Edgar Filing: CALAMOS STRATEGIC TOTAL RETURN FUND

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 2004

1933 ACT FILE NO. 333-

1940 ACT FILE NO. 811-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-2
(CHECK APPROPRIATE BOXES)

[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] PRE-EFFECTIVE AMENDMENT NO.
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940
[ ] AMENDMENT NO.

CALAMOS STRATEGIC TOTAL RETURN 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 Cynthia G. Cobden
Vedder, Price, Kaufman & Bell, Boyd & Lloyd, LLC Simpson Thacher & Bartlett LLP
Kammholz, P.C. 70 West Madison Street, Suite 425 Lexington Avenue
222 North LaSalle Street 3300 New York, New York 10017
Chicago, Illinois 60601-1003 Chicago, Illinois 60602-4207

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 PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) FEE(2)
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Common Shares (no par
value).................... 1,000 $15.00 $15,000 $1.21
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Transmitted prior to the filing date to the designated lockbox of the
Securities and Exchange Commission at Mellon Bank in Pittsburgh,
Pennsylvania.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT, WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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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, DATED , 2004

PROSPECTUS
SHARES

CALAMOS STRATEGIC TOTAL RETURN FUND
COMMON SHARES OF BENEFICIAL INTEREST
$ PER SHARE
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INVESTMENT OBJECTIVE. Calamos Strategic Total Return 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
primarily in common and preferred stocks and income producing securities such as
investment grade and below investment grade (high yield/high risk) debt
securities. The Fund, under normal circumstances, will invest at least 50% of
its managed assets in equity securities (including securities that are
convertible into equity securities). The Fund may invest up to 35% of its
managed 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. The Fund may invest up to 15% of its managed
assets in securities of foreign issuers in emerging markets. "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. 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
Corporation, 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 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 common
shares have been authorized for listing on the New York Stock Exchange under the
symbol " ," subject to official notice of issuance.
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INVESTING IN THE FUND'S COMMON SHARES INVOLVES RISKS THAT ARE DESCRIBED IN
"RISK FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS.

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.
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PER SHARE TOTAL(2)
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Public offering price $ $
Sales load $ $
Proceeds, before expenses, to the Fund(1) $ $

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(1) Total expenses of issuance and distribution (other than the sales load) are
estimated to be $ .
(2) The Fund has granted the underwriters an option to purchase up to
additional common shares at the public offering price less the sales load,
solely to cover over-allotments, if any. If such option is exercised in
full, the total public offering price, sales load and proceeds, before
expenses, to the Fund will be $ , $ and $ ,
respectively. See "Underwriting."

The underwriters expect to deliver the common shares to purchasers on or
about , 2004.
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, 2004

(continued from previous page)

LEVERAGE. The Fund may, but is not required to, issue preferred shares,
borrow money or issue debt securities. Those practices are 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 33% of the Fund's total assets immediately after
issuance. The use of preferred shares or borrowing to leverage the common shares
creates risks. See "Risk Factors -- Leverage" beginning on page of this
prospectus.

You should read this 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
, 2004, containing additional information about the Fund, has been
filed with the Securities and Exchange Commission (the "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 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
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.

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.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE 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.
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TABLE OF CONTENTS

PAGE
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Prospectus Summary.......................................... 1
Summary of Fund Expenses.................................... 12
The Fund.................................................... 13
Use of Proceeds............................................. 13
Investment Objective and Principal Investment Strategies.... 14
Leverage.................................................... 17
Interest Rate Transactions.................................. 20
Risk Factors................................................ 21
Management of the Fund...................................... 28
Dividends and Distributions; Automatic Dividend Reinvestment
Plan...................................................... 30
Closed-End Fund Structure................................... 33
U.S. Federal Income Tax Matters............................. 34
Net Asset Value............................................. 36
Description of Shares....................................... 36
Certain Provisions of the Agreement and Declaration of Trust
and By-Laws............................................... 38
Underwriting................................................ 41
Custodian, Transfer Agent, Dividend Disbursing Agent and
Registrar................................................. 44
Legal Opinions.............................................. 44
Table of Contents for Statement of Additional Information... 45

Until , 2004 (25 days 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 dealers' obligation to deliver a prospectus when acting as underwriters
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 Strategic Total Return Fund is a newly
organized, diversified, closed-end management
investment company. Throughout the prospectus,
we refer to Calamos Strategic Total Return 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 $ per share. The
common shares are being offered by a group of
underwriters led by . 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 will invest primarily
in common and preferred stocks and income
producing securities such as investment grade
and below investment grade debt securities. The
Fund, under normal circumstances, will invest
at least 50% of its managed assets in equity
securities (including securities that are
convertible into equity securities). The Fund
may invest up to 35% of its managed 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. The Fund may
invest up to 15% of its managed assets in
securities of foreign issuers in emerging
markets. "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.

interest in that company. Therefore, the Fund
participates in the financial success or
failure of any company in which it has an
equity interest.

HIGH YIELD SECURITIES. The Fund may invest in
high yield securities for either current income
or capital appreciation or both. 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. Non-convertible 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
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 35% of its managed 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. The Fund may
invest up to 15% of its managed assets in
securities of foreign issuers in 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
these percentage limitations, 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 Securities."

CONVERTIBLE SECURITIES. The Fund may invest in
convertible securities. A convertible security
is a debt security or preferred stock that is
exchangeable for an equity security (typically
of the same 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. The
Fund may invest in convertible securities of
any rating. Securities that are convertible
into equity securities are considered equity
securities for purposes of the Fund's policy to
invest at least 50% of its managed assets in
equity securities. See "Investment Objective
and Principal Investment
Strategies -- Principal Investment
Strategies -- Convertible Securities."

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 equity securities for
purposes of the Fund's policy to invest at
least 50% of its managed assets in equity
securities. See "Investment Objective and
Principal Investment Strategies -- Principal
Investment Strategies -- Synthetic Convertible
Securities."

OTHER SECURITIES. The Fund may invest in other
securities of various types. Normally, the Fund
invests substantially all of its assets to meet
its investment objective. 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, use
leverage by issuing 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 33% of the Fund's total assets immediately
after issuance. As a non-fundamental policy,
such preferred shares or borrowing may not
exceed 38% of the Fund's total assets. However,
the Board of Trustees reserves the right to
issue preferred shares or borrow to the extent
permitted by the Investment Company Act of 1940
(the "1940 Act"). See "Leverage." 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' 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, which can be
significant. These risks include the
possibility that the value of the assets
acquired with the proceeds of leverage
decreases although the Fund's liability to
holders of preferred shares or other types of
leverage 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.
Holders of preferred shares will have voting
rights in addition to and separate from the
voting rights of common shareholders. See
"Description of Shares -- Preferred Shares" and
"Certain Provisions of the Agreement and
Declaration of Trust and By-Laws." The holders
of preferred shares, on the one hand, and the
holders of the common shares, on the other, may
have interests that conflict in certain
situations. Since Calamos' management 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
leverage the Fund. Calamos intends to leverage
the Fund only when it believes that the
potential return on additional investments
acquired with the proceeds of leverage is
likely to exceed the costs incurred in
connection with the borrowing or issuance of
preferred shares. The Fund will pay and common
shareholders will effectively bear any costs
and expenses relating to any borrowings and to
the issuance and ongoing maintenance of
preferred shares. See "Leverage" and "Risk
Factors -- Leverage."

Interest Rate Transactions.... In connection with the Fund's likely use of
leverage, the Fund, if market conditions are
deemed favorable, likely will enter into
interest rate swap or cap transactions to
attempt to protect itself from increasing
dividend or interest expenses on its leverage.
The use of interest rate swaps and caps is a
highly specialized activity that involves
investment techniques and risks different from
those associated with ordinary portfolio
security transactions.

In an interest rate swap, the Fund would agree
to pay to the other party to the interest rate
swap (which is known as the "counterparty") a
fixed rate payment in exchange for the
counterparty agreeing to pay to the Fund a
payment at a variable rate that is expected to
approximate the rate on any variable rate
payment obligation on the Fund's leverage. The
payment obligations would be based on the
notional amount of the swap.

In an interest rate cap, the Fund would pay a
premium to the counterparty to the interest
rate cap and, to the extent that a specified
variable rate index exceeds a predetermined
fixed rate, would receive from the counterparty
payments of the difference based on the
notional amount of such cap. Depending on the
state of interest rates in general, the Fund's
use of interest rate

swap or cap transactions could enhance or harm
the overall performance of the common shares.
See "Interest Rate Transactions."

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 , 200 , Calamos
managed approximately $ 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 1.00% of the Fund's average weekly
managed assets. 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 common shares have been authorized for
listing on the New York Stock Exchange under
the symbol " ," subject to official notice
of issuance.

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."

Fund Accountant............... will provide fund
accounting and financial accounting services to
the Fund.

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................. Subject to the discussion in the following
paragraph, commencing with the Fund's first
dividend, 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 60 days of
the completion of this offering and to pay that
initial monthly dividend approximately 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.

In , 2004, Calamos, on behalf of
itself and certain funds, filed an exemptive
application with the Securities and Exchange
Commission ("SEC") seeking an order under the
1940 Act facilitating the implementation of a
dividend policy calling for monthly
distributions of a fixed percentage of its net
asset value ("Managed Dividend Policy"). The
application will include the Fund as a party.
If, and when, Calamos, on behalf of itself and
other parties, receives the requested relief,
the Fund may, subject to the determination of
its Board of Trustees, implement a Managed
Dividend Policy.

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."

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. Following the
offering, net asset value will be reduced by
the underwriting discount and the amount of
offering expenses paid by the Fund. Immediately
following any offering of preferred shares, net
asset value will be reduced by the costs of
that offering paid by the Fund. See "Risk
Factors -- Market Price of Shares."

EQUITY SECURITIES. Equity investments are
subject to greater fluctuations in market value
than other asset classes as a result of such
factors as the issuer's business performance,
investor

perceptions, stock market trends and general
economic conditions. Equity securities are
subordinated to bonds and other debt
instruments in a company's capital structure in
terms of priority to corporate income and
liquidation payments.

HIGH YIELD SECURITIES. The Fund may invest in
high yield securities of any rating. Investment
in high yield securities involves substantial
risk of loss. Below investment grade
non-convertible 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.

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;

- 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;

- 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; and

- market interest rates currently are at
historically low levels. See "Risk
Factors -- Interest Rate Risks."

DEFAULT RISK. Default risk refers to the risk
that a company who issues a debt security will
be unable to fulfill its obligations to repay
principal and interest. The lower a debt
security is rated, the greater the default
risk.

ability to take advantage of other market
opportunities. 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' judgment may play a greater
role in the valuation process. 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."

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
9

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."

LEVERAGE. The Fund may use leverage by issuing
preferred shares, borrowing money or issuing
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 33% of the Fund's total
assets immediately after issuance. As a
non-fundamental policy, such preferred shares
or borrowing may not exceed 38% 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.

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 borrowings.
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. See "Risk
Factors -- Leverage."

INTEREST RATE TRANSACTIONS RISK. The Fund may
enter into an interest rate swap or cap
transaction to attempt to protect itself from
increasing dividend or interest expenses on its
leverage resulting from increasing short-term
interest rates. A decline in interest rates may
result in a decline in the value of the swap or
cap, which may result in a decline in the net
asset value of the Fund. See "Risk
Factors -- Interest Rate Transactions Risk."

TAX RISK. The Fund may invest in certain
securities, such as certain convertible
securities, for which the federal income tax
treatment may not be clear or may be subject to
recharacterization by the Internal Revenue
Service. It could be more difficult for the
Fund to comply with the tax requirements
applicable to regulated investment companies if
the tax characterization of the Fund's
investments or the tax treatment of the income
from such investments were successfully
challenged by the Internal Revenue Service. See
"U.S. Federal Income Tax Matters."

MANAGEMENT RISK. Calamos' 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 conversion of the Fund
to an open-end investment company or a merger,
asset sale or similar transaction. Holders of
preferred shares will have voting rights in
addition to and separate from the voting rights
of common shareholders with respect to certain
of these matters. See "Description of
Shares -- Preferred Shares" and "Certain
Provisions of the Agreement and Declaration of
Trust and By-Laws." The holders of preferred
shares, on the one hand, and the holders of the
common shares, on the other, may have interests
that conflict in these situations. See "Risk
Factors -- Antitakeover Provisions."

MARKET DISRUPTION RISK. Certain events have a
disruptive effect on the securities markets,
such as terrorist attacks (including the
terrorist attacks in the United States on
September 11, 2001), war and other geopolitical
events, earthquakes, storms and other
disasters. The Fund cannot predict the effects
of similar events in the future on the U.S.
economy.

SUMMARY OF FUND EXPENSES

The following table shows the Fund's expenses as a percentage of net assets
attributable to common shares assuming the Fund issues preferred shares in an
amount equal to 33% of the Fund's total assets immediately after issuance.
"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).............. %
Offering Expenses Borne by the Fund (as a percentage of
offering price)(1)(2)..................................... %
Dividend Reinvestment Plan Fees............................. None(3)

PERCENTAGE OF
NET ASSETS
ATTRIBUTABLE TO
COMMON
SHARES(4)
---------------

ANNUAL EXPENSES
Management Fee.............................................. %
Other Expenses.............................................. %
Interest Payments on Borrowed Funds(5)...................... None
----
Total Annual Expenses....................................... %

---------------
(1) Calamos has agreed to pay organizational expenses and offering costs (other
than sales load) that exceed $0.03 per share.

(2) If the Fund offers preferred shares, costs of that offering, estimated to be
approximately % of the total amount of the preferred share offering,
will effectively be borne by the common shareholders and result in a
reduction of the net asset value of the common shares. Assuming the issuance
of preferred shares in the amount equal to 33% of the Fund's total assets
immediately after issuance, those offering costs are estimated to be
approximately $ per common share ( % of the estimated proceeds from
the Fund's common share offering after deducting offering costs).

(3) A shareholder that directs the plan agent to sell shares held in a dividend
reinvestment account will pay brokerage charges.

(4) If the Fund does not issue preferred shares, or otherwise use leverage, the
Fund's expenses would be as set out in the table below:

PERCENTAGE OF
NET ASSETS
ATTRIBUTABLE TO
COMMON
SHARES
---------------

(5) In the event the Fund, as an alternative to issuing preferred shares,
utilizes leverage through borrowings in an amount equal to % of the
Fund's total assets (including the amount obtained from leverage), it is
estimated that, as a percentage of net assets attributable to common shares,
the "Management Fee" would be %, "Other Expenses" would be %,
"Interest Payments on Borrowed Funds" (assuming an interest rate of %,
which interest rate is subject to change based on prevailing market
conditions) would be % and "Total Annual Expenses" would be %.
Based on the "Total Annual Expenses" and in accordance with the example
below, the expenses for years 1, 3, 5 and 10 would be $ , $ ,
$ and $ , respectively.

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 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, as a
percentage of net assets, 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
$ , estimated offering and organizational expenses of this offering of
$ and the estimated preferred share offering costs of $ , assuming
preferred shares are issued representing % of the Fund's total assets) that
you would pay on a $1,000 investment in common shares, assuming (1) net annual
expenses of % of net assets attributable to common shares a 5% annual
return and (2) the Fund issues preferred shares in an amount equal to % of
the Fund's total assets:(1)

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

Total Expenses Incurred(1)........................ $ $ $ $

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE ASSUMED.
---------------
(1) 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. 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 use leverage, and otherwise making the same assumptions in the
example above, would be: 1 year, $ ; 3 years, $ ; 5 years,
$ ; and 10 years, $ .

THE FUND

Calamos Strategic Total Return Fund is a newly organized, diversified,
closed-end management investment company. The Fund was organized under the laws
of the state of Delaware on December 31, 2003, 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 invest substantially all of the net proceeds in
securities that meet the investment objective 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's investment
objective may be changed by the Board of Trustees without a shareholder vote.
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 primarily in common and
preferred stocks and income producing securities such as investment grade and
below investment grade debt securities. The Fund, under normal circumstances,
will invest at least 50% of its managed assets in equity securities (including
securities that are convertible into equity securities). The Fund may invest up
to 35% of its managed 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. The Fund may invest up to 15% of its
managed assets in securities of foreign issuers in emerging markets.

HIGH YIELD SECURITIES. The Fund will invest in high yield securities for
either current income or capital appreciation or both. 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 invest in high yield securities of any rating.
Non-convertible 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
non-convertible 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.

OTHER INCOME SECURITIES. The Fund may also invest in investment grade
income securities. The Fund's investments in investment grade 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.

FOREIGN SECURITIES. Although the Fund primarily invests in securities of
U.S. issuers, the Fund may invest up to 35% of its managed 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. The
Fund may invest up to 15% of its managed assets in securities of foreign issuers
in 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 these percentage limitations, foreign securities do not
include securities represented by American Depository Receipts ("ADRs") or
securities guaranteed by a U.S. person.

CONVERTIBLE SECURITIES. A convertible security is a debt security or
preferred stock that is exchangeable for an equity security (typically of the
same 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. The Fund
may invest in convertible securities of
14

any rating. Securities that are convertible into equity securities are
considered equity securities for purposes of the Fund's policy to invest at
least 50% of its managed assets in equity 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. Different companies may issue the fixed-income and convertible
components, which may be purchased separately and at different times. The Fund
may also purchase synthetic securities created by other parties, typically
investment banks, including convertible structured notes. Convertible structured
notes are fixed income debentures linked to equity. 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 equity securities for purposes of the Fund's policy to invest at
least 50% of its managed assets in equity securities.

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").
Calamos, under the supervision of the Board of Trustees, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the Fund's
limit of investing no more than 15% of its managed assets in illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, Calamos will consider the
trading markets for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, Calamos could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market and (4) nature of a security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities will be monitored and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than 15% of its assets in
illiquid securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the portfolio's assets invested in illiquid securities
if qualified institutional buyers are unwilling to purchase such securities.

STRUCTURED PRODUCTS. The Fund may invest in interests in entities
organized and operated for the purpose of restructuring the investment
characteristics of certain other investments. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments and the issuance by that entity of one or more
classes of securities ("structured products") backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured products to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to structured products is dependent on the extent
of the cash flow on the underlying instruments. The Fund may invest in
structured products, which represent derived investment positions based on
relationships among different markets or asset classes.

[The Fund may also invest in other types of structured products, including,
among others, baskets of credit default swaps referencing a portfolio of
high-yield securities.] A structured product may be considered to be leveraged
to the extent its interest rate varies by a magnitude that exceeds the magnitude
of the change in the index rate of interest. Because they are linked to their
underlying markets or securities, investments in structured products generally
are subject to greater volatility than an investment directly in the underlying
market or security. Total return on the structured product is derived by linking
return to one or more characteristics of the underlying instrument. Because
certain structured products of the type in which the Fund may invest may involve
no credit enhancement, the credit risk of those
15

structured products generally would be equivalent to that of the underlying
instruments. The Fund may invest in a class of structured products that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured products typically have higher yields and present
greater risks than unsubordinated structured products. Although the Fund's
purchase of subordinated structured products would have similar economic effect
to that of borrowing against the underlying securities, the purchase will not be
deemed to be leverage for purposes of the Fund's limitations related to
borrowing and leverage.

Certain issuers of structured products may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940, as amended ("1940
Act"). As a result, the Fund's investments in these structured products may be
limited by the restrictions contained in the 1940 Act. Structured products are
typically sold in private placement transactions, and there currently is no
active trading market for structured products. As a result, certain structured
products in which the Fund invests may be deemed illiquid and subject to its
limitation on illiquid investments.

Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security.

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, General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, 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. 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.
16

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.

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 are 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.

TEMPORARY DEFENSIVE 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. During such periods, the Fund may not be able to
achieve its investment objective.

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 could 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 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 33% of the Fund's total assets immediately after issuance. 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 38% of
the Fund's total assets. However, the Board of Trustees reserves the right to
issue preferred shares or borrow to the extent permitted by the 1940 Act. 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' 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 interest 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 common 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 common 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 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 would increase the cost of
borrowing over the stated interest rate. The Fund will pay (and common
shareholders will bear) any costs and expenses relating to any borrowings and to
the issuance and ongoing maintenance of preferred shares (for example,
distribution related expenses such as a participation fee paid at what it
expects will be an annual rate of 0.25% of preferred share liquidation
preference to broker-dealers successfully participating in preferred share
auctions). Net asset value will be reduced immediately following any offering of
preferred shares by the costs of that offering paid by the Fund.

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.

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 borrowings.
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.

If and the extent to which 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'
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.

EFFECTS OF LEVERAGE

Assuming the Fund issues preferred shares with a liquidation preference
equal to approximately 33% of the Fund's total assets and an annual dividend
rate of % of such liquidation preference (which rate is approximately the
current rate which Calamos expects the Fund to pay, based on market rates as of
, 200 ), income generated by the Fund's portfolio (net of estimated
expenses) would need to exceed % 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 33% 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 %.
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........................ ( )% ( )% ( )% % %

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.

INTEREST RATE TRANSACTIONS

In connection with the Fund's likely use of leverage, the Fund, if market
conditions are deemed favorable, likely will enter into interest rate swap or
cap transactions to attempt to protect itself from increasing dividend or
interest expenses on its leverage. Interest rate swaps involve the Fund's
agreement with the swap counterparty to pay a fixed rate payment in exchange for
the counterparty agreeing to pay the Fund a payment at a variable rate that is
expected to approximate the rate of any variable rate payment obligation on the
Fund's leverage. The payment obligations would be based on the notional amount
of the swap.

The Fund may use an interest rate cap, which would require it to pay a
premium to the cap counterparty and would entitle it, to the extent that a
specified variable rate index exceeds a predetermined fixed rate, to receive
from the counterparty payment of the difference based on the notional amount of
such cap. The Fund would use interest rate swaps or caps only with the intent to
reduce or eliminate the
20

risk that an increase in short-term interest rates could have on common share
net earnings as a result of leverage.

The Fund will usually enter into swaps or caps on a net basis; that is, the
two payment streams will be netted out in a cash settlement on the payment date
or dates specified in the instrument, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. The Fund intends to
maintain in a segregated account with its custodian cash or liquid securities
having a value at least equal to the Fund's net payment obligations under any
swap transaction, marked-to-market daily.

The use of interest rate swaps and caps is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. Depending on the state of
interest rates in general, the Fund's use of interest rate swaps or caps could
enhance or harm the overall performance of the common shares. To the extent that
there is a decline in interest rates for maturities equal to the remaining
maturity on the Fund's fixed rate payment obligation under the interest rate
swap or equal to the remaining term of the interest rate cap, the value of the
swap or cap (which initially has a value of zero) could decline, and could
result in a decline in the net asset value of the common shares. If, on the
other hand, such rates were to increase, the value of the swap or cap could
increase, and thereby increase the net asset value of the common shares. As
interest rate swaps or caps approach their maturity, their positive or negative
value due to interest rate changes will approach zero.

In addition, if the short-term interest rates effectively received by the
Fund during the term of an interest rate swap are lower than the Fund's fixed
rate of payment on the swap, the swap will increase the Fund's operating
expenses and reduce common share net earnings. For example, if the Fund were to
(A) issue preferred shares representing 33% of the Fund's total assets and (B)
enter into one or more interest rate swaps in a notional amount equal to 75% of
its outstanding preferred shares under which the Fund would receive a short-term
swap rate of % and pay a fixed swap rate of % over the term of the
swap, the swap would effectively increase Fund expenses and reduce Fund common
share net earnings by approximately % as a percentage of net assets
attributable to common shares and approximately % as a percentage of
managed assets. If, on the other hand, the short-term interest rates effectively
received by the Fund are higher than the Fund's fixed rate of payment on the
interest rate swap, the swap would enhance common share net earnings. In either
case, the swap would have the effect of reducing fluctuations in the Fund's cost
of leverage due to changes in short-term interest rates during the term of the
swap. The example above is purely for illustrative purposes and is not
predictive of the actual percentage of the Fund's leverage that will be hedged
by a swap, the actual fixed rates that the Fund will pay under the swap (which
will depend on market interest rates for the applicable maturities at the time
the Fund enters into swaps) or the actual short-term rates that the Fund will
receive on any swaps (which fluctuate frequently during the term of the swap,
and may change significantly from initial levels), or the actual impact such
swaps will have on the Fund's expenses and common share net earnings.

Buying interest rate caps could enhance the performance of the common
shares by providing a maximum leverage expense. Buying interest rate caps could
also increase the operating expenses of the Fund and decrease the net earnings
of the common shares in the event that the premium paid by the Fund to the
counterparty exceeds the additional amount the Fund would have been required to
pay on its preferred shares due to increases in short-term interest rates during
the term of the cap had it not entered into the cap agreement. The Fund has no
current intention of selling an interest rate swap or cap. The Fund will monitor
any interest rate swaps or caps with a view to ensuring that the Fund remains in
compliance with all applicable tax requirements.

Interest rate swaps and caps do not involve the delivery of securities or
other underlying assets or principal. Accordingly, the risk of loss with respect
to interest rate swaps is limited to the net amount of interest payments that
the Fund is contractually obligated to make. If the counterparty defaults, the
Fund would not be able to use the anticipated net receipts under the swap or cap
to offset the dividend or interest payments on the Fund's leverage. Depending on
whether the Fund would be entitled to receive net payments from the counterparty
on the swap or cap, which in turn would depend on the general state of

short-term interest rates at that point in time, such a default could negatively
impact the performance of the common shares.

Although this will not guarantee that the counterparty does not default,
the Fund will not enter into an interest rate swap or cap transaction with any
counterparty that Calamos believes does not have the financial resources to
honor its obligation under the interest rate swap or cap transaction. Further,
Calamos will continually monitor the financial stability of a counterparty to an
interest rate swap or cap transaction in an effort to proactively protect the
Fund's investments.

In addition, at the time the interest rate swap or cap transaction reaches
its scheduled termination date, there is a risk that the Fund will not be able
to obtain a replacement transaction or that the terms of the replacement will
not be as favorable as on the expiring transaction. If this occurs, it could
have a negative impact on the performance of the common shares.

The Fund may choose or be required to redeem some or all preferred shares
or prepay any borrowings. This redemption would likely result in the Fund
seeking to terminate early all or a portion of any swap or cap transaction. Such
early termination of a swap could result in a termination payment by or to the
Fund. An early termination of a cap could result in a termination payment to the
Fund.

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 common and
preferred stocks and income producing securities such as investment grade and
below investment grade debt 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 has no operating history or history of
public trading.

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 and immediately following any offering of
preferred shares by the costs of that offering 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.

EQUITY SECURITIES. Equity investments are subject to greater fluctuations
in market value than other asset classes as a result of such factors as a
company's business performance, investor perceptions, stock market trends and
general economic conditions. Equity securities are subordinated to bonds and
other debt instruments in a company's capital structure in terms of priority to
corporate income and liquidation payments.

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.

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, downturns 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 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 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.

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.

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;

- 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; and

- market interest rates currently are at historically low levels.

DEFAULT RISK. Default risk refers to the risk that a company who issues a
debt security will be unable to fulfill its obligations to repay principal and
interest. The lower a debt security is rated, the greater its default risk.

ILLIQUID INVESTMENTS. The Fund may invest up to 15% of its managed assets
in securities that, at the time of investment, are illiquid (determined using
the Commission's standard applicable to investment companies, i.e., securities
that cannot be disposed of within 7 days in the ordinary course of business at
approximately the value at which the Fund has valued the 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. Calamos, under the supervision of the Board of
Trustees, will determine whether securities purchased under Rule 144A are
illiquid (that is, not readily marketable) and thus subject to the Fund's limit
of investing no more than 15% of its managed assets in illiquid securities.
Investments in Rule 144A Securities could have the effect of increasing the
amount of the Fund's assets invested in illiquid securities if qualified
institutional buyers are unwilling to purchase these Rule 144A 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' 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;

- the 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, including expropriation and nationalization;

- the difficulty in obtaining or enforcing a court judgment in non-U.S.
countries;

- restrictions on foreign investments in non-U.S. jurisdictions;

- difficulties in effecting the repatriation of capital invested in
non-U.S. countries; 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 conditions 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.

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.

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 33% of the Fund's total assets
immediately after issuance. As a non-fundamental policy, such preferred shares,
borrowing or debt securities may not exceed 38% of the Fund's total assets.
However, the Board of Trustees reserves the right to issue preferred shares or
borrow to the extent permitted by the 1940 Act.

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.

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 borrowings. The Fund may be
subject to certain restrictions on investments imposed
26

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.

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. To the
extent that the Fund is required, in connection with maintaining 1940 Act asset
coverage requirements or otherwise, or elects to redeem any preferred shares or
prepay any borrowings, the Fund may need to liquidate investments to fund such
redemptions or prepayments. Liquidation at times of adverse economic conditions
may result in capital loss and reduce returns to common shareholders.

Since Calamos' investment management fee is a percentage of the Fund's
managed assets, Calamos' 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 TRANSACTIONS RISK. The Fund may enter into an interest rate
swap or cap transaction to attempt to protect itself from increasing dividend or
interest expenses on its preferred shares, debt securities or other borrowings
resulting from increasing short-term interest rates. A decline in interest rates
may result in a decline in the value of the swap or cap, which may result in a
decline in the net asset value of the Fund.

Depending on the state of interest rates in general, the Fund's use of
interest rate swap or cap transactions could enhance or harm the overall
performance of the common shares. To the extent there is a decline in interest
rates, the value of the interest rate swap or cap could decline, and could
result in a decline in the net asset value of the common shares. In addition, if
the counterparty to an interest rate swap or cap defaults, the Fund would not be
able to use the anticipated net receipts under the swap or cap to offset the
dividend or interest payments on the Fund's leverage.

Depending on whether the Fund would be entitled to receive net payments
from the counterparty on the swap or cap, which in turn would depend on the
general state of short-term interest rates at that point in time, such a default
could negatively impact the performance of the common shares. In addition, at
the time an interest rate swap or cap transaction reaches its scheduled
termination date, there is a risk that the Fund would not be able to obtain a
replacement transaction or that the terms of the replacement would not be as
favorable as on the expiring transaction. If either of these events occurs, it
could have a negative impact on the performance of the common shares.

If the Fund fails to maintain a required 200% asset coverage of the
liquidation value of the outstanding preferred shares or if the Fund loses its
expected rating on its preferred shares or fails to maintain other covenants
with respect to its preferred shares, the Fund may be required to redeem some or
all of the preferred shares. Similarly, the Fund could be required to prepay the
principal amount of any debt securities or other borrowings. Such redemption or
prepayment would likely result in the Fund seeking to terminate early all or a
portion of any swap or cap transaction. Early termination of a swap could result
in a termination payment by or to the Fund. Early termination of a cap could
result in a termination payment to the Fund. The Fund intends to maintain in a
segregated account with its custodian cash or liquid securities having a value
at least equal to the Fund's net payment obligations under any swap transaction,
marked-to-market daily.

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 investment 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.

TAX RISK. The Fund may invest in certain securities, such as certain
convertible securities, for which the federal income tax treatment may not be
clear or may be subject to recharacterization by the Internal Revenue Service.
It could be more difficult for the Fund to comply with the tax requirements
applicable to regulated investment companies if the tax characterization of the
Fund's investments or the tax treatment of the income from such investments were
successfully challenged by the Internal Revenue Service. See "U.S. Federal
Income Tax Matters."

MANAGEMENT RISK. Calamos' 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
transactions with affiliates, converting the Fund to an open-end investment
company or a merger, asset sale or similar transaction. Holders of preferred
shares will have voting rights in addition to and separate from the voting
rights of common shareholders with respect to certain of these matters. See
"Description of Shares -- Preferred Shares" and "Certain Provisions of the
Agreement and Declaration of Trust and By-Laws." The holders of preferred
shares, on the one hand, and the holders of the common shares, on the other, may
have interests that conflict in these situations.

MARKET DISRUPTION RISK. Certain events have a disruptive effect on the
securities markets, such as terrorist attacks (including the terrorist attacks
in the United States on September 11, 2001), war and other geopolitical events,
earthquakes, storms and other disasters. The Fund cannot predict the effects of
similar events in the future on the U.S. economy.

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 six Trustees of the Fund, three of whom are "interested persons" of
the Trust (as defined in the 1940 Act) and three 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 , 200 Calamos managed approximately $
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, 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 and
Form N-CSR; (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 1.00% of
managed assets. Because the fees paid to Calamos are determined on the basis of
the Fund's managed assets, Calamos' 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
29

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.

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 CFS, an affiliate of Calamos, and Nick P. Calamos has
been senior executive vice president of Calamos and CFS. For over 20 years, the
Calamos management team has managed money for their clients in convertible, high
yield and global strategies. Furthermore, Calamos has extensive experience
investing in foreign markets through its convertible securities and high yield
securities strategies. Such experience has included investments in established
as well as emerging foreign markets.

FUND ACCOUNTANT

Under the terms of a fund accounting servicing agreement ("Fund Accounting
Servicing Agreement"), provides certain
administrative and accounting services, including but not limited to,
accounting, valuation, financial reporting and tax accounting services to the
Fund and to the Calamos Convertible and High Income Fund, Calamos Investment
Trust and Calamos Advisors Trust (the Fund, Calamos Convertible and High Income
Fund, Calamos Investment Trust and Calamos Advisors Trust are collectively
referred to as the "Calamos Funds") as described more fully in the Statement of
Additional Information. For the services rendered to the Calamos Funds,
receives fees based on the combined managed assets of the Calamos Funds
("Combined Assets"). Each fund of the Calamos Funds pays its pro-rata share of
the fees payable to USB described below based on relative managed assets of each
fund.

For the fund accounting services receives a fee at the annual
rate of ("fund accounting service fee"). For the financial accounting
services receives a fee at the annual rate of ("financial
accounting service fee").

Calamos will provide the financial accounting services to the Calamos Funds
described more fully in the Statement of Additional Information, rather than
. For providing those services, Calamos will receive a fee at the annual
rate of 0.0175% on the first $1 billion of Combined Assets; 0.0150% on the next
$1 billion of Combined Assets; and 0.0110% on Combined Assets above $2 billion
("proposed financial accounting service fee"). Each fund of the Calamos Funds
will pay its pro-rata share of the proposed financial accounting service fee to
Calamos based on relative managed assets of each fund.

DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC DIVIDEND REINVESTMENT PLAN

DIVIDENDS AND DISTRIBUTIONS

Subject to the determination of the Board of Trustees to implement a
Managed Dividend Policy, as described below, commencing with the first dividend,
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 60 days of the
completion of this offering and to pay that initial monthly dividend
approximately 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.

In 2004, Calamos, on behalf of itself and certain funds, filed an
exemptive application with the SEC seeking an order under the 1940 Act
facilitating the implementation of the Managed Dividend Policy. The application
will include the Fund as a party. If, and when, Calamos, on behalf of itself and
other parties, receives the requested relief, the Fund may, subject to the
determination of its Board of Trustees, implement a Managed Dividend Policy.

Under a Managed Dividend Policy, the Fund would intend to distribute a
monthly fixed percentage of net asset value to common shareholders. Under a
Managed Dividend Policy, if, for any monthly distribution, net investment income
and net realized capital gains were less than the amount of the distribution,
the differences would be distributed from the Fund's assets. In addition, in
order to make such distributions, the Fund might have to sell a portion of its
investment portfolio at a time when independent investment judgment might not
dictate such action. The Fund's final distribution for each calendar year would
include any remaining net investment income and net realized capital gains, if
any, undistributed during the year.

If, for any calendar year, the Fund's total distributions exceeded net
investment income and net realized capital gains (the "Excess"), the Excess,
distributed from the Fund's assets, would generally be treated as dividend
income to the extent of the Fund's current and accumulated earnings and profits.
Thereafter, such Excess would be treated as a tax-free return of capital up to
the amount of the common shareholder's tax basis in his, her or its common
shares, with any amounts exceeding such basis treated as gain from the sale of
common shares. Pursuant to the requirements of the 1940 Act and other applicable
laws, a notice would accompany each monthly distribution with respect to the
estimated source of the distribution made.

In the event the Fund distributed the Excess, such distribution would
decrease the Fund's total assets and, therefore, have the likely effect of
increasing the Fund's expense ratio. There is a risk that the Fund would not
eventually realize capital gains in an amount corresponding to a distribution of
the Excess.

There is no guarantee that the Fund will receive an exemptive order
facilitating the implementation of a Managed Dividend Policy or, if received,
that the Board of Trustees will determine to implement a Managed Dividend
Policy. The Board of Trustees reserves the right to change the dividend policy
from time to time.

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
31

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 the record date for the
applicable distribution.

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
32

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 the Plan
Agent sell part or all of his shares, the 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 institution or non-U.S. investors. INVESTORS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE TAX CONSEQUENCES TO THEM BEFORE
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 Internal Revenue Code
of 1986, as amended (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 taxable 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 taxable income, net tax-exempt interest, and net
capital gain. In addition, the Fund will generally be subject to a nondeductible
4% federal excise tax on the portion of its undistributed ordinary income and
capital gains if it fails to meet certain distribution requirements with respect
to each calendar year. The Fund intends to make distributions in a timely manner
and accordingly does not expect to be subject to the excise tax.

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 such event, the Fund's distributions, to the extent derived from the Fund's
current or accumulated earnings and profits, would generally constitute ordinary
dividends, which would generally be eligible for the dividends received
deduction available to corporate shareholders, and non corporate shareholders
would generally be able to treat such distributions as "qualified dividend
income" eligible for reduced rates of federal income taxation in taxable years
beginning on or before December 21, 2008.

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. Distributions
of investment company

taxable income are generally taxable as ordinary income. However, a portion of
such distributions derived from certain corporate dividends may qualify for
either the dividends received deduction available to corporate shareholders
under Section 243 of the Code or the reduced rates of federal income taxation
for "qualified dividend income" currently available to non corporate
shareholders under Section 1(h)(11) of the Code, provided certain holding period
and other requirements are met. Distributions of 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. A distribution of an amount in excess of the Fund's current and
accumulated earnings and profits, if any, will be treated by a shareholder as a
tax-free return of capital which is applied against and reduces the
shareholder's basis in his or her shares. To the extent that the amount of any
such distribution exceeds the shareholder's basis in his or her shares, the
excess will be treated by the shareholder as gain from the sale or exchange of
shares. 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. If such an event occurs, the
tax basis of shares owned by a shareholder of the Fund will, for U.S. federal
income tax purposes, 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
current rate of 28% 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 THEREUNDER 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 BEFORE MAKING AN INVESTMENT IN THE FUND.

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 are valued at the last current
reported sale price as of the time of valuation. Securities quoted on the NASDAQ
National Market System are valued at the Nasdaq Official Closing Price ("NOCP"),
as determined by Nasdaq, or lacking an NOCP, at the last current reported sale
price as of the time of valuation. 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
common shares of the Fund for $ . 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 up to 33% of the Fund's total assets immediately after
issuance. 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 38% 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 of 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. These provisions,
however, have the advantage of potentially requiring persons seeking control of
the Fund to negotiate with its management regarding the price to be paid and
facilitating the continuity of the Fund's investment objective and policies. The
Board of Trustees of the Fund has considered these provisions and concluded that
they are in the best interests of the Fund.

The Board of Trustees is divided into three classes and the terms of the
Trustees of the different classes are staggered. 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
39

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

are acting as
representatives of the underwriters named below. Subject to the terms and
conditions stated in the Fund's underwriting agreement dated ,
2004, 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
UNDERWRITERS COMMON SHARES
------------ -------------

Total................................................

The underwriting agreement provides that the obligations of the
underwriters to purchase the common shares included in this offering are subject
to approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all the common shares (other than those
covered by the over-allotment option described below) if they purchase any of
the common shares.

The underwriters propose to 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 dealers at the public offering price
less a concession not to exceed $ per common share. The sales load the Fund
will pay of $ per common share is equal to % of the initial offering
price. The underwriters may allow, and such dealers may reallow, a concession
not to exceed $0.10 per common share on sales to certain other dealers. If all
of the common shares are not sold at the initial offering price, the
representatives may change the public offering price and other selling terms.
Investors must pay for any common shares purchased on or before ,
2004. The representatives have advised the Fund that the underwriters do not
intend to confirm any sales to any accounts over which they exercise
discretionary authority.

Calamos (and not the Fund) has also agreed to pay to
a fee at an annual rate equal to % of the
Fund's managed assets. This fee will be payable in arrears at the end of each
calendar quarter during the continuance of the investment management agreement
or other advisory agreement between Calamos and the Fund. The total amount of
the fee payments, plus the amounts paid by the Fund to reimburse certain
underwriter legal expenses, will not exceed % of the total price to the
public of the common shares offered hereby; provided, that in determining when
the maximum amount has been paid, the value of each of the quarterly payments
shall be discounted at the annual rate of % to the closing date of this
offering. has agreed to provide certain
after-market services to Calamos designed to maintain the visibility of the Fund
on an ongoing basis and to provide relevant information, studies or reports
regarding the Fund and the closed-end investment company industry.

The Fund has granted to the underwriters an option, exercisable for 45 days
from the date of this prospectus, to purchase up to additional common
shares at the public offering price less the sales load. The underwriters may
exercise such option solely for the purpose of covering over-allotments, if any,
in connection with this offering. To the extent such option is exercised, each
underwriter will be obligated, subject to certain conditions, to purchase a
number of additional common shares approximately proportionate to such
underwriter's initial purchase commitment.

The Fund and Calamos have agreed that, for a period of 180 days from the
date of this prospectus, they will not, without the prior written consent of
, on behalf of the underwriters, dispose of or
hedge any common shares or any securities convertible into or exchangeable for
common shares. in its sole discretion may release
any of the securities subject to these agreements at any time without notice.

Prior to the offering, there has been no public market for the common
shares. Consequently, the initial public offering price for the common shares
was determined by negotiation among the Fund, Calamos and the representatives.
There can be no assurance, however, that the price at which the common shares
will sell in the public market after this offering will not be lower than the
price at which they are sold by the underwriters or that an active trading
market in the common shares will develop and continue after this offering. The
common shares have been authorized for listing on the New York Stock Exchange.

The following table shows the sales load that the Fund will pay to the
underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional common shares.

PAID BY FUND
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------

Per share.................................................. $ $
Total...................................................... $ $

In the underwriting 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.

Calamos has agreed to pay organizational expenses and offering costs (other
than sales load) that exceed $0.03 per share.

In addition, the Fund has agreed to reimburse the underwriters for certain
expenses incurred by the underwriters in the offering.

In connection with the requirements for listing the 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.

Certain underwriters may make a market in the common shares after trading
in the common shares has commenced on the New York Stock Exchange. No
underwriter is, however, obligated to conduct market-making activities and any
such activities may be discontinued at any time without notice, at the sole
discretion of the underwriter. No assurance can be given as to the liquidity of,
or the trading market for, the common shares as a result of any market-making
activities undertaken by any underwriter. This prospectus is to be used by any
underwriter in connection with the offering and, during the period in which a
prospectus must be delivered, with offers and sales of the common shares in
market-making transactions in the over-the-counter market at negotiated prices
related to prevailing market prices at the time of the sale.

The underwriters have advised the Fund that, pursuant to Regulation M under
the Securities Exchange Act of 1934, as amended, certain persons participating
in the offering may engage in transactions, including stabilizing bids, covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the common shares at a level
above that which might otherwise prevail in the open market. A "stabilizing bid"
is a bid for or the purchase of the common shares on behalf of an underwriter
for the purpose of fixing or maintaining the price of the common shares. A
"covering transaction" is a bid for or purchase of the common shares on behalf
of an underwriter to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is a contractual arrangement
whereby if, during a specified period after the issuance of the common shares,
the underwriters purchase common shares in the open market for the account of
the underwriting syndicate and the common shares purchased can be traced to a
particular underwriter or member of the selling group, the underwriting
syndicate may require the underwriter or selling group member in question to
purchase the common shares in question at the cost price to the syndicate or may
recover from (or decline to pay to) the underwriter or selling group member in
question any or all compensation (including, with respect to a representative,
the applicable syndicate management fee) applicable to the common shares in
question. As a result, an underwriter or selling group member and, in turn,
brokers may lose the fees that they otherwise would have earned from a sale of
the common shares if their customer resells the common shares while the penalty
bid is in effect. The underwriters are not required to engage in any of these
activities, and any such activities, if commenced, may be discontinued at any
time. These transactions may be effected on the New York Stock Exchange or
otherwise.

The underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives, without liability on the part of any
underwriter to the Fund or Calamos, by notice to the Fund or Calamos, if, prior
to the delivery of and payment for the common shares, (i) trading in the common
shares shall have been suspended by the Securities and Exchange Commission or
the New York Stock Exchange or trading in securities generally on the New York
Stock Exchange shall have been suspended or limited or minimum prices for
trading in securities generally shall have been established on such exchange,
(ii) a commercial banking moratorium shall have been declared by either federal
or New York state authorities, or (iii) there shall have occurred any outbreak
or escalation of hostilities, declaration by the United States of a national
emergency or war, or other calamity or crisis the effect of which on financial
markets in the United States is such as to make it, in the representatives' sole
judgment, impracticable or inadvisable to proceed with the offering or delivery
of the common shares as contemplated by this prospectus (exclusive of any
supplement hereto).

The Fund anticipates that from time to time the representatives of the
underwriters and certain other underwriters may act as brokers or dealers in
connection with the execution of the Fund's portfolio transactions after they
have ceased to be underwriters and, subject to certain restrictions, may act as
brokers while they are underwriters.

Prior to the public offering of common shares, Calamos will purchase common
shares from the Fund in an amount satisfying the net worth requirements of
Section 14(a) of the 1940 Act.

The principal business address of is
.

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, P.C.
("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 . Vedder Price
and 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-20
Management of the Fund...................................... S-22
Portfolio Transactions...................................... S-29
Repurchase of Common Shares................................. S-30
U.S. Federal Income Tax Matters............................. S-32
Performance-Related, Comparative and Other Information...... S-37
Experts..................................................... S-38
Additional Information...................................... S-38
Appendix A -- Description of Ratings........................ A-1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

CALAMOS STRATEGIC TOTAL
RETURN FUND
COMMON SHARES OF BENEFICIAL INTEREST
------------

PROSPECTUS

, 2004

------------

SEC FILE NUMBER: 811-
333-

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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 __________, 2004

CALAMOS STRATEGIC TOTAL RETURN FUND

STATEMENT OF ADDITIONAL INFORMATION

Calamos Strategic Total Return 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 ________ __, 2004. 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-20
Management of the Fund...........................................S-22
Portfolio Transactions...........................................S-29
Repurchase of Common Shares......................................S-30
U.S. Federal Income Tax Matters..................................S-32
Performance-Related, Comparative and Other Information...........S-37
Experts ........................................................S-38
Additional Information...........................................S-38
Appendix A--Description of Ratings................................A-1

This Statement of Additional Information is dated _______ __, 2004.

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 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 and 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.

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
primarily in common and preferred stock and income producing securities such as
investment grade and below investment grade debt securities. The Fund, under
normal circumstances, will invest at least 50% of its managed assets in equity
securities (including securities that are convertible into equity securities).
The Fund may invest up to 35% of its managed 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. The Fund may
invest up to 15% of its managed assets in securities of foreign issuers in
emerging markets. "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.

EQUITY SECURITIES. Equity securities include common and preferred
stocks, warrants, rights, and depository receipts. Under normal circumstances,
the Fund will invest at least 50% of its managed assets in equity securities
(including securities that are convertible into equity securities). An
investment in the equity securities of a company represents a proportionate
ownership interest in that company. Therefore, the Fund participates in the
financial success or failure of any company in which it has a equity interest.
Equity investments are subject to greater fluctuations in market value than
other asset classes as a result of such factors as a company's business
performance, investor perceptions, stock market trends and general economic
conditions. Equity securities are subordinated to bonds and other debt
instruments in a company's capital structure in terms of priority to corporate
income and liquidation payments.

Preferred stocks involve credit risk, which is the risk that a
preferred stock in the Fund's portfolio will decline in price or fail to make
dividend payments when due because the issuer of the security experiences a
decline in its financial status. In addition to credit risk, investments in
preferred stocks involve certain other risks. Certain preferred stocks contain
provisions that allow an issuer under certain circumstances to skip
distributions (in the case of "non-cumulative" preferred stocks) or defer
distributions (in the case of "cumulative" preferred stocks). If the Fund owns a
preferred stock that is deferring its distributions, the Fund may be required to
report income for tax purposes while it is not receiving income from that stock.
In certain varying circumstances, an issuer may redeem its preferred stock prior
to a specified date in the event of certain tax or legal changes or at the
issuer's call. In the

S-1

event of a redemption, the Fund may not be able to reinvest the proceeds at
comparable rates of return. Preferred stocks typically do not provide any voting
rights, except incases when dividends are in arrears for a specified number of
periods.

Equity securities of small company and mid cap companies historically
have been subject to greater investment risk than those of large companies. The
risks generally associated with small and medium-sized companies include more
limited product lines, markets and financial resources, lack of management depth
or experience, dependency on key personnel and vulnerability to adverse market
and economic developments. Accordingly, the prices of small and medium-sized
company equity securities tend to be more volatile than prices of large company
stocks. Further, the prices of small and medium-sized company equity securities
are often adversely affected by limited trading volumes and the lack of publicly
available information.

HIGH YIELD 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.
Non-convertible 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 non-convertible 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:

o increased price sensitivity to changing interest rates and to
a deteriorating economic environment;

o greater risk of loss due to default or declining credit
quality;

o adverse company specific events are more likely to render the
issuer unable to make interest and/or principal payments; and

o 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.

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

S-2

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

S-3

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 ____% 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

S-4

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 35% of its managed assets
in securities of foreign issuers. The Fund may invest up to 15% of its managed
assets in securities of foreign issuers in emerging markets. For these purposes,
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

S-5

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.

S-6

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.

S-7

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.

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.

S-8

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.

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' 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. The Fund may purchase agreements, sometimes called cash puts, that
may accompany the purchase of a new issue of bonds from a dealer.

A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to

S-9

protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price. The Fund's purchase of a call option on a security, financial future,
index, currency or other instrument might be intended to protect a fund against
an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument.

The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.

With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund may sell OTC options (other than OTC currency options) that are subject to
a buy-back provision permitting the Fund to require the Counterparty to sell the
option back to a fund at a formula price within seven days. The Fund expects
generally to enter into OTC options that have cash settlement provisions,
although it is not required to do so. The staff of the SEC currently takes the
position that OTC options purchased by a fund, and portfolio securities
"covering" the amount of a fund's obligation pursuant to an OTC option sold by
it (or the amount of assets equal to the formula price for the repurchase of the
option, if any, less the amount by which the option is in the money) are
illiquid, and are subject to a fund's limitation on investing no more than 15%
of its net assets in illiquid securities.

The Fund may also purchase and sell options on securities indices and
other financial indices. Options on securities indices and other financial
indices are similar to options on a security or other instrument except that,
rather than settling by physical delivery of the underlying instrument, they
settle by cash settlement, i.e., an option or an index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of the index upon which the option is based exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
(except if, in the case of an OTC option, physical delivery is specified). This
amount of cash is equal to the excess of the closing price of the index over the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount. The gain or loss on an option on an index depends
on price movements in the instruments making upon the market, market segment,
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities.

S-10

The Fund will write call options and put options only if they are
"covered." For example, a call option written by the Fund will require the Fund
to hold the securities subject to the call (or securities convertible into the
needed securities without additional consideration) or to segregate cash or
liquid assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by a fund on an index will require the Fund to own
portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.

OTC options entered into by the Fund and OCC issued and exchange listed
index options will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of cash or liquid
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by the Fund, or the in-the-money amount
plus any sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by the Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and the Fund will segregate an
amount of cash or liquid assets equal to the full value of the option. OTC
options settling with physical delivery, or with an election of either physical
delivery or cash settlement, will be treated the same as other options settling
with physical delivery.

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.

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. The ability of the Fund to utilize options
successfully will depend on Calamos' ability to predict pertinent market
investments, which cannot be assured.

S-11

The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms. 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.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty (as
described above under "Options on Securities, Indexes and Currencies") fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a fund or fails to make a cash settlement
payment due in accordance with the terms of that option, a fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, Calamos must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
The Fund will engage in OTC option transactions only with U.S. government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers" or broker/dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by Calamos.

The Fund may purchase and sell call options on securities indices and
currencies. All calls sold by the Fund must be "covered." Even though the Fund
will receive the option premium to help protect it against loss, a call sold by
the Fund exposes the Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or instrument and may require a fund to hold a security or instrument
which it might otherwise have sold. The Fund may purchase and sell put options
on securities indices and currencies. In selling put options, there is a risk
that the Fund may be required to buy the underlying security at a
disadvantageous price above the market price.

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

S-12

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.

--------
(1) A futures contract on an index is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.
Although the value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is made.

S-13

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

S-14

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.

The Fund has claimed an exclusion from registration as a commodity pool
under the Commodity Exchange Act ("CEA") and, therefore, the Fund and its
officers and trustees are not subject to the registration requirements of the
CEA. The Fund reserves the right to engage in transactions involving futures and
options thereon to the extent allowed by Commodity Future Trading Commission
("CFTC") regulations in effect from time to time and in accordance with the
Fund's policies.

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

S-15

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 of 1986, as amended (the "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

S-16

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.

INTEREST RATE TRANSACTIONS. In connection with the Fund's likely use of
leverage, the Fund, if market conditions are deemed favorable, likely will enter
into interest rate swap or cap transactions to attempt to protect itself from
increasing dividend or interest expenses on its leverage. Interest rate swaps
involve the Fund's agreement with the swap counterparty to pay a fixed rate
payment in exchange for the counterparty agreeing to pay the Fund a payment at a
variable rate that is expected to approximate the rate on any variable rate
payment obligation on the Fund's leverage. The payment obligations would be
based on the notional amount of the swap. The Fund may use an interest rate cap,
which would require it to pay a premium to the cap counterparty and would
entitle it, to the extent that a specified variable rate index exceeds a
predetermined fixed rate, to receive from the counterparty payment of the
difference based on the notional amount. The Fund would use interest rate swaps
or caps only with the intent to reduce or eliminate the risk that an increase in
short-term interest rates could have on common share net earnings as a result of
leverage.

The Fund will usually enter into swaps or caps on a net basis; that is,
the two payment streams will be netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. The Fund intends to
maintain in a segregated account with its custodian cash or liquid securities
having a value at least equal to the Fund's net payment obligations under any
swap transaction, marked-to-market daily.

The use of interest rate swaps and caps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. Depending on the state
of interest rates in general, the Fund's use of interest rate swaps or caps
could enhance or harm the overall performance on the common shares. To the
extent there is a decline in interest rates, the value of the interest rate swap
or cap could decline, and could result in a decline in the net asset value of
the common shares. In addition, if short-term interest rates are lower than the
Fund's fixed rate of payment on the interest rate swap, the swap will reduce
common share net earnings. If, on the other hand, short-term interest rates are
higher than the fixed rate of payment on the interest rate swap, the swap will
enhance common share net earnings. Buying interest rate caps could enhance the
performance of the common shares by providing a maximum leverage expense. Buying
interest rate caps could also decrease the net earnings of the common shares in
the event that the premium paid by the Fund to the counterparty exceeds the
additional amount the Fund would have been required to pay had it not entered
into the cap agreement. The Fund has no current intention of selling an interest
rate swap or cap.

Interest rate swaps and caps do not involve the delivery of securities
or other underlying assets or principal. Accordingly, the risk of loss with
respect to interest rate swaps is limited to the net amount of interest payments
that the Fund is contractually obligated to make. If the counterparty defaults,
the Fund would not be able to use the anticipated net receipts under the swap or
cap to offset the dividend or interest payments on the Fund's leverage.
Depending on whether the Fund would be entitled to receive net payments from the
counterparty on the swap or cap, which in turn would depend on the general state
of short-term interest rates at that point in time, such a default could
negatively impact the performance of the common shares.

Although this will not guarantee that the counterparty does not
default, the Fund will not enter into an interest rate swap or cap transaction
with any counter-party that Calamos believes does not have the financial
resources to honor its obligation under the interest rate swap or cap
transaction. Further, Calamos will continually monitor the financial stability
of a counterparty to an interest rate swap or cap transaction in an effort to
proactively protect the Fund's investments.

S-17

In addition, at the time the interest rate swap or cap transaction
reaches its scheduled termination date, there is a risk that the Fund would not
be able to obtain a replacement transaction or that the terms of the replacement
would not be as favorable as on the expiring transaction. If this occurs, it
could have a negative impact on the performance of the Fund's common shares.

The Fund may choose or be required to redeem some or all of the
preferred shares or prepay any borrowings. This redemption would likely result
in the Fund seeking to terminate early all or a portion of any swap or cap
transaction. Such early termination of a swap could result in termination
payment by or to the Fund. An early termination of a cap could result in a
termination payment to the Fund.

SWAPS, CAPS, FLOORS AND COLLARS. The Fund may enter into interest rate,
currency, index and other swaps and the purchase or sale of related caps, floors
and collars. The Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund will not sell interest rate
caps or floors where it does not own securities or other instruments providing
the income stream the Fund may be obligated to pay. Interest rate swaps involve
the exchange by the Fund with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for fixed
rate payments with respect to a notional amount of principal. A currency swap is
an agreement to exchange cash flows on a notional amount of two or more
currencies based on the relative value differential among them and an index swap
is an agreement to swap cash flows on a notional amount based on changes in the
values of the reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling such cap
to the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as the Fund will segregate
assets (or enter into offsetting positions) to cover its obligations under
swaps, Calamos and the Fund believe such obligations do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to its borrowing restrictions. The Fund will not enter into any swap,
cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from a NRSRO or is determined to be of equivalent credit quality by
Calamos. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid, however, some swaps may be considered illiquid. Caps, floors
and collars are more recent innovations for which standardized documentation has
not yet been fully developed and, accordingly, they are less liquid than swaps.

STRUCTURED NOTES. Structured notes, generally, are (other than
convertible structured notes described above) derivative debt securities, the
interest rate or principal of which is determined by an unrelated indicator.
Indexed securities include structured notes as well as securities other than
debt securities, the interest rate or principal of which is determined by an
unrelated indicator. Indexed securities may include a multiplier that multiplies
the indexed element by a specified factor and, therefore, the value of such
securities may be very volatile. To the extent a Fund invests in these
securities, however, Calamos analyzes these securities in its overall assessment
of the effective duration of the Fund's portfolio in an effort to monitor the
Fund's interest rate risk.

"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 up to 15% of its managed
assets in securities that, at the time of investment, are illiquid (determined
using the Commission's standard applicable to investment companies, i.e.,
securities that cannot be disposed of within 7 days in the ordinary course of
business at approximately the value at which the Fund has valued the
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. Calamos, under the supervision of the
Board of Trustees, will determine whether securities purchased under Rule 144A
are illiquid (that is, not readily marketable) and thus subject to the Fund's
limit on investing no more than 15% of its managed assets in illiquid
securities. Investments in Rule 144A Securities could have the effect of
increasing the amount of the Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase these Rule 144A
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' 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

S-18

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 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 DEFENSIVE 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.

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 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

S-19

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.

S-20

(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.

Currently 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, currently under the 1940
Act, 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.
Currently under the 1940 Act, the Fund is not permitted to incur indebtedness
unless immediately after such borrowing the Fund has 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, currently 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.

Currently under the 1940 Act, the Fund is not permitted to lend money
or property to any person, directly or indirectly, if such person controls or is
under common control with the Fund, except for a loan from the Fund to a company
which owns all of the outstanding securities of the Fund, except directors'
qualifying shares. Currently, under interpretative positions of the SEC, the
Fund may not have on loan at any given time securities representing more than
one-third of its total assets.

Currently under the 1940 Act, a "senior security" does not include any
promissory note or evidence of indebtedness where such loan is for temporary
purposes only and in an amount not exceeding 5% of the value of the total assets
of the issuer at the time the loan is made. A loan is presumed to be for
temporary purposes if it is repaid within sixty days and is not extended or
renewed.

S-21

Currently, the Fund would be deemed to "concentrate" in a particular
industry if it invested 25% or more of its total assets in that industry.
Currently under the 1940 Act, a "diversified company" means a management company
which meets the following requirements: at least 75% of the value of its total
assets is represented by cash and cash items (including receivables), government
securities, securities of other investment companies, and other securities for
the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of such
management company and not more than 10% of the outstanding voting securities of
such issuer.

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 38% 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 age, positions held with the Fund, term of office and length
of service and 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 serves as a Trustee of other
investment companies (11 U.S. registered investment portfolios) for which
Calamos serves as investment adviser (collectively, the "Calamos Funds"). The
address for all Interested Trustees and all officers of the Fund is 1111 East
Warrenville Road, Naperville, Illinois 60563-1493. The address of Mr. Hanauer
is 361 Forest Avenue, Suite 200, Laguna Beach, California 92651; Mr. Neal's is
309 Sterling Road, Kenilworth, Illinois 60043; Mr. Marsh's is 311 South Wacker
Drive, Suite 3000 Chicago, IL 60606-6677; and Mr. Rybak's is 12813 Misty Harbour
Lane, Palos Park, IL 60464.

S-22

POSITIONS TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE
NAME AND AGE AT HELD WITH AND LENGTH OF YEARS AND OTHER DIRECTORSHIPS HELD BY
________ __, 2004 THE FUND SERVICE THE TRUSTEE
------------------------ ------------- ------------------- ------------------------------------------

INTERESTED TRUSTEES:

*John P. Calamos (__) Trustee and Trustee since President and CEO, Calamos Holdings, Inc.,
President _______ 2003. Term Calamos and Calamos Financial Services,
expires in 200_. Inc. ("CFS").

*Nick P. Calamos (__) Trustee Trustee since Senior Executive Vice President, Calamos
_______ 2003. Term Holdings, Inc., Calamos and CFS.
expires in 200_.
INDEPENDENT TRUSTEES:

Joe F. Hanauer (__) Trustee Trustee since Director, MAF Bancorp (banking); Director,
_______ 2003. Term Homestore.com, Inc., (Internet provider of
expires in 200_. real estate information and products);
Director, Combined Investments, L.P.
(investment management).

+Weston W. Marsh (__) Trustee Trustee since Partner, Freeborn & Peters (law firm).
_______ 2003. Term
expires in 200_.

John E. Neal (__) Trustee Trustee since Managing Director, Bank One Capital Markets
_______ 2003. Term (investment banking) (since 2000);
expires in 200_. Executive Vice President and Head of Real
Estate Department, Bank One (1998-2000);
Director, the Brickman Group, Ltd.

William R. Rybak (__) Trustee Trustee since Retired Private Investor; Executive Vice
_______ 2003. Term President and CFO, Van Kampen Investments,
expires in 200_. Inc. (investment manager) prior thereto;
Director, Howe Barnes Investments; Director,
PrivateBancorp.

--------
* John P. Calamos and Nick P. Calamos are trustees who are "interested persons"
of the Fund as defined in the Investment Company Act of 1940 because of their
position with Calamos.

+ 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 Fund, the Fund does not believe that Mr. Marsh is
an "interested person" of Calamos. In addition, Mr. Marsh's law firm has
performed work for a number of underwriters and may be deemed to be an
interested person for as long as those underwriters serve as principal
underwriters to the Fund.

S-23

FUND OFFICERS:

Rhowena Blank (__) Treasurer Since December 15, 2003. Vice President-Operations, Calamos (since
Serves at the 1999); Vice President, CFS (since 2000);
discretion of the Director of Operations, Christian Brothers
Board. Investment Services (1998-1999); and Audit
Manager, Ernst & Young, LP (1994-1998).

Patrick H. Dudasik (__) Vice President Since December 15, 2003. Executive Vice President, Chief Financial
Serves at the and Administrative Officer and Treasurer of
discretion of the Calamos Holdings, Inc., Calamos and CFS
Board. (since 2001); Chief Financial Officer,
David Gomez and Associates, Inc. (executive
search firm) (1998-2001); and Chief
Financial Officer, Scudder Kemper
Investments, Inc., prior thereto.

James S. Hamman, Jr. (__) Secretary Since December 15, 2003. Executive Vice President and General
Serves at the Counsel, Calamos Holdings, Inc., Calamos
discretion of the and CFS (since 1998); Vice President and
Board. Associate Counsel, Scudder Kemper
Investments, Inc., prior thereto.

Jeff Lotito (__) Assistant Since December 15, 2003. Operations Supervisor, Calamos (since
Treasurer Serves at the 2000); Manager-Fund Administration, Van
discretion of the Kampen Investments, Inc. (investment
Board. management) (1999-2000);
Supervisor-Corporate Accounting,
Stein Roe and Farnham
(investment manager)(1998-1999).

Ian J. McPheron (__) Assistant Since December 15, 2003. Associate Counsel and Director of
Secretary Serves at the Compliance of Calamos and CFS (since 2002);
discretion of the Associate, Gardner, Carton & Douglas (law
Board. firm) (2002); Vice President, Associate
General Counsel and Assistant Secretary,
Van Kampen Investments, Inc. (2000-2002);
Associate, Wildman, Harrold, Allen & Dixon
(law firm) (1997-2000).

The Fund's Board of Trustees consists of six 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 John P. Calamos, Weston W. Marsh and William
Rybak expire at the first annual meeting following this public offering, the
terms of Joe F. Hanauer and John E. Neal expire at the second annual meeting,
and the term of Nick P. Calamos expires 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. Each officer serves until
his or her successor is chosen and qualified or until his or her resignation or
removal by the Board of Trustees.

COMMITTEES OF THE BOARD OF TRUSTEES. The Funds Board of Trustees
currently has three standing committees:

S-24

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. Hanauer, Neal, and Rybak, each a
non-interested Trustee, serve on the Audit Committee. The Audit Committee
approves the selection of the independent auditors to the Trustees, approves
services to be rendered by the auditors, monitors the auditors' performance,
reviews the results of the Fund's audit, determines whether to recommend to the
Board that the Fund's audited financial statements be included in the Fund's
annual report and responds to other matters deemed appropriate by the Board of
Trustees.

Governance Committee. Messrs. Hanauer, Neal, and Rybak, each a
non-interested Trustee, 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 make 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.

In addition to the above committees, there is a pricing committee
comprised of officers of the Fund and employees of Calamos. 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
Fund Complex as a group. Compensation from the Fund is for the current calendar
year and is estimated. Total compensation from the Calamos Fund Complex as a
group is for the calendar year ended December 31, 2003.

TOTAL COMPENSATION FROM
ESTIMATED AGGREGATE CALAMOS FUND
NAME OF TRUSTEE COMPENSATION FROM FUND COMPLEX(1)*
----------------------------------- ------------------------ -------------------------

John P. Calamos..................... $ 0 $ 0
Nick P. Calamos..................... 0 0
Richard J. Dowen(2).................
Joe F. Hanauer......................
Weston W. Marsh.....................
John E. Neal........................
William Rybak.......................

------------------
(1) Includes fees that may have been deferred during the year pursuant to a
deferred compensation plan with Calamos Investment Trust. Deferred
amounts are treated as though such amounts have been invested and
reinvested in shares of one or more of the Calamos Funds selected by the
trustee. As of December 31, 2003, the values of Mr. Neal's deferred
compensation accounts was $______.
(2) Mr. Dowen resigned effective ___________________.
* The Calamos Fund Complex consists of five investment companies and each
applicable series thereunder including the Fund, Calamos Investment
Trust, Calamos Advisors Trust, Calamos Convertible Opportunities and
Income Fund and Calamos Convertible and High Income Fund.

S-25

The Fund has adopted a deferred compensation plan (the "Plan"). Under
the Plan, a Trustee who is not an "interested person" of Calamos and who has
elected to participate in the Plan ("participating Trustees") may defer receipt
of all or a portion of his compensation from Fund in order to defer payment of
income taxes or for other reasons. The deferred compensation payable to the
participating Trustee is credited to Trustee's deferral account as of the
business day such compensation would have been paid to the Trustee. The value of
a Trustee's deferred compensation account at any time is equal to what would be
the value if the amounts credited to the account had instead been invested in
shares of one or more of the portfolios of Calamos Investment Trust as
designated by the Trustee. Thus, the value of the account increases with
contributions to the account or with increases in the value of the measuring
shares, and the value of the account decreases with withdrawals from the account
or with declines in the value of the measuring shares. If a participating
trustee retires, the Trustee may elect to receive payments under the plan in a
lump sum or in equal installments over a period of five years. If a
participating Trustee dies, any amount payable under the Plan will be paid to
the Trustee's beneficiaries.

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 Fund Complex 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, 2003. 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 Fund Complex. Beneficial ownership is
determined in accordance with the rules of the SEC.

AGGREGATE DOLLAR RANGE
OF EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES IN THE
NAME OF TRUSTEE SECURITIES IN THE FUND CALAMOS FUND COMPLEX
------------------------------------ ------------------------- -----------------------------

INTERESTED TRUSTEES:
John P. Calamos..................... None
Nick P. Calamos..................... None
Weston W. Marsh..................... None

NON-INTERESTED TRUSTEES:
Joe F. Hanauer...................... None
John E. Neal........................ None
William Rybak....................... None

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 transactions may not be made in certain
securities, and requires the submission 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.

S-26

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 and
Form N-CSR; (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 1.00% of
managed assets. Because the fees paid to Calamos are determined on the basis of
the Fund's managed assets, Calamos' interest in determining whether to leverage
the Fund may differ from the interests of the Fund.

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;

S-27

(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, 200_. 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 is
required to be approved before it is entered into, and may be continued annually
beyond its initial term both by the Board of Trustees and by 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 reviewed materials furnished by Calamos, including information
regarding Calamos, its affiliates and their personnel, operations and financial
condition. The Independent Trustees discussed with representatives of Calamos
the Fund's operations and Calamos' ability to provide advisory and other
services to the Fund. The Independent Trustees also reviewed, among other
things:

o the investment performance of other Calamos funds with similar
investment strategies;

o the proposed fees to be charged by Calamos for investment
management services;

o the Fund's projected total operating expenses;

o the investment performance, fees and total expenses of
investment companies with similar objectives and strategies
managed by other investment advisers; and

o the experience of the investment advisory and other personnel
providing services to the Fund and the historical quality of
the services provided by Calamos.

S-28

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.

FUND ACCOUNTANT. Under the terms of a fund accounting servicing
agreement ("Fund Accounting Servicing Agreement"),___________________ provides
certain administration and accounting services, including but not limited to,
fund accounting and financial accounting services to the Fund and to the Calamos
Convertible and High Income Fund, Calamos Investment Trust and Calamos Advisors
Trust (the Fund, Calamos Convertible and High Income Fund, Calamos Investment
Trust and Calamos Advisors Trust are collectively referred to as the "Calamos
Funds"). For the services rendered to the Calamos Funds, ____ receives fees
based on the combined managed assets of the Calamos Funds ("Combined Assets").
Each fund of the Calamos Funds pays their pro-rata share of the fees payable to
USB described below based on relative managed assets of each fund.

Calamos will provide the following financial accounting services to the
Calamos Funds, rather than ____: management of expenses and expense payment
processing; monitor the calculation of expense accrual amounts for any fund and
make any necessary modifications; coordinate any expense reimbursement
calculations and payment; calculate yields on the funds in accordance with rules
and regulations of the SEC; calculate net investment income dividends and
capital gains distributions; calculate track and report tax adjustments on all
assets of each fund, including but not limited to contingent debt and preferred
trust obligations; prepare excise tax and fiscal year distributions schedules;
prepare tax information required for financial statement footnotes; prepare
state and federal income tax returns; prepare specialized calculations of
amortization on convertible securities; prepare year-end dividend disclosure
information; monitor trustee deferred compensation plan accruals and valuations;
and prepare Form 1099 information statements for Board members and service
providers. For providing those financial accounting services, will receive a fee
payable monthly at the annual rate of 0.0175% on the first $1 billion of
Combined Assets; 0.0150% on the next $1 billion of Combined Assets; and 0.0110%
on Combined Assets above $2 billion ("proposed financial accounting service
fee"). Each fund of the Calamos Funds will pay its pro-rata share of the
proposed financial accounting service fee payable to Calamos based on relative
managed assets of each fund.

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

S-29

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' 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

S-30

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.

S-31

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
hereof, 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 BEFORE MAKING AN INVESTMENT IN THE FUND TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES TO THEM OF INVESTING IN THE FUND, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES AS WELL AS 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 Internal Revenue Code
of 1986, as amended (the "Code") so that it will not pay U.S. federal income tax
on income and capital gains distributed to shareholders. 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 total 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.

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 taxable income or "net capital gain" (i.e.,
the excess of net long-term capital gains

S-32

over net short-term capital losses), it will be subject to U.S. federal income
tax at regular corporate rates (currently at a maximum rate of 35%) on the
amount retained. The Fund intends to distribute at least annually, all or
substantially all of its investment company taxable income, net tax-exempt
interest, and net capital gain. 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 calendar year if it fails to meet certain
distribution requirements with respect to such calendar year. The Fund intends
to make distributions in a timely manner and accordingly does not expect to be
subject to this excise tax.

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 such event, the Fund's distributions, to the extent derived from the
Fund's current or accumulated earnings and profits, would generally constitute
ordinary dividends, which would be eligible for the dividends received deduction
available to corporate shareholders under Section 243 of the Code, and non
corporate shareholders of the Fund generally would be able to treat such
distributions as "qualified dividend income" under Section 1(h) (11) of the Code
which is generally eligible for reduced rates of federal income taxation in
taxable years beginning on or before December 31, 2008.

The Fund expects to declare the initial monthly dividend on the common
shares within approximately 60 days of the completion of this offering and to
pay that initial monthly dividend approximately 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 taxes.

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. Distributions of 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 generally taxable as ordinary income to the extent of the Fund's
current and accumulated earnings and profits. Dividends derived from "qualified
dividend income" (i.e., generally, dividends paid by domestic corporations and
certain foreign corporations to non corporate investors), if any, will be
subject to tax at rates equivalent to long-term capital gain provided certain
holding period and other requirements are satisfied. Distributions of net
capital gain, 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. A distribution of an amount in excess of the Fund's
current and accumulated earnings and profits, if any, will be treated by a
shareholder as a tax-free return of capital which is applied against and reduces
the shareholder's basis in his or her shares. To the extent that the amount of
any such distribution exceeds the shareholder's basis in his or her shares, the
excess will be treated by the shareholder as gain from the sale or exchange of
shares. The U.S. federal income tax status of all distributions will be
designated by the Fund and reported to the shareholders annually.

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.

S-33

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.

Any dividend declared by the Fund in October, November or December with
a record date in such a month and paid during the following January will be
treated for U.S. federal income tax purposes as paid by the Fund and 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 gain and loss to be treated as ordinary income
and loss and may affect the amount, timing and character of distributions to
shareholders.

If the Fund acquires any equity interest (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 taxes.

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 could
potentially limit or eliminate the Fund's ability to make distributions on its
common

S-34

shares until the asset coverage is restored. These limitations could prevent the
Fund from distributing at least 90% of its investment company taxable income as
is required under the Code and therefore might jeopardize the Fund's
qualification for the reduced rates of corporate tax applicable to regulated
investment companies and/or might subject the Fund to the nondeductible 4%
federal 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 regarding
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 a shareholder acquires 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.

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

S-35

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 may qualify for either the dividends
received deduction available to corporate shareholders, or treatment as
"qualified dividend income," available to non corporate shareholders, subject to
certain holding period and other requirements, but only to the extent the Fund
earned dividend income from stock investments in U.S. domestic corporations and
certain qualified foreign corporations.

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 (e.g., dividends qualifying for the dividends
received deduction, "qualified dividend income," ordinary income and net capital
gains). Consequently, if both common shares and preferred shares are
outstanding, the Fund intends to designate distributions made to each class of
particular types of income in accordance with each class' proportionate shares
of such income. Thus, the Fund will designate dividends qualifying for the
corporate dividends-received deduction, "qualified dividend income," ordinary
income 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
dividends 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 REIT'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,"
28% of reportable payments, including dividends, capital gain distributions and
the proceeds of sales or other dispositions of

S-36

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.

Under recently promulgated Treasury regulations, if a shareholder
recognizes a loss with respect to shares of $2 million or more in a single
taxable year (or $4 million or more in any combination of taxable years) for an
individual shareholder, S corporation or trust or $10 million or more in a
single taxable year (or $20 million or more in any combination of years) for a
shareholder who is a C corporation, such shareholder may be required to file
with the IRS a disclosure statement on Form 8886. Direct shareholders of
portfolio securities are generally excepted from this reporting requirement, but
under current guidance, shareholders of a regulated investment company are not
excepted. Future guidance may extend the current exception from this reporting
requirement to shareholders of most or all regulated investment companies. The
fact that a loss is reportable under these regulations does not affect the legal
determination of whether the taxpayer's treatment of the loss is proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their individual circumstances.

The description of certain federal income 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,
trusts or estates). 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 provided a valid and effective IRS Form W-8BEN is on
file with 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 BEFORE MAKING AN INVESTMENT IN THE FUND.

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

S-37

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 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.

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 ________ __, 2004 appearing
in this statement of additional information have been audited by Deloitte &
Touche LLP 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

S-38

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.

S-39

APPENDIX A--DESCRIPTION OF RATINGS(1)

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.

---------------------
(1) The ratings indicated herein are believed to be the most recent ratings
available at the date of this prospectus for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so, and the ratings indicated do not necessarily represent ratings which will be
given to these securities on the date of the fund's fiscal year-end.

A-1

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.

A-2

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:

o 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;

o Nature of and provisions of the obligation;

o 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.

A-3

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

A-4

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.

A-5

PART C -- OTHER INFORMATION

ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS

1. Financial Statements:

The Registrant's [statement of assets and liabilities (balance sheet)]
dated _________ __, 2004, notes to that financial statement and report of
independent public accountants thereon will be filed with a 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 Merger Agreement. (**)
k. Form of Stock Transfer Agency 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.1 Code of Ethics. (**)

(*) 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.

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....................................... $ *
New York Stock Exchange listing fee..................... *
Printing (other than certificates)...................... *
Engraving and printing certificates..................... *
Accounting fees and expenses............................ *
Legal fees and expenses................................. *
NASD fee................................................ *
Miscellaneous........................................... *
-----------
Total................................................ $ *
===========
-------------
* To be completed by amendment.

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

None.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

As of ____________ __, 2004, the number or record holders of each class
of securities of the Registrant was

TITLE OF CLASS NUMBER OF RECORD HOLDERS
--------------------------------- ------------------------

Common Shares (no par value)............. --

ITEM 29. INDEMNIFICATION

The Registrant's Agreement and Declaration of Trust (the
"Declaration"), dated December 30, 2003, 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 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.

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 or at the offices of the transfer agent, 111 8th Avenue, New
York, New York 10011-5201.

ITEM 32. MANAGEMENT SERVICES

Not applicable.

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 Registrant's statement of
additional information.

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 this City of Naperville and State of Illinois, on the 7th day of
January, 2004.

Calamos Strategic Total Return 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 January 7, 2004
------------------------------------ Executive Officer)
John P. Calamos

/s/ Patrick Dudasik Vice President (Principal Financial and January 7, 2004
------------------------------------ Accounting Officer)
Patrick Dudasik

/s/ Nick P. Calamos Trustee January 7, 2004
------------------------------------
Nick P. Calamos

/s/ Joe E. Hanauer Trustee January 7, 2004
------------------------------------
Joe E. Hanauer

/s/ John E. Neal Trustee January 7, 2004
------------------------------------
John E. Neal

/s/ Weston W. Marsh Trustee January 7, 2004
------------------------------------
Weston W. Marsh

/s/ William Rybak Trustee January 7, 2004
------------------------------------
William Rybak

EXHIBIT INDEX

EXHIBIT DOCUMENT

a.1. Agreement and Declaration of Trust

a.2. Certificate of Trust

b. By-laws