenses
of the Fund (including out-of-pocket expenses, but not including Calamos'
overhead or employee costs); (b) fees payable to Calamos; (c) legal expenses;
(d) auditing and accounting expenses; (e) maintenance of books and records that
are required to be maintained by the Fund's custodian or other agents of the
Fund; (f) telephone, telex, facsimile, postage and other communications
expenses; (g) taxes and governmental fees; (h) fees, dues and expenses incurred
by the Fund in connection with membership in investment company trade
organizations and the expense of attendance at professional meetings of such
organizations; (i) fees and expenses of accounting agents, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars; (j)
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; (k) expenses of preparing
share certificates; (l) expenses in connection with the issuance, offering,
distribution, sale, redemption or repurchase of securities issued by the Fund;
(m) expenses relating to investor and public relations provided by parties other
than Calamos; (n) expenses and fees of registering or qualifying shares of
beneficial interest of the Fund for sale; (o) interest charges, bond premiums
and other insurance expenses; (p) freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; (q) the
compensation and all expenses (specifically including travel expenses relating
to Fund business) of Trustees, officers and employees of the Fund who are not
affiliated persons of Calamos; (r) brokerage commissions or other costs of
acquiring or disposing of any portfolio securities of the Fund; (s) expenses of
printing and distributing reports, notices and dividends to shareholders; (t)
expenses of preparing and setting in type, printing and mailing prospectuses and
statements of additional information of the Fund and supplements thereto; (u)
costs of stationery; (v) any litigation expenses; (w) indemnification of
Trustees and officers of the Fund; (x) costs of shareholders' and other
meetings; (y) interest on borrowed money, if any; and (z) the fees and other
expenses of listing the Fund's shares on the New York Stock Exchange or any
other national stock exchange.
For the first eight years of the Fund's operations, Calamos has contractually agreed to waive its management fee in the amounts, and for the time periods, set forth below:
FEE WAIVED FEE WAIVED
(AS A PERCENTAGE OF (AS A PERCENTAGE OF
PERIOD ENDING AVERAGE WEEKLY PERIOD ENDING AVERAGE WEEKLY
JUNE 30, MANAGED ASSETS) JUNE 30, MANAGED ASSETS)
--------------------- -------------------- --------------------- --------------------
2002(1).............. 0.25% 2007................. 0.25%
2003................. 0.25% 2008................. 0.18%
2004................. 0.25% 2009................. 0.11%
2005................. 0.25% 2010................. 0.04%
2006................. 0.25%
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(1) From the commencement of operations.
Calamos has not agreed to waive any portion of its management fee beyond June 30, 2010.
PORTFOLIO MANAGER
John P. Calamos and Nick P. Calamos are responsible for managing the portfolio of the Fund. During the past five years, John P. Calamos has been president of Calamos and Calamos Financial Services, Inc. ("CFS"), an affiliate of Calamos, and Nick P. Calamos has been senior executive vice president of Calamos and CFS.
ADMINISTRATOR
Under the terms of an administration agreement among the Fund, Calamos and Princeton Administrators, L.P. (the "Administrator"), an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Administration Agreement"), the Administrator performs or arranges for the performance of certain administrative services necessary for the operation of the Fund, including, but not limited to, maintaining certain of the books and records of the Fund, preparing certain reports and other documents required by U.S. federal securities laws and regulations, responding to inquiries from Fund shareholders, calculating and distributing for publication the net asset value of the Fund's shares and providing the Fund with certain administrative office facilities. For the services rendered and the facilities furnished, Calamos (and not the Fund) will pay the Administrator a monthly fee at the annual rate of 0.125% of the Fund's average weekly managed assets, subject to a monthly minimum fee of $12,500. The Administration Agreement will continue in effect until terminated by any party upon 60 days' prior written notice.
DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC DIVIDEND REINVESTMENT PLAN
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute all or a portion of its net investment income monthly to holders of common shares. The Fund expects to declare the initial monthly dividend on the common shares within approximately 45 days of the completion of this offering and to pay that initial monthly dividend approximately 60 to 90 days after the completion of this offering. Dividends and distributions may be payable in cash or common shares, with the option to receive cash in lieu of the shares. The Fund may at times, and in its discretion, pay out less than the entire amount of net investment income earned in any particular period and may at times pay out such accumulated undistributed income in addition to net investment income earned in other periods in order to permit the Fund to maintain a more stable level of distributions. As a result, the dividend paid by the Fund to holders of common shares for any particular period may be more or less than the amount of net investment income earned by the Fund during such period. The Fund is not required to maintain a stable level of distributions to shareholders. For federal income tax purposes, the Fund is required to distribute substantially all of its net investment income each year to both reduce its federal income tax liability and to avoid a potential excise tax. The Fund intends to distribute all realized capital gains, if any, at least annually.
Under the 1940 Act, the Fund is not permitted to incur indebtedness unless immediately after such incurrence the Fund has an asset coverage of at least 300% of the aggregate outstanding principal balance of indebtedness. Additionally, under the 1940 Act, the Fund may not declare any dividend or other distribution upon any class of its capital shares, or purchase any such capital shares, unless the aggregate indebtedness of the Fund has, at the time of the declaration of any such dividend or distribution or at the time of any such purchase, an asset coverage of at least 300% after deducting the amount of such dividend, distribution, or purchase price, as the case may be.
While any preferred shares are outstanding, the Fund may not declare any cash dividend or other distribution on its common shares, unless at the time of such declaration, (1) all accumulated preferred dividends have been paid and (2) the net asset value of the Fund's portfolio (determined after deducting the amount of such dividend or other distribution) is at least 200% of the liquidation value of the outstanding preferred shares (expected to be equal to the original purchase price per share plus any accumulated and unpaid dividends thereon).
In addition to the limitations imposed by the 1940 Act described above, certain lenders may impose additional restrictions on the payment of dividends or distributions on the common shares in the event of a default on the Fund's borrowings. If the Fund's ability to make distributions on its common shares is limited, such limitation could, under certain circumstances, impair the ability of the Fund to maintain its qualification for taxation as a regulated investment company, which would have adverse tax consequences for shareholders. See "Leverage" and "U.S. Federal Income Tax Matters."
See "Automatic Dividend Reinvestment Plan" for information concerning the manner in which dividends and distributions to common shareholders may be automatically reinvested in common shares. Dividends and distributions may be taxable to shareholders whether they are reinvested in shares of the Fund or received in cash.
The yield on the Fund's common shares will vary from period to period depending on factors including, but not limited to, market conditions, the timing of the Fund's investment in portfolio securities, the securities comprising the Fund's portfolio, changes in interest rates including changes in the relationship between short-term rates and long-term rates, the amount and timing of the use of borrowings and other leverage by the Fund, the effects of leverage on the common shares discussed above under "Leverage," the timing of the investment of leverage proceeds in portfolio securities, the Fund's net assets and its operating expenses. Consequently, the Fund cannot guarantee any particular yield on its shares and the yield for any given period is not an indication or representation of future yields on the Fund's shares.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Automatic Dividend Reinvestment Plan ("Plan"), unless a shareholder is ineligible or elects otherwise, all dividend and capital gains distributions are automatically reinvested by The Bank of New York, as agent for shareholders in administering the Plan ("Plan Agent"), in additional common shares of the Fund. Shareholders who elect not to participate in the Plan will receive all dividends and distributions payable in cash paid by check mailed directly to the shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee) by The Bank of New York, as dividend paying agent. Such shareholders may elect not to participate in the Plan and to receive all dividends and distributions in cash by sending written instructions to The Bank of New York, as dividend paying agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by giving notice in writing to the Plan Agent; such termination will be effective with respect to a particular dividend or distribution if notice is received prior to such record date.
Whenever the Fund declares a dividend or distribution payable either in shares or in cash, non-participants in the Plan will receive cash, and participants in the Plan will receive the equivalent in shares of common shares. The shares are acquired by the Plan Agent for the participant's account, depending upon the circumstances described below, either (i) through receipt of additional common shares from the Fund ("newly issued shares") or (ii) by purchase of outstanding common shares on the open market ("open-market purchases") on the New York Stock Exchange or elsewhere. If, on the payment date, the net asset value per share of the common shares is equal to or less than the market price per common share plus estimated brokerage commissions (such condition being referred to herein as "market premium"), the Plan Agent will receive newly issued shares from the Fund for each participant's account. The number of newly issued common shares to be credited to the participant's account will be determined by dividing the dollar amount of the dividend or distribution by the greater of (i) the net asset value per common share on the payment date, or (ii) 95% of the market price per common share on the payment date.
If, on the payment date, the net asset value per common share exceeds the market price plus estimated brokerage commissions (such condition being referred to herein as "market discount"), the Plan Agent has until the last business day before the next date on which the shares trade on an "ex-dividend" basis or in no event more than 30 days after the payment date ("last purchase date") to invest the dividend or distribution amount in shares acquired in open-market purchases. It is contemplated that the Fund will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the payment date on the dividend through the date before the next ex- dividend date, which typically will be approximately ten days. The weighted average price (including brokerage commissions) of all common shares purchased by the Plan Agent as Plan Agent will be the price per common share allocable to each participant. If, before the Plan Agent has completed its open-market purchases, the market price of a common share exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Fund's shares,
resulting in the acquisition of fewer shares than if the dividend had been paid in newly issued shares on the payment date. Because of the foregoing difficulty with respect to open-market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will invest the uninvested portion of the dividend or distribution amount in newly issued shares at the close of business on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes written confirmation of each acquisition made for the participant's account as soon as practicable, but in no event later than 60 days after the date thereof. Shares in the account of each Plan participant will be held by the Plan Agent in non-certificated form in the Plan Agent's name or that of its nominee, and each shareholder's proxy will include those shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held pursuant to the Plan first in accordance with the instructions of the participants then with respect to any proxies not returned by such participant, in the same proportion as the Plan Agent votes the proxies returned by the participants.
There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or distributions payable either in shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open-market purchases in connection with the reinvestment of dividends or distributions. If a participant elects to have the Plan Agent sell part or all of his or her common shares and remit the proceeds, such participant will be charged his or her pro rata share of brokerage commissions on the shares sold, plus a $15 transaction fee.
The automatic reinvestment of dividends and distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends. See "U.S. Federal Income Tax Matters."
Shareholders participating in the Plan may receive benefits not available to shareholders not participating in the Plan. If the market price plus commissions of the Fund's shares is higher than the net asset value, participants in the Plan will receive shares of the Fund at less than they could otherwise purchase them and will have shares with a cash value greater than the value of any cash distribution they would have received on their shares. If the market price plus commissions is below the net asset value, participants receive distributions of shares with a net asset value greater than the value of any cash distribution they would have received on their shares. However, there may be insufficient shares available in the market to make distributions in shares at prices below the net asset value. Also, since the Fund does not redeem its shares, the price on resale may be more or less than the net asset value. See "U.S. Federal Income Tax Matters" for a discussion of tax consequences of the Plan.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan if in the judgment of the Board of Trustees such a change is warranted. The Plan may be terminated by the Plan Agent or the Fund upon notice in writing mailed to each participant at least 60 days prior to the effective date of the termination. Upon any termination, the Plan Agent will cause a certificate or certificates to be issued for the full shares held by each participant under the Plan and cash adjustment for any fraction of a common share at the then current market value of the common shares to be delivered to him or her. If preferred, a participant may request the sale of all of the common shares held by the Plan Agent in his or her Plan account in order to terminate participation in the Plan. If such participant elects in advance of such termination to have Plan Agent sell part or all of his shares, Plan Agent is authorized to deduct from the proceeds a $15.00 fee plus the brokerage commissions incurred for the transaction. If a participant has terminated his or her participation in the Plan but continues to have common shares registered in his or her name, he or she may re-enroll in the Plan at any time by notifying the Plan Agent in writing at the address above. The terms and conditions of the Plan may be amended by the Plan Agent or the Fund at any time but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Commission or any other regulatory authority, only by mailing to each participant appropriate written notice at least 30 days
prior to the effective date thereof. The amendment shall be deemed to be accepted by each participant unless, prior to the effective date thereof, the Plan Agent receives notice of the termination of the participant's account under the Plan. Any such amendment may include an appointment by the Plan Agent of a successor Plan Agent, subject to the prior written approval of the successor Plan Agent by the Fund. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at Dividend Reinvestment Department, P.O. Box 1958 Newark, NJ 07101-9774.
CLOSED-END FUND STRUCTURE
The Fund is a newly organized, diversified, closed-end management investment company (commonly referred to as a closed-end fund). Closed-end funds differ from open-end management investment companies (which are generally referred to as mutual funds) in that closed-end funds generally list their shares for trading on a stock exchange and do not redeem their shares at the request of the shareholder. This means that if you wish to sell your shares of a closed-end fund you must trade them on the market like any other stock at the prevailing market price at that time. In a mutual fund, if the shareholder wishes to sell shares of the fund, the mutual fund will redeem or buy back the shares at "net asset value." Also, mutual funds generally offer new shares on a continuous basis to new investors, and closed-end funds generally do not. The continuous inflows and outflows of assets in a mutual fund can make it difficult to manage the fund's investments. By comparison, closed-end funds are generally able to stay more fully invested in securities that are consistent with their investment objectives and also have greater flexibility to make certain types of investments and to use certain investment strategies, such as financial leverage and investments in illiquid securities.
Shares of closed-end funds frequently trade at a discount to their net asset value. To the extent the common shares do trade at a discount, the Fund's Board of Trustees may from time to time engage in open-market repurchases or tender offers for shares after balancing the benefit to shareholders of the increase in the net asset value per share resulting from such purchases against the decrease in the assets of the Fund and potential increase in the expense ratio of expenses to assets of the Fund. The Board of Trustees believes that in addition to the beneficial effects described above, any such purchases or tender offers may result in the temporary narrowing of any discount but will not have any long-term effect on the level of any discount. We cannot guarantee or assure, however, that the Fund's Board of Trustees will decide to engage in any of these actions. Nor is there any guarantee or assurance that such actions, if undertaken, would result in the shares trading at a price equal or close to net asset value per share. The Board of Trustees might also consider converting the Fund to an open-end mutual fund, which would also require a vote of the shareholders of the Fund. Conversion of the Fund to an open-end mutual fund would require an amendment to the Fund's Declaration of Trust. Such an amendment would require the favorable vote of the holders of at least 75% of the Fund's outstanding shares (including any preferred shares) entitled to be voted on the matter, voting as a single class (or a majority of such shares if the amendment were previously approved, adopted or authorized by 75% of the total number of Trustees fixed in accordance with the By-laws), and, assuming preferred shares are issued, the affirmative vote of a majority of outstanding preferred shares, voting as a separate class.
U.S. FEDERAL INCOME TAX MATTERS
The following is a description of certain U.S. federal income tax consequences to a shareholder that acquires, holds and/or disposes of common shares of the Fund. The discussion reflects applicable tax laws of the United States as of the date of this prospectus, which tax laws may be changed or subject to new interpretations by the courts or the Internal Revenue Service ("IRS") retroactively or prospectively. No attempt is made to present a detailed explanation of U.S. federal income tax concerns affecting the Fund and its shareholders, and the discussion set forth herein does not constitute tax advice. In addition, no attempt is made to present state, local or foreign tax concerns or tax concerns applicable to an investor
with a special tax status such as a financial institutional or non-U.S.
investors. INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE
THE TAX CONSEQUENCES TO THEM OF INVESTING IN THE FUND.
The Fund intends to elect to be treated, and to qualify each year, as a "regulated investment company" under Subchapter M of the Code so that it will not pay U.S. federal income tax on income and capital gains distributed to shareholders. If the Fund qualifies as a regulated investment company and distributes to its shareholders at least 90% of the sum of (i) its "investment company taxable income" as that term is defined in the Code (which includes, among other things, dividends, taxable interest, the excess of any net short-term capital gains over net long-term capital losses and certain net foreign exchange gains as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (ii) the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the Fund will be relieved of U.S. federal income tax on any income of the Fund, including long-term capital gains, distributed to shareholders. However, if the Fund retains any investment company income or "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), it will be subject to U.S. federal income tax at regular corporate rates (currently at the maximum rate of 35%) on the amount retained. The Fund intends to distribute at least annually all or substantially all of its investment company income, net tax-exempt interest, and net capital gain.
If for any taxable year the Fund did not qualify as a regulated investment company for U.S. federal income tax purposes, it would be treated as a U.S. corporation subject to U.S. federal income tax and distributions to its shareholders would not be deducted by the Fund in computing its taxable income. In addition, in the event of a failure to qualify as a regulated investment company, the Fund's distributions, to the extent derived from the Fund's current or accumulated earnings and profits, would generally constitute ordinary dividends, which although generally eligible for the corporate dividend received deduction, would be taxable to shareholders as ordinary income, even though such distributions might otherwise, at least in part, have been treated as long-term capital gains in such shareholder's hands.
Unless a shareholder is ineligible to participate or elects otherwise, all distributions will be automatically reinvested in additional shares of common stock of the Fund pursuant to the Plan. For U.S. federal income tax purposes, all dividends are taxable whether a shareholder takes them in cash or they are reinvested pursuant to the Plan in additional shares of the Fund. Dividends from investment company taxable income are generally taxable as ordinary income. Dividends from net capital gain, if any, are generally taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the Fund. The U.S. federal income tax status of all distributions will be designated by the Fund and reported to the shareholders annually.
If the Fund retains any net capital gain, the Fund may designate the retained amount as undistributed capital gains in a notice to shareholders who, if subject to U.S. federal income tax on long-term capital gains (i) will be required to include in income as long-term capital gain, their proportionate share of such undistributed amount, and (ii) will be entitled to credit their proportionate share of the tax paid by the Fund on the undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will generally be increased by the difference between the amount of undistributed net capital gain included in the shareholder's gross income and the tax deemed paid by the shareholders.
If a shareholder's distributions are automatically reinvested pursuant to the Plan and the Plan Agent invests the distribution in shares acquired on behalf of the shareholder in open-market purchases, for U.S. federal income tax purposes, the shareholder will be treated as having received a taxable distribution in the amount of the cash dividend that the shareholder would have received if the shareholder had elected to receive cash. If a shareholder's distributions are automatically reinvested pursuant to the Plan and the Plan Agent invests the distribution in newly issued shares of the Fund, the shareholder will be treated as receiving a taxable distribution equal to the fair market value of the stock the shareholder receives.
Sales and other dispositions of the Fund's shares are taxable events for shareholders that are subject to federal income tax. Shareholders should consult their own tax advisors with reference to their individual circumstances to determine whether any particular transaction in the Fund's shares is properly treated as a sale for tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions. Any loss realized by a shareholder upon the sale or other disposition of shares with a tax holding period of six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain with respect to such shares. Losses on sales or other dispositions of shares may be disallowed under the "wash sale" rules in the event of other investments in the Fund (including those made pursuant to reinvestment of dividends) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares. In such a case, the disallowed portion of any loss generally would be included in the U.S. federal tax basis of the shares acquired in the other investments.
The Fund is required in certain circumstances to backup withhold at a rate of 30% (for calendar years 2002 and 2003) on reportable payments including dividends, capital gain distributions, and proceeds of sales or other dispositions of the Fund's shares paid to certain holders of the Fund's shares who do not furnish the Fund with their correct social security number or other taxpayer identification number and certain other certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to a shareholder may be refunded or credited against such shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE PROVISIONS OF THE CODE AND THE TREASURY REGULATIONS IN EFFECT AS THEY DIRECTLY GOVERN THE TAXATION OF THE FUND AND ITS SHAREHOLDERS. THESE PROVISIONS ARE SUBJECT TO CHANGE BY LEGISLATIVE OR ADMINISTRATIVE ACTION, AND ANY SUCH CHANGE MAY BE RETROACTIVE. A MORE COMPLETE DISCUSSION OF THE TAX RULES APPLICABLE TO THE FUND CAN BE FOUND IN THE STATEMENT OF ADDITIONAL INFORMATION WHICH IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING SPECIFIC QUESTIONS AS TO U.S. FEDERAL, FOREIGN, STATE, AND LOCAL INCOME OR OTHER TAXES.
NET ASSET VALUE
Net asset value per share is determined as of the close of regular session trading on the New York Stock Exchange (usually 4:00 p.m., Eastern time), on the last business day in each week. Net asset value is calculated by dividing the value of all of the securities and other assets of the Fund, less its liabilities (including accrued expenses and indebtedness) and the aggregate liquidation value of any outstanding preferred shares, by the total number of common shares outstanding. Currently, the net asset values of shares of publicly traded closed-end investment companies investing in debt securities are published in Barron's, the Monday edition of The Wall Street Journal and the Monday and Saturday editions of The New York Times.
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. 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 New York Stock Exchange. 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 New York Stock Exchange, whichever is earlier. If market prices are not readily available or the Fund's valuation methods do not produce a value reflective of the fair value of the security, securities and other assets are priced at a fair value as determined by the Board of Trustees or a committee thereof.
DESCRIPTION OF SHARES
The Fund is authorized to issue an unlimited number of common shares, without par value. The Fund is also authorized to issue preferred shares. Upon the completion of this offering, the Fund will only have common shares outstanding. The Board of Trustees is authorized, however, to classify and reclassify any unissued shares into one or more additional classes or series of shares. The Board of Trustees may establish such series or class, including preferred shares, from time to time by setting or changing in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares and pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any existing class or series. The Board of Trustees, without shareholder approval, is authorized to amend the Agreement and Declaration of Trust and By-laws to reflect the terms of any such class or series, including any class of preferred shares. The Fund currently anticipates that it will issue preferred shares as soon as practicable after the closing of this offering. See "Leverage." The Fund is also authorized to issue other securities, including debt securities.
COMMON SHARES
Common shares, when issued and outstanding, will be fully paid and non-assessable. Shareholders are entitled to share pro rata in the net assets of the Fund available for distribution to common shareholders upon liquidation of the Fund. Common shareholders are entitled to one vote for each share held.
In the event that the Fund issues preferred shares and so long as any shares of the Fund's preferred shares are outstanding, holders of common shares will not be entitled to receive any net income of or other distributions from the Fund unless all accumulated dividends on preferred shares have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to preferred shares would be at least 200% after giving effect to such distributions. See "Leverage."
The Fund will send unaudited reports at least semiannually and audited annual financial statements to all of its shareholders.
Calamos provided the initial capital for the Fund by purchasing 7,000 common shares of the Fund for $100,275. As of the date of this prospectus, Calamos owned 100% of the outstanding common shares. Calamos may be deemed to control the Fund until such time as it owns less than 25% of the outstanding shares of the Fund.
PREFERRED SHARES
The Fund currently anticipates issuing, as soon as practicable after the closing of this offering, cumulative preferred shares with an aggregate liquidation preference of approximately 25% of the Fund's total assets. As a non-fundamental policy, the Fund may not issue preferred shares (or borrow money and issue debt securities) with an aggregate liquidation preference (or aggregate principal amount) exceeding 33 1/3% of the Fund's total assets. However, the Board of Trustees reserves the right to issue preferred shares to the extent permitted by the 1940 Act, which currently limits the aggregate liquidation preference of all outstanding preferred shares to 50% of the value of the Fund's total assets less the Fund's liabilities and indebtedness. Although the terms of any preferred shares, including dividend rate, liquidation preference and redemption provisions, will be determined by the Board of Trustees, subject to applicable law and the Agreement and Declaration of Trust, it is likely that the preferred shares will be structured to carry a relatively short-term dividend rate reflecting interest rates on short-term bonds, by providing for the periodic redetermination of the dividend rate at relatively short intervals through an auction, remarketing or other procedure. The Fund also believes that it is likely that the liquidation preference, voting rights and redemption provisions of the preferred shares will be similar to those stated below.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the holders of preferred shares will be entitled to receive a preferential liquidating distribution, which is expected to equal the original purchase price per preferred share plus accumulated and unpaid dividends,
whether or not declared, before any distribution of assets is made to holders of common shares. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of preferred shares will not be entitled to any further participation in any distribution of assets by the Fund.
The 1940 Act requires that the holders of any preferred shares, voting separately as a single class, have the right to elect at least two Trustees at all times. The remaining Trustees will be elected by holders of common shares and preferred shares, voting together as a single class. In addition, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, the holders of any preferred shares have the right to elect a majority of the Trustees at any time two years' accumulated dividends on any preferred shares are unpaid. The 1940 Act also requires that, in addition to any approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the preferred shares, and (2) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other things, changes in the Fund's subclassification as a closed-end investment company or changes in its fundamental investment restrictions. See "Certain Provisions in the Agreement and Declaration of Trust and By-Laws." As a result of these voting rights, the Fund's ability to take any such actions may be impeded to the extent that there are any preferred shares outstanding. The Board of Trustees presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law, holders of preferred shares will have equal voting rights with holders of common shares (one vote per share, unless otherwise required by the 1940 Act) and will vote together with holders of common shares as a single class.
The affirmative vote of the holders of a majority of the outstanding preferred shares, voting as a separate class, will be required to amend, alter or repeal any of the preferences, rights or powers of holders of preferred shares so as to affect materially and adversely such preferences, rights or powers, or to increase or decrease the authorized number of preferred shares. The class vote of holders of preferred shares described above will in each case be in addition to any other vote required to authorize the action in question.
The terms of the preferred shares are expected to provide that (i) they are redeemable by the Fund in whole or in part at the original purchase price per share plus accrued dividends per share, (ii) the Fund may tender for or purchase preferred shares and (iii) the Fund may subsequently resell any shares so tendered for or purchased. Any redemption or purchase of preferred shares by the Fund will reduce the leverage applicable to the common shares, while any resale of shares by the Fund will increase that leverage.
The discussion above describes the possible offering of preferred shares by the Fund. If the Board of Trustees determines to proceed with such an offering, the terms of the preferred shares may be the same as, or different from, the terms described above, subject to applicable law and the Agreement and Declaration of Trust. The Board of Trustees, without the approval of the holders of common shares, may authorize an offering of preferred shares or may determine not to authorize such an offering, and may fix the terms of the preferred shares to be offered.
CERTAIN PROVISIONS OF THE AGREEMENT AND DECLARATION OF TRUST
AND BY-LAWS
The Fund's Agreement and Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board of Trustees and could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. The Board of Trustees is divided into three classes of approximately equal size. The terms of the Trustees of the different classes are staggered so that approximately one third of the Board of Trustees is elected by shareholders each year. A Trustee may be removed from office with or without cause by a vote of at least a majority of the then Trustees if such removal is approved by the holders of at least 75% of the shares entitled to vote with respect to the election of such Trustee and present in person or by proxy at a meeting of shareholders called for such purpose.
In addition, the Agreement and Declaration of Trust requires the affirmative vote of at least 75% of the outstanding shares entitled to vote on the matter for the Trust to merge or consolidate with any other corporation, association, trust or other organization or to sell, lease or exchange all or substantially all of the Fund's assets; unless such action has been approved, adopted or authorized by the affirmative vote of at least 75% of the Trustees then in office, in which case, the affirmative vote of a majority of the outstanding shares entitled to vote on the matter is required.
In addition, conversion of the Fund to an open-end investment company would require an amendment to the Fund's Agreement and Declaration of Trust. Such an amendment would require the favorable vote of a majority of the then Trustees followed by a favorable vote of the holders of at least 75% of the shares entitled to vote on the matter, voting as separate classes or series (or a majority of such shares if the amendment was previously approved by 75% of the Trustees). Such a vote also would satisfy a separate requirement in the 1940 Act that the change be approved by the shareholders. Shareholders of an open-end investment company may require the company to redeem their shares of common stock at any time (except in certain circumstances as authorized by or under the 1940 Act) at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. If the Fund is converted to an open-end investment company, it could be required to liquidate portfolio securities to meet requests for redemption, and the common shares would no longer be listed on the New York Stock Exchange. Conversion to an open-end investment company would also require changes in certain of the Fund's investment policies and restrictions, such as those relating to the purchase of illiquid securities.
In addition, the Agreement and Declaration of Trust requires the affirmative vote or consent of a majority of the then Trustees followed by the affirmative vote or consent of the holders of at least 75% of the shares of each affected class or series of the Fund outstanding, voting separately as a class or series, to approve, adopt or authorize certain transactions with 5% or greater holders of a class or series of shares and their associates, unless the transaction has been approved by at least 75% of the Trustees, in which case a majority of the outstanding shares entitled to vote shall be required. For purposes of these provisions, a 5% or greater holder of a class or series of shares (a "Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class or series of shares of beneficial interest of the Fund. The 5% holder transactions subject to these special approval requirements are:
- the merger or consolidation of the Fund or any subsidiary of the Fund with or into any Principal Shareholder;
- the issuance of any securities of the Fund to any Principal Shareholder for cash; or
- the sale, lease or exchange to the Fund or any subsidiary of the Fund in exchange for securities of the Fund, of any assets of any Principal Shareholder, except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a 12-month period.
The Fund may be terminated by the affirmative vote of not less than 75% of the Trustees then in office by written notice to the shareholders.
The Agreement and Declaration of Trust and By-laws provide that the Board of Trustees has the power, to the exclusion of shareholders, to make, alter or repeal any of the By-laws (except for any by-law specified not to be amended or repealed by the Board), subject to the requirements of the 1940 Act. Neither this provision of the Agreement and Declaration of Trust, nor any of the foregoing provisions thereof requiring the affirmative vote of 75% of outstanding shares of the Fund, can be amended or repealed except by the vote of such required number of shares.
The Fund's By-laws generally require that advance notice be given to the Fund in the event a shareholder desires to nominate a person for election to the Board of Trustees or to transact any other business at an annual meeting of shareholders. With respect to an annual meeting following the first annual meeting of shareholders, notice of any such nomination or business must be delivered to or received at the principal executive offices of the Fund not less than 90 calendar days nor more than 120 calendar days prior to the anniversary date of the prior year's annual meeting (subject to certain exceptions). In the case of the first annual meeting of shareholders, the notice must be given no later than the tenth calendar day following public disclosure as specified in the By-laws of the date of the meeting. Any notice by a shareholder must be accompanied by certain information as provided in the By-laws.
UNDERWRITING
Subject to the terms and conditions of a purchase agreement dated , 2002, each underwriter named below has severally agreed to purchase, and the Fund has agreed to sell to such underwriter, the number of common shares set forth opposite the name of such underwriter.
NUMBER OF
UNDERWRITER COMMON SHARES
----------- -------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
UBS Warburg LLC.............................................
Advest, Inc. ...............................................
Janney Montgomery Scott LLC.................................
Legg Mason Wood Walker, Incorporated........................
Stephens Inc. ..............................................
TD Waterhouse Investor Services, Inc. ......................
Wedbush Morgan Securities...................................
--------
Total.............................................
========
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The purchase agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to the approval of certain legal matters by counsel and to certain other conditions. The underwriters are obligated to purchase all the common shares sold under the purchase agreement if any of the common shares are purchased. In the purchase agreement, the Fund and Calamos have agreed to indemnify the underwriters against certain liabilities, including liabilities arising under the Securities Act of 1933, or to contribute payments the underwriters may be required to make for any of those liabilities.
The underwriters propose to initially offer some of the common shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the common shares to certain dealers at the public offering price less a concession not in excess of $ per share. The sales load the Fund will pay of $.675 per share is equal to 4.5% of the initial offering price. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share on sales to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
The following table shows the public offering price, sales load and proceeds before expenses to the Fund. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
Public offering price............................ $15.00 $ $
Sales load....................................... $.675 $ $
Proceeds, before expenses, to the Fund........... $14.325 $ $
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The expenses of the offering are estimated at $ and are payable by the Fund. The Fund has agreed to pay the underwriters $0.005 per common share as a partial reimbursement of expenses incurred in connection with the offering. Calamos has agreed to pay organizational expenses and offering costs of the Fund (other than sales load) that exceed $0.03 per share.
The Fund has granted the underwriters an option to purchase up to additional common shares at the public offering price, less the sales load, within 45 days from the date of this prospectus solely to cover any over-allotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.
In connection with the requirements for listing the Fund's common shares on the New York Stock Exchange, the underwriters have undertaken to sell lots of 100 or more common shares to a minimum of 2,000 beneficial owners in the United States. The minimum investment requirement is 100 common shares.
Until the distribution of the common shares is complete, Securities and Exchange Commission ("SEC") rules may limit underwriters and selling group members from bidding for and purchasing the Fund's common shares. However, the underwriters may engage in transactions that stabilize the price of common shares, such as bids or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the Fund's common shares in connection with the offering, i.e., if they sell more common shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing common shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. Purchases of common shares to stabilize its price or to reduce a short position may cause the price of the Fund's common shares to be higher than it might be in the absence of such purchases.
Neither the Fund nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transaction described above may have on the price of common shares. In addition, neither the Fund nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
The Fund has agreed not to offer or sell any additional common shares for a period of 180 days after the date of the purchase agreement without the prior written consent of the underwriters, except for the sale of common shares to the underwriters pursuant to the purchase agreement.
The Fund anticipates that the underwriters may from time to time act as brokers or dealers in executing the Fund's portfolio transactions after they have ceased to be underwriters. The underwriters are active underwriters of, and dealers in, securities and act as market makers in a number of such securities and, therefore, can be expected to engage in portfolio transactions with the Fund.
The principal business address of Merrill Lynch, Pierce, Fenner & Smith Incorporated is 4 World Financial Center, North Tower, 250 Vesey Street, New York, New York 10080.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
The Fund's securities and cash are held under a custodian agreement with The Bank of New York, One Wall Street, New York, New York 10286. The transfer agent, dividend disbursing agent and registrar for the Fund's shares is also The Bank of New York.
LEGAL OPINIONS
Bell, Boyd & Lloyd LLC, Chicago, Illinois, serves as counsel to the Fund and to the non-interested Trustees. Vedder, Price, Kaufman & Kammholz ("Vedder Price"), Chicago, Illinois, which is serving as special counsel to the Fund in connection with the offering, will pass on the legality of the shares offered hereby. Vedder Price is also counsel to Calamos. Certain matters will be passed upon for the underwriters by Clifford Chance Rogers & Wells LLP, New York, New York. Vedder Price and Clifford Chance Rogers & Wells LLP may rely on matters of Delaware law on the opinion of Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware.
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
Use of Proceeds............................................. S-1 Investment Objective and Policies........................... S-1 Investment Restrictions..................................... S-18 Management of the Fund...................................... S-19 Portfolio Transactions...................................... S-25 Repurchase of Common Shares................................. S-26 U.S. Federal Income Tax Matters............................. S-27 Performance-Related, Comparative and Other Information...... S-33 Experts..................................................... S-33 Additional Information...................................... S-33 Financial Statement and Independent Auditors' Report........ S-33 Appendix A -- Description of Ratings........................ A-1 |
4,000,000 SHARES
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
COMMON SHARES OF BENEFICIAL INTEREST
MERRILL LYNCH & CO.
UBS WARBURG
ADVEST, INC.
JANNEY MONTGOMERY SCOTT LLC
LEGG MASON WOOD WALKER
INCORPORATED
STEPHENS INC.
TD WATERHOUSE
WEDBUSH MORGAN SECURITIES
The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 21, 2002
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
Calamos Convertible Opportunities and Income Fund (the "Fund") is a newly organized, diversified, closed-end management investment company. This Statement of Additional Information relating to common shares does not constitute a prospectus, but should be read in conjunction with the Prospectus relating thereto dated _______________ __, 2002. This Statement of Additional Information does not include all information that a prospective investor should consider before purchasing common shares, and investors should obtain and read the Prospectus prior to purchasing such shares. A copy of the Prospectus may be obtained without charge by calling 1-800-582-6959. You may also obtain a copy of the Prospectus on the Securities and Exchange Commission's web site (http://www.sec.gov).
TABLE OF CONTENTS
Use of Proceeds................................................................................................S-1 Investment Objective and Policies..............................................................................S-1 Investment Restrictions.......................................................................................S-18 Management of the Fund........................................................................................S-19 Portfolio Transactions........................................................................................S-25 Repurchase of Common Shares...................................................................................S-26 U.S. Federal Income Tax Matters...............................................................................S-27 Performance-Related, Comparative and Other Information........................................................S-33 Experts .....................................................................................................S-33 Additional Information........................................................................................S-33 Financial Statement and Independent Auditors' Report..........................................................S-33 Appendix A-- Description of Ratings............................................................................A-1 |
This Statement of Additional Information is dated _____________ __, 2002.
USE OF PROCEEDS
The Fund will invest the net proceeds of the offering in accordance with the Fund's investment objective and policies as stated below. It is presently anticipated that the Fund will be able to invest substantially all of the net proceeds in securities that meet the investment objective and policies within three months after completion of the offering. Pending such investment, the net proceeds may be invested in U.S. government securities high grade, short-term money market instruments. If necessary, the Fund may also purchase, as temporary investments, securities of other open- or closed-end investment companies that invest primarily the types of securities in which the Fund may invest directly.
INVESTMENT OBJECTIVE AND POLICIES
The prospectus presents the investment objective and the principal investment strategies and risks of the Fund. This section supplements the disclosure in the Fund's prospectus and provides additional information on the Fund's investment policies or restrictions. Restrictions or policies stated as a maximum percentage of the Fund's assets are only applied immediately after a portfolio investment to which the policy or restriction is applicable (other than the limitations on borrowing). Accordingly, any later increase or decrease resulting from a change in values, net assets or other circumstances will not be considered in determining whether the investment complies with the Fund's restrictions and policies.
PRIMARY INVESTMENTS
Under normal circumstances, the Fund will invest at least 80% of its
managed assets in a diversified portfolio of convertible securities and
non-convertible income securities. The Fund will provide written notice to
shareholders at least 60 days prior to any change to the requirement that it
invest at least 80% of its managed assets as described in the sentence above.
The portion of the Fund's assets invested in convertible securities and
non-convertible income securities will vary from time to time in light of the
Fund's investment objective, changes in equity prices and changes in interest
rates and other economic and market factors, although, under normal
circumstances, the Fund will invest at least 50% of its managed assets in
convertible securities. "Managed assets" means the total assets of the Fund
(including any assets attributable to any leverage that may be outstanding)
minus the sum of accrued liabilities (other than debt representing financial
leverage). For this purpose, the liquidation preference on the preferred shares
will not constitute a liability.
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 typically will 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
Calamos Asset Management, Inc. ("Calamos") 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 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 Calamos 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.
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. Because 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 Fund 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.
The Fund's holdings of synthetic convertible securities are considered convertible securities for purposes of the Fund's policy to invest at least 50% of its assets in convertible securities and 80% of its managed assets in a diversified portfolio of convertible and non-convertible income securities.
HIGH YIELD SECURITIES
A substantial portion of the Fund's assets may be invested in below investment grade (high yield, high risk) securities. The high yield securities in which the Fund invests are rated Ba or lower by Moody's or BB or lower by Standard & Poor's or are unrated but determined by Calamos to be of comparable quality. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative with respect to the issuer's capacity to pay interest and repay principal.
INVESTMENT IN HIGH YIELD SECURITIES INVOLVES SUBSTANTIAL RISK OF LOSS. Below investment grade debt securities or comparable unrated securities are commonly referred to as "junk bonds" and are considered predominantly speculative with respect to the issuer's ability to pay interest and principal and are susceptible to default or decline in market value due to adverse economic and business developments. The market values for high yield securities tend to be very volatile, and these securities are less liquid than investment grade debt securities. For these reasons, your investment in the Fund is subject to the following specific risks:
- increased price sensitivity to changing interest rates and to a deteriorating economic environment;
- greater risk of loss due to default or declining credit quality;
- adverse company specific events are more likely to render the issuer unable to make interest and/or principal payments; and
- if a negative perception of the high yield market develops, the price and liquidity of high yield securities may be depressed. This negative perception could last for a significant period of time.
Debt securities rated below investment grade are speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of such securities. A rating of C from Moody's means that the issue so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Standard & Poor's assigns a rating of C to issues that are currently highly vulnerable to nonpayment, and the C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on the obligation are being continued (a C rating is also assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying). See Appendix A to this statement of additional information for a description of Moody's and Standard & Poor's ratings.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a high yield issuer to make principal payments and interest payments than an investment grade issuer. The principal amount of high yield securities outstanding has proliferated in the past decade as an increasing number of issuers have used high yield securities for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. Similarly, down-turns in profitability in specific industries could adversely affect the ability of high yield issuers in that industry to meet their obligations. The market values of lower quality debt securities tend to reflect individual developments of the issuer to a greater extent than do higher quality securities, which react primarily to fluctuations in the general level of interest rates. Factors having an adverse impact on the market value of lower quality securities may have an adverse effect on the Fund's net asset value and the market value of its common shares. In addition, the Fund may incur additional expenses to the extent it is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings. In certain circumstances, the Fund may be required to foreclose on an issuer's assets and take possession of its property or operations. In such circumstances, the Fund would incur additional costs in disposing of such assets and potential liabilities from operating any business acquired.
The secondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the Fund's ability to dispose of
a particular security when necessary to meet its liquidity needs. There are fewer dealers in the market for high yield securities than investment grade obligations. The prices quoted by different dealers may vary significantly and the spread between the bid and asked price is generally much larger than higher quality instruments. Under adverse market or economic conditions, the secondary market for high yield securities could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become illiquid. As a result, the Fund could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the Fund's net asset value.
Since investors generally perceive that there are greater risks associated with lower quality debt securities of the type in which the Fund may invest a portion of its assets, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the debt securities market, changes in perceptions of issuers' creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the debt securities market, resulting in greater yield and price volatility.
If the Fund invests in high yield securities that are rated C or below, the Fund will incur significant risk in addition to the risks associated with investments in high yield securities and corporate loans. Distressed securities frequently do not produce income while they are outstanding. The Fund may purchase distressed securities that are in default or the issuers of which are in bankruptcy. The Fund may be required to bear certain extraordinary expenses in order to protect and recover its investment.
DISTRESSED SECURITIES
The Fund may, but currently does not intend to, invest up to 5% of its total assets in distressed securities, including corporate loans, which are the subject of bankruptcy proceedings or otherwise in default as to the repayment of principal and/or payment of interest at the time of acquisition by the Fund or are rated in the lower rating categories (Ca or lower by Moody's or CC or lower by Standard & Poor's) or which are unrated investments considered by Calamos to be of comparable quality. Investment in distressed securities is speculative and involves significant risk. Distressed securities frequently do not produce income while they are outstanding and may require the Fund to bear certain extraordinary expenses in order to protect and recover its investment. Therefore, to the extent the Fund seeks capital appreciation through investment in distressed securities, the Fund's ability to achieve current income for its shareholders may be diminished. The Fund also will be subject to significant uncertainty as to when and in what manner and for what value the obligations evidenced by the distressed securities will eventually be satisfied (e.g., through a liquidation of the obligor's assets, an exchange offer or plan of reorganization involving the distressed securities or a payment of some amount in satisfaction of the obligation). In addition, even if an exchange offer is made or a plan of reorganization is adopted with respect to distressed securities held by the Fund, there can be no assurance that the securities or other assets received by the Fund in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by the Fund upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of the Fund's participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed securities, the Fund may be restricted from disposing of such securities.
LOANS
The Fund may invest up to 5% of its total assets in loan participations and other direct claims against a borrower. The corporate loans in which the Fund invests primarily consist of direct obligations of a borrower and may include debtor in possession financings pursuant to Chapter 11 of the U.S.
Bankruptcy Code, obligations of a borrower issued in connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code, leveraged buy-out loans, leveraged recapitalization loans, receivables purchase facilities, and privately placed notes. The Fund may invest in a corporate loan at origination as a co-lender or by acquiring in the secondary market participations in, assignments of or novations of a corporate loan. By purchasing a participation, the Fund acquires some or all of the interest of a bank or other lending institution in a loan to a corporate or government borrower. The participations typically will result in the Fund having a contractual relationship only with the lender not the borrower. The Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. Many such loans are secured, although some may be unsecured. Such loans may be in default at the time of purchase. Loans that are fully secured offer the Fund more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Direct debt instruments may involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the Fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The markets in loans are not regulated by federal securities laws or the Securities and Exchange Commission (SEC).
As in the case of other high yield investments, such corporate loans may be rated in the lower rating categories of the established rating services (Ba or lower by Moody's or BB or lower by Standard & Poor's), or may be unrated investments considered by Calamos to be of comparable quality. As in the case of other high yield investments, such corporate loans can be expected to provide higher yields than lower yielding, higher rated fixed income securities, but may be subject to greater risk of loss of principal and income. There are, however, some significant differences between corporate loans and high yield bonds. Corporate loan obligations are frequently secured by pledges of liens and security interests in the assets of the borrower, and the holders of corporate loans are frequently the beneficiaries of debt service subordination provisions imposed on the borrower's bondholders. These arrangements are designed to give corporate loan investors preferential treatment over high yield investors in the event of a deterioration in the credit quality of the issuer. Even when these arrangements exist, however, there can be no assurance that the borrowers of the corporate loans will repay principal and/or pay interest in full. Corporate loans generally bear interest at rates set at a margin above a generally recognized base lending rate that may fluctuate on a day-to-day basis, in the case of the prime rate of a U.S. bank, or which may be adjusted on set dates, typically 30 days but generally not more than one year, in the case of the London Interbank Offered Rate. Consequently, the value of corporate loans held by the Fund may be expected to fluctuate significantly less than the value of other fixed rate high yield instruments as a result of changes in the interest rate environment. On the other hand, the secondary dealer market for certain corporate loans may not be as well developed as the secondary dealer market for high yield bonds, and therefore presents increased market risk relating to liquidity and pricing concerns.
FOREIGN SECURITIES
The Fund may invest up to 25% of its net assets, in securities of foreign issuers. For this purpose, foreign securities do not include American Depositary Receipts ("ADRs") or securities guaranteed by a United States person, but may include foreign securities in the form of European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or other securities representing underlying shares of foreign issuers. Positions in those securities are not necessarily denominated in the same currency as the common stocks into which they may be converted. ADRs are receipts typically issued by an American bank or trust company evidencing ownership of the underlying securities. EDRs are European receipts listed on the Luxembourg Stock Exchange evidencing a similar arrangement. GDRs are U.S. dollar-denominated receipts evidencing ownership of foreign securities. Generally, ADRs, in registered form, are designed
for the U.S. securities markets and EDRs and GDRs, in bearer form, are designed for use in foreign securities markets. The 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, the 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 Fund intends to invest in companies and government securities 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.
The Fund expects that substantially all of its investments will be in developed nations. However, the 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 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 Fund 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 the 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 the Fund enters into a forward contract, the Fund's custodian will segregate liquid assets of the Fund having a value equal to the Fund's commitment under such forward contract. At the maturity of the forward contract to deliver a particular currency, the Fund may either sell the portfolio security related to the contract and make delivery of the currency, or it may retain the security and either acquire the currency on the spot market or terminate its contractual obligation to deliver the currency by purchasing an offsetting contract with the same currency trader obligating it to purchase on the same maturity date the same amount of the currency. It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of a forward contract. Accordingly, it may be necessary for a Fund to purchase additional currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of currency the Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the currency. Conversely, it may be necessary to sell on the spot market some of the currency received upon the sale of the portfolio security if its market value exceeds the amount of currency the Fund is obligated to deliver.
If the 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 the 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. Because currency exchange transactions are usually conducted on a principal basis, no fees or commissions are involved.
SYNTHETIC FOREIGN MONEY MARKET POSITIONS
The Fund may invest in money market instruments denominated in foreign currencies. In addition to, or in lieu of, such direct investment, the 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.
DEBT OBLIGATIONS OF NON-U.S. GOVERNMENTS
An investment in debt obligations of non-U.S. governments and their political subdivisions (sovereign debt) involves special risks that are not present in corporate debt obligations. The non-U.S. issuer of the sovereign debt or the non-U.S. governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the Fund may have limited recourse in the event of a default. During periods of economic uncertainty, the market prices of sovereign debt may be more volatile than prices of debt obligations of U.S. issuers. In the past, certain non-U.S. countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and interest on their sovereign debt.
A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient non-U.S. currency, the relative size of the debt service burden, the sovereign debtor's policy toward its principal international lenders and local political constraints. Sovereign debtors may also be dependent on expected disbursements from non-U.S. governments, multilateral agencies and other entities to reduce principal and interest arrearages on their debt. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance or repay principal or interest when due may result in the cancellation of third-party commitments to lend funds to the sovereign debtor, which may further impair such debtor's ability or willingness to service its debts.
EURODOLLAR INSTRUMENTS AND SAMURAI AND YANKEE BONDS. The Fund may invest in Eurodollar instruments and Samurai and Yankee bonds. Eurodollar instruments are bonds of corporate and government issuers that pay interest and principal in U.S. dollars but are issued in markets outside the
United States, primarily in Europe. Samurai bonds are yen-denominated bonds sold in Japan by non-Japanese issuers. Yankee bonds are U.S. dollar-denominated bonds typically issued in the U.S. by non-U.S. governments and their agencies and non-U.S. banks and corporations. The Fund may also invest in Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee Certificates of Deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit issued by non-U.S. branches of domestic banks; ETDs are U.S. dollar-denominated deposits in a non-U.S. branch of a U.S. bank or in a non-U.S. bank; and Yankee CDs are U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a non-U.S. bank and held in the U.S. These investments involve risks that are different from investments in securities issued by U.S. issuers, including potential unfavorable political and economic developments, non-U.S. withholding or other taxes, seizure of non-U.S. deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to broker-dealers and banks.
Any such loan must be continuously secured by collateral in cash or cash
equivalents maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The Fund 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
Calamos'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.
OPTIONS ON SECURITIES, INDEXES AND CURRENCIES
The 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 the Nasdaq National Market System. The 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.)
The Fund will write call options and put options only if they are "covered." For example, in the case of a call option on a security, the option is "covered" if the Fund owns the security underlying the
call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or cash equivalents in such amount are held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio.
If an option written by the 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.
The 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 the 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 the Fund seeks to close out an option position. If the Fund were unable to close out an option that it has purchased on a security, it would have to exercise the option in order to realize any profit or the option would expire and become worthless. If the Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security until the option expired. As the writer of a covered call option on a security, the Fund foregoes, during the option's life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call. As the writer of a covered call option on a foreign currency, the Fund foregoes, during the option's life, the opportunity to profit from currency appreciation.
If trading were suspended in an option purchased or written by the 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
The 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.
The 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.
The 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. When a purchase or sale of a futures contract is made by the 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 the 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 is 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 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 the 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, the Fund may also use those investment vehicles, provided the Board of Trustees determines that their use is consistent with the Fund's investment objective.
When purchasing a futures contract or writing a put option on a futures contract, the 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.
The Fund may not maintain open short positions in futures contracts, call options written on futures contracts or call options written on indexes if, in the aggregate, the market value of all such open positions exceeds the current value of the securities in its portfolio, plus or minus unrealized gains and losses on the open positions, adjusted for the historical relative volatility of the relationship between the portfolio and the positions. For this purpose, to the extent the Fund has written call options on specific securities in its portfolio, the value of those securities will be deducted from the current market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5 and thereby avoid being deemed a "commodity pool operator," the 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%.
WARRANTS
The 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 be greater than the percentage increase or decrease in the value of the underlying common stock.
PORTFOLIO TURNOVER
Although the Fund does 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 the 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
The 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. The 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 a short sale against the box, the Fund does not deliver from its portfolio the securities sold and does not receive immediately the proceeds from the short sale. Instead, the Fund borrows the securities sold short from a broker-dealer through which the short sale is executed, and the broker-dealer delivers such securities, on behalf of the Fund, to the purchaser of such securities. Such broker-dealer is entitled to retain the proceeds from the short sale until the Fund delivers to such broker-dealer the securities sold short. In addition, the Fund is required to pay to the broker-dealer the amount of any dividends paid on shares sold short. Finally, to secure its obligation to deliver to such broker-dealer the securities sold short, the Fund must deposit and continuously maintain in a separate account with the Fund's custodian an equivalent amount of the securities sold short or securities convertible into or exchangeable for such securities without the payment of additional consideration. The Fund is said to have a short position in the securities sold until it delivers to the broker-dealer the securities sold, at which time the Fund receives the proceeds of the sale. Because the Fund ordinarily will want to continue to hold securities in its portfolio that are sold short, the Fund will normally close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short, rather than by delivering portfolio securities.
A short sale works the same way, except that the Fund places in the segregated account cash or U.S. government securities equal in value to the difference between (i) the market value of the securities sold short at the time they were sold short and (ii) any cash or U.S. government securities required to be deposited with the broker as collateral. In addition, so long as the short position is open, the Fund must adjust daily the value of the segregated account so that the amount deposited in it, plus any amount deposited with the broker as collateral, will equal the current market value of the security sold short. However, the value of the segregated account may not be reduced below the point at which the segregated account, plus any amount deposited with the broker, is equal to the market value of the securities sold short at the time they were sold short.
Short sales may protect the 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 the 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 the 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 the Fund's position in the convertible securities, the anticipated fluctuation in the conversion premiums is considered. The Fund will also incur transaction costs in connection with short sales. Certain provisions of the Internal Revenue Code (and related Treasury Regulations thereunder) may limit the degree to which the Fund is able to enter into short sales and other transactions with similar effects without triggering adverse tax consequences, which limitations might impair the Fund's ability to achieve its investment objective. See "U.S. Federal Income Tax Matters."
In addition to enabling the Fund to hedge against market risk, short sales may afford the 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.
"WHEN-ISSUED" AND DELAYED DELIVERY SECURITIES AND REVERSE REPURCHASE AGREEMENTS
The 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 Calamos 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.
The 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 the 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 may increase net asset value fluctuation.
ILLIQUID SECURITIES
The Fund may invest without limitation in securities that have not been registered for public sale, but that are eligible for purchase and sale by certain qualified institutional buyers. Although many of the Rule 144A Securities in which the Fund invests may be, in the view of Calamos, liquid if qualified institutional buyers are unwilling to purchase these Rule 144A Securities, they may be illiquid. The Fund may invest without limit in illiquid securities. Illiquid securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund pays for or recovers upon the sale of illiquid securities. Illiquid securities are also more difficult to value and Calamos's judgment may play a greater role in the valuation process. Investment of the Fund's assets in illiquid securities may restrict the Fund's ability to take advantage of market opportunities. The risks associated with illiquid securities may be particularly acute in situations in which the Fund's operations require cash and could result in the Fund borrowing to meet its short-term needs or incurring losses on the sale of illiquid securities.
The Fund may invest without limit in bonds, corporate loans, convertible securities, preferred stocks and other securities that lack a secondary trading market or are otherwise considered illiquid. Liquidity of a security relates to the ability to easily dispose of the security and the price to be obtained upon disposition of the security, which may be less than would be obtained for a comparable more liquid security. Such investments may affect the Fund's ability to realize the net asset value in the event of a voluntary or involuntary liquidation of its assets.
TEMPORARY INVESTMENTS
The Fund may make temporary investments without limitation when Calamos 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 that 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, the 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 the 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 the Fund to earn interest on assets awaiting long term investment. The Fund requires 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.
PREFERRED SHARES
The Fund may invest in preferred shares. The preferred shares that the Fund will invest in will typically be convertible securities. Preferred shares are equity securities, but they have many characteristics of fixed income securities, such as a fixed dividend payment rate and/or a liquidity preference over the issuer's common shares.
REAL ESTATE INVESTMENT FUNDS ("REITS") AND ASSOCIATED RISK FACTORS
REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund will indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in addition to the expenses paid by the Fund. Debt securities issued by REITs are, for the most part, general and unsecured obligations and are subject to risks associated with REITs.
Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated with such industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REIT's investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources, may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically REITs have been more volatile in price than the larger capitalization stocks included in Standard & Poor's 500 Stock Index.
OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other investment companies to
the extent that such investments are consistent with the Fund's investment
objective and policies and permissible under the Investment Company Act of 1940,
as amended (the "1940 Act"). Under the 1940 Act, the Fund may not acquire the
securities of other domestic or non-U.S. investment companies if, as a result,
(i) more than 10% of the Fund's total assets would be invested in securities of
other investment companies, (ii) such purchase would result in more than 3% of
the total outstanding voting securities of any one investment company being held
by the Fund, or (iii) more than 5% of the Fund's total assets would be invested
in any
one investment company. These limitations do not apply to the purchase of shares of any investment company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company.
The Fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies' expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund's own operations.
INVESTMENT RESTRICTIONS
The following are the Fund's fundamental investment restrictions. These restrictions may not be changed without the approval of the holders of a majority of the Fund's outstanding voting securities (which for this purpose and under the 1940 Act means the lesser of (i) 67% of the common shares represented at a meeting at which more than 50% of the outstanding common shares are represented or (ii) more than 50% of the outstanding common shares). If the Fund were to issue a class of preferred shares, the investment restrictions could not be changed without the approval of a majority of the outstanding common and preferred shares, voting together as a class, and the approval of a majority of the outstanding preferred shares, voting separately by class.
The Fund may not:
(1) Issue senior securities, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder.
(2) Borrow money, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder.
(3) Invest in real estate, except that the Fund may invest in securities of issuers that invest in real estate or interests therein, securities that are secured by real estate or interests therein, securities of real estate investment funds and mortgage-backed securities.
(4) Make loans, except by the purchase of debt obligations, by entering into repurchase agreements or through the lending of portfolio securities and as otherwise permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder.
(5) Invest in physical commodities or contracts relating to physical commodities.
(6) Act as an underwriter, except as it may be deemed to be an underwriter in a sale of securities held in its portfolio.
(7) Make any investment inconsistent with the Fund's classification as a diversified investment company under the 1940 Act and the rules and interpretive positions of the SEC thereunder.
(8) Concentrate its investments in securities of companies in any particular industry as defined in the 1940 Act and the rules and interpretive positions of the SEC thereunder.
All other investment policies of the Fund are considered non-fundamental and may be changed by the Board of Trustees without prior approval of the Fund's outstanding voting shares.
Under the 1940 Act, the Fund may invest up to 10% of its total assets in the aggregate in shares of other investment companies and up to 5% of its total assets in any one investment company, provided
the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. As a shareholder in any investment company, the Fund will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Fund's advisory fees and other expenses with respect to assets so invested. Holders of common shares would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein and in the Prospectus. As described in the prospectus in the section entitled "Risks," the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
In addition, to comply with federal income tax requirements for qualification as a "regulated investment company," the Fund's investments will be limited by both an income and an asset test. See "U.S. Federal Income Tax Matters."
As a non-fundamental policy, the Fund may not issue preferred shares, borrow money or issue debt securities in an aggregate amount exceeding 33 1/3% of the Fund's total assets.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Fund's Board of Trustees provides broad supervision over the Fund's
affairs. The officers of the Fund are responsible for the Fund's operations. The
Fund's Trustees and officers are listed below, together with their principal
occupations during the past five years. Asterisks indicates those Trustees who
are interested persons of the Fund within the meaning of the 1940 Act, and they
are referred to as Interested Trustees. Trustees who are not interested persons
of the Fund are referred to as Independent Trustees. Each of the Trustees,
except Messrs. Marsh and Rybak, serves as a Trustee of each of Calamos
Investment Trust and Calamos Advisors Trust (nine U.S. registered investment
portfolios), each of which Calamos serves as investment adviser (collectively,
the nine portfolios are called the "Calamos Funds"). Messrs. Marsh and Rybak are
nominees for election as Trustees of each of Calamos Investment Trust and
Calamos Advisors Trust. The address for all Interested Trustees and all officers
of the Fund is 1111 East Warrenville Road, Naperville, Illinois 60563-1493
except Mr. Marsh whose address is 311 South Wacker Drive, Suite 3000, Chicago,
IL 60606-6677. The addresses of the "non-interested" Trustees are as follows:
the address of Mr. Dowen is Department of Finance, Northern Illinois University,
DeKalb, Illinois 60115; that of Mr. Hanauer is 361 Forest Avenue, Suite 200,
Laguna Beach, California 92651; that of Mr. Neal is 309 Sterling Road,
Kenilworth, Illinois 60043; and that of Mr. Rybak is 12813 Misty Harbour Lane,
Palos Park, IL 60464.
TERM OF
POSITIONS OFFICE AND
HELD WITH THE LENGTH OF PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
NAME AND AGE FUND SERVICE AND OTHER DIRECTORSHIPS HELD BY THE TRUSTEE
----------------------- ---------------- -------------- --------------------------------------------
INTERESTED TRUSTEES:
*John P. Calamos (61) Trustee and Trustee since President, Calamos; President, Calamos Financial
President April 2002. Services, Inc. ("CFS"); Trustee,
Term expires Calamos Advisors Trust and Calamos Investment
in 2005. Trust.
*Nick P. Calamos (40) Trustee Trustee since Senior Executive Vice President, Calamos and CFS;
May 2002. Trustee, Calamos Advisors Trust and Calamos
Term expires Investment Trust.
in 2004.
*Weston W. Marsh (51) Trustee Trustee since Partner, Freeborn & Peters (law firm); Director,
May 2002. Telesource International (construction and power
Term expires company); Nominee for election as Trustee, Calamos
in 2005. Advisors Trust and Calamos Investment Trust.
INDEPENDENT TRUSTEES:
Richard J. Dowen (57) Trustee Trustee since Chair and Professor of Finance, Northern Illinois University;
May 2002. Trustee, Calamos Advisors Trust and Calamos
Term expires Investment Trust.
in 2004.
Joe F. Hanauer (64) Trustee Trustee since Director, MAF Bancorp (banking); Director, Homestore.com,
May 2002. Inc., (internet provider of real estate information and
Term expires products); Director, Grubb & Ellis Co. (advisory firm
in 2003. specializing in real estate); Director, Combined Investments,
L.P. (investment management); Trustee, Calamos Advisors Trust
and Calamos Investment Trust (since 2001).
John E. Neal (52) Trustee Trustee since Managing Director, Bank One Capital Markets (investment
May 2002. banking) (since 1999); Private Investor (1998); and
Term expires President, Kemper Mutual Funds (1996-1977); Trustee,
in 2003. Calamos Advisors Trust and Calamos Investment Trust (since 2001).
William Rybak (51) Trustee Trustee since Director, Howe Barnes Investments (since January 2002); Executive
May 2002. Vice President and Chief Financial Officer, Van Kampen
Term expires Investments, Inc. (and subsidiaries) (investment manager)
in 2005. (1986-2000); Director, Alliance Bancorp (formerly Hinsdale
Financial Corporation) (savings & loan holding company)
(1986-2001); Nominee for election as Trustee, Calamos Advisors
Trust and Calamos Investment Trust.
FUND OFFICERS:
Patrick H. Dudasik (46) Vice President Since Executive Vice President, Chief Financial and
April 2002. Administrative Officer and Treasurer of Calamos,
Serves at the since 2001; Chief Financial Officer, David Gomez
discretion of and Associates, 1998-2001; Chief Financial
the Board. Officer, Scudder Kemper Investments, Inc.,
(investment manager) 1994-1998.
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TERM OF
POSITIONS OFFICE AND
HELD WITH THE LENGTH OF PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
NAME AND AGE FUND SERVICE AND OTHER DIRECTORSHIPS HELD BY THE TRUSTEE
----------------------- ---------------- -------------- --------------------------------------------
Rhowena Blank (33) Treasurer Since Vice President-Operations, Calamos,(since 1999);
April 2002. Director of Operations, Christian Brothers
Serves at the Investment Services (investment manager),(1998-1999);
discretion of Audit Manager, Ernst & Young, LP (independent auditors),
the Board. (1994-1998).
Jeff Lotito (29) Assistant Since Operations Manager, Calamos, (since 2000);
Treasurer April 2002. Manager-Fund Administration, Van Kampen,
Serves at the (1999-2000); Supervisor-Corporate Accounting,
discretion of Stein Roe and Farnham Incorporated (investment manager),
the Board. (1998-1999); Supervisor-Financial Reporting, Scudder Kemper
Investments, Inc., (1996-1998).
James S. Hamman, Jr. Secretary Since Executive Vice President and General Counsel,
(32) April 2002. Calamos, (since 1998); Vice President and
Serves at the Associate Counsel, Scudder Kemper Investments,
discretion of Inc., (1996-1998).
the Board.
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* 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") because of their position with Calamos. Weston W. Marsh is a trustee who is an "interested person" of the Trust as defined in the 1940 Act because he is a partner at a law firm that has performed work for one or more principal underwriters. In addition, Mr. Marsh is a partner at a law firm that has performed work for John P. Calamos, the chief executive and a controlling person of Calamos (such work was not with respect to 1940 Act or Investment Advisers Act of 1940 matters). Upon the advice of counsel to the Trust, the Trust does not believe that Mr. Marsh is an "interested person" of Calamos.
The Trustees of the Trust are also Trustees of Calamos Advisors Trust and Calamos Investment Trust, both open-end investment companies advised by Calamos.
The Fund's Board of Trustees consists of seven members. The term of one class expires each year commencing with the first annual meeting following this public offering and no term shall continue for more than three years after the applicable election. The terms of Joe F. Hanauer and John E. Neal expire at the first annual meeting following this public offering, the terms of Nick P. Calamos and Richard J. Dowen expire at the second annual meeting, and the terms of John P. Calamos, Weston W. Marsh and William Rybak expire at the third annual meeting. Subsequently, each class of Trustees will stand for election at the conclusion of its respective term. Such classification may prevent replacement of a majority of the Trustees for up to a two-year period.
COMMITTEES OF THE BOARD OF TRUSTEES. The Funds Board of Trustees currently has three standing committees:
Executive Committee. Messrs. John Calamos and Nick Calamos are members of the Executive Committee, which has authority during intervals between meetings of the board of trustees to exercise the powers of the board, with certain exceptions.
Audit Committee. Messrs. Dowen, Hanauer, Neal, and Rybak serve on the Audit Committee. The Audit Committee recommends independent auditors to the trustees, monitors the auditors' performance, reviews the results of the Funds audit, and responds to other matters deemed appropriate by the Board of Trustees.
Governance Committee. Messrs. Dowen, Hanauer, Neal, Marsh and Rybak serve on the Governance Committee. The Governance Committee oversees the independence and effective functioning of the Board of Trustees and endeavors to be informed about good practices for fund boards. The members of the Governance Committee who are not interested persons of the Trust makes recommendations to the Board of Trustees regarding candidates for election as non-interested Trustees. The Governance Committee will not consider shareholder recommendations regarding candidates for election as Trustees. S-20
The Fund's Agreement and Declaration of Trust provides that the Fund will indemnify the Trustees and officers against liabilities and expenses incurred in connection with any claim in which they may be involved because of their offices with the Fund, unless it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Fund or that such indemnification would relieve any officer or Trustee of any liability to the Fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties.
COMPENSATION OF OFFICERS AND TRUSTEES
The Fund pays no salaries or compensation to any of its officers or to the Trustees who are affiliated persons of Calamos.
The following table sets forth certain information with respect to the compensation paid to each Trustee by the Fund and the Calamos Funds as a group. Compensation from the Fund is for the current calendar year and is estimated. Total compensation from the Calamos Funds as a group is for the calendar year ended December 31, 2001.
ESTIMATED AGGREGATE TOTAL COMPENSATION FROM THE
NAME OF TRUSTEE COMPENSATION FROM FUND FUND AND OTHER CALAMOS FUNDS(1)
---------------------------- ---------------------- -------------------------------
John P. Calamos $ 0 $ 0
Nick P. Calamos 0 0
Richard J. Dowen 6,200 20,000
Joe F. Hanauer 6,200 2,333
John E. Neal 6,200 2,330
Weston W. Marsh 6,200 0
William Rybak 6,200 0
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OWNERSHIP OF SHARES OF THE FUND AND OTHER CALAMOS FUNDS
The following table indicates the value of shares that each Trustee beneficially owns in the Fund and the Calamos Funds in the aggregate. The value of shares of the Calamos Funds is determined on the basis of the net asset value of the class of shares held as of December 31, 2001. The value of the shares held are stated in ranges in accordance with the requirements of the Securities and Exchange Commission (the "Commission"). The table reflects the Trustee's beneficial ownership of shares of the Calamos Funds. Beneficial ownership is determined in accordance with the rules of the SEC.
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
DOLLAR RANGE OF EQUITY REGISTERED INVESTMENT
NAME OF TRUSTEE SECURITIES IN THE FUND COMPANIES IN THE CALAMOS FUNDS(1)
---------------------------- ----------------------- ---------------------------------
INTERESTED TRUSTEES:
John P. Calamos None Over 100,000
Nick P. Calamos None Over 100,000
Weston W. Marsh None None
Non-Interested Trustees:
Richard J. Dowen None 50,001-100,000
Joe F. Hanauer None None
John E. Neal None Over 100,000
William Rybak None None
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(1) Messrs. Hanauer, Marsh and Rybak did not become trustees until 2002.
CODE OF ETHICS
The Fund and Calamos have adopted a code of ethics under Rule 17j-1 of the 1940 Act which is applicable to officers, directors/Trustees and designated employees of Calamos and CFS. Employees of Calamos and CFS are permitted to make personal securities transactions, including transactions in securities that the Fund may purchase, sell or hold, subject to requirements and restrictions set forth in the code of ethics of Calamos and CFS. The code of ethics contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities of Calamos and CFS employees and the interests of investment advisory clients such as the Fund. Among other things, the code of ethics prohibits certain types of transactions absent prior approval, imposes time periods during which personal transaction of duplicate broker confirmations and statements and quarterly reporting of securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process. Exceptions to these and other provisions of the code of ethics may be granted in particular circumstances after review by appropriate personnel.
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Subject to the overall authority of the board of trustees, Calamos
provides the Fund with investment research, advice and supervision and furnishes
continuously an investment program for the Fund. In addition, Calamos furnishes
for use of the Fund such office space and facilities as the Fund may require for
its reasonable needs and supervises the business and affairs of the Fund and
provides the following other services on behalf of the Fund and not provided by
persons not a party to the investment management agreement: (i) preparing or
assisting in the preparation of reports to and meeting materials for the
Trustees; (ii) supervising, negotiating contractual arrangements with, to the
extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
(iii) assisting in the preparation and making of filings with the Commission and
other regulatory and self-regulatory organizations, including, but not limited
to, preliminary and definitive proxy materials, amendments to the Fund's
registration statement on Form N-2 and semi-annual reports on Form N-SAR; (iv)
overseeing the tabulation of proxies by the Fund's transfer agent; (v) assisting
in the preparation and filing of the Fund's federal, state and local tax
returns; (vi) assisting in the preparation and filing of the Fund's federal
excise tax return pursuant to Section 4982 of the Code; (vii) providing
assistance with investor and public relations matters; (viii) monitoring the
valuation of portfolio securities and the calculation of net asset value; (ix)
monitoring the registration of shares of beneficial interest of the Fund under
applicable federal and state securities laws; (x) maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; (xi) assisting in establishing the accounting policies of the Fund;
(xii) assisting in the resolution of accounting issues that may arise with
respect to the Fund's operations and consulting with the Fund's independent
accountants, legal counsel and the Fund's other agents as necessary in
connection therewith; (xiii) reviewing the Fund's bills; (xiv) assisting the
Fund in determining the amount of dividends and distributions available to be
paid by the Fund to its shareholders, preparing and arranging for the printing
of dividend notices to shareholders, and providing the transfer and dividend
paying agent, the custodian, and the accounting agent with such information as
is required for such parties to effect the payment of dividends and
distributions; and (xv) otherwise assisting the Fund as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trustees.
Under the investment management agreement, the Fund pays to Calamos a fee based on the average weekly managed assets that is accrued daily and paid on a monthly basis. The fee paid by the Fund is at the annual rate of 0.80% of managed assets. Because the fees paid to Calamos are determined on the basis of the Fund's managed assets, Calamos's interest in determining whether to leverage the Fund may differ from the interests of the Fund.
For the first eight years of the Fund's operations, Calamos has contractually agreed to waive its management fee in the amounts, and for the time periods, set forth below:
FEE WAIVED FEE WAIVED
(AS A PERCENTAGE OF (AS A PERCENTAGE OF
PERIOD ENDING AVERAGE WEEKLY PERIOD ENDING AVERAGE WEEKLY
JUNE 30 MANAGED ASSETS) JUNE 30 MANAGED ASSETS)
-------------- ------------------- ------------- -------------------
2002(1) 0.25% 2007 0.25%
2003 0.25% 2008 0.18%
2004 0.25% 2009 0.11%
2005 0.25% 2010 0.04%
2006 0.25%
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Calamos has not agreed to waive any portion of its management fees beyond June 30, 2010.
Under the terms of its investment management agreement with the Fund,
except for the services and facilities provided by Calamos as set forth therein,
the Fund shall assume and pay all expenses for all other Fund operations and
activities and shall reimburse Calamos for any such expenses incurred by
Calamos. The expenses borne by the Fund shall include, without limitation:
(a) organization expenses of the Fund (including out-of-pocket expenses, but not
including the Manager's overhead or employee costs); (b) fees payable to
Calamos; (c) legal expenses; (d) auditing and accounting expenses; (e)
maintenance of books and records that are required to be maintained by the
Fund's custodian or other agents of the Fund; (f) telephone, telex, facsimile,
postage and other communications expenses; (g) taxes and governmental fees; (h)
fees, dues and expenses incurred by the Fund in connection with membership in
investment company trade organizations and the expense of attendance at
professional meetings of such organizations; (i) fees and expenses of accounting
agents, custodians, subcustodians, transfer agents, dividend disbursing agents
and registrars; (j) payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; (k) expenses
of preparing share certificates; (l) expenses in connection with the issuance,
offering, distribution, sale, redemption or repurchase of securities issued by
the Fund; (m) expenses relating to investor and public relations provided by
parties other than Calamos; (n) expenses and fees of registering or qualifying
shares of beneficial interest of the Fund for sale; (o) interest charges, bond
premiums and other insurance expenses; (p) freight, insurance and other charges
in connection with the shipment of the Fund's portfolio securities; (q) the
compensation and all expenses (specifically including travel expenses relating
to Fund business) of Trustees, officers and employees of the Fund who are not
affiliated persons of Calamos; (r) brokerage commissions or other costs of
acquiring or disposing of any portfolio securities of the Fund; (s) expenses of
printing and distributing reports, notices and dividends to shareholders; (t)
expenses of preparing and setting in type, printing and mailing prospectuses and
statements of additional information of the Fund and supplements thereto; (u)
costs of stationery; (v) any litigation expenses; (w) indemnification of
Trustees and officers of the Fund; (x) costs of shareholders' and other
meetings; (y) interest on borrowed money, if any; and (z) the fees and other
expenses of listing the Fund's shares on the New York Stock Exchange or any
other national stock exchange.
Unless earlier terminated as described below, the investment management agreement will remain in effect until August 1, 2003. The investment management agreement continues in effect 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 (as defined in the 1940 Act) of the Fund, and (2) a majority of the trustees who are not interested persons of any party to the investment management agreement, cast in person at a meeting called for the purpose of voting on such approval. The investment management agreement may be terminated at any time, without penalty, by either the Fund or Calamos upon 60 days' written notice, and is automatically terminated in the event of its assignment as defined in the 1940 Act.
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE INVESTMENT MANAGEMENT AGREEMENT. The Fund's investment management agreement be approved before it is entered into and thereafter annually both by the Board of Trustees and a majority of the Independent Trustees voting separately. The Independent Trustees have determined that the terms of the Fund's investment management agreement are fair and reasonable and that the agreement is in the Fund's best interests. The Independent Trustees believe that the investment management agreement will enable the Fund to enjoy high quality investment management services at a cost which they deem appropriate, reasonable and in the best interests of the Fund. In making such determinations, the Independent Trustees relied upon the assistance of counsel to the Independent Trustees.
In evaluating the investment management agreement, the Independent Trustees considered Calamos, its affiliates and their personnel, operations and financial condition. The Independent Trustees discussed with representatives
of Calamos the Fund's operations and Calamos's ability to provide advisory and other services to the Fund. The Independent Trustees also reviewed, among other things:
- the investment performance of other Calamos funds with similar investment strategies;
- the proposed fees to be charged by Calamos for investment management services;
- the Fund's projected total operating expenses;
- the investment performance, fees and total expenses of investment companies with similar objectives and strategies managed by other investment advisers;
- the experience of the investment advisory and other personnel providing services to the Fund and the historical quality of the services provided by Calamos; and
The Independent Trustees considered the following as relevant to their recommendations: (1) the favorable history, reputation, qualification and background of Calamos, as well as the qualifications of its personnel and its financial condition; (2) that the fee and estimated expense ratios of the Fund are reasonable given the quality of services expected to be provided and are comparable to the fee and expense ratios of similar investment companies; (3) the relative performance of other funds managed by Calamos with similar objectives compared to the results of other comparable investment companies and unmanaged indices; and (4) other factors that the Independent Trustees deemed relevant.
The use of the name "Calamos" in the name of the Fund is pursuant to licenses granted by Calamos, and the Fund has agreed to change the names to remove those references if Calamos ceases to act as investment adviser to the Fund.
Princeton Administrators, L.P., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, will serve as administrator for the Fund. Calamos (and not the Fund) will pay the administrator a monthly fee at an annual rate of 0.125% of the Fund's average weekly managed assets, subject to a monthly minimum fee of $12,500.
PORTFOLIO TRANSACTIONS
Portfolio transactions on behalf of the Fund 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 Fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by the Fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer.
In executing portfolio transactions, Calamos uses its best efforts to obtain for the Fund the most favorable combination of price and execution available. In seeking the most favorable combination of price and execution, Calamos considers all factors it deems relevant, including price, the size of the transaction, the nature of the market for the security, the amount of commission, the timing of the transaction taking into account market prices and trends, the execution capability of the broker-dealer and the quality of service rendered by the broker-dealer in other transactions.
The Trustees have determined that portfolio transactions for the Fund may be executed through CFS if, in the judgment of Calamos, 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 Fund 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 Fund 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, Calamos may consider sales of shares of the Fund as a factor in the selection of broker-dealers to execute portfolio transactions for that Fund.
In allocating the Fund's portfolio brokerage transactions to unaffiliated broker-dealers, Calamos 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 Calamos believes these services have substantial value, they are considered supplemental to Calamos'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"), Calamos may pay a broker-dealer that provides brokerage and research services an amount of commission for effecting a securities transaction for the Fund in excess of the commission that another broker-dealer would have charged for effecting that transaction if the amount is believed by Calamos to be reasonable in relation to the value of the overall quality of the brokerage and research services provided. Other clients of Calamos may indirectly benefit from the provision of these services to Calamos, and the Fund may indirectly benefit from services provided to Calamos as a result of transactions for other clients.
REPURCHASE OF COMMON SHARES
The Fund is a closed-end investment company and as such its shareholders will not have the right to cause the Fund to redeem their shares. Instead, the Fund's common shares will trade in the open market at a price that will be a function of several factors, including dividend levels (which are in turn affected by expenses), net asset value, call protection, dividend stability, relative demand for and supply of such shares in the market, general market and economic conditions and other factors. Because shares of a closed-end investment company may frequently trade at prices lower than net asset value, the Fund's Board of Trustees may consider action that might be taken to reduce or eliminate any material discount from net asset value in respect of common shares, which may include the repurchase of such shares in the open market or in private transactions, the making of a tender offer for such shares, or the conversion of the Fund to an open-end investment company. The Board of Trustees may decide not to take any of these actions. In addition, there can be no assurance that share repurchases or tender offers, if undertaken, will reduce market discount.
Notwithstanding the foregoing, at any time when the Fund's preferred shares are outstanding, the Fund may not purchase, redeem or otherwise acquire any of its common shares unless (1) all accumulated preferred shares dividends have been paid and (2) at the time of such purchase, redemption or acquisition, the net asset value of the Fund's portfolio (determined after deducting the acquisition price of the common shares) is at least 200% of the liquidation value of the outstanding preferred shares (expected to equal the original purchase price per share plus any accrued and unpaid dividends thereon). Any service fees incurred in connection with any tender offer made by the Fund will be borne by the Fund and will not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment restrictions, the Fund may borrow to finance the repurchase of shares or to make a tender offer. Interest on any borrowings to finance share repurchase transactions or the accumulation of cash by the Fund in anticipation of share repurchases or tenders will reduce the Fund's net income. Any share repurchase, tender offer or borrowing that might be approved by the Fund's Board of Trustees would have to comply with the Exchange Act, the 1940 Act and the rules and regulations thereunder.
Although the decision to take action in response to a discount from net asset value will be made by the Board of Trustees at the time it considers such issue, it is not currently anticipated that the Board of Trustees would authorize repurchases of common shares or a tender offer for such shares if: (1) such transactions, if consummated, would (a) result in the delisting of the common shares from the New York Stock Exchange, or (b) impair the Fund's status as a regulated investment company under the Code (which would make the Fund a taxable entity, causing the Fund's income to be taxed at the corporate level in addition to the taxation of shareholders who receive dividends from the Fund) or as a registered closed-end investment company under the 1940 Act; (2) the Fund would not be able to liquidate portfolio securities in an orderly manner and consistent with the Fund's investment objective and policies in order to repurchase shares; or (3) there is, in the board's judgment, any (a) material legal action or proceeding instituted or threatened challenging such transactions or otherwise materially adversely affecting the Fund, (b) general suspension of or limitation on prices for trading securities on the New York Stock Exchange, (c) declaration of a banking moratorium by federal or state authorities or any suspension of payment by United States or New York banks, (d) material limitation affecting the Fund or the issuers of its portfolio securities by federal or state authorities on the extension of credit by lending institutions or on the exchange of foreign currency, (e) commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (f) other event or condition which would have a material adverse effect (including any adverse tax effect) on the Fund or its shareholders if shares were repurchased.
The repurchase by the Fund of its shares at prices below net asset value will result in an increase in the net asset value of those shares that remain outstanding. However, there can be no assurance that share repurchases or tender offers at or below net asset value will result in the Fund's shares trading at a price equal to their net asset value. Nevertheless, the fact that the Fund's shares may be the subject of repurchase or tender offers from time to time, or that the Fund may be converted to an open-end investment company, may reduce any spread between market price and net asset value that might otherwise exist.
In addition, a purchase by the Fund of its common shares will decrease the Fund's total managed assets which would likely have the effect of increasing the Fund's expense ratio. Any purchase by the Fund of its common shares at a time when preferred shares are outstanding will increase the leverage applicable to the outstanding common shares then remaining.
Before deciding whether to take any action if the common shares trade below net asset value, the Fund's Board of Trustees would likely consider all relevant factors, including the extent and duration of the discount, the liquidity of the Fund's portfolio, the impact of any action that might be taken on the Fund or its shareholders and market considerations. Based on these considerations, even if the Fund's shares should trade at a discount, the Board of Trustees may determine that, in the interest of the Fund and its shareholders, no action should be taken.
U.S. FEDERAL INCOME TAX MATTERS
The following is a summary discussion of certain U.S. federal income tax consequences that may be relevant to a shareholder that acquires, holds and/or disposes of common shares of the Fund. This
discussion only addresses U.S. federal income tax consequences to U.S. shareholders who hold their shares as capital assets and does not address all of the U.S. federal income tax consequences that may be relevant to particular shareholders in light of their individual circumstances. This discussion also does not address the tax consequences to shareholders who are subject to special rules, including, without limitation, financial institutions, insurance companies, dealers in securities or foreign currencies, foreign holders, persons who hold their shares as or in a hedge against currency risk, a constructive sale, or conversion transaction, holders who are subject to the alternative minimum tax, or tax-exempt or tax-deferred plans, accounts, or entities. In addition, the discussion does not address any state, local, or foreign tax consequences. The discussion reflects applicable tax laws of the United States as of the date of this prospectus, which tax laws may be changed or subject to new interpretations by the courts or the Internal Revenue Service ("IRS") retroactively or prospectively. No attempt is made to present a detailed explanation of all U.S. federal income tax concerns affecting the Fund and its shareholders, and the discussion set forth herein does not constitute tax advice. Investors are urged to consult their own tax advisers to determine the specific tax consequences to them of investing in the Fund, including the applicable federal, state, local and foreign tax consequences to them and the effect of possible changes in tax laws.
The Fund intends to elect to be treated and to qualify each year as a "regulated investment company" under Subchapter M of the Code so that it will not pay U.S. federal income tax on income and capital gains distributed to shareholders. If a Fund qualifies as a regulated investment company and distributes to its shareholders at least 90% of the sum of (i) its "investment company taxable income" as that term is defined in the Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (ii) the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the Fund will be relieved of U.S. federal income tax on any income of the Fund, including long-term capital gains, distributed to shareholders. However, if the Fund retains any investment company income or "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), it will be subject to U.S. federal income tax at regular corporate rates on the amount retained. The Fund intends to distribute at least annually all or substantially all of its investment company income, net tax-exempt interest, and net capital gain. If for any taxable year the Fund does not qualify as a regulated investment company for U.S. federal income tax purposes, it would be treated as a U.S. corporation subject to U.S. federal income tax and distributions to its shareholders would not be deductible by the Fund in computing its taxable income. In addition, in the event that the Fund does not so qualify, the Fund's distributions, to the extent derived from the Fund's current or accumulated earnings and profits, would generally constitute ordinary dividends, which although eligible for the corporate dividend received deduction, would be taxable to shareholders as ordinary income, even though such distributions might otherwise, at least in part, have been treated as long-term capital gains in such shareholder's hands.
Under the Code, the Fund will be subject to a nondeductible 4% federal excise tax on a portion of its undistributed ordinary income and capital gains for any year if it fails to meet certain distribution requirements with respect to that year. The Fund intends to make distributions in a timely manner and accordingly does not expect to be subject to the excise tax.
The Fund expects to declare the initial monthly dividend on the common shares within approximately 45 days of the completion of this offering and to pay that initial monthly dividend approximately 60 to 90 days after the completion of this offering. The Fund intends to distribute any net short- and long-term capital gains at least annually. Dividends from income and/or capital gains may also be paid at such other times as may be necessary for the Fund to avoid U.S. federal income or excise tax.
In order to qualify as a regulated investment company under Subchapter M of the Code, the Fund must, among other things, derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies (the "90% income test"). For purposes of the 90% income test, the character of income earned by certain entities in which the Fund invests that are not treated as corporations (e.g., partnerships) for U.S. federal income tax purposes will generally pass through to the Fund. Consequently, the Fund may be required to limit its equity investments in such entities that earn fee income, rental income or other nonqualifying income.
In addition to the 90% income test, the Fund must also diversify its holdings (commonly referred to as the "asset test") so that, at the end of each quarter of its taxable year (i) at least 50% of the market value of the Fund's assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies and other securities, with such other securities of any one issuer limited for the purposes of this calculation to an amount not greater in value than 5% of the value of the Fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or of two or more issuers controlled by the Fund and engaged in the same, similar or related trades or businesses.
Unless a shareholder is ineligible to participate or elects otherwise, all distributions will be automatically reinvested in additional common shares of the Fund pursuant to the Automatic Dividend Reinvestment Plan (the "Plan"). For U.S. federal income tax purposes, all dividends are generally taxable whether a shareholder takes them in cash or they are reinvested pursuant to the Plan in additional shares of the Fund. Dividends from investment company taxable income, which includes net investment income, net short-term capital gain in excess of net long-term capital loss and certain net foreign exchange gains, are taxable as ordinary income to the extent of the Fund's current and accumulated earnings and profits. Dividends from net capital gain (net long-term capital gain in excess of net short-term capital loss), if any, are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the Fund. The U.S. federal income tax status of all distributions will be designated by the Fund and reported to the shareholders annually.
If the Fund retains any net capital gain, the Fund may designate the retained amount as undistributed capital gains in a notice to shareholders who, if subject to U.S. federal income tax on long-term capital gains (i) will be required to include in income, as long-term capital gain, their proportionate share of such undistributed amount, and (ii) will be entitled to credit their proportionate share of the tax paid by the Fund on the undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by the difference between the amount of undistributed net capital gain included in the shareholder's gross income and the tax deemed paid by the shareholders.
If a shareholder's distributions are automatically reinvested pursuant to the Plan and the Plan Agent invests the distribution in shares acquired on behalf of the shareholder in open-market purchases, for U.S. federal income tax purposes, the shareholder will be treated as having received a taxable distribution in the amount of the cash dividend that the shareholder would have received if the shareholder had elected to receive cash. If a shareholder's distributions are automatically reinvested pursuant to the Plan and the Plan Agent invests the distribution in newly issued shares of the Fund, the shareholder will be treated as receiving a taxable distribution equal to the fair market value of the stock the shareholder receives.
Any dividend declared by the Fund as of a record date in October, November or December and paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection with certain transactions involving foreign currency-denominated debt securities, certain options and futures contracts relating to foreign currency, foreign currency forward contracts, foreign currencies, or payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such gains and losses to be treated as ordinary income and losses and may affect the amount, timing and character of distributions to shareholders. Under future Treasury regulations, any such transactions that are not directly related to the Fund's investments in stock or securities (or its options contracts or futures contracts with respect to stock or securities) may have to be limited in order to enable the Fund to satisfy the 90% income test.
If the Fund acquires any equity interest (under future Treasury regulations, generally including not only stock but also an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or that hold at least 50% of their assets in investments producing such passive income ("passive foreign investment companies"), the Fund could be subject to U.S. federal income tax and additional interest charges on "excess distributions" received from such companies or on gain from the sale of stock in such companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction for such a tax. An election may generally be available that would ameliorate these adverse tax consequences, but any such election could require the Fund to recognize taxable income or gain (subject to tax distribution requirements) without the concurrent receipt of cash. These investments could also result in the treatment of associated capital gains as ordinary income. The Fund may limit and/or manage its holdings in passive foreign investment companies to limit its tax liability or maximize its return from these investments.
The Fund may invest to a significant extent in debt obligations that are in the lowest rating categories or are unrated, including debt obligations of issuers not currently paying interest or who are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the Fund. Tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the Fund when, as and if it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.
If the Fund utilizes leverage through borrowing, asset coverage limitations imposed by the 1940 Act as well as additional restrictions that may be imposed by certain lenders on the payment of dividends or distributions potentially could limit or eliminate the Fund's ability to make distributions on its common shares until the asset coverage is restored. These limitations could prevent the Fund from distributing at least 90% of its net income as is required under the Code and therefore might jeopardize the Fund's qualification for the reduced rates of corporate tax applicable to certain regulated investment companies and/or might subject the Fund to the nondeductible 4% excise tax. Upon any failure to meet the asset coverage requirements imposed by the 1940 Act, the Fund may, in its sole discretion and to the extent permitted under the 1940 Act, purchase or redeem shares of preferred stock in order to maintain or restore the requisite asset coverage and avoid the adverse consequences to the Fund and its shareholders of failing to meet the distribution requirements. There can be no assurance, however, that any such action
would achieve these objectives. The Fund will endeavor to avoid restrictions on its ability to distribute dividends.
If the Fund invests in certain pay-in-kind securities, zero coupon securities, deferred interest securities or, in general, any other securities with original issue discount (or with market discount if the Fund elects to include market discount in income currently), the Fund must accrue income on such investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, the Fund must distribute, at least annually, all or substantially all of its net income, including such accrued income, to shareholders to avoid U.S. federal income and excise taxes. Therefore, the Fund may have to dispose of its portfolio securities under disadvantageous circumstances to generate cash, or may have to leverage itself by borrowing the cash, to satisfy distribution requirements.
At the time of an investor's purchase of the Fund's shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the Fund's portfolio or undistributed taxable income of the Fund. Consequently, subsequent distributions by the Fund with respect to these shares from such appreciation or income may be taxable to such investor even if the net asset value of the investor's shares is, as a result of the distributions, reduced below the investor's cost for such shares and the distributions economically represent a return of a portion of the investment.
Sales and other dispositions of the Fund's shares are taxable events for shareholders that are subject to tax. Shareholders should consult their own tax advisors with reference to their individual circumstances to determine whether any particular transaction in the Fund's shares is properly treated as a sale for tax purposes (as the following discussion assumes) and the tax treatment of any gains or losses recognized in such transactions. Any loss realized by a shareholder upon the sale or other disposition of shares with a tax holding period of six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain with respect to such shares. Losses on sales or other dispositions of shares may be disallowed under "wash sale" rules in the event of other investments in the Fund (including those made pursuant to reinvestment of dividends) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares. In such a case, the disallowed portion of any loss generally would be included in the U.S. federal tax basis of the shares acquired in the other investments in the Fund.
The Fund may engage in various transactions utilizing options, futures contracts, forward contracts, hedge instruments, straddles, and other similar transactions. Such transactions may be subject to special provisions of the Code that, among other things, affect the character of any income realized by the Fund from such investments, accelerate recognition of income to the Fund, defer Fund losses, and affect the determination of whether capital gain and loss is characterized as long-term or short-term capital gain or loss. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions may also require the Fund to mark-to-market certain types of the positions in its portfolio (i.e., treat them as if they were closed out), which may cause the Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the distribution requirements for avoiding U.S. federal income and excise taxes. The Fund will monitor its transactions, will make the appropriate tax elections, and will make the appropriate entries in its books and records when it acquires an option, futures contract, forward contract, hedge instrument or other similar investment in order to mitigate the effect of these rules, prevent disqualification of the Fund as a regulated investment company and minimize the imposition of U.S. federal income and excise taxes.
Certain distributions by the Fund to its corporate shareholders may qualify for the corporate dividends-received deduction subject to certain holding period requirements and limitations on debt financings under the Code, but only to the extent the Fund earned dividend income from stock investments in U.S. domestic corporations and certain other requirements are satisfied. The Fund is
permitted to acquire stocks of U.S. domestic corporations, and it is therefore possible that a small portion of the Fund's distributions, from the dividends attributable to such stocks, may qualify for the dividend-received deduction. Such qualifying portion, if any, may affect a corporate shareholder's liability for alternative minimum tax and/or result in basis reductions and other consequences in certain circumstances.
The IRS has taken the position that if a regulated investment company has two classes of shares, it must designate distributions made to each class in any year as consisting of no more than such class's proportionate share of particular types of income, including dividends qualifying for the corporate dividends-received deduction (if any) and net capital gains. Consequently, if both common shares and preferred shares are outstanding, the Fund intends to designate distributions made to the classes of particular types of income in accordance with the classes' proportionate shares of such income. Thus, the Fund will designate dividends qualifying for the corporate dividends-received deduction (if any), income not qualifying for the dividends-received deduction and net capital gains in a manner that allocates such income between the holders of common shares and preferred shares in proportion to the total distributions made to each class during or for the taxable year, or otherwise as required by applicable law.
The Fund may invest in REITs that hold residual interests in real estate mortgage investment conduits ("REMICs"). Under Treasury regulations that have not yet been issued, but may apply retroactively, a portion of the Fund's income from a REIT that is attributable to the REITS's residual interest in a REMIC (referred to in the Code as an "excess inclusion") will be subject to federal income tax in all events. These regulations are also expected to provide that excess inclusion income of a regulated investment company, such as the Fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest directly. In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on unrelated business income, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign shareholder, will not qualify for any reduction in U.S. federal withholding tax. In addition, if at any time during any taxable year a "disqualified organization" (as defined in the Code) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the highest federal income tax rate imposed on corporations. The Fund does not intend to invest in REITs in which a substantial portion of the assets will consist of residual interests in REMICs.
The Fund may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect to its investments in those countries, which would, if imposed, reduce the yield on or return from those investments. Tax treaties between certain countries and the U.S. may reduce or eliminate such taxes in some cases. The Fund does not expect to satisfy the requirements for passing through to its shareholders their pro rata shares of qualified foreign taxes paid by the Fund, with the result that shareholders will not include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such taxes on their own tax returns.
Federal law requires that the Fund withhold, as "backup withholding," 30% (for calendar years 2002 and 2003) of reportable payments, including dividends, capital gain distributions and the proceeds of sales or other dispositions of the Fund's shares paid to shareholders who have not complied with IRS
regulations. In order to avoid this withholding requirement, shareholders must certify on their Account Applications, or on a separate IRS Form W-9, that the Social Security Number or other Taxpayer Identification Number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt from backup withholding. The Fund may nevertheless be required to withhold if it receives notice from the IRS or a broker that the number provided is incorrect or backup withholding is applicable as a result of previous underreporting of interest or dividend income.
The description of certain federal tax provisions above relates only to U.S. federal income tax consequences for shareholders who are U.S. persons, (i.e., U.S. citizens or residents or U.S. corporations, partnerships, Funds or estates and who are subject to U.S. federal income tax). Investors other than U.S. persons may be subject to different U.S. tax treatment, including a non-resident alien U.S. withholding tax at the rate of 30% or at a lower treaty rate on amounts treated as ordinary dividends from the Fund and, unless an effective IRS Form W-8BEN, or other authorized withholding certificate is on file, to backup withholding at the rate of 30% on certain other payments from the Fund. Shareholders should consult their own tax advisors on these matters and on any specific question of U.S. federal, state, local, foreign and other applicable tax laws.
PERFORMANCE-RELATED, COMPARATIVE AND OTHER INFORMATION
The Fund may quote certain performance-related information and may compare certain aspects of its portfolio and structure to other substantially similar closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar Inc. or other independent services. Comparison of the Fund to an alternative investment should be made with consideration of differences in features and expected performance. The Fund may obtain data from sources or reporting services, such as Bloomberg Financial ("Bloomberg") and Lipper, that the Fund believes to be generally accurate.
From time to time, the Fund and/or Calamos may report to shareholders or to the public in advertisements concerning the performance of Calamos as adviser to clients other than the Fund, or on the comparative performance or standing of Calamos in relation to other money managers. Calamos also may provide to current or prospective private account clients, in connection with standardized performance information for the Fund, performance information for the Fund gross of fees and expenses for the purpose of assisting such clients in evaluating similar performance information provided by other investment managers or institutions. Comparative information may be compiled or provided by independent ratings services or by news organizations. Performance information for the Fund or for other investment companies or accounts managed by Calamos may also be compared to various unmanaged indexes or to other benchmarks, some of which may not be available for direct investment. Any performance information, whether related to the Fund or Calamos, should be considered in light of the Fund's investment objective and policies, the characteristics and quality of the Fund, and the market conditions during the time period indicated, and should not be considered to be representative of what may be achieved in the future.
Past Performance is not indicative of future results. At the time Common Shareholders sell their shares, they may be worth more or less than their original investment. At any time in the future, yields and total return may be higher or lower than past yields and total return, and there can be no assurance that any historical results will continue.
From time to time, Calamos or the Fund may use, in advertisements or information furnished to present or prospective shareholders, information regarding Calamos including, without limitation, information regarding Calamos' investment style, organization, professional staff, clients (including other registered investment companies), assets under management and performance record. These materials may refer to opinions or rankings of Calamos' overall investment management performance contained in third-party reports or publications. Calamos has been dedicated to convertible securities research and investing since 1977. John P. Calamos and Nick P. Calamos have led the research and portfolio management team together since the early 1980s. Calamos employs a disciplined, quantitative investment process which has been designed and refined over 25 years.
Advertisements for the Fund may make reference to certain other open-end investment companies managed by Calamos, including the Calamos Convertible Fund which was introduced in 1985.
From time to time, the Fund's advertisements or information furnished to present or prospective shareholders may refer to the returns and yields offered by various types of investments, as well as the yield spreads on such investments. For instance, such advertisements may note, if applicable, that convertibles have outperformed other classes of bonds.
CONVERTIBLES OUTPERFORMED OTHER BOND CLASSES
July 1, 1976 to December 31, 2001
Includes Consumer Price Index (CPI)
Long-Term Intermediate Municipal Convertible Corporate
Government Government Bonds Bonds Bonds Bonds CPI
Jun-76 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Jul-76 $1.01 $1.01 $1.01 $1.01 $1.01 $1.01
Aug-76 $1.03 $1.03 $1.02 $1.02 $1.03 $1.01
Sep-76 $1.04 $1.04 $1.02 $1.04 $1.05 $1.01
Oct-76 $1.05 $1.05 $1.02 $1.03 $1.06 $1.02
Nov-76 $1.09 $1.09 $1.06 $1.06 $1.08 $1.02
Dec-76 $1.12 $1.09 $1.09 $1.10 $1.10 $1.02
Jan-77 $1.08 $1.07 $1.09 $1.10 $1.09 $1.03
Feb-77 $1.08 $1.08 $1.09 $1.09 $1.09 $1.04
Mar-77 $1.08 $1.08 $1.10 $1.09 $1.10 $1.05
Apr-77 $1.09 $1.09 $1.11 $1.11 $1.11 $1.06
May-77 $1.11 $1.09 $1.11 $1.12 $1.12 $1.06
Jun-77 $1.12 $1.10 $1.13 $1.15 $1.14 $1.07
Jul-77 $1.12 $1.10 $1.13 $1.14 $1.14 $1.07
Aug-77 $1.14 $1.11 $1.15 $1.13 $1.16 $1.08
Sep-77 $1.14 $1.11 $1.16 $1.12 $1.16 $1.08
Oct-77 $1.12 $1.10 $1.15 $1.11 $1.15 $1.08
Nov-77 $1.14 $1.11 $1.16 $1.14 $1.16 $1.09
Dec-77 $1.12 $1.11 $1.16 $1.14 $1.15 $1.09
Jan-78 $1.11 $1.11 $1.16 $1.12 $1.15 $1.10
Feb-78 $1.11 $1.11 $1.17 $1.12 $1.15 $1.11
Mar-78 $1.11 $1.11 $1.17 $1.15 $1.15 $1.12
Apr-78 $1.10 $1.12 $1.16 $1.18 $1.16 $1.13
May-78 $1.10 $1.12 $1.15 $1.20 $1.16 $1.14
Jun-78 $1.09 $1.11 $1.13 $1.19 $1.16 $1.15
Jul-78 $1.11 $1.12 $1.13 $1.23 $1.17 $1.16
Aug-78 $1.13 $1.13 $1.15 $1.28 $1.19 $1.16
Sep-78 $1.12 $1.14 $1.16 $1.27 $1.19 $1.17
Oct-78 $1.10 $1.13 $1.14 $1.18 $1.17 $1.18
Nov-78 $1.12 $1.14 $1.15 $1.19 $1.18 $1.19
Dec-78 $1.10 $1.14 $1.14 $1.20 $1.17 $1.19
Jan-79 $1.12 $1.15 $1.16 $1.25 $1.19 $1.20
Feb-79 $1.11 $1.14 $1.17 $1.24 $1.19 $1.22
Mar-79 $1.12 $1.16 $1.17 $1.28 $1.20 $1.23
Apr-79 $1.11 $1.16 $1.18 $1.29 $1.20 $1.24
May-79 $1.14 $1.18 $1.19 $1.29 $1.21 $1.26
Jun-79 $1.18 $1.21 $1.20 $1.33 $1.24 $1.27
Jul-79 $1.17 $1.21 $1.21 $1.35 $1.24 $1.29
Aug-79 $1.16 $1.20 $1.20 $1.40 $1.25 $1.30
Sep-79 $1.15 $1.20 $1.19 $1.39 $1.23 $1.31
Oct-79 $1.05 $1.14 $1.12 $1.29 $1.16 $1.33
Nov-79 $1.08 $1.18 $1.12 $1.36 $1.18 $1.34
Dec-79 $1.09 $1.19 $1.12 $1.39 $1.18 $1.35
Jan-80 $1.01 $1.18 $1.11 $1.47 $1.15 $1.37
Feb-80 $0.96 $1.10 $1.05 $1.44 $1.10 $1.39
Mar-80 $0.93 $1.12 $0.99 $1.30 $1.08 $1.41
Apr-80 $1.07 $1.25 $1.06 $1.39 $1.17 $1.43
May-80 $1.12 $1.31 $1.12 $1.49 $1.23 $1.44
Jun-80 $1.16 $1.30 $1.13 $1.54 $1.26 $1.46
Jul-80 $1.10 $1.29 $1.10 $1.62 $1.24 $1.46
Aug-80 $1.06 $1.24 $1.06 $1.65 $1.21 $1.47
Sep-80 $1.03 $1.23 $1.04 $1.67 $1.19 $1.48
Oct-80 $1.00 $1.21 $1.04 $1.70 $1.18 $1.49
Nov-80 $1.01 $1.22 $1.02 $1.80 $1.19 $1.51
Dec-80 $1.05 $1.24 $1.00 $1.77 $1.20 $1.52
Jan-81 $1.03 $1.24 $1.01 $1.74 $1.20 $1.53
Feb-81 $0.99 $1.21 $1.01 $1.76 $1.18 $1.55
Mar-81 $1.03 $1.24 $1.03 $1.86 $1.21 $1.56
Apr-81 $0.97 $1.22 $0.99 $1.85 $1.16 $1.57
May-81 $1.03 $1.25 $1.01 $1.89 $1.20 $1.58
Jun-81 $1.02 $1.26 $1.02 $1.88 $1.21 $1.59
Jul-81 $0.98 $1.22 $0.99 $1.84 $1.19 $1.61
Aug-81 $0.94 $1.20 $0.92 $1.77 $1.16 $1.63
Sep-81 $0.93 $1.22 $0.92 $1.70 $1.14 $1.64
Oct-81 $1.01 $1.29 $0.94 $1.77 $1.19 $1.65
Nov-81 $1.15 $1.37 $0.99 $1.87 $1.30 $1.65
Dec-81 $1.07 $1.36 $0.93 $1.83 $1.26 $1.65
Jan-82 $1.07 $1.36 $0.95 $1.81 $1.26 $1.66
Feb-82 $1.09 $1.38 $0.98 $1.78 $1.28 $1.67
Mar-82 $1.12 $1.39 $0.99 $1.76 $1.30 $1.66
Apr-82 $1.16 $1.43 $1.05 $1.84 $1.33 $1.67
May-82 $1.16 $1.45 $1.06 $1.79 $1.36 $1.69
Jun-82 $1.14 $1.43 $1.04 $1.78 $1.33 $1.71
Jul-82 $1.19 $1.50 $1.08 $1.80 $1.38 $1.72
Aug-82 $1.29 $1.57 $1.15 $1.94 $1.46 $1.72
Sep-82 $1.36 $1.62 $1.20 $2.01 $1.53 $1.72
Oct-82 $1.45 $1.70 $1.23 $2.24 $1.61 $1.73
Nov-82 $1.45 $1.72 $1.21 $2.38 $1.64 $1.73
Dec-82 $1.50 $1.75 $1.26 $2.40 $1.67 $1.72
Jan-83 $1.45 $1.75 $1.28 $2.36 $1.68 $1.72
Feb-83 $1.52 $1.80 $1.32 $2.47 $1.74 $1.72
Mar-83 $1.51 $1.79 $1.34 $2.57 $1.76 $1.72
Apr-83 $1.56 $1.83 $1.38 $2.71 $1.82 $1.74
May-83 $1.50 $1.81 $1.34 $2.74 $1.80 $1.75
Jun-83 $1.51 $1.81 $1.35 $2.82 $1.79 $1.75
Jul-83 $1.43 $1.78 $1.35 $2.80 $1.74 $1.76
Aug-83 $1.43 $1.79 $1.34 $2.70 $1.75 $1.77
Sep-83 $1.51 $1.85 $1.38 $2.73 $1.81 $1.77
Oct-83 $1.49 $1.85 $1.37 $2.66 $1.80 $1.78
Nov-83 $1.51 $1.87 $1.37 $2.74 $1.83 $1.78
Dec-83 $1.51 $1.88 $1.39 $2.70 $1.82 $1.78
Jan-84 $1.54 $1.91 $1.42 $2.71 $1.87 $1.79
Feb-84 $1.51 $1.90 $1.41 $2.60 $1.85 $1.80
Mar-84 $1.49 $1.89 $1.42 $2.61 $1.83 $1.81
Apr-84 $1.48 $1.89 $1.42 $2.59 $1.81 $1.82
May-84 $1.40 $1.85 $1.35 $2.51 $1.76 $1.82
Jun-84 $1.42 $1.86 $1.37 $2.55 $1.78 $1.83
Jul-84 $1.52 $1.94 $1.43 $2.54 $1.84 $1.83
Aug-84 $1.56 $1.96 $1.44 $2.71 $1.88 $1.84
Sep-84 $1.61 $2.00 $1.44 $2.75 $1.92 $1.85
Oct-84 $1.70 $2.07 $1.46 $2.78 $1.99 $1.85
Nov-84 $1.72 $2.11 $1.48 $2.78 $2.03 $1.85
Dec-84 $1.74 $2.14 $1.50 $2.82 $2.04 $1.85
Jan-85 $1.80 $2.19 $1.56 $3.01 $2.10 $1.86
Feb-85 $1.71 $2.15 $1.54 $3.07 $2.06 $1.87
Mar-85 $1.77 $2.18 $1.55 $3.04 $2.09 $1.87
Apr-85 $1.81 $2.24 $1.59 $3.06 $2.14 $1.88
May-85 $1.97 $2.35 $1.64 $3.24 $2.24 $1.89
Jun-85 $2.00 $2.37 $1.66 $3.30 $2.26 $1.89
Jul-85 $1.96 $2.36 $1.67 $3.32 $2.26 $1.90
Aug-85 $2.01 $2.40 $1.67 $3.31 $2.30 $1.90
Sep-85 $2.01 $2.43 $1.65 $3.25 $2.31 $1.91
Oct-85 $2.08 $2.47 $1.69 $3.32 $2.35 $1.91
Nov-85 $2.16 $2.51 $1.74 $3.47 $2.40 $1.92
Dec-85 $2.28 $2.58 $1.77 $3.59 $2.47 $1.92
Jan-86 $2.27 $2.60 $1.84 $3.64 $2.49 $1.93
Feb-86 $2.53 $2.67 $1.91 $3.86 $2.59 $1.93
Mar-86 $2.73 $2.76 $1.92 $4.05 $2.65 $1.92
Apr-86 $2.70 $2.78 $1.92 $4.07 $2.67 $1.91
May-86 $2.57 $2.72 $1.89 $4.14 $2.65 $1.92
Jun-86 $2.73 $2.80 $1.91 $4.20 $2.69 $1.93
Jul-86 $2.70 $2.84 $1.92 $4.07 $2.69 $1.93
Aug-86 $2.83 $2.92 $2.00 $4.23 $2.74 $1.93
Sep-86 $2.69 $2.89 $1.99 $4.12 $2.73 $1.94
Oct-86 $2.77 $2.93 $2.04 $4.25 $2.77 $1.94
Nov-86 $2.84 $2.97 $2.07 $4.26 $2.81 $1.94
Dec-86 $2.84 $2.97 $2.07 $4.23 $2.83 $1.95
Jan-87 $2.88 $3.00 $2.11 $4.48 $2.87 $1.96
Feb-87 $2.94 $3.02 $2.13 $4.64 $2.90 $1.97
Mar-87 $2.87 $3.01 $2.12 $4.70 $2.90 $1.97
Apr-87 $2.74 $2.94 $2.00 $4.59 $2.82 $1.99
May-87 $2.71 $2.92 $1.98 $4.62 $2.81 $1.99
Jun-87 $2.74 $2.96 $2.03 $4.70 $2.84 $2.00
Jul-87 $2.69 $2.97 $2.05 $4.83 $2.84 $2.00
Aug-87 $2.64 $2.96 $2.05 $4.95 $2.83 $2.01
Sep-87 $2.55 $2.91 $1.98 $4.88 $2.78 $2.02
Oct-87 $2.70 $3.00 $1.98 $4.03 $2.82 $2.03
Nov-87 $2.71 $3.03 $2.03 $3.92 $2.85 $2.03
Dec-87 $2.76 $3.05 $2.06 $4.13 $2.89 $2.03
Jan-88 $2.94 $3.15 $2.13 $4.23 $2.98 $2.04
Feb-88 $2.96 $3.19 $2.15 $4.42 $3.02 $2.04
Mar-88 $2.87 $3.16 $2.12 $4.42 $3.01 $2.05
Apr-88 $2.82 $3.15 $2.13 $4.50 $3.00 $2.06
May-88 $2.79 $3.13 $2.13 $4.46 $2.98 $2.07
Jun-88 $2.90 $3.19 $2.17 $4.63 $3.05 $2.08
Jul-88 $2.85 $3.17 $2.18 $4.58 $3.04 $2.09
Aug-88 $2.86 $3.17 $2.19 $4.50 $3.05 $2.10
Sep-88 $2.96 $3.23 $2.22 $4.60 $3.11 $2.11
Oct-88 $3.05 $3.28 $2.27 $4.68 $3.15 $2.12
Nov-88 $2.99 $3.24 $2.25 $4.61 $3.13 $2.12
Dec-88 $3.03 $3.24 $2.28 $4.71 $3.14 $2.12
Jan-89 $3.09 $3.28 $2.31 $4.89 $3.18 $2.13
Feb-89 $3.03 $3.26 $2.29 $4.89 $3.17 $2.14
Mar-89 $3.07 $3.28 $2.29 $4.94 $3.18 $2.15
Apr-89 $3.12 $3.35 $2.34 $5.10 $3.23 $2.17
May-89 $3.24 $3.42 $2.38 $5.20 $3.29 $2.18
Jun-89 $3.42 $3.53 $2.41 $5.19 $3.37 $2.19
Jul-89 $3.50 $3.62 $2.44 $5.35 $3.42 $2.19
Aug-89 $3.41 $3.53 $2.42 $5.45 $3.39 $2.19
Sep-89 $3.42 $3.55 $2.41 $5.44 $3.40 $2.20
Oct-89 $3.55 $3.64 $2.44 $5.32 $3.45 $2.21
Nov-89 $3.58 $3.67 $2.47 $5.37 $3.47 $2.22
Dec-89 $3.57 $3.67 $2.49 $5.36 $3.48 $2.22
Jan-90 $3.45 $3.63 $2.47 $5.19 $3.43 $2.24
Feb-90 $3.44 $3.64 $2.49 $5.25 $3.43 $2.25
Mar-90 $3.43 $3.64 $2.49 $5.33 $3.43 $2.27
Apr-90 $3.36 $3.61 $2.47 $5.23 $3.40 $2.27
May-90 $3.50 $3.70 $2.52 $5.50 $3.49 $2.28
Jun-90 $3.58 $3.76 $2.55 $5.50 $3.54 $2.29
Jul-90 $3.62 $3.82 $2.58 $5.45 $3.58 $2.30
Aug-90 $3.47 $3.79 $2.54 $5.20 $3.53 $2.32
Sep-90 $3.51 $3.83 $2.54 $4.99 $3.53 $2.34
Oct-90 $3.58 $3.89 $2.58 $4.89 $3.55 $2.35
Nov-90 $3.73 $3.97 $2.63 $5.09 $3.62 $2.36
Dec-90 $3.79 $4.03 $2.64 $5.23 $3.67 $2.36
Jan-91 $3.84 $4.07 $2.67 $5.43 $3.71 $2.37
Feb-91 $3.86 $4.09 $2.69 $5.69 $3.76 $2.37
Mar-91 $3.87 $4.10 $2.70 $5.78 $3.79 $2.38
Apr-91 $3.92 $4.15 $2.73 $5.84 $3.84 $2.38
May-91 $3.93 $4.17 $2.75 $5.99 $3.87 $2.39
Jun-91 $3.90 $4.16 $2.75 $5.88 $3.87 $2.40
Jul-91 $3.96 $4.22 $2.78 $6.11 $3.91 $2.40
Aug-91 $4.10 $4.32 $2.82 $6.31 $4.00 $2.41
Sep-91 $4.22 $4.42 $2.85 $6.36 $4.07 $2.42
Oct-91 $4.24 $4.47 $2.88 $6.42 $4.11 $2.42
Nov-91 $4.28 $4.53 $2.88 $6.31 $4.15 $2.43
Dec-91 $4.53 $4.65 $2.94 $6.64 $4.27 $2.43
Jan-92 $4.38 $4.56 $2.94 $6.78 $4.24 $2.43
Feb-92 $4.40 $4.57 $2.95 $6.85 $4.26 $2.44
Mar-92 $4.36 $4.53 $2.95 $6.76 $4.25 $2.45
Apr-92 $4.37 $4.58 $2.98 $6.73 $4.28 $2.46
May-92 $4.47 $4.68 $3.01 $6.84 $4.35 $2.46
Jun-92 $4.56 $4.76 $3.06 $6.77 $4.41 $2.47
Jul-92 $4.75 $4.88 $3.16 $6.97 $4.51 $2.47
Aug-92 $4.78 $4.95 $3.12 $6.94 $4.55 $2.48
Sep-92 $4.87 $5.05 $3.13 $7.07 $4.60 $2.49
Oct-92 $4.77 $4.96 $3.09 $7.12 $4.54 $2.50
Nov-92 $4.77 $4.91 $3.15 $7.29 $4.54 $2.50
Dec-92 $4.89 $4.99 $3.19 $7.43 $4.60 $2.50
Jan-93 $5.03 $5.12 $3.22 $7.60 $4.69 $2.51
Feb-93 $5.21 $5.25 $3.33 $7.58 $4.78 $2.52
Mar-93 $5.22 $5.27 $3.30 $7.78 $4.80 $2.53
Apr-93 $5.26 $5.31 $3.33 $7.73 $4.84 $2.54
May-93 $5.28 $5.31 $3.35 $7.91 $4.84 $2.54
Jun-93 $5.52 $5.42 $3.40 $8.00 $4.93 $2.54
Jul-93 $5.62 $5.42 $3.40 $8.07 $4.96 $2.54
Aug-93 $5.87 $5.54 $3.47 $8.35 $5.05 $2.55
Sep-93 $5.90 $5.57 $3.51 $8.40 $5.07 $2.56
Oct-93 $5.95 $5.58 $3.51 $8.55 $5.09 $2.57
Nov-93 $5.80 $5.53 $3.48 $8.46 $5.05 $2.57
Dec-93 $5.81 $5.55 $3.55 $8.53 $5.08 $2.57
Jan-94 $5.96 $5.62 $3.59 $8.69 $5.14 $2.57
Feb-94 $5.69 $5.48 $3.50 $8.67 $5.05 $2.58
Mar-94 $5.47 $5.34 $3.37 $8.39 $4.94 $2.59
Apr-94 $5.39 $5.28 $3.39 $8.19 $4.89 $2.60
May-94 $5.34 $5.28 $3.41 $8.18 $4.88 $2.60
Jun-94 $5.29 $5.27 $3.40 $8.08 $4.87 $2.61
Jul-94 $5.48 $5.35 $3.45 $8.26 $4.94 $2.61
Aug-94 $5.43 $5.37 $3.46 $8.48 $4.95 $2.62
Sep-94 $5.25 $5.28 $3.41 $8.44 $4.90 $2.63
Oct-94 $5.24 $5.27 $3.36 $8.48 $4.89 $2.63
Nov-94 $5.28 $5.23 $3.30 $8.31 $4.87 $2.64
Dec-94 $5.36 $5.26 $3.37 $8.35 $4.89 $2.64
Jan-95 $5.51 $5.36 $3.45 $8.39 $4.96 $2.65
Feb-95 $5.66 $5.48 $3.54 $8.68 $5.07 $2.66
Mar-95 $5.72 $5.52 $3.57 $8.90 $5.10 $2.67
Apr-95 $5.81 $5.60 $3.57 $9.03 $5.17 $2.68
May-95 $6.27 $5.80 $3.67 $9.24 $5.35 $2.68
Jun-95 $6.36 $5.85 $3.64 $9.61 $5.38 $2.69
Jul-95 $6.25 $5.84 $3.67 $9.98 $5.37 $2.69
Aug-95 $6.40 $5.89 $3.70 $10.01 $5.43 $2.69
Sep-95 $6.51 $5.93 $3.72 $10.15 $5.48 $2.70
Oct-95 $6.70 $6.00 $3.77 $9.92 $5.55 $2.71
Nov-95 $6.87 $6.09 $3.83 $10.25 $5.62 $2.71
Dec-95 $7.06 $6.15 $3.87 $10.26 $5.70 $2.70
Jan-96 $7.05 $6.15 $3.89 $10.38 $5.74 $2.72
Feb-96 $6.71 $6.06 $3.87 $10.67 $5.64 $2.73
Mar-96 $6.57 $5.99 $3.82 $10.68 $5.60 $2.74
Apr-96 $6.46 $5.96 $3.80 $10.99 $5.58 $2.75
May-96 $6.42 $5.94 $3.81 $11.21 $5.57 $2.76
Jun-96 $6.56 $6.01 $3.84 $10.93 $5.63 $2.76
Jul-96 $6.57 $6.03 $3.87 $10.49 $5.64 $2.76
Aug-96 $6.48 $6.03 $3.87 $10.87 $5.64 $2.77
Sep-96 $6.66 $6.12 $3.91 $11.19 $5.74 $2.78
Oct-96 $6.93 $6.23 $3.95 $11.22 $5.85 $2.79
Nov-96 $7.18 $6.32 $4.01 $11.53 $5.95 $2.79
Dec-96 $6.99 $6.27 $4.00 $11.46 $5.91 $2.79
Jan-97 $6.94 $6.29 $4.00 $11.81 $5.93 $2.80
Feb-97 $6.94 $6.29 $4.04 $11.69 $5.95 $2.81
Mar-97 $6.77 $6.22 $3.99 $11.41 $5.88 $2.82
Apr-97 $6.94 $6.31 $4.02 $11.50 $5.96 $2.82
May-97 $7.01 $6.36 $4.07 $11.99 $6.01 $2.82
Jun-97 $7.14 $6.43 $4.11 $12.34 $6.08 $2.82
Jul-97 $7.59 $6.60 $4.21 $13.07 $6.24 $2.83
Aug-97 $7.35 $6.53 $4.18 $13.14 $6.19 $2.83
Sep-97 $7.58 $6.63 $4.22 $13.66 $6.28 $2.84
Oct-97 $7.84 $6.73 $4.24 $13.18 $6.34 $2.85
Nov-97 $7.96 $6.73 $4.27 $13.08 $6.36 $2.84
Dec-97 $8.10 $6.80 $4.33 $13.11 $6.42 $2.84
Jan-98 $8.26 $6.89 $4.36 $13.16 $6.49 $2.85
Feb-98 $8.21 $6.88 $4.36 $13.75 $6.49 $2.85
Mar-98 $8.22 $6.90 $4.36 $14.12 $6.52 $2.86
Apr-98 $8.25 $6.94 $4.34 $14.25 $6.55 $2.86
May-98 $8.41 $6.98 $4.40 $13.85 $6.60 $2.87
Jun-98 $8.61 $7.03 $4.42 $14.01 $6.65 $2.87
Jul-98 $8.57 $7.06 $4.43 $13.83 $6.66 $2.87
Aug-98 $8.95 $7.19 $4.49 $12.22 $6.69 $2.88
Sep-98 $9.27 $7.36 $4.54 $12.49 $6.83 $2.88
Oct-98 $9.13 $7.37 $4.53 $12.96 $6.78 $2.89
Nov-98 $9.20 $7.35 $4.54 $13.68 $6.83 $2.89
Dec-98 $9.18 $7.38 $4.55 $14.64 $6.84 $2.89
Jan-99 $9.29 $7.42 $4.60 $15.15 $6.93 $2.89
Feb-99 $8.80 $7.22 $4.58 $14.60 $6.65 $2.90
Mar-99 $8.80 $7.28 $4.59 $15.30 $6.65 $2.91
Apr-99 $8.82 $7.30 $4.60 $15.55 $6.63 $2.93
May-99 $8.65 $7.19 $4.58 $15.28 $6.52 $2.93
Jun-99 $8.58 $7.22 $4.51 $15.91 $6.41 $2.93
Jul-99 $8.52 $7.21 $4.53 $15.69 $6.34 $2.94
Aug-99 $8.47 $7.22 $4.49 $15.79 $6.32 $2.94
Sep-99 $8.54 $7.29 $4.49 $16.12 $6.38 $2.96
Oct-99 $8.53 $7.29 $4.44 $16.72 $6.41 $2.96
Nov-99 $8.48 $7.28 $4.49 $17.95 $6.40 $2.96
Dec-99 $8.35 $7.25 $4.46 $20.00 $6.33 $2.96
Jan-00 $8.54 $7.21 $4.44 $19.86 $6.32 $2.97
Feb-00 $8.77 $7.26 $4.49 $22.36 $6.38 $2.99
Mar-00 $9.09 $7.41 $4.59 $21.85 $6.48 $3.01
Apr-00 $9.02 $7.38 $4.56 $20.68 $6.41 $3.01
May-00 $8.97 $7.42 $4.54 $19.45 $6.31 $3.02
Jun-00 $9.19 $7.56 $4.66 $21.01 $6.51 $3.03
Jul-00 $9.35 $7.61 $4.72 $20.23 $6.63 $3.04
Aug-00 $9.57 $7.72 $4.79 $21.95 $6.72 $3.04
Sep-00 $9.42 $7.79 $4.77 $21.65 $6.75 $3.06
Oct-00 $9.60 $7.85 $4.82 $20.84 $6.78 $3.06
Nov-00 $9.90 $7.99 $4.86 $18.18 $6.96 $3.07
Dec-00 $10.15 $8.16 $4.98 $18.77 $7.15 $3.07
Jan-01 $10.15 $8.24 $5.03 $20.01 $7.40 $3.09
Feb-01 $10.34 $8.33 $5.04 $18.10 $7.50 $3.10
Mar-01 $10.27 $8.39 $5.09 $17.22 $7.47 $3.11
Apr-01 $9.95 $8.29 $5.03 $18.51 $7.38 $3.12
May-01 $9.98 $8.29 $5.09 $18.44 $7.48 $3.14
Jun-01 $10.07 $8.34 $5.12 $18.15 $7.52 $3.14
Jul-01 $10.45 $8.55 $5.20 $17.74 $7.79 $3.13
Aug-01 $10.66 $8.63 $5.28 $17.33 $7.91 $3.13
Sep-01 $10.75 $8.85 $5.27 $16.34 $7.79 $3.15
Oct-01 $11.25 $9.01 $5.33 $16.79 $8.13 $3.16
Nov-01 $10.72 $8.85 $5.28 $17.36 $7.98 $3.16
Dec-01 $10.52 $8.78 $5.23 $17.67 $7.91 $3.16
|
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Performance shown does
not represent the past or future performance of any CALAMOS portfolios. It
should be noted that for certain periods during July 1, 1976 to December 31,
2001 convertibles have not outperformed some or all other bond classes. Source:
Used with permission. *Ibbotson Associates, Inc. All rights reserved. (Certain
portions of this work were derived from copyrighted works of Roger G. Ibbotson
and Rex Sinquefield.) Russell/Mellon Analytics: Credit Suisse First Boston
Convertible Index 1982-present. -Convertible 7/76-12/81: Morningstar convertible
bond style benchmark, an equally weighted average of individual bond funds. 1/82
-present, Credit Suisse First Boston Convertible Index which is an unmanaged
index often used as a performance benchmark for convertible accounts. Generally
includes approximately 350 issues, with market caps in excess of $50 million,
excluding mandatory and contingent conversion convertibles. Typically issues
rated below B- by S&P are excluded. Non-rated convertible bonds are included.
-U.S. Long Term Intermediate Bonds '76-12/86: Returns from Government Bond file
at the Center for Research and Security Prices at the University of Chicago. For
'87-present: Total returns are calculated from the Wall Street Journal prices
using the coupon accrual method as the change in the flat or/and interest price.
-U.S. Long Term Government Bonds 76-12/76: Returns from Government Bond file at
the Center for Research and Security Prices at the University of Chicago.
1/77-present: Constructed with data from the Wall Street Journal and are
calculated as the change in the flat or/and interest price. -U.S. Corporate Bond
Index 1976- present: Total returns are represented by the Salomon Bros Long Term
High Grade Corporate Bond Index, an unmanaged index generally considered
representative of higher quality corporate bond market with at least 10 years to
maturity. -Municipal 7/76-12/98: Morningstar municipal bond style benchmark -
National: seeks income that is exempt from federal income tax by investing
primarily in bonds issued by any state or municipality. As of 1/99 Lehman Bros
Municipal Bond Index: Computed twice monthly from prices on approximately 1,100
bonds. Prices are supplied by Kenny Information Systems, Inc. The index is
composed of approximately 60% revenue bonds and 40% state government
obligations. -Consumer Price Index 76-present: Measure of the changing consumer
prices, as determined by the US Bureau of Labor Statistics. -The principal and
interest of government bonds, as well as the principal and interest of U.S.
Treasury bills are guaranteed by the full faith and credit of the United States.
Please remember that one cannot invest in an index. As with other investments,
there are risks associated with convertible securities, such as the risk that
the issuing company will become insolvent.
The Fund's advertising materials may also compare the performance of investment companies with differing investment styles, objectives or portfolio contents. Returns for investment companies that invest primarily in bonds may be compared with returns of investment companies investing primarily in equities.
Advertising or related material may from time to time refer to the Calamos' judgment as to the attractiveness of an investment in closed-end investment companies such as the Fund. Such materials may include specific and general assessments and forecasts regarding the U.S. economy, equity and convertible markets, corporate credit quality, yield spreads, bond prices and other factors, as well as the impact of such factors on the Fund.
EXPERTS
The financial statements of the Fund as of June 14, 2002 appearing in this statement of additional information has been audited by Ernst & Young, LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois, 60606 independent auditors, as set forth in their report thereon appearing elsewhere herein, and is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto, relating to the shares offered hereby, has been filed by the Fund with the Commission, Washington, D.C. The prospectus and this statement of additional information do not contain all of the information set forth in the Registration Statement, including any exhibits and schedules thereto. For further information with respect to the Fund and the shares offered hereby, reference is made to the Registration Statement. Statements contained in the prospectus and this statement of additional information as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A copy of the Registration Statement may be inspected without charge at the Commission's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the Commission upon the payment of certain fees prescribed by the Commission.
FINANCIAL STATEMENT AND REPORT OF INDEPENDENT AUDITORS
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of Calamos Convertible Opportunities and Income Fund
We have audited the statement of assets and liabilities as of June 14, 2002 and the related statement of operations for the period from April 17, 2002 (date of organization) through June 14, 2002 for the Calammos Convertible Opportunities and Income Fund (the "Fund"). These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund at June 14, 2002, and the results of its operations for the period from April 17, 2002 (date of organization) through June 14, 2002, in conformity with accounting principles generally accepted in the United States.
Chicago, Illinois
June 18, 2002
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 14, 2002
ASSETS:
Cash ........................................................ $ 100,275
Receivable from Investment Adviser .......................... 65,000
Deferred offering costs ..................................... 690,300
-----------
Total assets ................................................ 855,575
-----------
LIABILITIES:
Accrued offering costs ...................................... 690,300
Accrued organizational expenses ............................. 65,000
-----------
Total liabilities ........................................... 755,300
-----------
Net Assets (7,000 shares of beneficial interest issued and
outstanding; unlimited shares authorized) ................... $ 100,275
===========
Net asset value per share ................................... $ 14.325
===========
|
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 17, 2002 (DATE OF ORGANIZATION) THROUGH JUNE 14, 2002
Investment income $ -
-----------
Organizational expenses 65,000
Less: Reimbursement from Investment Advisor (65,000)
-----------
Net Expenses -
-----------
Net Investment Income $ -
-----------
|
NOTES
1. ORGANIZATION
Calamos Convertible Opportunities and Income Fund (the "Fund") is a diversified, closed-end management investment company incorporated on April 17, 2002, which has had no operations other than the sale and issuance of 7,000 shares of beneficial interest at an aggregate purchase price of $100,275 to Calamos Asset Management, Inc. (the "Investment Adviser"). The Investment Adviser has agreed to reimburse the amount by which the aggregate of all of the Fund's organizational expenses and all offering costs (other than the sales load) exceeds $0.03 per share. Accordingly, the Fund's share of offering costs will be recorded as a reduction of the proceeds from the sale of its Common Shares upon the commencement of the Fund's operations. Estimated offering costs to be borne by the Fund total $690,300. Additionally, if the Fund completes an offering of Preferred Shares, the Fund will also pay expenses in connection with such offering.
2. ACCOUNTING POLICIES
The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates.
3. AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with the Investment Adviser, which provides for payment of a monthly fee computed at the annual rate of 0.80% of the Fund's average weekly Managed Assets, as defined. The Investment Adviser has contractually agreed to waive a portion of its management fee for the first eight years of the Fund's operations. The Investment Adviser will waive 0.25% of average weekly Total Managed Assets through June 30, 2007. The waiver is then reduced to 0.18% through June 30, 2008, 0.11% through June 30, 2009 and 0.04% through June 30, 2010.
The Investment Adviser has entered with the Fund into an Administration Agreement with Princeton Administrators, L.P. (the "Administrator"). The Investment Adviser will pay the Administrator a monthly fee computed at the annual rate of 0.125% of the Fund's average weekly Managed Assets, subject to a monthly minimum fee of $12,500. "Total Managed Assets" means the total assets of the Fund (including any assets attributable to leverage) minus accrued liabilities (other than liabilities representing leverage). For purposes of calculating "Managed Assets", the liquidation preference of any preferred shares outstanding is not considered a liability.
In the event that the public offering of the Fund does not occur, the Investment Adviser has agreed to reimburse the Fund for all organizational expenses.
4. FEDERAL INCOME TAXES
The Fund intends to qualify as a "regulated investment company" and as such (and by complying with the applicable provisions of the Internal Revenue Code of 1986, as amended) will not be subject to Federal income tax on taxable income (including realized capital gains) that is distributed to shareholders.
5. CONTINGENT RECEIVABLE FROM INVESTMENT ADVISER
In the event that the public offering of the Fund does not occur, the Investment Adviser has agreed to reimburse the Fund for all organizational expenses.
APPENDIX A -- DESCRIPTION OF RATINGS(2)
MOODY'S PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of return on funds employed. Conservative capitalization structure with moderate reliance on debt and ample asset protection. Broad margins in earnings coverage of fixed financial charges and high internal cash generation. Well-established access to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation than is the case for Prime-2 securities. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt-protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
MOODY'S DEBT RATINGS
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While 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 issues.
Aa: Bonds and preferred stock which are rated Aa are judged to be of 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 securities 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 the Aaa securities.
A: Bonds and preferred stock which are 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 some time in the future.
Baa: Bonds and preferred stock which are 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 and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are 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 and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Moody's assigns ratings to individual debt securities issued from medium-term note (MTN) programs, in addition to indicating ratings to MTN programs themselves. Notes issued under MTN programs with such indicated ratings are rated at issuance at the rating applicable to all pari passu notes issued under the same program, at the program's relevant indicated rating, provided such notes do not exhibit any of the characteristics listed below. For notes with any of the following characteristics, the rating of the individual note may differ from the indicated rating of the program:
1) Notes containing features which link the cash flow and/or market value to the credit performance of any third party or parties.
2) Notes allowing for negative coupons, or negative principal.
3) Notes containing any provision which could obligate the investor to make any additional payments.
Market participants must determine whether any particular note is rated, and if so, at what rating level.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based, in varying degrees, on the following considerations:
- Likelihood of payment-capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
- Nature of and provisions of the obligation;
- Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation applies when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding
company obligations.) Accordingly, in the case of junior debt, the rating may not conform exactly with the category definition.
AAA: An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated C is CURRENTLY HIGHLY VULNERABLE to nonpayment. The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A C also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.
D: An obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
r: This symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating.
N.R.: This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.
LOCAL CURRENCY AND FOREIGN CURRENCY RISKS
Country risk considerations are a standard part of Standard & Poor's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial statements.
The Registrant's financial statements dated June 14, 2002, notes to those financial statements and report of independent auditors thereon are filed with this pre-effective amendment to the Registrant's Registration Statement.
2. Exhibits:
a.1. Agreement and Declaration of Trust. (*)
a.2. Certificate of Trust. (*)
b. By-Laws. (*)
c. None.
d. Form of Share Certificate. (**)
e. Terms and Conditions of the Dividend Reinvestment Plan. (**)
f. None.
g. Investment Management Agreement with Calamos Asset Management,
Inc. (**)
h.1. Form of Underwriting Agreement. (***)
h.2. Form of Standard Dealer Agreement. (**)
h.3. Master Agreement Among Underwriters. (**)
i. None.
j.1. Form of Custody Agreement. (**)
j.2. Form of Foreign Custody Manager Agreement. (**)
k.1. Form of Stock Transfer Agency Agreement. (**)
k.2. Administration Agreement. (**)
l.1. Opinion of Vedder Price Kaufman & Kammholz. (**)
l.2. Opinion of Morris, Nichols, Arsht & Tunnell.(**)
m. None.
n. Consent of Auditors. (**)
o. Not applicable.
p. Subscription Agreement. (**)
q. None.
r. Code of Ethics of Calamos Asset Management, Inc., Calamos
Financial Services, Inc., Calamos Investment Trust, Calamos
Advisors Trust and the Calamos Convertible Opportunities and
Income Fund. (**)
(*) Previously filed.
(**) Filed herewith.
(***) To be filed by Amendment.
ITEM 25. MARKETING ARRANGEMENTS
Reference will be made to the underwriting agreement for the Registrant's shares of beneficial interest to be filed in an amendment to the Registrant's Registration Statement.
Part C-1-
ITEM 26. OTHER EXPENSES AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in connection with the offering described in this Registration Statement:
Registration fees....................................... $ 13,800 New York Stock Exchange listing fee..................... 150,000 Printing (other than certificates)...................... 386,000 Legal fees and expenses................................. 75,000 NASD fee................................................ 15,500 Miscellaneous........................................... 100,000 Total................................................ $690,300 |
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of June 21, 2002, the number or record holders of each class of securities of
the Registrant was (1) (2) TITLE OF CLASS NUMBER OF RECORD HOLDERS Common Shares (no par value) 1 |
ITEM 29. INDEMNIFICATION
The Registrant's Agreement and Declaration of Trust (the "Declaration"), dated April 17, 2002, provides that every person who is, or has been, a Trustee or an officer, employee or agent of the Registrant (including any individual who serves at its request as director, officer, partner, employee, Trustee, agent or the like of another organization in which it has any interest as a shareholder, creditor or otherwise) ("Covered Person") shall be indemnified by the Registrant or the appropriate series of the Registrant to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Covered Person and against amounts paid or incurred by him in the settlement thereof; provided that no indemnification shall be provided to a Covered Person (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or (B) not to have acted in good faith and in a manner the person reasonably believed to be or not opposed to the best interest of the Registrant; or (ii) in the event of a settlement, unless there has been a
Part C-2-
determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry) or (D) by a vote of a majority of the Outstanding Shares entitled to vote (excluding any Outstanding Shares owned of record or beneficially by such individual).
The Declaration also provides that if any shareholder or former shareholder of any series of the Registrant shall be held personally liable solely by reason of his being or having been a shareholder and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable series of the Registrant to be held harmless from and indemnified against all loss and expense arising from such liability. The Registrant, on behalf of its affected series, shall, upon request by such shareholder, assume the defense of any claim made against such shareholder for any act or obligation of the series and satisfy any judgment thereon from the assets of the series.
Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the "1933 Act"), may be available 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 SEC such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant's 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 1933 Act and will be governed by the final adjudication of such issue.
The registrant, its trustees and officers, its investment adviser, the other investment companies advised by the adviser and certain persons affiliated with them are insured, within the limits and subject to the limitations of the insurance, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings. The insurance expressly excludes coverage for any trustee or officer whose personal dishonesty, fraudulent breach of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully fails to act prudently.
ITEM 30. 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 31. 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., 1111 East Warrenville Road, Naperville, Illinois 60563, at the offices of the custodian, 100 Church Street, New York, New York 10286, at the offices of the transfer agent, 111 8th Avenue, New York, New York 10011-5201 or at the offices of the administrator, 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
Part C-3-
ITEM 33. UNDERTAKINGS
1. The Registrant undertakes to suspend the offering of shares until the prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the registration statement or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. Not applicable.
5. (a) For the purposes of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act shall be deemed to be part of the Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prominent delivery within two business days of receipt of a written or oral request the Registrants statement of additional information.
Part C-4-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or Investment Company Act of 1940, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Naperville and State of Illinois, on the 21st day of June, 2002.
Calamos Convertible Opportunities and Income Fund
By: /s/ John P. Calamos
----------------------------------------------
John P. Calamos, Trustee and President
|
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date(s) indicated.
/s/ John P. Calamos Trustee and President (Principal ---------------------------- Executive Officer) June 21, 2002 John P. Calamos /s/ Rhowena Blank Treasurer (Principal Financial and ---------------------------- Accounting Officer) June 21, 2002 Rhowena Blank /s/ Nick P. Calamos Trustee June 21, 2002 ---------------------------- Nick P. Calamos /s/ Richard J. Dowen Trustee June 21, 2002 ---------------------------- Richard J. Dowen /s/ Joe F. Hanauer Trustee June 21, 2002 ---------------------------- Joe F. Hanauer /s/ John E. Neal Trustee June 21, 2002 ---------------------------- John E. Neal /s/ Weston W. Marsh Trustee June 21, 2002 ---------------------------- Weston W. Marsh /s/ William Rybak Trustee June 21, 2002 ---------------------------- William Rybak |
EXHIBIT INDEX
Exhibit Document
------- --------
d. Form of Share Certificate.
e. Terms and Conditions of the Dividend Reinvestment Plan.
g. Investment Management Agreement with Calamos Asset Management,
Inc.
h.2 Form of Standard Dealer Agreement.
h.3 Master Agreement Among Underwriters.
j.1 Form of Custody Agreement.
j.2 Form of Foreign Custody Manager Agreement.
k.1 Form of Stock Transfer Agency Agreement.
k.2 Administration Agreement.
l.1 Opinion of Vedder, Price, Kaufman & Kawnholz.
l.2 Opinion of Morris, Nichols, Arsht & Tunnell.
n. Consent of Auditors.
p. Subscription Agreement.
r. Code of Ethics of Calamos Asset Management, Inc., Calamos
Financial Services, Inc., Calamos Investment Trust, Calamos
Advisors Trust and the Calamos Convertible Opportunities and
Income Fund.
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Exhibit d
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
A STATUTORY BUSINESS TRUST (THE "TRUST")
FORM OF SPECIMEN CERTIFICATE
NUMBER SHARES
------- -------
THIS CERTIFICATE IS TRANSFERABLE IN
NEW YORK
CUSIP NO. 128117 10 8
SEE REVERSE FOR CERTAIN DEFINITIONS
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FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST, NO PAR VALUE, OF
Calamos Convertible Opportunities and Income Fund, a series of the Trust, transferable on the books of the Trust by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to all of the provisions of the Agreement and Declaration of Trust and By-Laws of the Trust, each as from time to time amended, to all of which the holder by acceptance hereof assents. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile signatures of its duly authorized officers
DATED: ---------------------------- --------------------------------- James S. Hamman, Jr. John P. Calamos Secretary President |
COUNTERSIGNED AND REGISTERED;
THE BANK OF NEW YORK
TRANSFER AGENT AND REGISTRAR
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
The following abbreviations, when used in the inscription on the face on this certificate, shall be construed as though they were written out in full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian _________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act______________________
(State)
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
|
Additional abbreviations may also be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
Dated:
-------------------------- ------------------------------------
Signature
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
|
Signature(s) Guaranteed:
Exhibit e
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
Registered holders ("Common Shareholders") of common shares of beneficial interest (the "Common Shares") of Calamos Convertible Opportunities and Income Fund (the "Trust") will automatically be enrolled (the "Participants") in its Dividend Reinvestment Plan (the "Plan") and are advised as follows:
1. THE PLAN AGENT. The Bank of New York (the "Agent") will act as agent for each Participant. The Agent will open an account for each Participant under the Plan in the same name in which his or her outstanding Common Shares are registered.
2. CASH OPTION. Pursuant to the Fund's Plan, unless a holder of Common Shares otherwise elects, all dividend and capital gains distributions will be automatically reinvested by the Agent in additional Common Shares of the Fund. Common Shareholders who elect not to participate in the Plan will receive all distributions in cash paid by check mailed directly to the shareholder of record (or, if the shares are held in street or other nominee name then to such nominee) by the Agent, as dividend paying agent. Such participants may elect not to participate in the Plan and to receive all distributions of dividends and capital gains in cash by sending written instructions to the Agent, as dividend paying agent, at the address set forth below.
3. MARKET PREMIUM ISSUANCES. If on the payment date for a Distribution, the net asset value per Common Share is equal to or less than the market price per Common Share plus estimated brokerage commissions, the Agent shall receive newly issued Common Shares ("Additional Common Shares") from the Trust for each Participant's account. The number of Additional Common Shares to be credited shall be determined by dividing the dollar amount of the Distribution by the greater of (i) the net asset value per Common Share on the payment date, or (ii) 95% of the market price per Common Share on the payment date.
4. MARKET DISCOUNT PURCHASES. If the net asset value per Common Share exceeds the market price plus estimated brokerage commissions on the payment date for a Distribution, the Agent (or a broker-dealer selected by the Agent) shall endeavor to apply the amount of such Distribution on each Participant's Common Shares to purchase Common Shares on the open market. In the event of a market discount on the payment date, the Agent will have until the last business day before the next date on which the shares trade on an "ex-dividend" basis or in no event more than 30 days after the dividend payment date (the "last purchase date") to invest the dividend amount in shares acquired in open-market purchases. It is contemplated that the Trust will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the payment date of each dividend through the date before the next "ex-dividend" date, which typically will be approximately ten days. The weighted average price (including brokerage commissions) of all Common Shares purchased by the Agent as Agent shall be the price per Common Share allocable to each Participant. If, before the Agent has completed its purchases, the market price plus estimated brokerage commissions exceeds the net asset value of the Common Shares as of the payment date, the purchase price paid by Agent may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if such Distribution had been paid in Common Shares issued by
the Trust. Because of the foregoing difficulty with respect to open-market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued Common Shares at the net asset value per Common Share at the close of business on the last purchase date. Participants should note that they will not be able to instruct the Agent to purchase Common Shares at a specific time or at a specific price. Open-market purchases may be made on any securities exchange where Common Shares are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as the Agent shall determine. Each Participant's uninvested funds held by the Agent will not bear interest. The Agent shall have no liability in connection with any inability to purchase Common Shares within the time provided, or with the timing of any purchases effected. The Agent shall have no responsibility for the value of Common Shares acquired. The Agent may commingle Participants' funds to be used for open-market purchases of Trust shares and the price per share allocable to each Participant in connection with such purchases shall be the average price (including brokerage commissions and other related costs) of all Trust shares purchased by Agent.
5. VALUATION. The market price of Common Shares on a particular date shall be the last sales price on the securities exchange where the Common Shares are listed on that date (the "Exchange"), or, if there is no sale on such Exchange on that date, then the mean between the closing bid and asked quotations on such Exchange on such date will be used. The net asset value per Common Share on, a particular date shall be the amount calculated on that date (or if not calculated on such date, the amount most recently calculated) by or on behalf of the Trust in accordance with the Trust's current prospectus.
6. TAXATION. The automatic reinvestment of Distributions does not relieve Participants of any federal, state or local taxes which may be payable (or required to be withheld on Distributions. Participants will receive tax information annually for their personal records and to help them prepare their federal income tax return. For further information as to tax consequences of participation in the Plan, Participants should consult with their own tax advisors.
7. LIABILITY OF AGENT. The Agent shall at all times act in good faith and agree to use its best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by the Agent's negligence, bad faith, or willful misconduct or that of its employees.
8. RECORDKEEPING. The Agent may hold each Participant's Common Shares acquired pursuant to the Plan together with the Common Shares of other Common Shareholders of the Trust acquired pursuant to the Plan in non-certificated form in the Agent's name or that of the Agent's nominee. Each Participant will be sent a confirmation by the Agent of each acquisition made for his or her account as soon as practicable, but in no event later than 60 days, after the date thereof. Upon a Participant's request, the Agent will deliver to the Participant, without charge, a certificate or certificates for the full Common Shares. Although each Participant may from time to time have an undivided fractional interest in a Common Share of
the Trust, no certificates for a fractional share will be issued. Similarly, Participants may request to sell a portion of the Common Shares held by the Agent in their Plan accounts by calling the Agent, writing to the Agent, or completing and returning the transaction form attached to each Plan statement. The Agent will sell such Common Shares through a broker-dealer selected by the Agent within 5 business days of receipt of the request. The sale price will equal the weighted average price of all Common Shares sold through the Plan on the day of the sale, less brokerage commissions. Participants should note that the Agent is unable to accept instructions to sell on a specific date or at a specific price. Any share dividends or split shares distributed by the Trust on Common Shares held by the Agent for Participants will be credited to their accounts. In the event that the Trust makes available to its Common Shareholders rights to purchase additional Common Shares, the Common Shares held for each Participant under the Plan will be added to other Common Shares held by the Participant in calculating the number of rights to be issued to each Participant.
9. PROXY MATERIALS. The Agent will forward to each Participant any proxy solicitation material. The Agent will vote any Common Shares held for a Participant first in accordance with the instructions set forth on proxies returned by such Participant to the Trust, and then with respect to any proxies not returned by such Participant to the Trust, in the same proportion as the Agent votes the proxies returned by the Participants to the Trust.
10. FEES. The Agent's service fee for handling Distributions will be paid by the Trust. Each Participant will be charged his or her pro rata share of brokerage commissions on all open-market purchases. If a Participant elects to have the Agent sell part or all of his or her Common Shares and remit the proceeds, such Participant will be charged his or her pro rata share of brokerage commissions on the shares sold, plus a $15 transaction fee.
11. TERMINATION IN THE PLAN. Each registered Participant may terminate his or her account under the Plan by notifying the Agent in writing at P.O. Box 1958, Newark, New Jersey 07101-9774, or by calling the Agent at 1-800-432-8224. Such termination will be effective with respect to a particular Distribution if the Participant's notice is received by the Agent prior to such Distribution record date. The Plan may be terminated by the Agent or the Trust upon notice in writing mailed to each Participant at least 60 days prior to the effective date of the termination. Upon any termination, the Agent will cause a certificate or certificates to be issued for the full shares held for each Participant under the Plan and cash adjustment for any fraction of a Common Share at the then current market value of the Common Shares to be delivered to him. If preferred, a Participant may request the sale of all of the Common Shares held by the Agent in his or her Plan account in order to terminate participation in the Plan. If any Participant elects in advance of such termination to have Agent sell part or all of his shares, Agent is authorized to deduct from the proceeds a $15.00 fee plus the brokerage commissions incurred for the transaction. If a Participant has terminated his or her participation in the Plan but continues to have Common Shares registered in his or her name, he or she may re-enroll in the Plan at any time by notifying the Agent in writing at the address above.
12. AMENDMENT OF THE PLAN. These terms and conditions may be amended by the Agent or the Trust at any time but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to each Participant appropriate written notice at least 30
days prior to the effective date thereof. The amendment shall be deemed to be accepted by each Participant unless, prior to the effective date thereof, the Agent receives notice of the termination of the Participant's account under the Plan. Any such amendment may include an appointment by the Agent of a successor Agent, subject to the prior written approval of the successor Agent by the Trust.
13. APPLICABLE LAW. These terms and conditions shall be governed by the laws of the State of New York.
Exhibit g
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 17th day of June 2002 (the "Agreement"), between CALAMOS ASSET MANAGEMENT, INC., a corporation organized under the laws of the State of Illinois and having its principal office and place of business in Naperville, Illinois (the "Manager"), and CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND, a Delaware business trust having its principal office and place of business in Naperville, Illinois (the "Trust").
WHEREAS, the Trust is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering investment management services and is so registered under the Investment Advisers Act of 1940; and
WHEREAS, the Trust wishes to retain the Manager to provide certain investment advisory, management and administrative services; and
WHEREAS, the Manager is willing to furnish such services on the terms and conditions hereinafter set forth;
THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed between the parties as follows:
1. APPOINTMENT OF MANAGER.
The Trust appoints the Manager to act as manager and investment adviser to the Trust for the period and on the terms herein set forth. The Manager accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF MANAGER. The Manager, at its own expense, shall furnish the following services and facilities to the Trust:
(a) Portfolio Management Services. Subject to the overall supervision and review of the Board of Trustees of the Trust ("Trustees"), the Manager will regularly provide the Trust with investment research, advice and supervision and will furnish continuously an investment program for the Trust, consistent with the investment objectives and policies of the Trust. The Manager will determine from time to time what securities shall be purchased for the Trust, what securities shall be held or sold by the Trust and what portion of the Trust's assets shall be held uninvested as cash, subject always to the provisions of the Trust's Certificate of Trust, Agreement and Declaration of Trust, By-Laws and its registration statement under the 1940 Act and under the Securities Act of 1933 covering the Trust's shares, as filed with the Securities and Exchange Commission (the "Commission"), and to the investment objectives, policies and restrictions of the Trust, as each of the same shall be from time to time in effect, and subject, further, to such policies and instructions as the Trustees may from time to time establish. To carry out such determinations, the Manager will exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust itself might or could do with respect to purchases, sales or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases, sales or other transactions.
The Manager shall place all orders for the purchase and sale of
portfolio securities for the account of the Trust with brokers or dealers
selected by the Manager, although the Trust will pay the actual brokerage
commissions on portfolio transactions in accordance with Paragraph 3. In
executing portfolio transactions and selecting brokers or dealers, the Manager
will use its best efforts to seek on behalf of the Trust or any Fund thereof the
best overall terms available for any transaction. The Manager shall consider all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). In evaluating the best overall
terms available, and in selecting the broker or dealer to execute a particular
transaction, the Manager may also consider the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Trust and/or other accounts over which the Manager or an
affiliate of the Manager exercises investment discretion. The Manager is
authorized to pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for any Fund which
is in excess of the amount of "commission" (as that term is used in Section
28(c), and as identified by the Commission) another broker or dealer would have
charged for effecting that transaction if, but only if, the Manager determines
in good faith that such commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of that particular transaction or in terms of all of the accounts over
which investment discretion is so exercised.
Manager (or an affiliate of Manager) may act as broker for Trust in connection with the purchase or sale of securities by or to the Trust if and to the extent permitted by procedures adopted from time to time by the Trustees. Such brokerage services are not within the scope of the duties of Manager under this agreement, and, within the limits permitted by law and the Trustees, Manager (or an affiliate of Manager) may receive brokerage commissions, fees or other remuneration from the Trust for such services in addition to its fee for services as Manager. Within the limits permitted by law, Manager may receive compensation from the Trust for other services performed by it for the Trust which are not within the scope of the duties of Manager under this Agreement.
(b) Other Services. In addition to the portfolio management services specified above in Paragraph 2(a), the Manager shall furnish for use of the Trust such office space and facilities as the Trust may require for its reasonable needs and shall supervise the business and affairs of the Trust and shall provide the following other services on behalf of the Trust and not provided by persons not parties to this Agreement:
(i) preparing or assisting in the preparation of reports to and meeting materials for the Trustees;
(ii) supervising, negotiating contractual arrangements with, to the extent appropriate, and monitoring the performance of, accounting agents, custodians, depositories, transfer agents and pricing agents, accountants, attorneys, printers,
underwriters, brokers and dealers, insurers and other persons in any capacity deemed to be necessary or desirable to Trust operations;
(iii) assisting in the preparation and making of filings with the Commission and other regulatory and self-regulatory organizations, including, but not limited to, preliminary and definitive proxy materials, amendments to the Trust's registration statement on Form N-2 and semi-annual reports on Form N-SAR;
(iv) overseeing the tabulation of proxies by the Trust's transfer agent;
(v) assisting in the preparation and filing of the Trust's federal, state and local tax returns;
(vi) assisting in the preparation and filing of the Trust's federal excise tax return pursuant to Section 4982 of the Code;
(vii) providing assistance with investor and public relations matters;
(viii) monitoring the valuation of portfolio securities and the calculation of net asset value;
(ix) monitoring the registration of shares of beneficial interest of the Trust under applicable federal and state securities laws;
(x) maintaining or causing to be maintained for the Trust all books, records and reports and any other information required under the 1940 Act, to the extent that such books, records and reports and other information are not maintained by the Trust's custodian or other agents of the Trust;
(xi) assisting in establishing the accounting policies of the Trust;
(xii) assisting in the resolution of accounting issues that may arise with respect to the Trust's operations and consulting with the Trust's independent accountants, legal counsel and the Trust's other agents as necessary in connection therewith;
(xiii) reviewing the Trust's bills;
(xiv) assisting the Trust in determining the amount of dividends and distributions available to be paid by the Trust to its shareholders, preparing and arranging for the printing of dividend notices to shareholders, and providing the transfer and dividend paying agent, the custodian, and the accounting agent with such information as is required for such parties to effect the payment of dividends and distributions; and
(xv) otherwise assisting the Trust as it may reasonably request in the conduct of the Trust's business, subject to the direction and control of the Trustees.
Nothing in this Agreement shall be deemed to shift to the Manager or diminish the obligations of any agent of the Trust or any other person not a party to this Agreement which is obligated to provide services to the Trust.
(c) Reports. The Manager shall furnish to the Trustees periodic reports on the investment performance of the Trust and on the performance of the Manager's obligations pursuant to this Agreement, and the Manager shall supply such additional reports and information as the Trust's officers or the Trustees shall reasonably request.
3. ALLOCATION OF EXPENSES. Except for the services and facilities to be provided by the Manager as set forth in Paragraph 2 above, the Trust assumes and shall pay all expenses for all other Trust operations and activities and shall reimburse the Manager for any such expenses incurred by the Manager. In addition, the Manager shall pay the compensation and expenses of all Trustees, officers and employees of the Trust who are affiliated persons of the Manager and the Manager shall make available, without expense to the Trust, the services of the Manager's directors, officers and employees as may be duly elected Trustees and officers of the Trust, subject to their individual consent to serve and to any limitations imposed by law. The expenses to be borne by the Trust shall include, without limitation:
(a) organization expenses of the Trust (including out-of-pocket expenses, but not including the Manager's overhead or employee costs);
(b) fees payable to the Manager;
(c) legal expenses;
(d) auditing and accounting expenses;
(e) maintenance of books and records that are required to be maintained by the Trust's custodian or other agents of the Trust;
(f) telephone, telex, facsimile, postage and other communications expenses;
(g) taxes and governmental fees;
(h) fees, dues and expenses incurred by the Trust in connection with membership in investment company trade organizations and the expense of attendance at professional meetings of such organizations;
(i) fees and expenses of accounting agents, custodians, subcustodians, transfer agents, dividend disbursing agents and registrars;
(j) payment for portfolio pricing or valuation services to pricing agents, accountants, bankers and other specialists, if any;
(k) expenses of preparing share certificates;
(l) expenses in connection with the issuance, offering, distribution, sale, redemption or repurchase of securities issued by the Trust;
(m) expenses relating to investor and public relations provided by parties other than the Manager;
(n) expenses and fees of registering or qualifying shares of beneficial interest of the Trust for sale;
(o) interest charges, bond premiums and other insurance expenses;
(p) freight, insurance and other charges in connection with the shipment of the Trust's portfolio securities;
(q) the compensation and all expenses (specifically including travel expenses relating to Trust business) of Trustees, officers and employees of the Trust who are not affiliated persons of the Manager;
(r) brokerage commissions or other costs of acquiring or disposing of any portfolio securities of the Trust;
(s) expenses of printing and distributing reports, notices and dividends to shareholders;
(t) expenses of preparing and setting in type, printing and mailing prospectuses and statements of additional information of the Trust and supplements thereto;
(u) costs of stationery;
(v) any litigation expenses;
(w) indemnification of Trustees and officers of the Trust;
(x) costs of shareholders' and other meetings;
(y) interest on borrowed money, if any; and
(z) the fees and other expenses of listing the Trust's shares on the New York Stock Exchange or any other national stock exchange.
4. MANAGEMENT FEE.
(a) The Trust shall pay to the Manager, as compensation for the Manager's services performed, facilities furnished and expenses assumed hereunder, a fee at the annual rate equal to 0.80% of the Trust's average weekly managed assets. "Managed assets" means the total assets of the Trust (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage).
(b) The management fee payable hereunder shall be computed weekly and paid monthly in arrears. In the event of termination of this Agreement, the fee shall be computed on the basis of the period ending on the last business day on which this Agreement is in effect subject to a pro rata adjustment based on the number of days elapsed in the current month as a percentage of the total number of days in such month.
(c) The Manager may from time to time agree not to impose all or a portion of its fee otherwise payable hereunder (in advance of the time such fee or a portion thereof would otherwise accrue) and/or undertake to pay or reimburse the Trust for all or a portion of its expenses not otherwise required to be borne or reimbursed by the Manager. Any such fee reduction or undertaking may be discontinued or modified by the Manager at any time.
5. RELATIONS WITH TRUST. Subject to and in accordance with the Declaration of Trust and Bylaws of the Trust and the Articles of Incorporation and Bylaws of the Manager, respectively, it is understood that the Trustees, officers, agents and shareholders of the Trust are or may be interested in the Manager (or any successor thereof) as directors, officers, or otherwise, that directors, officers, agents and shareholders of the Manager are or may be interested in the Trust as Trustees, officers, shareholders or otherwise, and that the effect of any such adverse interests shall be governed by said Declaration of Trust, Articles of Incorporation and Bylaws.
6. LIABILITY OF MANAGER AND OFFICERS AND TRUSTEES OF THE TRUST. No provision of this Agreement shall be deemed to protect the Manager against any liability to the Trust or its shareholders to which it might otherwise be subject by reason of any willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties under this Agreement. Nor shall any provision hereof be deemed to protect any Trustee or officer of the Trust against any such liability to which he might otherwise be subject by reason of any willful misfeasance, bad faith, gross negligence or reckless disregard of his obligations and duties.
7. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective on the date first
written above. Unless terminated as herein provided, this Agreement shall remain
in full force and effect until August 1, 2003 and shall continue in full force
and effect for periods of one year thereafter so long as such continuance is
approved at least annually (i) by either the Trustees or by vote of a majority
of the outstanding voting shares (as defined in the 1940 Act) of the Trust, and
(ii) in either event by the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval.
(b) Termination. This Agreement may be terminated at any time, without payment of any penalty, by vote of the Trustees or by vote of a majority of the outstanding shares (as defined in the 1940 Act), or by the Manager on sixty (60) days' written notice to the other party.
(c) Automatic Termination. This Agreement shall automatically terminate in the event of its "assignment," as that term is defined in the 1940 Act.
8. NAME OF TRUST. It is understood that the name "Calamos", and any logo associated with that name, is the valuable property of Calamos Asset Management, Inc., and that the Trust has the right to include "Calamos" as a part of its name only so long as this Agreement shall continue. Upon termination of this Agreement the Trust shall forthwith cease to use the "Calamos" name and logo and shall take such action as is necessary to change the name of the Trust and to amend its Declaration of Trust to change the Trust's name.
9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the terms of the State of Delaware.
10. SERVICES NOT EXCLUSIVE. The services of the Manager to the Trust hereunder are not to be deemed exclusive and the Manager shall be free to render similar services to others so long as its services hereunder are not impaired thereby.
11. LIMITATION OF LIABILITY. It is expressly agreed that the obligations of the Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but shall bind only the assets and property of the Trust as provided in the Declaration of Trust of the Trust. The execution and delivery of this Agreement have been authorized by the Trustees and shareholders of the Trust and signed by an authorized officer of the Trust, acting as such, and neither such authorization by the Trustees and shareholders nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Trust as provided in its Declaration of Trust.
12. MISCELLANEOUS. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. Should any part of this Agreement be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding and shall inure to the benefit of the parties hereto and their respective successors. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Investment Management Agreement has been executed for the Manager and the Trust by their duly authorized officers, as of the date first set forth above.
CALAMOS ASSET MANAGEMENT, INC.
CALAMOS CONVERTIBLE
OPPORTUNITIES AND INCOME FUND
EXHIBIT H.2
REVISED JULY 16, 2001
[MERRILL LYNCH LOGO]
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MERRILL LYNCH WORLD HEADQUARTERS
4 WORLD FINANCIAL CENTER
NEW YORK, N.Y. 10800
STANDARD DEALER AGREEMENT
Dear Sirs:
In connection with public offerings of securities underwritten by us, or by a group of underwriters (the "Underwriters") represented by us, you may be offered the opportunity to purchase a portion of such securities, as principal, at a discount from the offering price representing a selling concession or reallowance granted as consideration for services rendered by you in the sale of such securities. We request that you agree to the following terms and provisions, and make the following representations, which, together with any additional terms and provisions set forth in any wire or letter sent to you in connection with a particular offering, will govern all such purchases of securities and the reoffering thereof by you.
Your subscription to, or purchase of, such securities will constitute your reaffirmation of this Agreement.
1. When we are acting as representative (the "Representative") of the Underwriters in offering securities to you, it should be understood that all offers are made subject to prior sale of the subject securities, when, as and if such securities are delivered to and accepted by the Underwriters and subject to the approval of legal matters by their counsel. In such cases, any order from you for securities will be strictly subject to confirmation and we reserve the right in our uncontrolled discretion to reject any order in whole or in part. Upon release by us, you may reoffer such securities at the offering price fixed by us. With our consent, you may allow a discount, not in excess of the reallowance fixed by us, in selling such securities to other dealers, provided that in doing so you comply with the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"). Upon our request, you will advise us of the identity of any dealer to whom you allow such a discount and any Underwriter or dealer from whom you receive such a discount. After the securities are released for sale to the public, we may vary the offering price and other setting terms.
2. You represent that you are a dealer actually engaged in the investment banking or securities business and that you are either (i) a member in good standing of the NASD or (ii) a dealer with its principal place of business located outside the United States, its territories or possessions and not registered under the Securities Exchange Act of 1934 (a "non-member foreign dealer") or (iii) a bank not eligible for membership in the NASD. If you are a non-member foreign dealer, you agree to make no sales of securities within the United States, its territories or its possessions or to persons who are nationals thereof or residents therein. Non-member foreign dealers and banks agree, in making any sales, to comply with the NASD's interpretation with respect to free-riding and withholding. In accepting a selling concession where we are acting as Representative of the Underwriters, in accepting a reallowance from us whether or not we are acting as such Representative, and in allowing a discount to any other person, you agree to comply with the provisions of Rule 2740 of the Conduct Rules of the NASD, and, in addition, if you are a non-member foreign dealer or bank, you agree to comply, as though you were a member of the NASD, with the provisions of Rules 2730 and 2750 of such Conduct Rules and to comply with Rule 2420 thereof as that Rule applies to a non-member foreign dealer or bank. You represent that you are fully familiar with the above provisions of the Conduct Rules of the NASD.
3. If the securities have been registered under the Securities Act of 1933 (the "1933 Act"), in offering and selling such securities, you are not authorized to give any information or make any representation not contained in the prospectus relating thereto. You confirm that you are familiar with the rules and policies of the Securities and Exchange Commission relating to the distribution of preliminary and final prospectuses, and you agree that you will comply therewith in any offering covered by this Agreement. If we are acting as Representative of the Underwriters, we will make available to you, to the extent made available to us by the issuer of the securities, such number of copies of the
prospectus or offering documents, for securities not registered under the 1933 Act, as you may reasonably request.
4. If we are acting as Representative of the Underwriters of securities of an issuer that is not required to file reports under the Securities Exchange Act of 1934 (the "1934 Act"), you agree that you will not sell any of the securities to any account over which you have discretionary authority.
5. Payment for securities purchased by you is to be made at our office, One Liberty Plaza, 165 Broadway, New York, N.Y. 10006 (or at such other place as we may advise), at the offering price less the concession allowed to you, on such date as we may advise, by certified or official bank check in New York Clearing House funds (or such other funds as we may advise), payable to our order, against delivery of the securities to be purchased by you. We shall have authority to make appropriate arrangements for payment for and/or delivery through the facility of The Depository Trust Company or any such other depository or similar facility for the securities.
6. In the event that, prior to the completion of the distribution of securities covered by this Agreement, we purchase in the open market or otherwise any securities delivered to you, if we are acting as Representative of the Underwriters, you agree to repay to us for the accounts of the Underwriters the amount of the concession allowed to you plus brokerage commissions and any transfer taxes paid in connection with such purchase.
7. At any time prior to the completion of the distribution of securities covered by this Agreement you will, upon our request as Representative of the Underwriters, report to us the amount of securities purchased by you which then remains unsold and will, upon our request, sell to us for the account of one or more of the Underwriters such amount of such unsold securities as we may designate, at the offering price less an amount to be determined by us not in excess of the concession allowed to you.
8. If we are acting as Representative of the Underwriters, upon application to us, we will inform you of the states and other jurisdictions of the United States in which it is believed that the securities being offered are qualified for sale under, or are exempt from the requirements of, their respective securities laws, but we assume no responsibility with respect to your right to sell securities in any jurisdiction. We shall have authority to file with the Department of State of the State of New York a Further State Notice with respect to the securities, if necessary.
9. You agree that in connection with any offering of securities covered by this Agreement you will comply with the applicable provisions of the 1933 Act and the 1934 Act and the applicable rules and regulations of the Securities and Exchange Commission thereunder, the applicable rules and regulations of the NASD, and the applicable rules of any securities exchange having jurisdiction over the offering.
10. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to any offering covered by this Agreement. We shall be under no liability to you except for our lack of good faith and for obligations assumed by us in this Agreement, except that you do not waive any rights that you may have under the 1933 Act or the rules and regulations thereunder.
11. Any notice from us shall be deemed to have been duly given if mailed or transmitted by any standard form of written telecommunications to you at the above address or at such other address as you shall specify to us in writing.
12. With respect to any offering of securities covered by this Agreement, the price restrictions contained in Paragraph 1 hereof and the provisions of Paragraphs 6 and 7 hereof shall terminate as to such offering at the close of business on the 45th day after the securities are released for sale or, as to any or all such provisions, at such earlier time as we may advise. All other provisions of this Agreement shall remain operative and in full force and effect with respect to such offering.
13. This Agreement shall be governed by the laws of the State of New York.
Please confirm your agreement hereto by signing the enclosed duplicate copy hereof in the place provided below
and returning such signed duplicate copy to us at World Headquarters, 4 World Financial Center, New York, N.Y. 10080, Attention: Syndicate Operations. Upon receipt thereof, this instrument and such signed duplicate copy will evidence the agreement between us.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
Confirmed and accepted as of the
day of , 20
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Name of Dealer
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Authorized Officer or Partner
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(if not Officer or Partner, attach copy of Instrument of Authorization)
EXHIBIT H.3
MASTER AGREEMENT AMONG UNDERWRITERS
April 15, 1985
Merrill Lynch & Co.
Merrill Lynch Pierce Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281-1305
Dear Sirs:
We understand that from time to time you may act as Representative or as one of the Representatives of the several underwriters of offerings of securities of various issuers. This Agreement shall apply to any offering of securities in which we elect to act as an underwriter after receipt of an invitation from you which shall identify the issuer, contain information regarding certain terms of the securities to be offered and specify the amount of our proposed participation and the names of the other Representatives, if any, and that our participation as an underwriter in the offering shall be subject to the provisions of this Agreement. Your invitation will include instructions for our acceptance of such invitation. At or prior to the time of an offering, you will advise us, to the extent applicable, as to the expected offering date, the expected closing date, the initial offering price, the interest or dividend rate (or the method by which such rate is to be determined), the conversion price, the underwriting discount, the management fee, the selling concession and the reallowance, except that if the offering price of the securities is to be determined as contemplated by Rule 430A under the Securities Act of 1933 (such procedure being hereinafter referred to as "430A Pricing"), you shall so advise us and shall specify the maximum underwriting discount, management fee and selling concession. Such information may be conveyed by you in one or more communications (such communications received by us with respect to the offering are hereinafter collectively referred to as the "Invitation"). If the Purchase Agreement (as hereinafter defined) provides for the granting of an option to purchase additional securities to cover over-allotments or otherwise (an "over-allotment option"), you will notify us, in the Invitation, of such option and of our maximum obligation upon exercise of such option.
This Agreement, as amended or supplemented by the Invitation, shall become effective with respect to our participation in an offering of securities if you receive our oral or written acceptance and you do not receive a written communication revoking our acceptance prior to the time and date specified in the Invitation (our unrevoked acceptance after expiration of such time and date being hereinafter referred to as our "Acceptance"). Our Acceptance will constitute our confirmation that, except as otherwise stated in such Acceptance, each statement included in the Master Underwriters' Questionnaire set forth as Exhibit A hereto (or otherwise furnished to us) is correct. The issuer of the securities in any offering of securities made pursuant to this Agreement is hereinafter referred to as the "Issuer." If the Purchase Agreement does not provide for an over-allotment option, the securities to be purchased are hereinafter referred to as the "Securities"; if the Purchase Agreement provides for an over-allotment option, the securities the Underwriters (as hereinafter defined) are initially obligated to purchase pursuant to the Purchase Agreement are hereinafter called the "Initial Securities" and any additional securities which may be purchased upon exercise of the over-allotment option are hereinafter called the "Option Securities," with the Initial Securities and all or any part of the Option Securities being hereinafter collectively referred to as the "Securities." Any underwriters of Securities under this Agreement, including the Representatives (as hereinafter defined), are hereinafter collectively referred to as the "Underwriters." All references herein to "you" or to the "Representatives" shall mean Merrill Lynch, Pierce, Fenner & Smith Incorporated and the other firms, if any, which are named as Representatives in the Invitation. The Securities to be offered may, but need not, be registered for a delayed or continuous offering pursuant to Rule 415 under the Securities Act of 1933 (the "1933 Act").
The following provisions of this Agreement shall apply separately to each individual offering of Securities. This Agreement may be supplemented or amended by you by written notice to us and, except for supplements or amendments set forth in an Invitation relating to a particular offering of Securities, any such supplement or amendment to this Agreement shall be effective with respect to any offering of Securities to which this Agreement applies after this Agreement is so amended or supplemented.
Section 1 Purchase Agreement: Authority of Representatives. We authorize you to execute and deliver a purchase agreement and any amendment or supplement thereto and any associated Terms Agreement or other similar agreement (collectively, the "Purchase Agreement") on our behalf with the Issuer and/or any selling securityholder with respect to the Securities in such form as you determine. We will be bound by all terms of the Purchase Agreement as executed. We understand that changes may be made in those who are to be Underwriters, and in the amount of Securities to be purchased by them, but the amount of Securities to be purchased by us in accordance with the terms of this Agreement, including the maximum amount of Option Securities, if any, which we may become obligated to purchase by reason of the exercise of any over-allotment option provided in the Purchase Agreement, shall not be changed without our consent except as provided in the Purchase Agreement.
As Representatives of the Underwriters, you are authorized to take such action as you deem necessary or advisable to carry out this Agreement, the Purchase Agreement, and the purchase and sale of the Securities, and to agree to any waiver or modification of any provision of the Purchase Agreement. To the extent applicable, you are also authorized to determine (i) the amount of Option Securities, if any, to be purchased by the Underwriters pursuant to any over-allotment option and (ii) with respect to offerings using 430A Pricing, the initial offering price and the price at which the Securities are to be purchased in accordance with the Purchase Agreement. It is understood and agreed that Merrill Lynch, Pierce, Fenner & Smith Incorporated may act on behalf of all Representatives.
It is understood that, if so specified in the Invitation, arrangements may be made for the sale of Securities by the Issuer pursuant to delayed delivery contracts (hereinafter referred to as "Delayed Delivery Contracts"). References herein to delayed delivery and Delayed Delivery Contracts apply only to offerings to which delayed delivery is applicable. The term "underwriting obligation" as used in this Agreement with respect to any Underwriter, shall refer to the amount of Securities, including any Option Securities (plus such additional Securities as may be required by the Purchase Agreement in the event of a default by one or more of the Underwriters) which such Underwriter is obligated to purchase pursuant to the provisions of the Purchase Agreement, without regard to any reduction in such obligation as a result of Delayed Delivery Contracts which may be entered into by the Issuer.
If the Securities consist in whole or in part of debt obligations maturing serially, the serial Securities being purchased by each Underwriter pursuant to the Purchase Agreement will consist, subject to adjustment as provided in the Purchase Agreement, of serial Securities of each maturity in a principal amount which bears the same proportion to the aggregate principal amount of the serial Securities of such maturity to be purchased by all the Underwriters as the respective principal amount of serial Securities set forth opposite such Underwriter's name in the Purchase Agreement bears to the aggregate principal amount of the serial Securities to be purchased by all the Underwriters.
Section 2 Registration Statement and Prospectus: Offering Circular. In the case of an Invitation regarding to an offer of Securities registered under the 1933 Act (a "Registered Offering"), you will furnish to us, to the extent made available to you by the Issuer, copies of any registration statement or registration statements relating to the Securities which may be filed with the Securities and Exchange Commission (the "Commission") pursuant to the 1933 Act and of each amendment thereto (excluding exhibits but including any documents incorporated by reference therein). Such registration statement(s) as amended, and the prospectus(es) relating to the sale of Securities by the Issuer constituting a part thereof, including all documents incorporated therein by reference, as from time to time amended or supplemented by the filing of documents pursuant to the Securities Exchange Act of 1934 (the "1934 Act"), the 1933 Act or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus," respectively; provided, however, that a supplement to the Prospectus filed with the Commission pursuant to Rule 424 under the 1933 Act with respect to an offering of Securities (a "Prospectus Supplement") shall be deemed to have supplemented the Prospectus only with respect to the offering of Securities to which it relates.
With respect to Securities for which no Registration Statement is filed with the Commission, you will furnish to us, to the extent made available to you by the Issuer, copies of any private placement memorandum offering circular or other offering materials to be used in connection with the offering of the Securities and of each amendment thereto (the "Offering Circular").
Section 3 Offering. The sale of the securities to the public shall commence as soon as you deem advisable. We will not sell any Securities until they are released by you for that purpose. When notified by you that the Securities are released for sale, we will offer in conformity with the terms of the offering set forth in the Prospectus or Offering Circular, such of the Securities to be purchased by us as are not reserved for our account (or sale to Selected Dealers and others pursuant to Section 5. After the initial offering the offering price and the concession and discount therefrom may be changed by you by notice to the Underwriters, and we agree to be bound by any such change.
If, in accordance with the terms of offering set forth in the Prospectus or Offering Circular, the offering of the Securities is not at a fixed price but at varying prices set by individual Underwriters based on market prices or at negotiated prices, the provisions above relating to your right to change the offering price and concession and discount to dealers shall not apply, and other references in this Section and elsewhere in this Agreement to the offering price or Selected Dealers' concession shall be deemed to mean the prices and concessions determined by you from time to time in your discretion.
Unless otherwise permitted in the Invitation, we will not sell any Securities to any account over which we have discretionary authority. We will also comply with any other restrictions which may be set forth in the Invitation.
The initial public advertisement, if any, with respect to the Securities shall appear on such date, and shall include the names of such of the Underwriters, as you may determine.
Section 4 Delayed Delivery Arrangements. We authorize you to act on our behalf in making all arrangements for the solicitation of offers to purchase Securities from the Issuer pursuant to Delayed Delivery Contracts, and we agree that all such arrangements will be made only through you (directly or through Underwriters or Selected Dealers). You may allow to Selected Dealers in respect to such Securities a commission equal to the concession allowed to Selected Dealers pursuant to Section 5.
The obligations of the Underwriters shall be reduced in the aggregate by the principal amount of Securities covered by Delayed Delivery Contracts made by the Issuer, the obligation of each Underwriter to be reduced by the principal amount of such Securities, if any, allocated by you to such Underwriter. Your determination of the allocation for Securities covered by Delayed Delivery Contracts among the several Underwriters shall be final and conclusive, and we agree to be bound by any notice delivered by you to the Issuer setting forth the amount of the reduction in our obligation as a result of Delayed Delivery Contracts.
Upon receiving payment from the Issuer of the fee for arranging Delayed Delivery Contracts, you will credit our account with the portion of such fee applicable to the Securities covered by Delayed Delivery Contracts allocated to us. You will charge our account with any commission allocated to Selected Dealers in respect of Securities covered by Delayed Delivery Contracts allocated to us.
Section 5 Offering to Selected Dealers and Others: Management of Offering. We authorize you, for our account, to reserve for sale and sell to dealers ("Selected Dealers"), among whom any of the Underwriters may be included, such amount of Securities to be purchased by us as you shall determine. Reservations for sales to Selected Dealers for our account need not be in proportion to our underwriting obligation, but sales of Securities reserved for our account for sale to Selected Dealers shall be made as nearly as practicable in the ratio which the amount of Securities reserved for our account bears to the aggregate amount of Securities reserved for the account of all Underwriters, as calculated from day to day. Sales to Selected Dealers may be made under the Merrill Lynch, Pierce, Fenner & Smith Incorporated Standard Dealer Agreement, or otherwise. The price to Selected Dealers initially shall be the offering price less a concession not in excess of the Selected Dealers concession set forth in the Invitation. Selected Dealers shall be actually engaged in the investment banking or securities business and shall be either (i) members in good standing of the National Association of Securities Dealers, Inc. (the "NASD") or (ii) dealers with their principal place of business located outside the United States, its territories and its possessions and not registered under the 1934 Act who agree to make no sales within the United States, its territories or its possession or to persons who are nationals thereof or residents therein or (iii) banks that are not eligible for membership in the NASD. Each Selected Dealer shall agree to comply with the provisions of Section 24 of
Article III of the Rules of Fair Practice of the NASD, and each foreign Selected
Dealer or bank who is not a member of the NASD also shall agree to comply with
the NASD's interpretation with respect to free-riding and withholding, to
comply, as though it were a member of the NASD, with the provisions of Sections
8 and 36 of Article III of such Rules of Fair Practice and to comply with
Section 25 of Article III thereof as that Section applies to a non-member
foreign dealer or bank.
With your consent, the Underwriters may allow, and Selected Dealers may reallow, a discount on sales to any dealer who meets the above NASD requirements in an amount not in excess of the amount set forth in the Invitation. Upon your request, we will advise you of the identity of any dealer to whom we allow such a discount and any Underwriter or Selected Dealer from whom we receive such a discount.
We also authorize you, for our account, to reserve for sale and to sell Securities to be purchased by us at the offering price to others, including institutions and retail purchasers. Except for such sales which are designated by a purchaser to be for the account of a particular Underwriter, such reservations and sales shall be made as nearly as practicable in proportion to our underwriting obligation, unless you agree to a smaller proportion at our request.
At or before the time the Securities are released for sale, you shall notify us of the amount of Securities which have not been reserved for our account for sale to Selected Dealers and others and which is to be retained by us for direct sale.
We will from time to time, upon your request, report to you the amount of Securities retained by us for direct sale which remains unsold and, upon your request, deliver to you for our account, or sell to you for the account of one or more of the Underwriters, such amount of unsold Securities as you may designate at the offering price less an amount determined by you not in excess of the concession to Selected Dealers. You may also repurchase Securities from other Underwriters and Selected Dealers, for the account of one or more of the Underwriters, at prices determined by you not in excess of the offering price less the concession to Selected Dealers.
You may from time to time deliver to any Underwriter, for carrying purposes or for sale by such Underwriter, any of the Securities then reserved for sale to, but not purchased and paid for by, Selected Dealers or others as above provided, but to the extent that Securities are so delivered for sale by such Underwriter, the amount of Securities then reserved for the account of such Underwriter shall be correspondingly reduced. Securities delivered for carrying purposes only shall be redelivered to you upon demand.
The Underwriters and Selected Dealers may, with your consent, purchase Securities from and sell Securities to each other at the offering price less a concession not in excess of the concession to Selected Dealers.
Section 6 Repurchase of Securities Not Effectively Placed. In recognition of the importance of distributing the Securities to bona fide investors, we agree to repurchase on demand any Securities sold by us, except through you, which are purchased by you in the open market or otherwise during a period terminating as provided in Section 16, at a price equal to the cost of such purchase, including accrued interest, amortization of original issue discount or dividends, commissions and transfer and other taxes, if any, on redelivery. The certificates delivered to us need not be identical certificates delivered to you in respect of the Securities purchased. In lieu of requiring repurchase, you may, in your discretion, sell such Securities for our account at such prices, upon such terms and to such persons, including any of the other Underwriters, as you may determine, charging the amount of any loss and expense, or crediting the amount of any net profit, resulting from such sale, to our account, or you may charge our account with an amount determined by you not in excess of the concession to Selected Dealers.
Section 7 Stabilization and Over-Allotment. In order to facilitate the sale of the Securities, we authorize you, in your discretion, to purchase and sell Securities or any other securities of the Issuer or any guarantor of the Securities specified in the Invitation in the open market or otherwise, for long or short account, at such prices as you may determine, and, in arranging for sales to Selected Dealers or others, to over-allot. You may liquidate any long position or cover any short position incurred pursuant to this Section at such prices as you may determine. You shall make such purchases and sales (including over-allotments) for the accounts of the Underwriters as nearly as practicable in proportion to their respective underwriting obligations. It is understood that, in connection with any particular offering of Securities to which this Agreement applies, you may have made purchases of securities of the
Issuer or securities of any guarantor of the Securities for stabilizing purposes prior to the time when we become an Underwriter, and we agree that any such securities so purchased shall be treated as having been purchased for the respective accounts of the Underwriters pursuant to the foregoing authorization. At the close of business on any day or net commitment, either for long or short account, resulting from such purchases or sales (including over-allotments) shall not exceed 20% (or such other amount as may specified in the Invitation) of our underwriting obligation, except that such percentage may be increased with the approval of a majority in interest of the Underwriters. We will take up at cost on demand any Securities or other securities of the Issuer or any securities of any guarantor of the Securities so sold or over-allotted for our account, including accrued interest, amortization of original issue discount or dividends, and we will pay to you on demand the amount of any losses or expenses incurred for our account pursuant to this Section. In the event of default by any Underwriter in respect of its obligations under this Section, each non-defaulting Underwriter shall assume its share of the obligations of such defaulting Underwriter in the proportion that its underwriting obligation bears to the underwriting obligations of all non-defaulting Underwriters without relieving such defaulting Underwriter of its liability hereunder.
If you effect any stabilizing purchase pursuant to this Section, you shall promptly notify us of the date and time of the first stabilizing purchase and the date and time when stabilizing was terminated. You shall prepare and maintain such records as are required to be maintained by you as manager pursuant to Rule 17a-2 under the 1934 Act.
Section 8 Open Market Transactions. We represent and agree in connection with the offering of Securities we have complied and will comply with the provisions of Rule 10b-6 under the 1934 Act with regard to trading in the Securities. For purposes of the foregoing sentence, we agree that, in addition to the Securities, other securities of the Issuer or securities of any guarantor of the Securities or the right or option to purchase or otherwise acquire any securities of the Issuer or any securities of any guarantor of the Securities specified in the Invitation shall be considered securities of the same class and series as the Securities.
Section 9 Payment and Delivery. At or before such time on such dates and at such places as you may specify in the Invitation, we will deliver to you a certified or official bank check in such funds as are specified in the Invitation, payable to the order of Merrill Lynch, Pierce, Fenner & Smith Incorporated (unless otherwise specified in the Invitation) in an amount equal to, as you direct, either (i) the offering price or prices plus accured interest, amortization of original issue discount or dividends, if any, set forth in the Prospectus or Offering Circular less the concession to Selected Dealers in respect of the amount of Securities to be purchased by us in accordance with the terms of this Agreement, or (ii) the amount set forth in the Invitation with respect to the Securities to be purchased by us. We authorize you to make payment for our account of the purchase price for the Securities to be purchased by us against delivery to you of such Securities (which may be in temporary form), and the difference between such purchase price of the Securities and the amount of our funds delivered to you therefor shall be credited to our account.
Delivery to us of Securities retained by us for direct sale shall be made by you as soon as practicable after your receipt of the Securities. Upon termination of the provisions of this Agreement as provided in Section 16, you shall deliver to us any Securities reserved for our account for sale to Selected Dealers and others which remain unsold at that time.
You are authorized to make appropriate arrangements for payment for and/or delivery through the facilities of The Depository Trust Company or any such other depository or similar facility, the Securities to be purchased by us, or, if we are not a member, settlement may be made through a correspondent that is a member pursuant to our timely instructions to you.
Upon receiving payment for Securities sold for our account to Selected Dealers and others, you shall remit to us an amount equal to the amount paid by us to you in respect of such Securities and credit or charge our account with the difference, if any, between such amount and the price at which such Securities were sold.
In the event that the Purchase Agreement for an offering provides for the payment of a commission or other compensation to the Underwriters, we authorize you to receive such commission or other compensation for our account.
Section 10 Management Compensation. As compensation for your services in the management of the offering, we will pay you an amount equal to the management fee specified in the Invitation in respect of the Securities to be purchased by us pursuant to the Purchase Agreement, and we authorize you to charge our account with such amount. If there is more than one Representative, such compensation shall be divided among the Representatives in such proportions as they may determine.
Section 11 Authority to Borrow. We authorize you to advance your own funds for our account, charging current interest rates, or to arrange loans for our account or the account of the Underwriters, as you may deem necessary or advisable for the purchase, carrying, sale and distribution of the Securities. You may execute and deliver any notes or other instruments required in connection therewith and may hold or pledge as security therefor all or any part of the Securities which we or such Underwriters have agreed to purchase. The obligations of the Underwriters under loans arranged on their behalf shall be several in proportion to their respective participations in such loans, and not joint. Any lender is authorized to accept your instructions as to the disposition of the proceeds of any such loans. You shall credit each Underwriter with the proceeds of any loans made for its account.
Section 12 Legal Qualifications. You shall inform us, upon request, of the states and other jurisdictions of the United States in which it is believed that the Securities are qualified for sale under, or are exempt from the requirements of, their respective securities laws, but you assume no responsibility with respect to our right to sell Securities in any jurisdiction. You are authorized to file with the Department of State of the State of New York a Further State Notice with respect to the Securities, if necessary.
If we propose to offer Securities outside the United States, its territories or its possessions, we will take, at our own expense, such action, if any, as may be necessary to comply with the laws of each foreign jurisdiction in which we propose to offer Securities.
Section 13 Membership in National Association of Securities Dealers, Foreign Underwriters and Banks. We understand that you are a member in good standing of the NASD. We confirm that we are actually engaged in the investment banking or securities business and are either (i) a member in good standing of the NASD or (ii) a dealer with its principal place of business located outside the United States, its territories and its possessions and not registered under the 1934 Act who hereby agrees to make no sales within the United States, its territories or its possessions or to persons who are nationals thereof or residents therein (except that we may participate in sales to Selected Dealers and others under Section 5 of this Agreement) or (iii) a bank not eligible for membership in the NASD. We hereby agree to comply with Section 24 of Article III of the Rules of Fair Practice of the NASD, and if we are a foreign dealer or bank and not a member of the NASD we also hereby agree to comply with the NASD's interpretation with respect to free-riding and withholding, to comply, as though we were a member of the NASD, with the provisions of Sections 8 and 36 of Article III of such Rules of Fair Practice, and to comply with Section 25 of Article III thereof as that Section applies to a non-member foreign dealer or bank.
Section 14 Distribution of Prospectuses: Offering Circulars. We are familiar with Securities Act of 1933 Release No. 4968 and Rule 15c-2-8 under the 1934 Act, relating to the distribution of preliminary and final prospectuses, and we confirm that we will comply therewith, to the extent applicable, in connection with any sale of Securities. You shall cause to be made available to us, to the extent made available to you by the Issuer, such number of copies of the Prospectus as we may reasonably request for purposes contemplated by the 1933 Act, the 1934 Act and the rules and regulations thereunder.
Our Acceptance of an Invitation relating to an offering made pursuant to an Offering Circular shall constitute our agreement that, if requested by you, we will furnish a copy of any amendment to a preliminary or final Offering Circular to each person to whom we shall have furnished a previous preliminary or final Offering Circular. Our Acceptance shall constitute our confirmation that we have delivered and our agreement that we will deliver all preliminary and final Offering Circulars required for compliance with the applicable federal and state laws and the applicable rules and regulations of any regulatory body promulgated thereunder governing the use and distribution of offering circulars by underwriters and any additional instructions contained in the Invitation and, to the extent consistent with such laws, rules and regulations, our Acceptance shall constitute our confirmation that we have delivered and our agreement that we will deliver all preliminary and final Offering Circulars which would be required if the provisions of Rule 15c-2-8 (or any successor provision) under the 1934 Act applied to such offering.
Section 15 Net Capital. The incurrence by us of our obligations hereunder and under the Purchase Agreement in connection with the offering of the Securities will not place us in violation of the net capital requirements of Rule 15c3-1 under the 1934 Act or, if we are a financial institution subject to regulation by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency or the Federal Deposit Insurance Corporation, will not place us in violation of the capital requirements of such regulator or any other regulator to which we are subject.
Section 16 Termination. With respect to each offering of Securities pursuant to this Agreement, all limitations in this Agreement on the price at which the Securities may be sold, the period of time referred to in Section 6, the authority granted by the first sentence of Section 7, and the restrictions contained in Section 8 shall terminate at the close of business on the 45th day after the commencement of the offering of such Securities. You may terminate any or all of such provisions at any time prior thereto by notice to the Underwriters. All other provisions of this Agreement shall remain operative and in full force and effect with respect to such offering.
Section 17 Expenses and Settlement. You may charge our account with any transfer taxes on sales of Securities made for our account and with our proportionate share (based upon our underwriting obligation) of all other expenses incurred by you under this Agreement or otherwise in connection with the purchase, carrying, sale or distribution of the Securities. With respect to each offering of Securities pursuant to this Agreement, the respective accounts of the Underwriters shall be settled as promptly as practicable after the termination of all the provisions of this Agreement as provided in Section 16, but you may reserve such amounts as you may deem advisable for additional expenses. Your determination of the amount to be paid to or by us shall be conclusive. You may at any time make partial distributions of credit balances or call for payment of debit balances. Any of our funds in your hands may be held with your general funds without accountability for interest. Notwithstanding any settlement, we will remain liable for any taxes on transfers for our account and for our proportionate share (based upon our underwriting obligation) of all expenses and liabilities which may be incurred by or for the accounts of the Underwriters with respect to each offering of Securities pursuant to this Agreement.
Section 18 Indemnification. With respect to each offering of Securities pursuant to this Agreement, we will indemnify and hold harmless each other Underwriter and each person, if any, who controls each other Underwriter within the meaning of Section 15 of the 1933 Act, to the extent that and on the terms upon which we agree to indemnify and hold harmless the Issuer and other specified persons as set forth in the Purchase Agreement.
Section 19 Claims Against Underwriters. With respect to each offering of Securities pursuant to this Agreement, if at any time any person other than an Underwriter assets a claim (including any commenced or threatened investigation or proceeding by any governmental agency or body) against one or more of the Underwriters or against you as Representatives of the Underwriters arising out of an alleged untrue statement or omission in the Registration Statement (or any amendment thereto) or in any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or in any preliminary or final Offering Circular, or relating to any transaction contemplated by this Agreement, we authorize you to make such investigation, to retain such counsel for the Underwriters and to take such action in the defense of such claim as you may deem necessary or advisable. You may settle such claim with the approval of a majority in interest of the Underwriters. We will pay our proportionate share (based upon our underwriting obligation) of all expenses incurred by you (including the fees and expenses of counsel for the Underwriters) as incurred, in investigating and defending against such claim and our proportionate share of the aggregate liability incurred by all Underwriters in respect to such claim (after deducting any contribution or indemnification obtained pursuant to the Purchase Agreement, or otherwise, from persons other than Underwriters), whether such liability is the result of a judgment against one or more of the Underwriters or the result of any such settlement. Any Underwriter may retain separate counsel at its own expense. A claim against or liability incurred by a person who controls an Underwriter shall be deemed to have been made against or incurred by such Underwriter. In the event of default by any Underwriter in respect of its obligations under this Section, the non-defaulting Underwriters shall be obligated to pay the full amount thereof in the proportions that their respective underwriting obligations bear to the underwriting obligations of all non-defaulting Underwriters without relieving such defaulting Underwriter of its liability hereunder.
Section 20 Default by Underwriters. Default by any Underwriter in respect of its obligations hereunder or under the Purchase Agreement shall not release us from any of our obligations or in any way affect the
liability of such defaulting Underwriter to the other Underwriters for damages resulting from such default. If one or more Underwriters default under the Purchase Agreement, if provided in such Purchase Agreement you may (but shall not be obligated to) arrange for the purchase by others, which may include yourselves or other non-defaulting Underwriters, of all or a portion of the Securities not taken up by the defaulting Underwriters.
In the event that such arrangements are made, the respective underwriting obligations of the non-defaulting Underwriters and the amounts of the Securities to be purchased by others, if any, shall be taken as the basis for all rights and obligations hereunder; but this shall not in any way affect the liability of any defaulting Underwriter to the other Underwriters for damages resulting from its default, nor shall any such default relieve any other Underwriter of any of its obligations hereunder or under the Purchase Agreement except as herein or therein provided. In addition, in the event of default by one or more Underwriters in respect of their obligations under the Purchase Agreement to purchase the Securities agreed to be purchased by them thereunder and, to the extent that arrangements shall not have been made by you for any person to assume the obligations of such defaulting Underwriter or Underwriters, we agree, if provided in the Purchase Agreement, to assume our proportionate share, based upon our underwriting obligation, of the obligations of each such defaulting Underwriter (subject to the limitations contained in the Purchase Agreement) without relieving such defaulting Underwriter of its liability therefor.
In the event of default by one or more Underwriters in respect of their obligations under this Agreement to take up and pay for any securities purchased, or to deliver any securities sold or over-allotted, by you for the respective accounts of the Underwriters, or to bear their proportion of expenses or liabilities pursuant to this Agreement, and to the extent that arrangements shall not have been made by you for any persons to assume the obligations of such defaulting Underwriter or Underwriters, we agree to assume our proportionate share, based upon our respective underwriting obligation, of the obligations of each defaulting Underwriter without relieving any such defaulting Underwriter of its liability therefor.
Section 21 Legal Responsibility. As Representatives of the Underwriters, you shall have no liability to us, except for your lack of good faith and for obligations assumed by you in this Agreement and except that we do not waive any rights that we may have under the 1933 Act or the 1934 Act or the rules and regulations thereunder. No obligations not expressly assumed by you in this Agreement shall be implied herefrom.
Nothing herein contained shall constitute the Underwriters an association, or partners, with you, or with each other, or, except as otherwise provided herein or in the Purchase Agreement, render any Underwriter liable for the obligations of any other Underwriter, and the rights, obligations and liabilities of the Underwriters are several in accordance with their respective underwriting obligations and not joint.
If the Underwriters are deemed to constitute a partnership for federal income tax purposes, we elect to be excluded from the application of Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as amended, and agree not to take any position inconsistent with such election, and you, as Representatives, are authorized, in your discretion, to execute on behalf of the Underwriters such evidence of such election as may be required by the Internal Revenue Service.
Unless we have promptly notified you in writing otherwise, our name as it should appear in the Prospectus or Offering Circular and our address are set forth on the signature pages hereof.
Section 22 Notices. Any notice from you shall be deemed to have been duly given if mailed or transmitted to us at our address appearing below.
Section 23 Governing Law. This Agreement shall be governed by the laws of the State of New York applicable to agreements made and to be performed in said State.
Please confirm this Agreement and deliver a copy to us.
Very truly yours,
Name of Firm:
Address:
Confirmed as of the date first above written.
MERRILL, LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
EXHIBIT J.1
FORM OF CUSTODY AGREEMENT
AGREEMENT, dated as of ________________, 2002 between Calamos Convertible Opportunities and Income Fund, a business trust organized and existing under the laws of the State of Delaware having its principal office and place of business at _____________________ _____________________ (the "Fund") and The Bank of New York, a New York corporation authorized to do a banking business having its principal office and place of business at One Wall Street, New York, New York 10286 ("Custodian").
W I T N E S S E T H:
that for and in consideration of the mutual promises hereinafter set forth the Fund and Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words shall have the meanings set forth below:
1. "AUTHORIZED PERSON" shall be any person, whether or not an officer or employee of the Fund, duly authorized by the Fund's board to execute any Certificate or to give any Oral Instruction with respect to one or more Accounts, such persons to be designated in a Certificate annexed hereto as Schedule I hereto or such other Certificate as may be received by Custodian from time to time.
2. "BNY AFFILIATE" shall mean any office, branch or subsidiary of The Bank of New York Company, Inc.
3. "BOOK-ENTRY SYSTEM" shall mean the Federal Reserve/Treasury book-entry system for receiving and delivering securities, its successors and nominees.
4. "BUSINESS DAY" shall mean any day on which Custodian and relevant Depositories are open for business.
5. "CERTIFICATE" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to Custodian, which is actually received by Custodian by letter or facsimile transmission and signed on behalf of the Fund by an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person.
6. "COMPOSITE CURRENCY UNIT" shall mean the Euro or any other composite currency unit consisting of the aggregate of specified amounts of specified currencies, as such unit may be constituted from time to time.
7. "DEPOSITORY" shall include (a) the Book-Entry System, (b) the Depository Trust Company, (c) any other clearing agency or securities depository registered with the Securities and Exchange Commission identified to the Fund from time to time, and (d) the respective successors and nominees of the foregoing.
8. "FOREIGN DEPOSITORY" shall mean (a) Euroclear, (b) Clearstream Banking, societe anonyme, (c) each Eligible Securities Depository as defined in Rule 17f-7 under the Investment Company Act of 1940, as amended, identified to the Fund from time to time, and (d) the respective successors and nominees of the foregoing.
9. "INSTRUCTIONS" shall mean communications transmitted by electronic or telecommunications media, including S.W.I.F.T., computer-to-computer interface, or dedicated transmission lines.
10. "ORAL INSTRUCTIONS" shall mean verbal instructions received by Custodian from an Authorized Person or from a person reasonably believed by Custodian to be an Authorized Person.
11. "SERIES" shall mean the various portfolios, if any, of the Fund listed on Schedule II hereto, and if none are listed references to Series shall be references to the Fund.
12. "SECURITIES" shall include, without limitation, any common stock and other equity securities, bonds, debentures and other debt securities, notes, mortgages or other obligations, and any instruments representing rights to receive, purchase, or subscribe for the same, or representing any other rights or interests therein (whether represented by a certificate or held in a Depository or by a Subcustodian).
13. "SUBCUSTODIAN" shall mean a bank (including any branch thereof) or other financial institution (other than a Foreign Depository) located outside the U.S. which is utilized by Custodian in connection with the purchase, sale or custody of Securities hereunder and identified to the Fund from time to time, and their respective successors and nominees.
ARTICLE II
APPOINTMENT OF CUSTODIAN; ACCOUNTS;
REPRESENTATIONS, WARRANTIES, AND COVENANTS
1. (a) The Fund hereby appoints Custodian as custodian of all Securities and cash at any time delivered to Custodian during the term of this Agreement, and authorizes Custodian to hold Securities in registered form in its name or the name of its nominees. Custodian hereby accepts such appointment and agrees to establish and maintain one or more securities accounts and cash accounts for each Series in which Custodian will hold Securities and cash as provided herein. Custodian shall maintain books and records segregating the assets of each Series from the assets of any other Series. Such accounts (each, an "Account"; collectively, the "Accounts") shall be in the name of the Fund.
(b) Custodian may from time to time establish on its books and records such sub-accounts within each Account as the Fund and Custodian may agree upon (each a "Special
Account"), and Custodian shall reflect therein such assets as the Fund may specify in a Certificate or Instructions.
(c) Custodian may from time to time establish pursuant to a written agreement with and for the benefit of a broker, dealer, future commission merchant or other third party identified in a Certificate or Instructions such accounts on such terms and conditions as the Fund and Custodian shall agree, and Custodian shall transfer to such account such Securities and money as the Fund may specify in a Certificate or Instructions.
2. The Fund hereby represents and warrants, which representations and warranties shall be continuing and shall be deemed to be reaffirmed upon each delivery of a Certificate or each giving of Oral Instructions or Instructions by the Fund, that:
(a) It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business as now conducted, to enter into this Agreement, and to perform its obligations hereunder;
(b) This Agreement has been duly authorized, executed and delivered by the Fund, approved by a resolution of its board, constitutes a valid and legally binding obligation of the Fund, enforceable in accordance with its terms, and there is no statute, regulation, rule, order or judgment binding on it, and no provision of its charter or by-laws, nor of any mortgage, indenture, credit agreement or other contract binding on it or affecting its property, which would prohibit its execution or performance of this Agreement;
(c) It is conducting its business in substantial compliance with all applicable laws and requirements, both state and federal, and has obtained all regulatory licenses, approvals and consents necessary to carry on its business as now conducted;
(d) It will not use the services provided by Custodian hereunder in any manner that is, or will result in, a violation of any law, rule or regulation applicable to the Fund;
(e) Its board or its foreign custody manager, as defined in Rule 17f-5 under the Investment Company Act of 1940, as amended (the "`40 Act"), has determined that use of each Subcustodian (including any Replacement Custodian) and each Depository which Custodian or any Subcustodian is authorized to utilize in accordance with Section 1(a) of Article III hereof, satisfies the applicable requirements of the `40 Act and Rules 17f-4 or 17f-5 thereunder, as the case may be;
(f) The Fund or its investment adviser has determined that the custody arrangements of each Foreign Depository provide reasonable safeguards against the custody risks associated with maintaining assets with such Foreign Depository within the meaning of Rule 17f-7 under the `40 Act;
(g) It is fully informed of the protections and risks associated with various methods of transmitting Instructions and Oral Instructions and delivering Certificates to Custodian, understands that there may be more secure methods of transmitting or delivering the same than the methods selected by the Fund, agrees that the security procedures (if any) to be
utilized provide a commercially reasonable degree of protection in light of its particular needs and circumstances, and acknowledges and agrees that Instructions need not be reviewed by Custodian, may conclusively be presumed by Custodian to have been given by person(s) duly authorized, and may be acted upon as given;
(h) It shall manage its borrowings, including, without limitation, any advance or overdraft (including any day-light overdraft) in the Accounts, so that the aggregate of its total borrowings for each Series does not exceed the amount such Series is permitted to borrow under the `40 Act;
(i) Its transmission or giving of, and Custodian acting upon and in reliance on, Certificates, Instructions, or Oral Instructions pursuant to this Agreement shall at all times comply with the `40 Act;
(j) It shall impose and maintain restrictions on the destinations to which cash may be disbursed by Instructions to ensure that each disbursement is for a proper purpose; and
(k) It has the right to make the pledge and grant the security interest and security entitlement to Custodian contained in Section 1 of Article V hereof, free of any right of redemption or prior claim of any other person or entity, such pledge and such grants shall have a first priority subject to no setoffs, counterclaims, or other liens or grants prior to or on a parity therewith, and it shall take such additional steps as Custodian may require to assure such priority.
3. The Fund hereby covenants that it shall from time to time complete and execute and deliver to Custodian upon Custodian's request a Form FR U-1 (or successor form) whenever the Fund borrows from Custodian any money to be used for the purchase or carrying of margin stock as defined in Federal Reserve Regulation U.
ARTICLE III
CUSTODY AND RELATED SERVICES
1. (a) Subject to the terms hereof, the Fund hereby authorizes Custodian to hold any Securities received by it from time to time for the Fund's account. Custodian shall be entitled to utilize Depositories, Subcustodians, and, subject to subsection(c) of this Section 1, Foreign Depositories, to the extent possible in connection with its performance hereunder. Securities and cash held in a Depository or Foreign Depository will be held subject to the rules, terms and conditions of such entity. Securities and cash held through Subcustodians shall be held subject to the terms and conditions of Custodian's agreements with such Subcustodians. Subcustodians may be authorized to hold Securities in Foreign Depositories in which such Subcustodians participate. Unless otherwise required by local law or practice or a particular subcustodian agreement, Securities deposited with a Subcustodian, a Depositary or a Foreign Depository will be held in a commingled account, in the name of Custodian, holding only Securities held by Custodian as custodian for its customers. Custodian shall identify on its books and records the Securities and cash belonging to the Fund, whether held directly or indirectly through Depositories, Foreign Depositories, or Subcustodians. Custodian shall, directly or indirectly through Subcustodians, Depositories, or Foreign Depositories, endeavor, to the extent feasible, to
hold Securities in the country or other jurisdiction in which the principal trading market for such Securities is located, where such Securities are to be presented for cancellation and/or payment and/or registration, or where such Securities are acquired. Custodian at any time may cease utilizing any Subcustodian and/or may replace a Subcustodian with a different Subcustodian (the "Replacement Subcustodian"). In the event Custodian selects a Replacement Subcustodian, Custodian shall not utilize such Replacement Subcustodian until after the Fund's board or foreign custody manager has determined that utilization of such Replacement Subcustodian satisfies the requirements of the `40 Act and Rule 17f-5 thereunder.
(b) Unless Custodian has received a Certificate or Instructions
to the contrary, Custodian shall hold Securities indirectly through a
Subcustodian only if (i) the Securities are not subject to any right, charge,
security interest, lien or claim of any kind in favor of such Subcustodian or
its creditors or operators, including a receiver or trustee in bankruptcy or
similar authority, except for a claim of payment for the safe custody or
administration of Securities on behalf of the Fund by such Subcustodian, and
(ii) beneficial ownership of the Securities is freely transferable without the
payment of money or value other than for safe custody or administration.
(c) With respect to each Foreign Depository, Custodian shall exercise reasonable care, prudence, and diligence (i) to provide the Fund with an analysis of the custody risks associated with maintaining assets with the Foreign Depository, and (ii) to monitor such custody risks on a continuing basis and promptly notify the Fund of any material change in such risks. The Fund acknowledges and agrees that such analysis and monitoring shall be made on the basis of, and limited by, information gathered from Subcustodians or through publicly available information otherwise obtained by Custodian, and shall not include any evaluation of Country Risks. As used herein the term "Country Risks" shall mean with respect to any Foreign Depository: (a) the financial infrastructure of the country in which it is organized, (b) such country's prevailing custody and settlement practices, (c) nationalization, expropriation or other governmental actions, (d) such country's regulation of the banking or securities industry, (e) currency controls, restrictions, devaluations or fluctuations, and (f) market conditions which affect the order execution of securities transactions or affect the value of securities.
2. Custodian shall furnish the Fund with an advice of daily transactions (including a confirmation of each transfer of Securities) and a monthly summary of all transfers to or from the Accounts.
3. With respect to all Securities held hereunder, Custodian shall, unless otherwise instructed to the contrary:
(a) Receive all income and other payments and advise the Fund as promptly as practicable of any such amounts due but not paid;
(b) Present for payment and receive the amount paid upon all Securities which may mature and advise the Fund as promptly as practicable of any such amounts due but not paid;
(c) Forward to the Fund copies of all information or documents that it may actually receive from an issuer of Securities which, in the opinion of Custodian, are intended for the beneficial owner of Securities;
(d) Execute, as custodian, any certificates of ownership, affidavits, declarations or other certificates under any tax laws now or hereafter in effect in connection with the collection of bond and note coupons;
(e) Hold directly or through a Depository, a Foreign Depository, or a Subcustodian all rights and similar Securities issued with respect to any Securities credited to an Account hereunder; and
(f) Endorse for collection checks, drafts or other negotiable instruments.
4. (a) Custodian shall notify the Fund of rights or discretionary actions with respect to Securities held hereunder, and of the date or dates by when such rights must be exercised or such action must be taken, provided that Custodian has actually received, from the issuer or the relevant Depository (with respect to Securities issued in the United States) or from the relevant Subcustodian, Foreign Depository, or a nationally or internationally recognized bond or corporate action service to which Custodian subscribes, timely notice of such rights or discretionary corporate action or of the date or dates such rights must be exercised or such action must be taken. Absent actual receipt of such notice, Custodian shall have no liability for failing to so notify the Fund.
(b) Whenever Securities (including, but not limited to, warrants, options, tenders, options to tender or non-mandatory puts or calls) confer discretionary rights on the Fund or provide for discretionary action or alternative courses of action by the Fund, the Fund shall be responsible for making any decisions relating thereto and for directing Custodian to act. In order for Custodian to act, it must receive the Fund's Certificate or Instructions at Custodian's offices, addressed as Custodian may from time to time request, not later than noon (New York time) at least two (2) Business Days prior to the last scheduled date to act with respect to such Securities (or such earlier date or time as Custodian may specify to the Fund). Absent Custodian's timely receipt of such Certificate or Instructions, Custodian shall not be liable for failure to take any action relating to or to exercise any rights conferred by such Securities.
5. All voting rights with respect to Securities, however registered, shall be exercised by the Fund or its designee. For Securities issued in the United States, Custodian's only duty shall be to mail to the Fund any documents (including proxy statements, annual reports and signed proxies) actually received by Custodian relating to the exercise of such voting rights. With respect to Securities issued outside of the United States, Custodian's only duty shall be to provide the Fund with access to a provider of global proxy services at the Fund's request. The Fund shall be responsible for all costs associated with its use of such services.
6. Custodian shall promptly advise the Fund upon Custodian's actual receipt of notification of the partial redemption, partial payment or other action affecting less than all Securities of the relevant class. If Custodian, any Subcustodian, any Depository, or any Foreign
Depository holds any Securities in which the Fund has an interest as part of a fungible mass, Custodian, such Subcustodian, Depository, or Foreign Depository may select the Securities to participate in such partial redemption, partial payment or other action in any non-discriminatory manner that it customarily uses to make such selection.
7. Custodian shall not under any circumstances accept bearer interest coupons which have been stripped from United States federal, state or local government or agency securities unless explicitly agreed to by Custodian in writing.
8. The Fund shall be liable for all taxes, assessments, duties and other governmental charges, including any interest or penalty with respect thereto ("Taxes"), with respect to any cash or Securities held on behalf of the Fund or any transaction related thereto. The Fund shall indemnify Custodian and each Subcustodian for the amount of any Tax that Custodian, any such Subcustodian or any other withholding agent is required under applicable laws (whether by assessment or otherwise) to pay on behalf of, or in respect of income earned by or payments or distributions made to or for the account of the Fund (including any payment of Tax required by reason of an earlier failure to withhold). Custodian shall, or shall instruct the applicable Subcustodian or other withholding agent to, withhold the amount of any Tax which is required to be withheld under applicable law upon collection of any dividend, interest or other distribution made with respect to any Security and any proceeds or income from the sale, loan or other transfer of any Security. In the event that Custodian or any Subcustodian is required under applicable law to pay any Tax on behalf of the Fund, Custodian is hereby authorized to withdraw cash from any cash account in the amount required to pay such Tax and to use such cash, or to remit such cash to the appropriate Subcustodian or other withholding agent, for the timely payment of such Tax in the manner required by applicable law. If the aggregate amount of cash in all cash accounts is not sufficient to pay such Tax, Custodian shall promptly notify the Fund of the additional amount of cash (in the appropriate currency) required, and the Fund shall directly deposit such additional amount in the appropriate cash account promptly after receipt of such notice, for use by Custodian as specified herein. In the event that Custodian reasonably believes that Fund is eligible, pursuant to applicable law or to the provisions of any tax treaty, for a reduced rate of, or exemption from, any Tax which is otherwise required to be withheld or paid on behalf of the Fund under any applicable law, Custodian shall, or shall instruct the applicable Subcustodian or withholding agent to, either withhold or pay such Tax at such reduced rate or refrain from withholding or paying such Tax, as appropriate; provided that Custodian shall have received from the Fund all documentary evidence of residence or other qualification for such reduced rate or exemption required to be received under such applicable law or treaty. In the event that Custodian reasonably believes that a reduced rate of, or exemption from, any Tax is obtainable only by means of an application for refund, Custodian and the applicable Subcustodian shall have no responsibility for the accuracy or validity of any forms or documentation provided by the Fund to Custodian hereunder. The Fund hereby agrees to indemnify and hold harmless Custodian and each Subcustodian in respect of any liability arising from any underwithholding or underpayment of any Tax which results from the inaccuracy or invalidity of any such forms or other documentation, and such obligation to indemnify shall be a continuing obligation of the Fund, its successors and assigns notwithstanding the termination of this Agreement.
9. (a) For the purpose of settling Securities and foreign exchange transactions, the Fund shall provide Custodian with sufficient immediately available funds for all transactions by such time and date as conditions in the relevant market dictate. As used herein, "sufficient immediately available funds" shall mean either (i) sufficient cash denominated in U.S. dollars to purchase the necessary foreign currency, or (ii) sufficient applicable foreign currency, to settle the transaction. Custodian shall provide the Fund with immediately available funds each day which result from the actual settlement of all sale transactions, based upon advices received by Custodian from Subcustodians, Depositories, and Foreign Depositories. Such funds shall be in U.S. dollars or such other currency as the Fund may specify to Custodian.
(b) Any foreign exchange transaction effected by Custodian in connection with this Agreement may be entered with Custodian or a BNY Affiliate acting as principal or otherwise through customary banking channels. The Fund may issue a standing Certificate or Instructions with respect to foreign exchange transactions, but Custodian may establish rules or limitations concerning any foreign exchange facility made available to the Fund. The Fund shall bear all risks of investing in Securities or holding cash denominated in a foreign currency.
(c) To the extent that Custodian has agreed to provide pricing or other information services in connection with this Agreement, Custodian is authorized to utilize any vendor (including brokers and dealers of Securities) reasonably believed by Custodian to be reliable to provide such information. The Fund understands that certain pricing information with respect to complex financial instruments (e.g., derivatives) may be based on calculated amounts rather than actual market transactions and may not reflect actual market values, and that the variance between such calculated amounts and actual market values may or may not be material. Where vendors do not provide information for particular Securities or other property, an Authorized Person may advise Custodian in a Certificate regarding the fair market value of, or provide other information with respect to, such Securities or property as determined by it in good faith. Custodian shall not be liable for any loss, damage or expense incurred as a result of errors or omissions with respect to any pricing or other information utilized by Custodian hereunder.
10. Custodian shall promptly send to the Fund (a) any reports it receives from a Depository on such Depository's system of internal accounting control, and (b) such reports on its own system of internal accounting control as the Fund may reasonably request from time to time.
11. Until such time as Custodian receives a certificate to the contrary with respect to a particular Security, Custodian may release the identity of the Fund to an issuer which requests such information pursuant to the Shareholder Communications Act of 1985 for the specific purpose of direct communications between such issuer and shareholder.
ARTICLE IV
PURCHASE AND SALE OF SECURITIES;
CREDITS TO ACCOUNT
1. Promptly after each purchase or sale of Securities by the Fund, the Fund shall deliver to Custodian a Certificate or Instructions, or with respect to a purchase or sale of a Security
generally required to be settled on the same day the purchase or sale is made, Oral Instructions specifying all information Custodian may reasonably request to settle such purchase or sale. Custodian shall account for all purchases and sales of Securities on the actual settlement date unless otherwise agreed by Custodian.
2. The Fund understands that when Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. Notwithstanding any provision in this Agreement to the contrary, settlements, payments and deliveries of Securities may be effected by Custodian or any Subcustodian in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction in which the transaction occurs, including, without limitation, delivery to a purchaser or dealer therefor (or agent) against receipt with the expectation of receiving later payment for such Securities. The Fund assumes full responsibility for all risks, including, without limitation, credit risks, involved in connection with such deliveries of Securities.
3. Custodian may, as a matter of bookkeeping convenience or by separate agreement with the Fund, credit the Account with the proceeds from the sale, redemption or other disposition of Securities or interest, dividends or other distributions payable on Securities prior to its actual receipt of final payment therefor. All such credits shall be conditional until Custodian's actual receipt of final payment and may be reversed by Custodian to the extent that final payment is not received. Payment with respect to a transaction will not be "final" until Custodian shall have received immediately available funds which under applicable local law, rule and/or practice are irreversible and not subject to any security interest, levy or other encumbrance, and which are specifically applicable to such transaction.
ARTICLE V
OVERDRAFTS OR INDEBTEDNESS
1. If Custodian should in its sole discretion advance funds on behalf of any Series which results in an overdraft (including, without limitation, any day-light overdraft) because the money held by Custodian in an Account for such Series shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Series, as set forth in a Certificate, Instructions or Oral Instructions, or if an overdraft arises in the separate account of a Series for some other reason, including, without limitation, because of a reversal of a conditional credit or the purchase of any currency, or if the Fund is for any other reason indebted to Custodian with respect to a Series, including any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of Section 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by Custodian to the Fund for such Series payable on demand and shall bear interest from the date incurred at a rate per annum ordinarily charged by Custodian to its institutional customers, as such rate may be adjusted from time to time. In addition, the Fund hereby agrees that Custodian shall to the maximum extent permitted by law have a continuing lien, security interest, and security entitlement in and to any property, including, without limitation, any investment property or any financial asset, of such Series at
any time held by Custodian for the benefit of such Series or in which such Series may have an interest which is then in Custodian's possession or control or in possession or control of any third party acting in Custodian's behalf. The Fund authorizes Custodian, in its sole discretion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of account standing to such Series' credit on Custodian's books.
2. If the Fund borrows money from any bank (including Custodian if the
borrowing is pursuant to a separate agreement) for investment or for temporary
or emergency purposes using Securities held by Custodian hereunder as collateral
for such borrowings, the Fund shall deliver to Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which such
borrowing relates; (b) the name of the bank, (c) the amount of the borrowing,
(d) the time and date, if known, on which the loan is to be entered into, (e)
the total amount payable to the Fund on the borrowing date, (f) the Securities
to be delivered as collateral for such loan, including the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities, and (g) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the `40 Act and the Fund's prospectus. Custodian shall deliver
on the borrowing date specified in a Certificate the specified collateral
against payment by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. Custodian shall deliver such Securities as additional collateral as
may be specified in a Certificate to collateralize further any transaction
described in this Section. The Fund shall cause all Securities released from
collateral status to be returned directly to Custodian, and Custodian shall
receive from time to time such return of collateral as may be tendered to it. In
the event that the Fund fails to specify in a Certificate the Series, the name
of the issuer, the title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by Custodian, Custodian
shall not be under any obligation to deliver any Securities.
ARTICLE VI
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any shares issued by the Fund ("Shares") it shall deliver to Custodian a Certificate or Instructions specifying the amount of money and/or Securities to be received by Custodian for the sale of such Shares and specifically allocated to an Account for such Series.
2. Upon receipt of such money, Custodian shall credit such money to an Account in the name of the Series for which such money was received.
3. Except as provided hereinafter, whenever the Fund desires Custodian to make payment out of the money held by Custodian hereunder in connection with a redemption of any Shares, it shall furnish to Custodian:
(a) a resolution of the Fund's Board directing the Fund's transfer agent to redeem the Shares, and
(b) a Certificate specifying the number and Series of Shares redeemed, and the amount to be paid for such Shares.
4. Upon receipt from the Fund's transfer agent of an advice setting forth the Series and number of Shares received by such transfer agent for redemption and that such Shares are in good form for redemption, the Custodian shall make payment to such transfer agent, out of the money held in the Account of the appropriate Series, of the total amount specified in the Certificate issued pursuant to the foregoing paragraph 3 of this Article.
ARTICLE VII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. Whenever the Fund shall determine to pay a dividend or distribution on Shares it shall furnish to Custodian Instructions or a Certificate setting forth with respect to the Series specified therein the date of the declaration of such dividend or distribution, the total amount payable, and the payment date.
2. Upon the payment date specified in such Instructions or Certificate, Custodian shall pay out of the money held for the account of such Series the total amount payable to the dividend agent of the Fund specified therein.
ARTICLE VIII
CONCERNING CUSTODIAN
1. (a) Except as otherwise expressly provided herein, Custodian shall not be liable for any costs, expenses, damages, liabilities or claims, including attorneys' and accountants' fees (collectively, "Losses"), incurred by or asserted against the Fund, except those Losses arising out of Custodian's own negligence or willful misconduct. Custodian shall have no liability whatsoever for the action or inaction of any Depositories, or, except to the extent such action or inaction is a direct result of the Custodian's failure to fulfill its duties hereunder, of any Foreign Depositories. With respect to any Losses incurred by the Fund as a result of the acts or any failures to act by any Subcustodian (other than a BNY Affiliate), Custodian shall take appropriate action to recover such Losses from such Subcustodian; and Custodian's sole responsibility and liability to the Fund shall be limited to amounts so received from such Subcustodian (exclusive of costs and expenses incurred by Custodian). In no event shall Custodian be liable to the Fund or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection with this Agreement, nor shall BNY or any Subcustodian be liable: (i) for acting in accordance with any Certificate or Oral Instructions actually received by Custodian and reasonably believed by Custodian to be given by an Authorized Person; (ii) for acting in accordance with Instructions without reviewing the same; (iii) for conclusively presuming that all Instructions are given only by person(s) duly authorized; (iv) for conclusively presuming that all disbursements of cash directed by the Fund, whether by a Certificate, an Oral Instruction, or an Instruction, are in accordance with Section 2(i) of Article II hereof; (v) for
holding property in any particular country, including, but not limited to, Losses resulting from nationalization, expropriation or other governmental actions; regulation of the banking or securities industry; exchange or currency controls or restrictions, devaluations or fluctuations; availability of cash or Securities or market conditions which prevent the transfer of property or execution of Securities transactions or affect the value of property; (vi) for any Losses due to forces beyond the control of Custodian, including without limitation strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God, or interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; (vii) for the insolvency of any Subcustodian (other than a BNY Affiliate), any Depository, or, except to the extent such action or inaction is a direct result of the Custodian's failure to fulfill its duties hereunder, any Foreign Depository; or (viii) for any Losses arising from the applicability of any law or regulation now or hereafter in effect, or from the occurrence of any event, including, without limitation, implementation or adoption of any rules or procedures of a Foreign Depository, which may affect, limit, prevent or impose costs or burdens on, the transferability, convertibility, or availability of any currency or Composite Currency Unit in any country or on the transfer of any Securities, and in no event shall Custodian be obligated to substitute another currency for a currency (including a currency that is a component of a Composite Currency Unit) whose transferability, convertibility or availability has been affected, limited, or prevented by such law, regulation or event, and to the extent that any such law, regulation or event imposes a cost or charge upon Custodian in relation to the transferability, convertibility, or availability of any cash currency or Composite Currency Unit, such cost or charge shall be for the account of the Fund, and Custodian may treat any account denominated in an affected currency as a group of separate accounts denominated in the relevant component currencies.
(b) Custodian may enter into subcontracts, agreements and understandings with any BNY Affiliate, whenever and on such terms and conditions as it deems necessary or appropriate to perform its services hereunder. No such subcontract, agreement or understanding shall discharge Custodian from its obligations hereunder.
(c) The Fund agrees to indemnify Custodian and hold Custodian harmless from and against any and all Losses sustained or incurred by or asserted against Custodian by reason of or as a result of any action or inaction, or arising out of Custodian's performance hereunder, including reasonable fees and expenses of counsel incurred by Custodian in a successful defense of claims by the Fund; provided however, that the Fund shall not indemnify Custodian for those Losses arising out of Custodian's own negligence or willful misconduct. This indemnity shall be a continuing obligation of the Fund, its successors and assigns, notwithstanding the termination of this Agreement.
2. Without limiting the generality of the foregoing, Custodian shall be under no obligation to inquire into, and shall not be liable for:
(a) Any Losses incurred by the Fund or any other person as a result of the receipt or acceptance of fraudulent, forged or invalid Securities, or Securities which are otherwise not freely transferable or deliverable without encumbrance in any relevant market;
(b) The validity of the issue of any Securities purchased, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor;
(c) The legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor;
(d) The legality of the declaration or payment of any dividend or distribution by the Fund;
(e) The legality of any borrowing by the Fund;
(f) The legality of any loan of portfolio Securities, nor shall Custodian be under any duty or obligation to see to it that any cash or collateral delivered to it by a broker, dealer or financial institution or held by it at any time as a result of such loan of portfolio Securities is adequate security for the Fund against any loss it might sustain as a result of such loan, which duty or obligation shall be the sole responsibility of the Fund. In addition, Custodian shall be under no duty or obligation to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent makes payment to it of any dividends or interest which are payable to or for the account of the Fund during the period of such loan or at the termination of such loan, provided, however that Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due;
(g) The sufficiency or value of any amounts of money and/or Securities held in any Special Account in connection with transactions by the Fund; whether any broker, dealer, futures commission merchant or clearing member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or clearing member, or whether any payment received by Custodian from any broker, dealer, futures commission merchant or clearing member is the amount the Fund is entitled to receive, or to notify the Fund of Custodian's receipt or non-receipt of any such payment; or
(h) Whether any Securities at any time delivered to, or held by it or by any Subcustodian, for the account of the Fund and specifically allocated to a Series are such as properly may be held by the Fund or such Series under the provisions of its then current prospectus and statement of additional information, or to ascertain whether any transactions by the Fund, whether or not involving Custodian, are such transactions as may properly be engaged in by the Fund.
3. Custodian may, with respect to questions of law specifically regarding an Account, obtain the advice of counsel and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice.
4. Custodian shall be under no obligation to take action to collect any amount payable on Securities in default, or if payment is refused after due demand and presentment.
5. Custodian shall have no duty or responsibility to inquire into, make recommendations, supervise, or determine the suitability of any transactions affecting any Account.
6. The Fund shall pay to Custodian the fees and charges as may be specifically agreed upon from time to time and such other fees and charges at Custodian's standard rates for such services as may be applicable. The Fund shall reimburse Custodian for all costs associated with the conversion of the Fund's Securities hereunder and the transfer of Securities and records kept in connection with this Agreement. The Fund shall also reimburse Custodian for out-of-pocket expenses which are a normal incident of the services provided hereunder.
7. Custodian has the right to debit any cash account for any amount payable by the Fund in connection with any and all obligations of the Fund to Custodian. In addition to the rights of Custodian under applicable law and other agreements, at any time when the Fund shall not have honored any of its obligations to Custodian, Custodian shall have the right without notice to the Fund to retain or set-off, against such obligations of the Fund, any Securities or cash Custodian or a BNY Affiliate may directly or indirectly hold for the account of the Fund, and any obligations (whether matured or unmatured) that Custodian or a BNY Affiliate may have to the Fund in any currency or Composite Currency Unit. Any such asset of, or obligation to, the Fund may be transferred to Custodian and any BNY Affiliate in order to effect the above rights.
8. The Fund agrees to forward to Custodian a Certificate or Instructions confirming Oral Instructions by the close of business of the same day that such Oral Instructions are given to Custodian. The Fund agrees that the fact that such confirming Certificate or Instructions are not received or that a contrary Certificate or contrary Instructions are received by Custodian shall in no way affect the validity or enforceability of transactions authorized by such Oral Instructions and effected by Custodian. If the Fund elects to transmit Instructions through an on-line communications system offered by Custodian, the Fund's use thereof shall be subject to the Terms and Conditions attached as Appendix I hereto, and Custodian shall provide user and authorization codes, passwords and authentication keys only to an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person.
9. The books and records pertaining to the Fund which are in possession of Custodian shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the `40 Act and the rules thereunder. The Fund, or its authorized representatives, shall have access to such books and records during Custodian's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by Custodian to the Fund or its authorized representative. Upon the reasonable request of the Fund, Custodian shall provide in hard copy or on computer disc any records included in any such delivery which are maintained by Custodian on a computer disc, or are similarly maintained.
10. It is understood that Custodian is authorized to supply any information regarding the Accounts which is required by any law, regulation or rule now or hereafter in effect. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of a Depository, and with such reports on its own system of internal accounting control as the Fund may reasonably request from time to time.
11. Custodian shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied against Custodian in connection with this Agreement.
ARTICLE IX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. In the event such notice is given by the Fund, it shall be accompanied by a copy of a resolution of the board of the Fund, certified by the Secretary or any Assistant Secretary, electing to terminate this Agreement and designating a successor custodian or custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by Custodian, the Fund shall, on or before the termination date, deliver to Custodian a copy of a resolution of the board of the Fund, certified by the Secretary or any Assistant Secretary, designating a successor custodian or custodians. In the absence of such designation by the Fund, Custodian may designate a successor custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and Custodian shall upon receipt of a notice of acceptance by the successor custodian on that date deliver directly to the successor custodian all Securities and money then owned by the Fund and held by it as Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or Custodian in accordance with the preceding Section, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by Custodian of all Securities (other than Securities which cannot be delivered to the Fund) and money then owned by the Fund be deemed to be its own custodian and Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement.
ARTICLE X
MISCELLANEOUS
1. The Fund agrees to furnish to Custodian a new Certificate of Authorized Persons in the event of any change in the then present Authorized Persons. Until such new Certificate is received, Custodian shall be fully protected in acting upon Certificates or Oral Instructions of such present Authorized Persons.
2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to Custodian, shall be sufficiently given if addressed to Custodian and received by it at its offices at 100 Church Street, New York, New York 10286, or at such other place as Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and received by it at its offices at __________________________________________, or at such other place as the Fund may from time to time designate in writing.
4. Each and every right granted to either party hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of either party to exercise, and no delay in exercising, any right will operate as a waiver thereof, nor will any single or partial exercise by either party of any right preclude any other or future exercise thereof or the exercise of any other right.
5. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any exclusive jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties, except that any amendment to the Schedule I hereto need be signed only by the Fund and any amendment to Appendix I hereto need be signed only by Custodian. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party without the written consent of the other.
6. This Agreement shall be construed in accordance with the substantive laws of the State of New York, without regard to conflicts of laws principles thereof. The Fund and Custodian hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder. The Fund hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum. The Fund and Custodian each hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement.
7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the Fund and Custodian have caused this Agreement to be executed by their respective officers, thereunto duly authorized, as of the day and year first above written.
CALAMOS CONVERTIBLE OPPORTUNITIES
AND INCOME FUND
Title:
Tax Identification No:
THE BANK OF NEW YORK
Title:
SCHEDULE I
CERTIFICATE OF AUTHORIZED PERSONS
(THE FUND - ORAL AND WRITTEN INSTRUCTIONS)
The undersigned hereby certifies that he/she is the duly elected and acting ________________________ of Calamos Convertible Opportunities and Income Fund (the "Fund"), and further certifies that the following officers or employees of the Fund have been duly authorized in conformity with the Fund's Declaration of Trust and By-Laws to deliver Certificates and Oral Instructions to The Bank of New York ("Custodian") pursuant to the Custody Agreement between the Fund and Custodian dated _______________, and that the signatures appearing opposite their names are true and correct:
-------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature -------------------- --------------------- -------------------- Name Title Signature |
This certificate supersedes any certificate of Authorized Persons you may currently have on file.
Date:
SCHEDULE II
SERIES
APPENDIX I
THE BANK OF NEW YORK
ON-LINE COMMUNICATIONS SYSTEM (THE "SYSTEM")
TERMS AND CONDITIONS
1. License; Use. Upon delivery to an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person the Fund of software enabling the Fund to obtain access to the System (the "Software"), Custodian grants to the Fund a personal, nontransferable and nonexclusive license to use the Software solely for the purpose of transmitting Written Instructions, receiving reports, making inquiries or otherwise communicating with Custodian in connection with the Account(s). The Fund shall use the Software solely for its own internal and proper business purposes and not in the operation of a service bureau. Except as set forth herein, no license or right of any kind is granted to the Fund with respect to the Software. The Fund acknowledges that Custodian and its suppliers retain and have title and exclusive proprietary rights to the Software, including any trade secrets or other ideas, concepts, know-how, methodologies, or information incorporated therein and the exclusive rights to any copyrights, trademarks and patents (including registrations and applications for registration of either), or other statutory or legal protections available in respect thereof. The Fund further acknowledges that all or a part of the Software may be copyrighted or trademarked (or a registration or claim made therefor) by Custodian or its suppliers. The Fund shall not take any action with respect to the Software inconsistent with the foregoing acknowledgments, nor shall you attempt to decompile, reverse engineer or modify the Software. The Fund may not copy, sell, lease or provide, directly or indirectly, any of the Software or any portion thereof to any other person or entity without Custodian's prior written consent. The Fund may not remove any statutory copyright notice or other notice included in the Software or on any media containing the Software. The Fund shall reproduce any such notice on any reproduction of the Software and shall add any statutory copyright notice or other notice to the Software or media upon Custodian's request.
2. Equipment. The Fund shall obtain and maintain at its own cost and expense all equipment and services, including but not limited to communications services, necessary for it to utilize the Software and obtain access to the System, and Custodian shall not be responsible for the reliability or availability of any such equipment or services.
3. Proprietary Information. The Software, any data base and any proprietary data, processes, information and documentation made available to the Fund (other than which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of Custodian or its suppliers. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with respect to its own confidential property and trade secrets, but not less than reasonable care. Upon termination of the Agreement or the Software license granted herein for any reason, the Fund shall return to Custodian any and all copies of the Information which are in its possession or under its control.
4. Modifications. Custodian reserves the right to modify the Software from time to time and the Fund shall install new releases of the Software as Custodian may direct. The Fund agrees not to modify or attempt to modify the Software without Custodian's prior written consent. The Fund acknowledges that any modifications to the Software, whether by the Fund or Custodian and whether with or without Custodian's consent, shall become the property of Custodian.
5. NO REPRESENTATIONS OR WARRANTIES. CUSTODIAN AND ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE SOFTWARE, SERVICES OR ANY DATABASE, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE FUND ACKNOWLEDGES THAT THE SOFTWARE, SERVICES AND ANY DATABASE ARE PROVIDED "AS IS." IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ANY DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL, WHICH THE FUND MAY INCUR IN CONNECTION WITH THE SOFTWARE, SERVICES OR ANY DATABASE, EVEN IF CUSTODIAN OR SUCH SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ACTS OF GOD, MACHINE OR COMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR MALFUNCTION OF COMMUNICATION FACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR OR DISSIMILAR CAUSE BEYOND THEIR REASONABLE CONTROL.
6. Security; Reliance; Unauthorized Use. The Fund will cause all persons utilizing the Software and System to treat all applicable user and authorization codes, passwords and authentication keys with extreme care, and it will establish internal control and safekeeping procedures to restrict the availability of the same to persons duly authorized to give Instructions. Custodian is hereby irrevocably authorized to act in accordance with and rely on Instructions received by it through the System. The Fund acknowledges that it is its sole responsibility to assure that only persons duly authorized use the System and that Custodian shall not be responsible nor liable for any unauthorized use thereof.
7. System Acknowledgments. Custodian shall acknowledge through the System its receipt of each transmission communicated through the System, and in the absence of such acknowledgment Custodian shall not be liable for any failure to act in accordance with such transmission and the Fund may not claim that such transmission was received by Custodian.
8. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED STATES LAW. THE FUND MAY NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER, RANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER COUNTRY. IF CUSTODIAN DELIVERED THE SOFTWARE TO THE FUND OUTSIDE OF THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN ACCORDANCE WITH THE EXPORTER ADMINISTRATION REGULATIONS. DIVERSION CONTRARY TO U.S. LAW IS PROHIBITED. The Fund hereby authorizes Custodian to report its name and address to government agencies to which Custodian is required to provide such information by law.
9. ENCRYPTION. The Fund acknowledges and agrees that encryption may not be available for every communication through the System, or for all data. The Fund agrees that Custodian may deactivate any encryption features at any time, without notice or liability to the Fund, for the purpose of maintaining, repairing or troubleshooting the System or the Software.
EXHIBIT J.2
FORM OF FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of _________________, 2002 between Calamos Convertible Opportunities and Income Fund (the "Fund") and The Bank of New York ("BNY").
W I T N E S S E T H:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager on the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform the duties set forth herein on the terms and conditions contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter contained in this Agreement, the Fund and BNY hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
1. "BOARD" shall mean the board of directors or board of trustees, as the case may be, of the Fund.
2. "ELIGIBLE FOREIGN CUSTODIAN" shall have the meaning provided in the Rule.
3. "MONITORING SYSTEM" shall mean a system established by BNY to fulfill the Responsibilities specified in clauses (d) and (e) of Section 1 of Article III of this Agreement.
4. "RESPONSIBILITIES" shall mean the responsibilities delegated to BNY under the Rule as a Foreign Custody Manager with respect to each Specified Country and each Eligible Foreign Custodian selected by BNY, as such responsibilities are more fully described in Article III of this Agreement.
5. "RULE" shall mean Rule 17f-5 under the Investment Company Act of 1940, as amended on June 12, 2000.
6. "SPECIFIED COUNTRY" shall mean each country listed on Schedule I attached hereto and each country, other than the United States, constituting the primary market for a security with respect to which the Fund has given settlement instructions to The Bank of New York as custodian (the "Custodian") under its Custody Agreement with the Fund.
ARTICLE II.
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect to each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect to each Specified Country and agrees in performing the Responsibilities as a Foreign Custody Manager to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of the Fund's assets would exercise.
3. BNY shall provide to the Board at such times as the Board deems reasonable and appropriate based on the circumstances of the Fund's foreign custody arrangements written reports notifying the Board of the placement of assets of the Fund with a particular Eligible Foreign Custodian within a Specified Country and of any material change in the arrangements (including the contract governing such arrangements) with respect to assets of the Fund with any such Eligible Foreign Custodian.
ARTICLE III.
RESPONSIBILITIES
1. Subject to the provisions of this Agreement, BNY shall with
respect to each Specified Country select an Eligible Foreign Custodian. In
connection therewith, BNY shall: (a) determine that assets of the Fund held by
such Eligible Foreign Custodian will be subject to reasonable care, based on the
standards applicable to custodians in the relevant market in which such Eligible
Foreign Custodian operates, after considering all factors relevant to the
safekeeping of such assets, including, without limitation, those contained in
paragraph (c)(1) of the Rule; (b) determine that the Fund's foreign custody
arrangements with each Eligible Foreign Custodian are governed by a written
contract with the Custodian which will provide reasonable care for the Fund's
assets based on the standards specified in paragraph (c)(1) of the Rule; (c)
determine that each contract with an Eligible Foreign Custodian shall include
the provisions specified in paragraph (c)(2)(i)(A) through (F) of the Rule or,
alternatively, in lieu of any or all of such (c)(2)(i)(A) through (F)
provisions, such other provisions as BNY determines will provide, in their
entirety, the same or a greater level of care and protection for the assets of
the Fund as such specified provisions; (d) monitor pursuant to the Monitoring
System the appropriateness of maintaining the assets of the Fund with a
particular Eligible Foreign Custodian pursuant to paragraph (c)(1) of the Rule
and the performance of the contract governing such arrangement; and (e) advise
the Fund whenever BNY determines under the Monitoring System that an arrangement
(including, any material change in the contract governing such arrangement)
described in preceding clause (d) no longer meets the requirements of the Rule.
2. For purposes of preceding Section 1 of this Article, BNY's determination of appropriateness shall not include, nor be deemed to include, any evaluation of Country Risks associated with investment in a particular country. For purposes hereof, "Country Risks" shall mean systemic risks of holding assets in a particular country including but not limited to (a) an Eligible Foreign Custodian's use of any depositories that act as or operate a system or a transnational system for the central handling of securities or any equivalent book-entries; (b)
such country's financial infrastructure; (c) such country's prevailing custody and settlement practices; (d) nationalization, expropriation or other governmental actions; (e) regulation of the banking or securities industry; (f) currency controls, restrictions, devaluations or fluctuations; and (g) market conditions which affect the orderly execution of securities transactions or affect the value of securities.
ARTICLE IV.
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly authorized, executed and delivered by the Fund, constitutes a valid and legally binding obligation of the Fund enforceable in accordance with its terms, and no statute, regulation, rule, order, judgment or contract binding on the Fund prohibits the Fund's execution or performance of this Agreement; (b) this Agreement has been approved and ratified by the Board at a meeting duly called and at which a quorum was at all times present, and (c) the Board or the Fund's investment advisor has considered the Country Risks associated with investment in each Specified Country and will have considered such risks prior to any settlement instructions being given to the Custodian with respect to any other country.
2. BNY hereby represents that: (a) BNY is duly organized and existing under the laws of the State of New York, with full power to carry on its businesses as now conducted, and to enter into this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly authorized, executed and delivered by BNY, constitutes a valid and legally binding obligation of BNY enforceable in accordance with its terms, and no statute, regulation, rule, order, judgment or contract binding on BNY prohibits BNY's execution or performance of this Agreement; and (c) BNY has established the Monitoring System.
ARTICLE V.
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages, liabilities or claims, including attorneys' and accountants' fees, sustained or incurred by, or asserted against, the Fund except to the extent the same arises out of the failure of BNY to exercise the care, prudence and diligence required by Section 2 of Article II hereof. In no event shall BNY be liable to the Fund, the Board, or any third party for special, indirect or consequential damages, or for lost profits or loss of business, arising in connection with this Agreement.
2. The Fund shall indemnify BNY and hold it harmless from and against any and all costs, expenses, damages, liabilities or claims, including attorneys' and accountants' fees, sustained or incurred by, or asserted against, BNY by reason or as a result of any action or inaction, or arising out of BNY's performance hereunder, provided that the Fund shall not indemnify BNY to the extent any such costs, expenses, damages, liabilities or claims arises out of BNY's failure to exercise the reasonable care, prudence and diligence required by Section 2 of Article II hereof.
3. For its services hereunder, the Fund agrees to pay to BNY such compensation and out-of-pocket expenses as shall be mutually agreed.
4. BNY shall have only such duties as are expressly set forth herein. In no event shall BNY be liable for any Country Risks associated with investments in a particular country.
ARTICLE VI.
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and BNY as a foreign custody manager, and no provision in the Custody Agreement between the Fund and the Custodian shall affect the duties and obligations of BNY hereunder, nor shall any provision in this Agreement affect the duties or obligations of the Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to BNY, shall be sufficiently given if received by it at its offices at 100 Church Street, 10th Floor, New York, New York 10286, or at such other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if received by it at its offices at 1111 East Warrenville Road, Naperville, Illinois 60563-1493 or at such other place as the Fund may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided however, that this Agreement shall not be assignable by either party without the written consent of the other.
5. This Agreement shall be construed in accordance with the substantive laws of the State of New York, without regard to conflicts of laws principles thereof. The Fund and BNY hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder. The Fund hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum. The Fund and BNY each hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement.
6. The parties hereto agree that in performing hereunder, BNY is acting solely on behalf of the Fund and no contractual or service relationship shall be deemed to be established hereby between BNY and any other person by reason of this Agreement.
7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.
8. This Agreement shall terminate simultaneously with the termination of the Custody Agreement between the Fund and the Custodian, and may otherwise be terminated by either party giving to the other party a notice in writing specifying the date of such termination, which shall be not less than thirty (30) days after the date of such notice.
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be executed by their respective officers, thereunto duly authorized, as of the date first above written.
CALAMOS CONVERTIBLE
OPPORTUNITIES AND INCOME FUND
Tax Identification No.:
THE BANK OF NEW YORK
SCHEDULE I
Specified Countries
EXHIBIT K.1
FORM OF STOCK TRANSFER AGENCY AGREEMENT
AGREEMENT, made as of ___________, by and between ____________________, a corporation organized and existing under the laws of the State of ____________ (hereinafter referred to as the "Customer"), and THE BANK OF NEW YORK, a New York trust company (hereinafter referred to as the "Bank").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the following meanings:
1. "Business Day" shall be deemed to be each day on which the Bank is open for business.
2. "Certificate" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to the Bank by the Customer which is signed by any Officer, as hereinafter defined, and actually received by the Bank.
3. "Officer" shall be deemed to be the Customer's Chief Executive Officer, President, any Vice President, the Secretary, the Treasurer, the Controller, any Assistant Treasurer, and any Assistant Secretary duly authorized by the Board of Directors of the Customer to execute any Certificate, instruction, notice or other instrument on behalf of the Customer and named in a Certificate, as such Certificate may be amended from time to time.
4. "Shares" shall mean all or any part of each class of the shares of capital stock of the Customer which from time to time are authorized and/or issued by the Customer and identified in a Certificate of the Secretary of the Customer under corporate seal, as such Certificate may be amended from time to time, with respect to which the Bank is to act hereunder.
ARTICLE II
APPOINTMENT OF BANK
1. The Customer hereby constitutes and appoints the Bank as its agent to perform the services described herein and as more particularly described in Schedule I attached hereto (the "Services"), and the Bank hereby accepts appointment as such agent and agrees to perform the Services in accordance with the terms hereinafter set forth.
2. In connection with such appointment, the Customer shall deliver the following documents to the Bank:
(a) A certified copy of the Certificate of Incorporation or other document evidencing the Customer's form of organization (the "Charter") and all amendments thereto;
(b) A certified copy of the By-Laws of the Customer;
(c) A certified copy of a resolution of the Board of Directors of the Customer appointing the Bank to perform the Services and authorizing the execution and delivery of this Agreement;
(d) A Certificate signed by the Secretary of the Customer specifying: the number of authorized Shares, the number of such authorized Shares issued and currently outstanding, and the names and specimen signatures of all persons duly authorized by the Board of Directors of the Customer to execute any Certificate on behalf of the Customer, as such Certificate may be amended from time to time;
(e) A Specimen Share certificate for each class of Shares in the form approved by the Board of Directors of the Customer, together with a Certificate signed by the Secretary of the Customer as to such approval and covenanting to supply a new such Certificate and specimen whenever such form shall change;
(f) An opinion of counsel for the Customer, in a form satisfactory to the Bank, with respect to the validity of the authorized and outstanding Shares, the obtaining of all necessary governmental consents, whether such Shares are fully paid and non-assessable and the status of such Shares under the Securities Act of 1933, as amended, and any other applicable law or regulation (i.e., if subject to registration, that they have been registered and that the Registration Statement has become effective or, if exempt, the specific grounds therefor);
(g) A list of the name, address, social security or taxpayer identification number of each Shareholder, number of Shares owned, certificate numbers, and whether any "stops" have been placed; and
(h) An opinion of counsel for the Customer, in a form satisfactory to the Bank, with respect to the due authorization by the Customer and the validity and effectiveness of the use of facsimile signatures by the Bank in connection with the countersigning and registering of Share certificates of the Customer.
3. The Customer shall furnish the Bank with a sufficient supply of blank Share certificates and from time to time will renew such supply upon request of the Bank. Such blank Share certificates shall be properly signed, by facsimile or otherwise, by Officers of the Customer authorized by law or by the By-Laws to sign Share certificates, and, if required, shall bear the corporate seal or a facsimile thereof.
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Customer shall deliver to the Bank the following documents on or before the effective date of any increase, decrease or other change in the total number of Shares authorized to be issued:
(a) A certified copy of the amendment to the Charter giving effect to such increase, decrease or change;
(b) An opinion of counsel for the Customer, in a form satisfactory to the Bank, with respect to the validity of the Shares, the obtaining of all necessary governmental consents, whether such Shares are fully paid and non-assessable and the status of such Shares under the Securities Act of 1933, as amended, and any other applicable federal law or regulations (i.e., if subject to registration, that they have been registered and that the Registration Statement has become effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the Bank was theretofore expressly limited, a certified copy of a resolution of the Board of Directors of the Customer increasing the authority of the Bank.
2. Prior to the issuance of any additional Shares pursuant to stock dividends, stock splits or otherwise, and prior to any
reduction in the number of Shares outstanding, the Customer shall deliver the following documents to the Bank:
(a) A certified copy of the resolutions adopted by the Board of Directors and/or the shareholders of the Customer authorizing such issuance of additional Shares of the Customer or such reduction, as the case may be;
(b) A certified copy of the order or consent of each governmental or regulatory authority required by law as a prerequisite to the issuance or reduction of such Shares, as the case may be, and an opinion of counsel for the Customer that no other order or consent is required; and
(c) An opinion of counsel for the Customer, in a form satisfactory to the Bank, with respect to the validity of the Shares, the obtaining of all necessary governmental consents, whether such Shares are fully paid and non-assessable and the status of such Shares under the Securities Act of 1933, as amended, and any other applicable law or regulation (i.e., if subject to registration, that they have been registered and that the Registration Statement has become effective, or, if exempt, the specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other capital adjustment requiring a change in the form of Share certificates, the Bank will issue Share certificates in the new form in exchange for, or upon transfer of, outstanding Share certificates in the old form, upon receiving:
(a) A Certificate authorizing the issuance of Share certificates in the new form;
(b) A certified copy of any amendment to the Charter with respect to the change;
(c) Specimen Share certificates for each class of Shares in the new form approved by the Board of Directors of the Customer, with a Certificate signed by the Secretary of the Customer as to such approval;
(d) A certified copy of the order or consent of each governmental or regulatory authority required by law as a prerequisite to the issuance of the Shares in the new
form, and an opinion of counsel for the Customer that the order or consent of no other governmental or regulatory authority is required; and
(e) An opinion of counsel for the Customer, in a form satisfactory to the Bank, with respect to the validity of the Shares in the new form, the obtaining of all necessary governmental consents, whether such Shares are fully paid and non-assessable and the status of such Shares under the Securities Act of 1933, as amended, and any other applicable law or regulation (i.e., if subject to registration, that the Shares have been registered and that the Registration Statement has become effective or, if exempt, the specific grounds therefor).
2. The Customer shall furnish the Bank with a sufficient supply of blank Share certificates in the new form, and from time to time will replenish such supply upon the request of the Bank. Such blank Share certificates shall be properly signed, by facsimile or otherwise, by Officers of the Customer authorized by law or by the By-Laws to sign Share certificates and, if required, shall bear the corporate seal or a facsimile thereof.
ARTICLE V
ISSUANCE AND TRANSFER OF SHARES
1. The Bank will issue Share certificates upon receipt of a Certificate from an Officer, but shall not be required to issue Share certificates after it has received from an appropriate federal or state authority written notification that the sale of Shares has been suspended or discontinued, and the Bank shall be entitled to rely upon such written notification. The Bank shall not be responsible for the payment of any original issue or other taxes required to be paid by the Customer in connection with the issuance of any Shares.
2. Shares will be transferred upon presentation to the Bank of Share certificates in form deemed by the Bank properly endorsed for transfer, accompanied by such documents as the Bank deems necessary to evidence the authority of the person making such transfer, and bearing satisfactory evidence of the payment of applicable stock transfer taxes. In the case of small estates where no administration is contemplated, the Bank may, when furnished with an appropriate surety bond, and without further approval of the Customer, transfer Shares registered in the name of the decedent where the current market value of the Shares being transferred does not exceed such amount as may from time to time be prescribed by the various states. The Bank reserves the right to refuse to transfer Shares until it is satisfied that the
endorsements on Share certificates are valid and genuine, and for that purpose it may require, unless otherwise instructed by an Officer of the Customer, a guaranty of signature by an "eligible guarantor institution" meeting the requirements of the Bank, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Bank in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. The Bank also reserves the right to refuse to transfer Shares until it is satisfied that the requested transfer is legally authorized, and it shall incur no liability for the refusal in good faith to make transfers which the Bank, in its judgment, deems improper or unauthorized, or until it is satisfied that there is no basis to any claims adverse to such transfer. The Bank may, in effecting transfers of Shares, rely upon those provisions of the Uniform Act for the Simplification of Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be amended from time to time, applicable to the transfer of securities, and the Customer shall indemnify the Bank for any act done or omitted by it in good faith in reliance upon such laws.
3. All certificates representing Shares that are subject to restrictions on transfer (e.g., securities acquired pursuant to an investment representation, securities held by controlling persons, securities subject to stockholders' agreement, etc.), shall be stamped with a legend describing the extent and conditions of the restrictions or referring to the source of such restrictions. The Bank assumes no responsibility with respect to the transfer of restricted securities where counsel for the Customer advises that such transfer may be properly effected.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Customer shall furnish to the Bank a copy of a resolution
of its Board of Directors, certified by the Secretary or any Assistant
Secretary, either (i) setting forth the date of the declaration of a dividend or
distribution, the date of accrual or payment, as the case may be, the record
date as of which shareholders entitled to payment, or accrual, as the case may
be, shall be determined, the amount per Share of such dividend or distribution,
the payment date on which all previously accrued and unpaid dividends are to be
paid, and the total amount, if any, payable to the Bank on such payment date, or
(ii) authorizing the declaration of dividends and distributions on a periodic
basis and authorizing the Bank to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Prior to the payment date specified in such Certificate or
resolution, as the case may be, the Customer shall, in the case of a cash
dividend or distribution, pay to the Bank an amount of cash, sufficient for the
Bank to make the payment, specified in such Certificate or resolution, to the
shareholders of record as of such payment date. The Bank will, upon receipt of
any such cash, (i) in the case of shareholders who are participants in a
dividend reinvestment and/or cash purchase plan of the Customer, reinvest such
cash dividends or distributions in accordance with the terms of such plan, and
(ii) in the case of shareholders who are not participants in any such plan, make
payment of such cash dividends or distributions to the shareholders of record as
of the record date by mailing a check, payable to the registered shareholder, to
the address of record or dividend mailing address. The Bank shall not be liable
for any improper payment made in accordance with a Certificate or resolution
described in the preceding paragraph. If the Bank shall not receive sufficient
cash prior to the payment date to make payments of any cash dividend or
distribution pursuant to subsections (i) and (ii) above to all shareholders of
the Customer as of the record date, the Bank shall, upon notifying the Customer,
withhold payment to all shareholders of the Customer as of the record date until
sufficient cash is provided to the Bank.
3. It is understood that the Bank shall in no way be responsible for the determination of the rate or form of dividends or distributions due to the shareholders.
4. It is understood that the Bank shall file such appropriate information returns concerning the payment of dividends and distributions with the proper federal, state and local authorities as are required by law to be filed by the Customer but shall in no way be responsible for the collection or withholding of taxes due on such dividends or distributions due to shareholders, except and only to the extent required of it by applicable law.
ARTICLE VII
CONCERNING THE CUSTOMER
1. The Customer shall promptly deliver to the Bank written notice of any change in the Officers authorized to sign Share certificates, Certificates, notifications or requests, together with a specimen signature of each new Officer. In the event any Officer who shall have signed manually or whose facsimile signature shall have been affixed to blank Share certificates shall die, resign or be removed prior to issuance of such Share certificates, the Bank may issue such Share certificates as the Share certificates of the Customer notwithstanding such death,
resignation or removal, and the Customer shall promptly deliver to the Bank such approvals, adoptions or ratifications as may be required by law.
2. Each copy of the Charter of the Customer and copies of all amendments thereto shall be certified by the Secretary of State (or other appropriate official) of the state of incorporation, and if such Charter and/or amendments are required by law also to be filed with a county or other officer or official body, a certificate of such filing shall be filed with a certified copy submitted to the Bank. Each copy of the By-Laws and copies of all amendments thereto, and copies of resolutions of the Board of Directors of the Customer, shall be certified by the Secretary or an Assistant Secretary of the Customer under the corporate seal.
3. Customer hereby represents and warrants:
(a) It is a corporation duly organized and validly existing under the laws of _________________.
(b) This Agreement has been duly authorized, executed and delivered on its behalf and constitutes the legal, valid and binding obligation of Customer. The execution, delivery and performance of this Agreement by Customer do not and will not violate any applicable law or regulation and do not require the consent of any governmental or other regulatory body except for such consents and approvals as have been obtained and are in full force and effect.
ARTICLE VIII
CONCERNING THE BANK
1. The Bank shall not be liable and shall be fully protected in acting upon any oral instruction, writing or document reasonably believed by it to be genuine and to have been given, signed or made by the proper person or persons and shall not be held to have any notice of any change of authority of any person until receipt of written notice thereof from an Officer of the Customer. It shall also be protected in processing Share certificates which it reasonably believes to bear the proper manual or facsimile signatures of the duly authorized Officer or Officers of the Customer and the proper countersignature of the Bank.
2. The Bank may establish such additional procedures, rules and regulations governing the transfer or registration of Share certificates as it may deem advisable and consistent with such rules and regulations generally adopted by bank transfer agents.
3. The Bank may keep such records as it deems advisable but not inconsistent with resolutions adopted by the Board of Directors of the Customer. The Bank may deliver to the Customer from time to time at its discretion, for safekeeping or disposition by the Customer in accordance with law, such records, papers, Share certificates which have been cancelled in transfer or exchange and other documents accumulated in the execution of its duties hereunder as the Bank may deem expedient, other than those which the Bank is itself required to maintain pursuant to applicable laws and regulations, and the Customer shall assume all responsibility for any failure thereafter to produce any record, paper, cancelled Share certificate or other document so returned, if and when required. The records maintained by the Bank pursuant to this paragraph which have not been previously delivered to the Customer pursuant to the foregoing provisions of this paragraph shall be considered to be the property of the Customer, shall be made available upon request for inspection by the Officers, employees and auditors of the Customer, and shall be delivered to the Customer upon request and in any event upon the date of termination of this Agreement, as specified in Article IX of this Agreement, in the form and manner kept by the Bank on such date of termination or such earlier date as may be requested by the Customer.
4. The Bank may employ agents or attorneys-in-fact at the expense of the Customer, and shall not be liable for any loss or expense arising out of, or in connection with, the actions or omissions to act of its agents or attorneys-in-fact, so long as the Bank acts in good faith and without negligence or willful misconduct in connection with the selection of such agents or attorneys-in-fact.
5. The Bank shall only be liable for any loss or damage arising out of its own negligence or willful misconduct; provided, however, that the Bank shall not be liable for any indirect, special, punitive or consequential damages.
6. The Customer shall indemnify and hold harmless the Bank from and against any and all claims (whether with or without basis in fact or law), costs, demands, expenses and liabilities, including reasonable attorney's fees, which the Bank may sustain or incur or which may be asserted against the Bank except for any liability which the Bank has assumed pursuant to the immediately preceding section. The Bank shall be deemed not to have acted with negligence and not to have engaged in willful misconduct by reason of or as a result of any action taken or omitted to be taken by the Bank without its own negligence or willful misconduct in reliance upon (i) any provision of this Agreement, (ii) any instrument, order or Share certificate reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized Officer of the Customer, (iii) any Certificate or other instructions of an Officer, (iv) any opinion of legal counsel for the Customer or the Bank, or (v) any law, act, regulation or any interpretation of the same even though such law, act, or regulation may thereafter have been altered, changed, amended or repealed. Nothing contained herein shall limit or in any way impair the right of the Bank to indemnification under any other provision of this Agreement.
7. Specifically, but not by way of limitation, the Customer shall indemnify and hold harmless the Bank from and against any and all claims (whether with or without basis in fact or law), costs, demands, expenses and liabilities, including reasonable attorney's fees, of any and every nature which the Bank may sustain or incur or which may be asserted against the Bank in connection with the genuineness of a Share certificate, the Bank's due authorization by the Customer to issue Shares and the form and amount of authorized Shares.
8. The Bank shall not incur any liability hereunder if by reason of any act of God or war or other circumstances beyond its control, it, or its employees, officers or directors shall be prevented, delayed or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of this Agreement it is provided shall be done or performed or by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of this Agreement it is provided shall or may be done or performed.
9. At any time the Bank may apply to an Officer of the Customer for written instructions with respect to any matter arising in connection with the Bank's duties and obligations under this Agreement, and the Bank shall not be liable for any action taken or omitted to be taken by the Bank in good faith in accordance with such instructions. Such application by the Bank for instructions from an Officer of the Customer may, at the option of the Bank, set forth in writing any action proposed to be taken or omitted to be taken by the Bank with respect to its duties or obligations under this Agreement and the date on and/or after which such action shall be taken, and the Bank shall not be liable for any action taken or omitted to be taken in accordance with a proposal included in any such application on or after the date specified therein unless, prior to taking or omitting to take any such action, the Bank has received written instructions in response to such application specifying the action to be taken or omitted. The Bank may consult counsel to the Customer or its own counsel, at the expense of the Customer, and shall be fully protected with respect to anything done or omitted by it in good faith in accordance with the advice or opinion of such counsel.
10. When mail is used for delivery of non-negotiable Share certificates, the value of which does not exceed the limits of the Bank's Blanket Bond, the Bank shall send such non-negotiable Share certificates by first class mail, and such deliveries will be covered while in transit by the Bank's Blanket Bond. Non-negotiable Share certificates, the value of which exceed the limits of the Bank's Blanket Bond, will be sent by insured registered mail. Negotiable Share certificates will be sent by insured registered mail. The Bank shall advise the Customer of any Share certificates returned as undeliverable after being mailed as herein provided for.
11. The Bank may issue new Share certificates in place of Share certificates represented to have been lost, stolen or destroyed upon receiving instructions in writing from an Officer and indemnity satisfactory to the Bank. Such instructions from the Customer shall be in such form as approved by the Board of Directors of the Customer in accordance with applicable law or the By-Laws of the Customer governing such matters. If the Bank receives written notification from the owner of the lost, stolen or destroyed Share certificate within a reasonable time after he has notice of it, the Bank shall promptly notify the Customer and shall act pursuant to written instructions signed by an Officer. If the Customer receives such written notification from the owner of the lost, stolen or destroyed Share certificate within a reasonable time after he has notice of it, the Customer shall promptly notify the Bank and the Bank shall act pursuant to written instructions signed by an Officer. The Bank shall not be liable for any act done or omitted by it pursuant to the written instructions described herein. The Bank may issue new Share certificates in exchange for, and upon surrender of, mutilated Share certificates.
12. The Bank will issue and mail subscription warrants for Shares, Shares representing stock dividends, exchanges or splits, or act as conversion agent upon receiving written instructions from an Officer and such other documents as the Bank may deem necessary.
13. The Bank will supply shareholder lists to the Customer from time to time upon receiving a request therefor from an Officer of the Customer.
14. In case of any requests or demands for the inspection of the shareholder records of the Customer, the Bank will notify the Customer and endeavor to secure instructions from an Officer as to such inspection. The Bank reserves the right, however, to exhibit the shareholder records to any person whenever it is advised by its counsel that there is a reasonable likelihood that
the Bank will be held liable for the failure to exhibit the shareholder records to such person.
15. At the request of an Officer, the Bank will address and mail such appropriate notices to shareholders as the Customer may direct.
16. Notwithstanding any provisions of this Agreement to the contrary, the Bank shall be under no duty or obligation to inquire into, and shall not be liable for:
(a) The legality of the issue, sale or transfer of any Shares, the sufficiency of the amount to be received in connection therewith, or the authority of the Customer to request such issuance, sale or transfer;
(b) The legality of the purchase of any Shares, the sufficiency of the amount to be paid in connection therewith, or the authority of the Customer to request such purchase;
(c) The legality of the declaration of any dividend by the Customer, or the legality of the issue of any Shares in payment of any stock dividend; or
(d) The legality of any recapitalization or readjustment of the Shares.
17. The Bank shall be entitled to receive and the Customer hereby agrees to pay to the Bank for its performance hereunder (i) out-of-pocket expenses (including legal expenses and attorney's fees) incurred in connection with this Agreement and its performance hereunder, and (ii) the compensation for services as set forth in Schedule I.
18. The Bank shall not be responsible for any money, whether or not represented by any check, draft or other instrument for the payment of money, received by it on behalf of the Customer, until the Bank actually receives and collects such funds.
19. The Bank shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied against the Bank in connection with this Agreement.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. In the event such notice is given by the Customer, it shall be accompanied by a copy of a resolution of the Board of Directors of the Customer, certified by its Secretary, electing to terminate this Agreement and designating a successor transfer agent or transfer agents. In the event such notice is given by the Bank, the Customer shall, on or before the termination date, deliver to the Bank a copy of a resolution of its Board of Directors certified by its Secretary designating a successor transfer agent or transfer agents. In the absence of such designation by the Customer, the Bank may designate a successor transfer agent. If the Customer fails to designate a successor transfer agent and if the Bank is unable to find a successor transfer agent, the Customer shall, upon the date specified in the notice of termination of this Agreement and delivery of the records maintained hereunder, be deemed to be its own transfer agent and the Bank shall thereafter be relieved of all duties and responsibilities hereunder. Upon termination hereof, the Customer shall pay to the Bank such compensation as may be due to the Bank as of the date of such termination, and shall reimburse the Bank for any disbursements and expenses made or incurred by the Bank and payable or reimbursable hereunder.
ARTICLE X
MISCELLANEOUS
1. The indemnities contained herein shall be continuing obligations of the Customer, its successors and assigns, notwithstanding the termination of this Agreement.
2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Customer shall be sufficiently given if addressed to the Customer and mailed or delivered to it at ___________, or at such other place as the Customer may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Bank shall be sufficiently given if addressed to the Bank and mailed or delivered to it at its office at 101 Barclay Street (22W), New York, New York 10286 or at such other place as the Bank may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a written agreement duly authorized and executed by both parties. Any duly authorized Officer may amend any Certificate naming Officers authorized to execute and deliver
Certificates, instructions, notices or other instruments, and the Secretary or any Assistant Secretary may amend any Certificate listing the shares of capital stock of the Customer for which the Bank performs Services hereunder.
5. This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party without the prior written consent of the other party, and provided, further, that any reorganization, merger, consolidation, or sale of assets, by the Bank shall not be deemed to constitute an assignment of this Agreement.
6. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The parties agree that, all actions and proceedings arising out of this Agreement or any of the transactions contemplated hereby, shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions contemplated hereby.
7. This Agreement may be executed in any number of counterparts each of which shall be deemed to be an original; but such counterparts, together, shall constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the Bank and the Customer, and no rights shall be granted to any other person by virtue of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective corporate officers, thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
Attest: -------------------------------
By:
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Name:
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Title:
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Attest: THE BANK OF NEW YORK
By:
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Name:
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Title:
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SCHEDULE I
Exhibit (k)(2)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, made as of the 12th day of June, 2002 among Calamos Convertible Opportunities and Income Fund, a Delaware business trust and a diversified closed-end management investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act") (the "Trust"), Calamos Asset Management, Inc., an Illinois corporation ("CAM"), and PRINCETON ADMINISTRATORS, L.P., a Delaware limited partnership (the "Administrator").
WHEREAS, CAM serves as investment manager to the Trust pursuant to an investment management agreement dated June 12, 2002;
WHEREAS, the investment management agreement provides that CAM will provide the Trust with investment research, advice and supervision and furnish an investment program for the Trust; and
WHEREAS, the Trust wishes to retain the Administrator to perform the administrative services contemplated by this Agreement to the Trust;
NOW, THEREFORE, the parties hereto agree as follows:
1. Duties of the Administrator. The Trust hereby retains the Administrator to act as administrator of the Trust, subject to the supervision and directions of CAM and the Board of Trustees of the Trust as herein set forth. Subject to the supervision and direction of CAM, the Administrator shall perform or arrange for the performance of the following administrative and clerical services:
(a) Calculate or arrange for the calculation and publication of the Trust's net asset value in accordance with the Trust's policy as adopted from time to time by the Board of Trustees;
(b) Maintain, or arrange for the maintenance of, certain books and records of the Trust, as mutually agreed upon between the parties hereto, that are required under the Investment Company Act;
(c) Provide the Trust with administrative offices and data processing facilities as well as the services of persons competent to perform such administrative and clerical functions as are necessary to provide effective operation of the Trust;
(d) Maintain the Trust's expense budget and monitor expense accruals;
(e) Arrange for payment of the Trusts' expenses, as CAM directs, which may include calculation of various contractual expenses of the Trust's service providers, and the review and approval of invoices for the Trust's account and submission to a Trust officer for authorization of payment in a manner to be agreed upon;
(f) Oversee and review calculations of fees paid to the Administrator, CAM, the transfer agent and the custodian;
(g) Compute the Trust's yield, total return, expense ratios and portfolio turnover rate as well as various Trust statistical data as reasonably requested;
(h) Prepare, for review and approval by officers of the Trust, financial information for the Trust's semi-annual and annual reports, proxy statements and other communications with shareholders required or otherwise to be sent to Trust shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders;
(i) Prepare reports relating to the business and affairs of the Trust as may be mutually agreed upon and not otherwise appropriately prepared by CAM or the Trust's custodian, counsel or auditors;
(j) Prepare, or arrange for preparation for review, approval and execution by officers of the Trust, the Trust's federal, state and local income tax returns, and any other required tax returns, as may be mutually agreed upon;
(k) Calculate the Trust's annual net investment income (including net realized short-term capital gain) and net realized long-term capital gain to determine the Trust's minimum annual distributions to shareholders and the tax and accounting treatment of such distributions on a per share basis, to be reviewed by the Trust's independent public accountants;
(l) Prepare for review by an officer of the Trust the Trust's periodic financial reports required to be filed with the Securities and Exchange Commission (the "SEC") on Form N-SAR and Form N-2 and such other reports, forms or filings, as may be mutually agreed upon;
(m) Prepare such financial information and reports as may be required by any stock exchange or exchanges on which the Trust's shares are listed, and such other information and reports required by such stock exchanges as may be mutually agreed upon;
(n) Prepare such financial information and reports as may be required by any banks from which the Trust borrows funds;
(o) Prepare reports related to the Trust's preferred stock, if any, as required by rating agencies;
(p) Assist in the preparation and filing of Forms 3, 4 and 5 pursuant to Section 16 of the Securities Exchange Act of 1934 and Section 30(f) of the Investment Company Act for the officers and trustees of the Trust, such filings to be based on information provided by those persons and CAM;
(q) Coordinate the performance of administrative and professional services rendered to the Trust by others, including its custodian, registrar, transfer agent, dividend disbursing agent and dividend reinvestment plan agent, as well as accounting, auditing and such other services as may from time to time be mutually agreed;
(r) Consult as necessary with the Trust's officers, independent accountants, legal counsel, custodian, accounting agent and transfer and dividend disbursing agent in establishing the accounting policies of the Trust;
(s) Review implementation of any stock purchase or dividend reinvestment programs authorized by the Board of Trustees;
(t) Provide such assistance to CAM, the custodian and the Trust's counsel and auditors as generally may reasonably be required to properly carry on the business and operations of the Trust; and
(u) Respond to, or refer to CAM, the Trust's officers or transfer agent, shareholder inquiries relating to the Trust.
The Trust and CAM agree to deliver and to use their reasonable commercial efforts to cause the custodian to deliver, on a timely basis, such information to the Administrator as may be necessary or appropriate for the Administrator's performance of its duties and responsibilities hereunder, including but not limited to, daily records of transactions, valuation of investments in United States dollars (which may be based on information provided by a pricing service) and expenses borne by the Trust, the Trust management letter to stockholders and such other information necessary for the Administrator to prepare the above referenced reports and filings, and the Administrator shall be entitled to rely on the accuracy and completeness of such information in performing its duties hereunder.
All services are to be furnished through the medium of any officer or employee of the Administrator as the Administrator deems appropriate in order to fulfill its obligations hereunder.
Each party shall bear all its own expenses incurred in connection with this Agreement, except as provided under Section 2 below. Printing and dissemination expenses, such as those for reports to shareholders and proxy statements, shall be expenses of the Trust.
2. Compensation of the Administrator. CAM will pay the Administrator a fee on the first business day of each calendar month for the previous month equal to the greater of (i) $150,000 per annum ($12,500 per month), or (ii) at an annual rate equal to 0.125% of the Trust's Managed Assets (as hereinafter defined). For the purposes of determining fees payable to the Administrator, the value of the Trust's assets shall be computed at the times and in the manner specified in the Trust's registration statement on Form N-2, as amended from time to time (the "Registration Statement"). Compensation by CAM to the Administrator shall commence on the date of the first receipt by the Trust of the proceeds of the sale of its shares to the underwriters as described in the Registration Statement, and the fee for the period from the date the Trust shall receive the proceeds of the sale of its shares to the underwriters as aforesaid to the end of the month during which such proceeds are so received, shall be pro-rated according to the proportion that such period bears to the full monthly period. Upon termination of this Agreement before the end of a month, the fee for such part of that month shall be pro-rated according to the proportion that such periods bear to the full monthly period and shall be payable within seven days after the date of termination of this Agreement. "Managed Assets" means the average weekly value of the Trust's total assets minus the sum of the Trust's liabilities, which
liabilities exclude debt relating to leverage, short-term debt and the aggregate liquidation preference of any outstanding preferred stock.
3. Limitation of Liability of the Administrator, Indemnification
(a) The Administrator may, with respect to questions of law, apply for and obtain the advice and opinion of legal counsel, and with respect to the application of generally accepted accounting principles or Federal Tax accounting principles, apply for and obtain the advice and opinion of accounting experts, at the reasonable expense of the Trust or CAM. The Administrator shall obtain prior permission of the Trust or CAM before obtaining the advice and opinion of legal or accounting experts at the expense of the Trust or CAM, and shall not use any counsel or accounting experts to which the Trust or CAM shall reasonably object. The Administrator shall be fully protected with respect to any action taken or omitted by it in good faith in conformity with this paragraph.
(b) The Administrator shall not be liable to the Trust or CAM for any action taken or omitted to be taken by the Administrator in connection with the performance of any of its duties or obligations under this Agreement, and the Trust shall indemnify the Administrator and hold it harmless from and against all damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) incurred by the Administrator in or by reason of any pending, threatened or contemplated action, suit, investigation or other proceeding (including an action or suit by or in the right of the Trust or its security holders) arising out of or otherwise based upon any action actually or allegedly taken or omitted to be taken by the Administrator in connection with the performance of any of its duties or obligations under this Agreement; provided, however, that nothing contained herein shall protect or be deemed to protect the Administrator against or entitle or be deemed to entitle the Administrator to indemnification in respect of any liability to CAM, the Trust or its security holders to which the Administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of its reckless disregard of its duties and obligations under this Agreement. Such expenses shall be paid by the Trust in advance of the final disposition of such matter upon invoice by the Administrator and receipt by the Trust of an undertaking from the Administrator to repay such amounts if it shall ultimately be established that the Administrator is not entitled to payment of such expenses hereunder.
(c) As used in this Paragraph 3, the term "Administrator" shall include any affiliates of the Administrator performing services for the Trust contemplated hereby, and trustees, officers, agents and employees of the Administrator or such affiliates.
4. Activities of the Administrator.
The services of the Administrator hereunder are not exclusive and nothing in this Agreement shall limit or restrict the right of the Administrator to engage in any other business or to render services of any kind to any other corporation, firm, individual or association. The Administrator shall be deemed to be an independent contractor, unless otherwise expressly provided or authorized by this Agreement.
5. Duration and termination of this Agreement.
This Agreement shall become effective as of the date on which the Trust's Registration Statement on Form N-2 shall be declared effective by the SEC and shall thereafter continue in effect unless terminated as herein provided. This Agreement may be terminated by any party hereto (without penalty) at any time upon not less than 60 days prior written notice to the other parties hereto.
6. Amendments of this Agreement.
This Agreement may be amended by the parties hereto only if such amendment is specifically approved by the Board of Trustees of the Trust and such amendment is set forth in a written instrument executed by each of the parties hereto.
7. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to choice of law principles thereof and in accordance with the Investment Company Act. In the case of any conflict, the Investment Company Act shall control.
8. Counterparts.
This Agreement may be executed by the parties hereto in counterparts, and if executed in more than one counterpart, the separate instruments shall constitute one agreement.
9. Notices. Any notice or other communication required to be given in writing pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Administrator at P.O. Box 9095, Princeton, New Jersey 08543-9095, Attention: Donald C. Burke, (2) to CAM at 1111 E. Warrenville Road, Naperville, Illinois 60563-1463 Attention: General Counsel, and to the Trust at 1111 E. Warrenville Road, Naperville, Illinois 60563-1463 Attention: Secretary.
10. Entire Agreement. This Agreement sets forth the agreement and understanding of the parties hereto solely with respect to the matters covered hereby and the relationship among CAM, the Trust and Princeton Administrators, L.P. as Administrator. Nothing in this Agreement shall govern, restrict or limit in any respect any other business dealings between the parties hereto unless otherwise expressly provided herein.
11. No Assignment. This Agreement shall not be assigned by any party without the prior written consent of the others, except that any party may assign the agreement to another party if such assignment is to a party controlling, controlled by or under common control with the assigning party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
CALAMOS ASSET MANAGEMENT, INC.
PRINCETON ADMINISTRATORS, L.P.
Exhibit l.1
June 21, 2002
Calamos Convertible Opportunities and Income Fund
1111 East Warrenville Road
Naperville, IL 60563-1493
Re: Calamos Convertible Opportunities and Income Fund
Ladies and Gentlemen:
We are acting as special counsel to Calamos Convertible Opportunities and Income Fund, a Delaware business trust (the "Fund"), in connection with the Fund's filing of a registration statement on Form N-2 under the Securities Act of 1933 (File No. 333-86678) and the Investment Company Act of 1940 (File No. 811-21080) (the "Registration Statement") with the Securities and Exchange Commission covering the registration and proposed issuance of common shares of beneficial interest (the "Shares") of the Calamos Convertible Opportunities and Income Fund Series (the "Series") of the Fund.
In rendering this opinion, we have examined:
(a) the form of Purchase Agreement (the "Purchase Agreement"), substantially in the form filed as an exhibit to the Registration Statement, proposed to be entered into among the Fund, Calamos Asset Management, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as representative of the several underwriters named therein;
(b) the Registration Statement;
(c) the Certificate of Trust and the Agreement and Declaration of Trust of the Fund;
(d) the By-Laws of the Fund;
(e) resolutions of the Board of Trustees in connection with the proposed issuance of the Shares;
(f) a Certificate of Good Standing as of a recent date from the Secretary of State of the State of Delaware;
(g) such other documents as we, in our professional judgment, have deemed necessary or appropriate as a basis for the opinions set forth below (items b-e above are referred to herein as the "Governing Documents").
VEDDER PRICE
Calamos Convertible Opportunities and Income Fund
June 21, 2002
In examining the documents referred to above, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of documents purporting to be originals and the conformity to originals of all documents submitted to us as copies. As to questions of fact material to our opinion, we have relied (without investigation or independent confirmation) upon the representations contained on certificates and other communications from public officials and officers of the Fund. We have assumed that the Registration Statement and the Purchase Agreement will be duly completed, executed and delivered. With respect to the opinions expressed below, we note that, pursuant to Section 2 of Article VIII of the Agreement and Declaration of Trust, the Trustees have the power to cause each shareholder, or each shareholder of a particular series, to pay directly, in advance or arrears, for charges of the Fund's custodian or transfer, shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such shareholder from declared but unpaid dividends owed such shareholder and/or by reducing the number of shares in the account of such shareholder by that number of full and/or fractional shares which represents the outstanding amount of such charges due from such shareholder.
We express no opinion as to the laws of any jurisdiction other than Title 12, Chapter 38 (Treatment of Delaware Business Trusts) of the Code of the State of Delaware and the laws of the State of Illinois (except that we express no opinion as to any choice of law provisions thereof) and the Federal laws of the United States of America. Insofar as this opinion pertains to matters governed by the laws of the State of Delaware, we are relying, with your consent, solely upon the opinion of Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the Fund, dated June 21, 2002, which opinion is satisfactory in substance and form to us.
Based on the foregoing, and subject to the qualifications, exceptions and limitations set forth herein, we are of the opinion that:
(1) The Fund is a duly formed and validly existing business trust in good standing under the laws of the State of Delaware; and
(2) The Shares, when issued to shareholders in accordance with the terms, conditions, requirements and procedures set forth in the Governing Documents and delivered by the Fund pursuant to the Purchase Agreement against payment of the consideration set forth in the Purchase Agreement, will constitute legally issued, fully paid and non-assessable Shares of beneficial interest in the Series.
We hereby consent to the filing of this opinion as Exhibit l.1 to the Registration Statement and to the reference to us under the caption "Legal Opinions" in the prospectus contained in the Registration Statement.
Very truly yours,
Vedder, Price, Kaufman & Kammholz
DAS/COK
EXHIBIT 1.2
[Letterhead of Morris, Nichols, Arsht & Tunnell]
June ___, 2002
Calamos Convertible Opportunities
and Income Fund
1111 East Warrenville Road
Naperville, Illinois 60563-1493
Re: Calamos Convertible Opportunities and Income Fund
Ladies and Gentlemen:
We have acted as special Delaware counsel to Calamos Convertible Opportunities and Income Fund, a Delaware business trust (the "Trust"), in connection with certain matters relating to the formation of the Trust and the issuance of shares of beneficial interest in the Calamos Convertible Opportunities and Income Fund Series (the "Series") of the Trust. Such shares are referred to herein as the "Shares". Capitalized terms used herein and not otherwise herein defined are used as defined in the Agreement and Declaration of the Trust of the Trust dated as of April 17, 2002 (the "Governing Instrument").
In rendering this opinion, we have examined and relied on copies of the following documents, each in the form provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on April 17, 2002 (the "Certificate of Trust"); the Governing Instrument; the Minutes of the Board of Trustees of the Trust prepared for adoption at a meeting held on May 7, 2002; the By-laws of the Trust (the "By-laws"); the Trust's Registration Statement under the Securities Act of 1933 and the Investment Company Act of 1940 on Form N-2 as filed with the Securities and Exchange Commission on April 19, 2002 (the "Registration Statement" and, together with the Governing Instrument, the By-laws and all of the foregoing actions by the Trustees of the Trust, the "Governing Documents"); and a certification of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, and
Calamos Convertible Opportunities
and Income Fund
June ___, 2002
the legal capacity of natural persons to complete the execution of documents. We have further assumed for the purpose of this opinion: (i) the due authorization, adoption, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced instruments, certificates and other documents (including the due adoption by the Trustees of all the foregoing consents, resolutions and other actions of the Trustees), and of all documents contemplated by either the Governing Documents or any applicable resolutions of the Trustees to be executed by investors desiring to become Shareholders; (ii) the payment of consideration for Shares, and the application of such consideration, as provided in the Governing Documents, and compliance with the other terms, conditions and restrictions set forth in the Governing Documents and all applicable resolutions of the Trustees of the Trust in connection with the issuance of Shares (including, without limitation, the taking of all appropriate action by the Trustees to designate Series and Classes of Shares and the rights and preferences attributable thereto as contemplated by the Governing Instrument); (iii) that appropriate notation of the names and addresses of, the number of Shares held by, and the consideration paid by, Shareholders will be maintained in the appropriate registers and other books and records of the Trust in connection with the issuance, redemption or transfer of Shares; (iv) that no event has occurred subsequent to the filing of the Certificate of Trust that would cause a termination or reorganization of the Trust or a Series or Class of the Trust under Sections 4 or 6 of Article IX of the Governing Instrument; (v) that the Trust became, prior to or within 180 days following the first issuance of beneficial interests therein, a registered investment company under the Investment Company Act of 1940; (vi) that the activities of the Trust have been and will be conducted in accordance with the terms of the Governing Instrument and the Delaware Business Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Delaware Act"); and (vii) that each of the documents examined by us is in full force and effect and has not been modified, supplemented or otherwise amended, except as herein referenced. No opinion is expressed herein with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. Further, we express no opinion with respect to, and we assume no responsibility for, any offering documentation relating to the Trust or the Shares. As to any facts material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that:
1. The Trust is a duly formed and validly existing business trust in good standing under the laws of the State of Delaware.
2. The Shares, when issued to Shareholders in accordance with the terms, conditions, requirements and procedures set forth in the Governing Documents, will constitute legally issued, fully paid and non-assessable Shares of beneficial interest in the Series.
With respect to the opinion expressed in paragraph 2 above, we note that, pursuant to Section 2 of Article VIII of the Governing Instrument, the Trustees have the power to cause each Shareholder, or each Shareholder of a particular Series, to pay directly, in advance or arrears, for
Calamos Convertible Opportunities
and Income Fund
June ___, 2002
charges of the Trust's custodian or transfer, Shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such shareholder from declared but unpaid dividends owed such Shareholder and/or by reducing the number of Shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder.
We hereby consent to the filing of a copy of this opinion with the Securities and Exchange Commission as part of a pre-effective amendment to the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as provided in this paragraph, the opinions set forth above are expressed solely for the benefit of the addressee hereof and may not be relied upon by any other person or entity for any purpose without our prior written consent. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts and our review of the above-referenced documents and certificates and the application of Delaware law as the same exists on the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
Exhibit N
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the use of our report dated June 18, 2002 in the Registration Statement (Form N-2) and related prospectus and statement of additional information of the Calamos Convertible Opportunities and Income Fund file with the Securities and Exchange Commission in this Pre-Effective Amendment No. 2 to the Registration Statement under the Securities Act of 1933 (File No. 333-86678) and in this Amendment No. 2 to the Registration Statement under the Investment Company Act of 1940 (File No. 811-21080).
ERNST & YOUNG LLP
Chicago, Illinois
June 21, 2002
Exhibit (p)
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
Subscription Agreement
This Agreement made this June 14, 2002 by and between Calamos Convertible Opportunities and Income Fund, a Delaware business trust (the "Fund"), and Calamos Asset Management, Inc., an Illinois corporation (the "Subscriber");
WITNESSETH:
WHEREAS, the Fund has been formed for the purposes of carrying on business as a closed-end diversified management investment company;
WHEREAS, the Subscriber has been selected by the Fund's Board of Trustees to serve as investment adviser to the Fund; and
WHEREAS, the Subscriber wishes to subscribe for and purchase, and the Fund wishes to sell to the Subscriber, 7,000 common shares for a purchase price of $14.325 per share.
NOW THEREFORE, IT IS AGREED:
1. The Subscriber subscribes for and agrees to purchase from the Fund 7,000 common shares for a purchase price of $14.325 per share. Subscriber agrees to make payment for these shares at such time as demand for payment may be made by an officer of the Fund.
2. The Fund agrees to issue and sell said shares to Subscriber promptly upon its receipt of the purchase price.
3. To induce the Fund to accept its subscription and issue the shares subscribed for, the Subscriber represents that it is informed as follows:
(a) That the shares being subscribed for have not been and will not be registered under the Securities Act of 1933 ("Securities Act");
(b) That the shares will be sold by the Fund in reliance on an exemption from the registration requirements of the Securities Act;
(c) That the Fund's reliance upon an exemption from the registration requirements of the Securities Act is predicated in part on the representation and agreements contained in this Subscription Agreement;
(d) That when issued, the shares will be "restricted securities" as defined in paragraph (a)(3) of Rule 144 of the General Rules and Regulations under the Securities Act ("Rule 144") and cannot be sold or transferred by Subscriber unless they are subsequently registered under the Securities Act or unless an exemption from such registration is available;
and
(e) That there do not appear to be any exemptions from the registration provisions of the Securities Act available to the Subscriber for resale for the shares. In the future, certain exemptions may possibly become available, including an exemption for limited sales including an exemption for limited sales in accordance with the conditions of Rule 144.
The Subscriber understands that a primary purpose of the information acknowledged in subparagraphs (a) through (e) above is to put it on notice as to restrictions on the transferability of the shares.
4. To further induce the Fund to accept its subscription and issue the shares subscribed for, the Subscriber:
(a) Represents and warrants that the shares subscribed for are being and will be acquired for investment for its own account and not on behalf of any other person or persons and not with a view to, or for sale in connection with, any public distribution thereof;
(b) Agrees that any certificates representing the shares subscribed for may bear a legend substantially in the following form:
The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933 or any other federal or state securities law. These shares may not be offered for sale, sold or otherwise transferred unless registered under said securities laws or unless some exemption from registration is available.
(c) Consents, as the sole holder of the Trust's common shares of beneficial interest and pursuant to Section 23(b)(2) of the Investment Company Act of 1940, to the issuance by the Trust of common shares of beneficial interest at a price per share as set forth in the Purchase Agreement relating to the public offering of Shares; and
5. This Subscription Agreement and all of its provisions shall be binding upon the legal representatives, heirs, successors and assigns of the parties hereto. This Subscription Agreement may be signed in one or more counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Subscription Agreement has been executed by the parties hereto as of the day and date first above written.
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
CALAMOS ASSET MANAGEMENT, INC.
Exhibit r
CALAMOS ASSET MANAGEMENT, INC.
CALAMOS FINANCIAL SERVICES, INC.
CALAMOS INVESTMENT TRUST
CALAMOS ADVISORS TRUST
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
CODE OF ETHICS
ADOPTED MAY 7, 2002
The philosophy of Calamos Asset Management, Inc. (CAM) and Calamos Financial Services, Inc. (CFS) is to avoid any conflict of interest, or the appearance of any conflict of interest, between the investment activities of any investment client of CAM, including Calamos Investment Trust, Calamos Advisors Trust and Calamos Convertible Opportunities and Income Fund (collectively referred to as "Clients") and the personal investment transactions of the directors, officers and employees of CAM and CFS.
This Code of Ethics establishes standards and procedures for the detection and prevention of certain conflicts of interest, including activities by which persons having knowledge of the investments and investment intentions of Clients might take advantage of that knowledge for their own benefit. Implementation and monitoring of those standards inevitably places some restrictions on the freedom of the investment activities of those people.
This Code of Ethics has been adopted by CAM, CFS, Calamos Investment Trust, Calamos Advisors Trust and Calamos Convertible Opportunities and Income Fund (each of Calamos Investment Trust, Calamos Advisors Trust and Calamos Convertible Opportunities and Income Fund being referred to herein as a "Trust") to meet those concerns and the legal requirements imposed by, among other things, Rule 17j-1 under the Investment Company Act of 1940. A copy of Rule 17j-1 is attached as Appendix A. Any questions about the Code or about the applicability of the Code to a personal securities transaction should be directed to the Chief Compliance Officer or, in his or her absence, the President of CAM.
I. STATEMENT OF PRINCIPLE
GENERAL PROHIBITIONS. The Investment Company Act and rules thereunder make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by a Trust, to:
A. employ any device, scheme or artifice to defraud a Trust;
B. make to a Trust any untrue statement of a material fact or omit to state to the Trust a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading;
C. engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon a Trust; or
D. engage in any manipulative practice with respect to a Trust.
Similarly, CAM and each person covered by the Code owe a duty of loyalty to all the accounts served by CAM. As such, they have a duty to place the interests of their respective Clients and shareholders of a Trust ahead of their own interests. In furtherance of this basic principle, all persons covered by the Code (i) must adhere to the Code of Ethics to avoid actual or potential conflicts of interest or abuse of such person's position of trust and responsibility and (ii) not take inappropriate advantage of their position.
PERSONAL SECURITIES TRANSACTIONS. This Code regulates personal securities transactions as a part of the effort by CAM, CFS and the Trusts, to detect and prevent conduct that might violate the general prohibitions outlined above. A PERSONAL SECURITIES TRANSACTION is a transaction in a SECURITY in which the person subject to this Code has a BENEFICIAL INTEREST.
- SECURITY is interpreted very broadly for this purpose, and includes notes, stocks, bonds, debentures, investment contracts, limited partnership interests, and any right to acquire any security (an option or warrant or convertible security, for example).
- You have a BENEFICIAL INTEREST in a security that you own individually, jointly, or as a guardian, executor or trustee, or in which you or your spouse or minor children or other dependents living in your household, have an interest. "Beneficial interest" is defined in Rule 16a-1(a)(2) under the Securities Exchange Act of 1934. A copy of Rule 16a-1(a), is attached as Appendix B and examples of beneficial interest are attached as Appendix C.
In any situation where the potential for conflict exists, transactions for a Client must take precedence over any personal transaction. The people subject to this Code owe a duty to their Clients to conduct their personal securities transactions in a manner that does not interfere with the portfolio transactions of the Client, otherwise take inappropriate advantage of their relationship to the Client or create any actual or potential conflict of interest between their interests and the interests of the Client.
Situations not specifically governed by this Code of Ethics will be resolved in light of this general principle.
II. HOW THE CODE'S RESTRICTIONS APPLY
The restrictions on personal securities transactions in Section III and the compliance procedures in Section VII differentiate among groups of people based on their positions and responsibilities with CAM, CFS and the Trust. The groups are: INVESTMENT PERSONS, ACCESS PERSONS and OUTSIDE TRUSTEES.
A. INVESTMENT PERSONS are those who make, or participate in making, investment decisions or recommendations for Clients, or who, in connection with their regular functions or duties with CAM or CFS, make, participate in, or obtain information regarding the purchase or sale of securities by a Client. Investment Persons are:
- each CAM portfolio manager;
- each analyst working for CAM;
- support staff of CAM working directly with portfolio managers and analysts;
- each trader of CAM; and
- CFS and CAM.
B. ACCESS PERSONS are those directors, officers and employees of CAM, CFS or a trust who are not Investment Persons or Outside Trustees.
C. OUTSIDE TRUSTEES are those trustees of a Trust who are not "interested persons" of a Trust.
III. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS
A. NO TRANSACTIONS WITH CLIENTS. No INVESTMENT PERSON, ACCESS PERSON or OUTSIDE TRUSTEE shall knowingly sell to or purchase from a Client any security or other property except securities issued by that Client.
B. NO CONFLICTING TRANSACTIONS. No INVESTMENT PERSON, ACCESS PERSON or OUTSIDE TRUSTEE shall purchase or sell for his or her own personal account and benefit, or for the account and benefit of any relative, any security that the person knows or has reason to believe is being purchased or sold or considered for purchase or sale by a Client, until the Client's transactions have been completed or consideration of such transactions has been abandoned.
NOTE: RESTRICTIONS C THROUGH F BELOW DO NOT APPLY TO THE OUTSIDE
TRUSTEES.
C. INITIAL PUBLIC OFFERINGS. No INVESTMENT PERSON or ACCESS PERSON shall acquire any security in an initial public offering.
D. PRIVATE PLACEMENTS. No INVESTMENT PERSON or ACCESS PERSON shall acquire any security in a private placement without the express written prior approval of the President or Managing Director of CAM. In deciding whether that approval should be granted, consideration will be given to whether the investment opportunity should be reserved for Clients and whether the opportunity has been offered because of the person's relationship with CAM or its Clients. An INVESTMENT PERSON who has been authorized to acquire a security in a private placement must disclose that investment if he or she later participates in consideration of an investment in that issuer for a Client's account. Any investment decision for the Client relating to that security must be made by other Investment Persons.
E. SHORT-TERM TRADING. No INVESTMENT PERSON may profit from the purchase and sale, or sale and purchase, of the same (or equivalent) securities within 60 days if the same (or equivalent) securities have been held by a Client during such 60-day period. Any profit so realized will be required to be donated to a charitable organization selected by CAM.
IV. GIFTS
Receipt by an INVESTMENT PERSON or ACCESS PERSON of a gift of substantial value (more than $100), a cash payment in any amount, a preferred personal investment opportunity, or other thing of more than de minimis value from any person or entity that does business, or is seeking to do business, with or on behalf of a Client, CAM or CFS, including a broker-dealer or security issuer, poses a potential conflict of interest and is prohibited.
It is not the intent of this Code to prohibit the ordinary courtesies of business life, such as token gifts or modest entertainment incidental to a business relationship.
V. SERVICE AS A DIRECTOR
No INVESTMENT PERSON or ACCESS PERSON may serve as a member of the board of directors or trustees of any publicly-held company without the prior written approval of the President or the Chief Compliance Officer, based on a determination that the board service would not be inconsistent with the interests of the Clients of CAM. If an Investment Person is serving as a board member, that Investment Person shall not participate in making investment decisions relating to the securities of the company on whose board he or she sits.
VI. INSIDE INFORMATION
Securities laws and regulations prohibit the misuse of "inside" material non-public information regarding an issuer when trading or recommending securities of that issuer.
Inside information obtained by any ACCESS PERSON or an INVESTMENT PERSON from any source must be kept strictly confidential. All inside information should be kept completely secure, and access to files and computer files containing such information should be restricted. ACCESS PERSONS and INVESTMENT PERSONS shall not act upon or disclose inside information and shall report the information and any proposed trade in the issuer to whom the information relates immediately to the Chief Compliance Officer. After the Chief Compliance Officer has reviewed the issue, CAM will determine whether any trading restrictions apply and what action, if any, the firm should take.
Inside information may include, but is not limited to, knowledge of pending orders or research recommendations, corporate finance activity, mergers and acquisitions, and other material non-public information that could affect the price of a security. Trading during a tender offer represents a particular concern in the law of insider trading. ACCESS PERSONS and INVESTMENT PERSONS should exercise particular caution any time they become aware of non-public information relating to a tender offer.
Client and Client account information is also confidential and must not be discussed with any individual whose responsibilities do not require knowledge of such information.
All questions and requests for assistance regarding confidential or inside information should be promptly directed to the Chief Compliance Officer.
VII. COMPLIANCE PROCEDURES
A. BLACKOUT PERIODS. [See pre-clearance requirements in Section VII. E. below] No personal securities transaction in which an INVESTMENT PERSON or an ACCESS PERSON has a beneficial interest shall be executed if a Client (1) has a conflicting order pending or (2) is actively considering a purchase or sale of the same security. A conflicting order is any order for the same security, or an option on that order, that has not been fully executed. A purchase of a security is being "actively considered" (a) when a recommendation to purchase or sell has been made for the Client and is pending or (b) with respect to the person making the recommendation, when that person is seriously considering making the recommendation.
Absent extraordinary circumstances, a personal securities transaction shall not be executed until the fifth business day after completion of any transaction for a Client.
B. DISCLOSURE OF PERSONAL HOLDINGS. Each INVESTMENT PERSON and ACCESS PERSON shall disclose to the Chief Compliance Officer securities holdings in which he or she has a beneficial interest (not including shares of open-end investment companies (mutual funds), direct obligations of
the U. S. government (U.S. treasury bills, notes and bonds), and money market instruments, including bank certificates of deposit, bankers' acceptances, commercial paper and repurchase agreements) no later than ten days after commencement of employment with CAM or CFS (or upon the adoption of this Code) and annually thereafter as of December 31 of each year. Annual reports shall be delivered to the Chief Compliance Officer no later than January 30 of the following year. The initial holdings and annual holdings reports shall contain the following information:
o title and number of shares, or principal amount, interest rate and maturity date (if applicable), of each security held beneficially;
o the name of any broker, dealer, bank or custodian with or through which an account is maintained in which the person has a beneficial interest; and
o the date the report is submitted.
C. REPORTING PERSONAL SECURITIES TRANSACTIONS.
1. An OUTSIDE TRUSTEE shall report in writing to the Chief Compliance Officer, within ten days after the end of the calendar quarter in which a transaction occurred, any personal transaction in a security that the Outside Trustee, at the time of the transaction, knew, or in the ordinary course of fulfilling his or her duties as a trustee should have known, that on the day of the transaction or within 15 days before or after that day a purchase or sale of that security was made by or considered for the Trust.
2. Each ACCESS PERSON and INVESTMENT PERSON shall (i) identify to CAM and CFS any brokerage or other account in which he or she has a beneficial interest and (ii) instruct the broker or custodian to deliver to CAM's Chief Compliance Officer duplicate confirmations of all transactions and duplicate monthly statements.
3. Each ACCESS PERSON and INVESTMENT PERSON shall report all personal securities transactions during a quarter to the Chief Compliance Officer no later than ten days after the end of the quarter. Quarterly transaction reports shall include the following information:
For each transaction:
o the date of the transaction;
o title and number of shares or principal amount, interest rate and maturity date (if applicable) of each security involved;
o the nature of the transaction (i.e., purchase, sale, gift, or other type of acquisition or disposition);
o the price at which the transaction was effected;
o the name of the broker, dealer or bank with or through which the transaction was effected; and
o the date the report is submitted.
In addition, for each account established during the month in which securities are held for the benefit of an Investment Person or Access Person, the quarterly report shall include:
o the name of the broker, dealer or bank with whom the account was established;
o the date the account was established; and
o the date the report is submitted.
4. For INVESTMENT PERSONS and ACCESS PERSONS who choose to execute all personal securities transactions through CFS, CFS will provide to CAM's Chief Compliance Officer information about transactions in the accounts of persons subject to this Code who have accounts with CFS.
5. Reports relating to the personal securities transactions of the Chief Compliance Officer shall be delivered to the President of CAM.
D. FORM OF REPORTS. Reports of personal securities transactions may be in any form (including copies of confirmations or monthly statements) but must include the information required by Section VII.C.3.
E. PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS. No INVESTMENT PERSON or ACCESS PERSON shall engage in a personal securities transaction unless the transaction shall have been approved in advance by any one of the President, the Managing Director, Research and Portfolio Management, or the Chief Compliance Officer of CAM, none of whom may approve his or her own transactions. In addition, the personal securities transactions of the President and Managing Director, Research and Portfolio Management must be approved in advance by the Chief Compliance Officer. Each approval shall be in writing and shall be forwarded to Compliance to be filed in the employee's trading files and retained for a period of three years.
If preclearance is granted, the individual must execute his or her trade within the period of time indicated by the approving person on the preclearance form, which period of time shall not exceed one business day from the day on which preclearance is granted. (Limit orders, which have been precleared and placed within this time limit, need not be precleared on subsequent days so long as the terms of the order have not changed.)
F. MONITORING OF TRANSACTIONS. CAM's Chief Compliance Officer will monitor the trading patterns of Investment Persons and Access Persons.
G. CERTIFICATION OF COMPLIANCE. Each Investment Person and Access Person is required to certify annually that (i) he or she has read and understands the Code, (ii) recognizes that he or she is subject to the Code, and (iii) he or she has disclosed or reported all personal securities transactions required to be disclosed or reported under the Code. The Chief Compliance Officer shall annually distribute a copy of the Code and request certification by all covered persons and shall be responsible for ensuring that all personnel comply with the certification requirement.
Each Investment Person and Access Person who has not engaged in any Personal Securities Transaction during the preceding year for which a report was required to be filed pursuant to the Code shall include a certification to that effect in his or her annual certification.
H. REPORT TO TRUSTS' BOARD. The officers of each Trust shall prepare an annual report to the board of each Trust that:
o summarizes existing procedures concerning personal investing and any changes in those procedures during the past year;
o describes issues that arose during the previous year under the Code or procedures concerning personal investing, including but not limited to information about material violations of the Code and sanctions imposed;
o certifies to the board that the Trust has adopted procedures reasonably necessary to prevent its Investment Persons and Access Persons from violating the Code; and
o identifies any recommended changes in existing restrictions or procedures based upon experience under the Code, evolving industry practices, or developments in applicable laws or regulations.
VIII. EXEMPT TRANSACTIONS
(a) The provisions of this Code are intended to restrict the personal investment activities of persons subject to the Code only to the extent necessary to accomplish the purposes of the Code. Therefore, the provisions of Sections III and VII of this Code shall not apply to:
A. Purchases or sales effected in any account over which the persons subject to this Code have no direct or indirect influence or control;
B. Purchases or sales of:
1. U.S. government securities;
2. shares of open-end investment companies (mutual funds, including money market funds), including but not limited to shares of any Trust portfolio; and
3. bank certificates of deposit or commercial paper.
C. Purchases or sales that are non-volitional on the part of either the person subject to this Code or the Client;
D. Purchases that are part of an automatic dividend reinvestment plan; and
E. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of securities to the extent such rights were acquired from such issuer, and sales of such rights so acquired.
(b) Discretionary Accounts of Outside Trustees
Purchases and sales of securities in an account in which an Outside Trustee has a beneficial interest shall not be subject to the prohibitions of Section VII if the account is managed by someone other than the Outside Trustee and the Outside Trustee did not have knowledge of the transactions until after they had been executed, provided the Outside Trustee has previously identified the account to CAM's Chief Compliance officer.
(c) De Minimis Exception. Purchases or sales in an amount less than $10,000 in a security that has a market capitalization of at least $5 billion are exempt from the prohibitions of Section III. and Section VII.A. of this Code, and are exempt from the pre-clearance requirements of Section VII.E. (However, please note that trades falling within this de minimis exception must be reported pursuant to Sections VII.B., VII.C. and VII.D. of this code).
(d) Under unusual circumstances, such as a personal financial emergency, employee stock ownership plans, stock option plans and certain personal trusts, or when it is determined that no conflict of interest or other breach of duty is involved,
application for an exemption to make a transaction may be made to the Chief
Compliance Officer, which application may be denied or granted. To request
consideration of an exemption, submit a written request containing details on
your circumstances, reasons for the exception and exception requested. The Chief
Compliance Officer may, in unusual circumstances, approve exceptions from the
Code of Ethics applicable to an individual, based on the unique circumstances of
such individual and based on a determination that the exceptions can be granted
(i) consistent with the individual's fiduciary obligations to Clients and (ii)
pursuant to procedures that are reasonably designed to avoid a conflict of
interest for the individual. Any such exceptions shall be subject to such
additional procedures, reviews and reporting as determined appropriate by the
Chief Compliance Officer in connection with granting such exception. Any such
exceptions will be reported to the Board of Directors of CAM at the meeting of
the Board of Directors immediately following the grant of such exception, and
such Board of Directors shall have the power to revoke or modify any such
exceptions prospectively.
IX. CONSEQUENCES OF FAILURE TO COMPLY WITH THE CODE
Compliance with this Code of Ethics is a condition of employment of CAM and CFS and retention of positions with the Trusts. Taking into consideration all relevant circumstances, management of CAM will determine what action is appropriate for any breach of the provisions of the Code by an Investment Person or Access Person. Possible actions include letters of sanction, suspension or termination of employment or removal from office.
The board of a Trust will determine what action is appropriate for any breach of the provisions of the Code by an Outside Trustee of the Trust, which may include removal from the board.
Reports filed pursuant to the Code will be maintained in confidence but will be reviewed by CAM, CFS or the Trust in order to verify compliance with the Code. Additional information may be required to clarify the nature of particular transactions.
X. RETENTION OF RECORDS
The Secretary of CAM shall maintain the records listed below for a period of five years at CAM's principal place of business in an easily accessible place:
A. a list of all persons subject to the Code during the period;
B. receipts signed by all persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it;
C. a copy of each code of ethics that has been in effect at any time during the period;
D. a copy of each report filed pursuant to this Code and a record of any known violation and action taken as a result thereof during the period; and
E. records evidencing prior approval of, and the rational supporting, an acquisition by an Investment Person or an Access Person of securities in a private placement.
ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS
FOR EMPLOYEES AND OFFICERS OF
CALAMOS ASSET MANAGEMENT, INC.,
CALAMOS FINANCIAL SERVICES, INC.,
CALAMOS INVESTMENT TRUST AND
CALAMOS ADVISORS TRUST
CALAMOS CONVERTIBLE OPPORTUNITIES AND INCOME FUND
CODE OF ETHICS. Calamos Asset Management, Inc. ("CAM"), Calamos Financial Services, Inc. ("CFS") and Calamos Investment Trust, Calamos Advisors Trust and Calamos Convertible Opportunities and Income Fund (each, a "Trust") have adopted a written Code of Ethics (the "Code") to avoid potential conflicts of interest by their personnel. A copy of the Code is attached to this letter. As a condition of your continued employment with CAM or CFS or the retention of your position, if any, as an officer of a Trust, you are required to read, understand and abide by the Code.
COMPLIANCE PROGRAM. The Code requires that all personnel furnish to the Chief Compliance Officer information regarding any investment account in which you have a "beneficial interest." You are also required to furnish to the Chief Compliance Officer copies of your monthly or quarterly account statements, or other documents, showing all purchases or sales of Securities in any such account, or which are effected by you or for your benefit, or the benefit of any member of your household. Additionally, you are required to furnish a report of your personal Securities holdings within 10 days of commencement of your employment with CAM or CFS and annually thereafter. These requirements apply to any investment account, such as an account at a brokerage house, trust account at a bank, custodial account or similar types of accounts.
This compliance program also requires that you report any contact with any Securities issuer, government or its personnel, or others, that, in the usual course of business, might involve inside or material non-public information. You must bring to the attention of the Chief Compliance Officer any information you receive from any source which might be insider or material non-public information.
Any questions concerning the Code should be directed to the Chief Compliance Officer.
I affirm that I have read and understand the Code. I agree to the terms and conditions set forth in the Code.
Signature Date
ANNUAL AFFIRMATION OF COMPLIANCE
FOR EMPLOYEES AND OFFICERS OF
CALAMOS ASSET MANAGEMENT, INC.,
CALAMOS FINANCIAL SERVICES, INC.,
CALAMOS INVESTMENT TRUST AND
CALAMOS ADVISORS TRUST
CALAMOS CONVERTIBLE OPPORTUNTIES AND INCOME FUND
I affirm that:
1. I have again read and, during the past year to the best of my knowledge, have complied with the Code of Ethics ("Code").
2. I have provided to the Chief Compliance Officer the names and addresses of each investment account that I had with any firm, including, but not limited to, broker-dealers, banks and others. (List of known accounts attached.)
3. I have provided to the Chief Compliance Officer copies of account statements or other reports showing each and every transaction in any security in which I have a beneficial interest, as defined in the Code, during the most recently ended calendar year;
or
During the most recent calendar year there were no transactions in any security in which I had a beneficial interest required to be reported pursuant to the Code.
4. I have provided to the Chief Compliance Officer a report of securities holdings in which I had a beneficial interest as of the end of the most recent calendar year, including all required information for each security in which I have any direct or indirect beneficial ownership.
ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS
FOR OUTSIDE TRUSTEES OF
CALAMOS INVESTMENT TRUST, CALAMOS ADVISORS TRUST AND
CALAMOS CONVERTIBLE OPPORTUNTIES AND INCOME FUND
CODE OF ETHICS. Calamos Asset Management, Inc. ("CAM"), Calamos Financial Services, Inc. ("CFS") and Calamos Investment Trust, Calamos Advisors Trust and Calamos Convertible Opportunities and Income Fund (each, a "Trust") have adopted a written Code of Ethics (the "Code") to avoid potential conflicts of interest by the outside trustees of each Trust and personnel of CAM and CFS. A copy of the Code is attached to this letter. As a condition of the retention of your position as a trustee, you are required to read, understand and abide by the Code.
Any questions concerning the Code should be directed to the Chief Compliance Officer.
I affirm that I have read and understand the Code of Ethics ("Code"). I agree to the terms and conditions set forth in the Code.
APPENDIX A
Subsection 270.17j-1 PERSONAL INVESTMENT ACTIVITIES OF INVESTMENT COMPANY PERSONNEL.
(a) Definitions. For purposes of this section:
(1) Access Person means:
(i) Any director, officer, general partner or Advisory Person of a Fund or of a Fund's investment adviser.
(A) If an investment adviser is primarily engaged in a business or businesses other than advising Funds or other advisory clients, the term Access Person means any director, officer, general partner or Advisory Person of the investment adviser who, with respect to any Fund, makes any recommendation, participates in the determination of which recommendation will be made, or whose principal function or duties relate to the determination of which recommendation will be made, or who, in connection with his or her duties, obtains any information concerning recommendations on Covered Securities being made by the investment adviser to any Fund.
(B) An investment adviser is "primarily engaged in a business or businesses other than advising Funds or other advisory clients" if, for each of its most recent three fiscal years or for the period of time since its organization, whichever is less, the investment adviser derived, on an unconsolidated basis, more than 50 percent of its total sales and revenues and more than 50 percent of its income (or loss), before income taxes and extraordinary items, from the other business or businesses.
(ii) Any director, officer or general partner of a principal underwriter who, in the ordinary course of business, makes, participates in or obtains information regarding, the purchase or sale of Covered Securities by the Fund for which the principal underwriter acts, or whose functions or duties in the ordinary course of business relate to the making of any recommendation to the Fund regarding the purchase or sale of Covered Securities.
(2) Advisory Person of a Fund or of a Fund's investment adviser means:
(i) Any employee of the Fund or investment adviser (or of any company in a control relationship to the Fund or investment adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by a Fund, or whose functions relate to the making of any recommendations with respect to the purchases or sales; and
(ii) Any natural person in a control relationship to the Fund or investment adviser who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of Covered Securities by the Fund.
(3) Control has the same meaning as in section 2(a)(9) of the Act [15 U.S.C. 80a-2(a)(9)].
(4) Covered Security means a security as defined in section 2(a)(36) of the Act [15 U.S.C. 80a-2(a)(36)], except that it does not include:
APPENDIX A
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and
(iii) Shares issued by open-end Funds.
(5) Fund means an investment company registered under the Investment Company Act.
(6) An Initial Public Offering means an offering of securities registered under the Securities Act of 1933 [15 U.S.C. 77a], the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78m or 78o(d)].
(7) Investment Personnel of a Fund or of a Fund's investment adviser means:
(i) Any employee of the Fund or investment adviser (or of any company in a control relationship to the Fund or investment adviser) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Fund.
(ii) Any natural person who controls the Fund or investment adviser and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of securities by the Fund.
(8) A Limited Offering means an offering that is exempt from registration
under the Securities Act of 1933 pursuant to section 4(2) or section
4(6) [15 U.S.C. 77d(2) or 77d(6)] or pursuant to rule 504, rule 505,
or rule 506 [17 CFR 230.504, 230.505, or 230.506] under the Securities
Act of 1933.
(9) Purchase or sale of a Covered Security includes, among other things, the writing of an option to purchase or sell a Covered Security.
(10) Security Held or to be Acquired by a Fund means:
(i) Any Covered Security which, within the most recent 15 days:
(A) Is or has been held by the Fund; or
(B) Is being or has been considered by the Fund or its investment adviser for purchase by the Fund; and
(ii) Any option to purchase or sell, and any security convertible into
or exchangeable for, a Covered Security described in paragraph
(a)(10)(i) of this section.
(b) Unlawful Actions. It is unlawful for any affiliated person of or principal underwriter for a Fund, or any affiliated person of an investment adviser of or principal underwriter for a Fund, in connection with the purchase or sale, directly or indirectly, by the person of a Security Held or to be Acquired by the Fund:
(1) To employ any device, scheme or artifice to defraud the Fund;
APPENDIX A
(2) To make any untrue statement of a material fact to the Fund or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
(c) Code of Ethics.
(1) Adoption and Approval of Code of Ethics.
(i) Every Fund (other than a money market fund or a Fund that does not invest in Covered Securities) and each investment adviser of and principal underwriter for the Fund, must adopt a written code of ethics containing provisions reasonably necessary to prevent its Access Persons from engaging in any conduct prohibited by paragraph (b) of this section.
(ii) The board of directors of a Fund, including a majority of directors who are not interested persons, must approve the code of ethics of the Fund, the code of ethics of each investment adviser and principal underwriter of the Fund, and any material changes to these codes. The board must base its approval of a code and any material changes to the code on a determination that the code contains provisions reasonably necessary to prevent Access Persons from engaging in any conduct prohibited by paragraph (b) of this section. Before approving a code of a Fund, investment adviser or principal underwriter or any amendment to the code, the board of directors must receive a certification from the Fund, investment adviser or principal underwriter that it has adopted procedures reasonably necessary to prevent Access Persons from violating the investment adviser's or principal underwriter's code of ethics. The Fund's board must approve the code of an investment adviser or principal underwriter before initially retaining the services of the investment adviser or principal underwriter. The Fund's board must approve a material change to a code no later than six months after adoption of the material change.
(iii) If a Fund is a unit investment trust, the Fund's principal underwriter or depositor must approve the Fund's code of ethics, as required by paragraph (c)(1)(ii) of this section. If the Fund has more than one principal underwriter or depositor, the principal underwriters and depositors may designate, in writing, which principal underwriter or depositor must conduct the approval required by paragraph (c)(1)(ii) of this section, if they obtain written consent from the designated principal underwriter or depositor.
(2) Administration of Code of Ethics.
(i) The Fund, investment adviser and principal underwriter must use reasonable diligence and institute procedures reasonably necessary to prevent violations of its code of ethics.
(ii) No less frequently than annually, every Fund (other than a unit investment trust) and its investment advisers and principal underwriters must furnish to the Fund's board of directors, and the board of directors must consider, a written report that:
APPENDIX A
(A) Describes any issues arising under the code of ethics or procedures since the last report to the board of directors, including, but not limited to, information about material violations of the code or procedures and sanctions imposed in response to the material violations; and
(B) Certifies that the Fund, investment adviser or principal underwriter, as applicable, has adopted procedures reasonably necessary to prevent Access Persons from violating the code.
(3) Exception for Principal Underwriters. The requirements of paragraphs
(c)(1) and (c)(2) of this section do not apply to any principal
underwriter unless:
(i) The principal underwriter is an affiliated person of the Fund or of the Fund's investment adviser; or
(ii) An officer, director or general partner of the principal underwriter serves as an officer, director or general partner of the Fund or of the Fund's investment adviser.
(d) Reporting Requirements of Access Persons.
(1) Reports Required. Unless excepted by paragraph (d)(2) of this section, every Access Person of a Fund (other than a money market fund or a Fund that does not invest in Covered Securities) and every Access Person of an investment adviser of or principal underwriter for the Fund, must report to that Fund, investment adviser or principal underwriter:
(i) Initial Holdings Reports. No later than 10 days after the person becomes an Access Person, the following information:
(A) The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person;
(B) The name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and
(C) The date that the report is submitted by the Access Person.
(ii) Quarterly Transaction Reports. No later than 10 days after the end of a calendar quarter, the following information:
(A) With respect to any transaction during the quarter in a Covered Security in which the Access Person had any direct or indirect beneficial ownership:
(1) The date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Covered Security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
APPENDIX A
(3) The price of the Covered Security at which the transaction was effected;
(4) The name of the broker, dealer or bank with or through which the transaction was effected; and
(5) The date that the report is submitted by the Access Person.
(B) With respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person:
(1) The name of the broker, dealer or bank with whom the Access Person established the account;
(2) The date the account was established; and
(3) The date that the report is submitted by the Access Person.
(iii) Annual Holdings Reports. Annually, the following information (which information must be current as of a date no more than 30 days before the report is submitted):
(A) The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership;
(B) The name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and
(C) The date that the report is submitted by the Access Person.
(2) Exceptions from Reporting Requirements.
(i) A person need not make a report under paragraph (d)(1) of this section with respect to transactions effected for, and Covered Securities held in, any account over which the person has no direct or indirect influence or control.
(ii) A director of a Fund who is not an "interested person" of the Fund within the meaning of section 2(a)(19) of the Act [15 U.S.C. 80a-2(a)(19)], and who would be required to make a report solely by reason of being a Fund director, need not make:
(A) An initial holdings report under paragraph (d)(1)(i) of this
section and an annual holdings report under paragraph
(d)(1)(iii) of this section; and
(B) A quarterly transaction report under paragraph (d)(1)(ii) of this section, unless the director knew or, in the ordinary course of fulfilling his or her official duties as a Fund director, should have known that during the 15-day period immediately before or after the director's transaction in a Covered Security, the Fund purchased or sold the Covered Security, or the Fund or its investment adviser considered purchasing or selling the Covered Security.
APPENDIX A
(iii) An Access Person to a Fund's principal underwriter need not make a report to the principal underwriter under paragraph (d)(1) of this section if:
(A) The principal underwriter is not an affiliated person of the Fund (unless the Fund is a unit investment trust) or any investment adviser of the Fund; and
(B) The principal underwriter has no officer, director or general partner who serves as an officer, director or general partner of the Fund or of any investment adviser of the Fund.
(iv) An Access Person to an investment adviser need not make a quarterly transaction report to the investment adviser under paragraph (d)(1)(ii) of this section if all the information in the report would duplicate information required to be recorded under subsections 275.204-2(a)(12) or 275.204-2(a)(13) of this chapter.
(v) An Access Person need not make a quarterly transaction report under paragraph (d)(1)(ii) of this section if the report would duplicate information contained in broker trade confirmations or account statements received by the Fund, investment adviser or principal underwriter with respect to the Access Person in the time period required by paragraph (d)(1)(ii), if all of the information required by that paragraph is contained in the broker trade confirmations or account statements, or in the records of the Fund, investment adviser or principal underwriter.
(3) Review of Reports. Each Fund, investment adviser and principal
underwriter to which reports are required to be made by paragraph
(d)(1) of this section must institute procedures by which appropriate
management or compliance personnel review these reports.
(4) Notification of Reporting Obligation. Each Fund, investment adviser and principal underwriter to which reports are required to be made by paragraph (d)(1) of this section must identify all Access Persons who are required to make these reports and must inform those Access Persons of their reporting obligation.
(5) Beneficial Ownership. For purposes of this section, beneficial ownership is interpreted in the same manner as it would be under subsection 240.16a-1(a)(2) of this chapter in determining whether a person is the beneficial owner of a security for purposes of section 16 of the Securities Exchange Act of 1934 [15 U.S.C. 78p] and the rules and regulations thereunder. Any report required by paragraph (d) of this section may contain a statement that the report will not be construed as an admission that the person making the report has any direct or indirect beneficial ownership in the Covered Security to which the report relates.
(e) Pre-approval of Investments in IPOs and Limited Offerings. Investment Personnel of a Fund or its investment adviser must obtain approval from the Fund or the Fund's investment adviser before directly or indirectly acquiring beneficial ownership in any securities in an Initial Public Offering or in a Limited Offering.
(f) Recordkeeping Requirements.
(1) Each Fund, investment adviser and principal underwriter that is required to adopt a code of ethics or to which reports are required to be made by Access Persons must, at its principal place of business, maintain records in the manner and to the extent set out in this paragraph (f), and must make these records available to the Commission or any
APPENDIX A
representative of the Commission at any time and from time to time for reasonable periodic, special or other examination:
(A) A copy of each code of ethics for the organization that is in effect, or at any time within the past five years was in effect, must be maintained in an easily accessible place;
(B) A record of any violation of the code of ethics, and of any action taken as a result of the violation, must be maintained in an easily accessible place for at least five years after the end of the fiscal year in which the violation occurs;
(C) A copy of each report made by an Access Person as required by this section, including any information provided in lieu of the reports under paragraph (d)(2)(v) of this section, must be maintained for at least five years after the end of the fiscal year in which the report is made or the information is provided, the first two years in an easily accessible place;
(D) A record of all persons, currently or within the past five years, who are or were required to make reports under paragraph (d) of this section, or who are or were responsible for reviewing these reports, must be maintained in an easily accessible place; and
(E) A copy of each report required by paragraph (c)(2)(ii) of this section must be maintained for at least five years after the end of the fiscal year in which it is made, the first two years in an easily accessible place.
(2) A Fund or investment adviser must maintain a record of any decision, and the reasons supporting the decision, to approve the acquisition by investment personnel of securities under paragraph (e), for at least five years after the end of the fiscal year in which the approval is granted.
APPENDIX B
REPORTS OF DIRECTORS, OFFICERS,
AND PRINCIPAL STOCKHOLDERS
RULE 16A-1(A)(2) UNDER THE SECURITIES EXCHANGE ACT OF 1934. DEFINITION OF TERMS.
Terms defined in this rule shall apply solely to Section 16 of the Act and the rules thereunder. These terms shall not be limited to Section 16(a) of the Act but also shall apply to all other subsections under Section 16 of the Act.
(a) The Term "beneficial owner" shall have the following applications:
(1) [Omitted]
(2) Other than for purposes of determining whether a person is a beneficial
owner of more than 10 percent of any class of equity securities registered under
Section 12 of the Act, the term "beneficial owner" shall mean any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares a direct or indirect pecuniary interest
in the equity securities, subject to the following:
(i) The term "pecuniary interest" in any class of equity securities shall mean the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities.
(ii) The term "indirect pecuniary interest" in any class of equity securities shall include, but not be limited to:
(A) Securities held by members of a person's immediate family sharing the same household; provided however that the presumption of such beneficial ownership may be rebutted; see also Rule 161-1(a)(4);
(B) A general partner's proportionate interest in the portfolio securities held by a general or limited partnership. The general partner's proportionate interest, as evidenced by the partnership agreement in effect at the time of the transaction and the partnership's most recent financial statements, shall be the greater of (1) the general partner's share of the partnership's profits, including profits attributed to any limited partnership interests held by the general partner and any other interest in profits that arise from the purchase and sale of the partnership's portfolio securities; or (2) the general partner's share of the partnership capital account, including the share attributable to any limited partnership interest held by the general partner.
(C) A performance-related fee, other than an asset-based fee, received by
any broker, dealer, bank, insurance company, investment company, investment
adviser, investment manager, trustee or person or entity performing a similar
function; provided however, that no pecuniary interest shall be present where:
(1) the performance-related fee, regardless of when payable, is calculated based
upon net capital gains and/or net capital appreciation generated from the
portfolio or from the fiduciary's overall
APPENDIX B
performance over a period of one year or more; and (2) equity securities of the issuer do not account for more than 10 percent of the market value of the portfolio. A right to nonperformance-related fee alone shall not represent a pecuniary interest in the securities;
(D) A person's right to dividends that is separated or separable from the underlying securities. Otherwise, a right to dividends alone shall not represent a pecuniary interest in the securities;
(E) A person's interest in securities held by a trust, as specified in Rule 16a-8(b); and
(F) A person's right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable.
(iii) A shareholder shall not be deemed to have a pecuniary interest in the portfolio securities held by a corporation or similar entity in which the person owns securities if the shareholder is not a controlling shareholder of the entity and does not have or share investment control over the entity's portfolio.
APPENDIX B
EXAMPLES OF BENEFICIAL INTEREST
For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security. Examples of beneficial ownership under this definition include:
o securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example);
o securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust);
o securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust.
o securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control;
o securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits;
o securities held by a personal holding company controlled by you alone or jointly with others;
o securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) your minor children or any immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or
o securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership.
APPENDIX B
You will NOT be deemed to have beneficial ownership of securities in the following situations:
o securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership's portfolio; and
o securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift.
THESE EXAMPLES ARE NOT EXCLUSIVE. THERE ARE OTHER CIRCUMSTANCES IN WHICH YOU MAY BE DEEMED TO HAVE A BENEFICIAL INTEREST IN A SECURITY. ANY QUESTIONS ABOUT WHETHER YOU HAVE A BENEFICIAL INTEREST SHOULD BE DIRECTED TO THE CHIEF COMPLIANCE OFFICER OF CAM.