If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment plans, check the following box ¨.
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 reinvestment plan, check the
following box x.
If this Form is a registration statement pursuant
to General Instruction A.2 or a post-effective amendment thereto, check the following box x.
If this Form is a registration statement pursuant to
General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box ¨.
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant
to Rule 413(b) under the Securities Act, check the following box ¨.
It is proposed that this filing will become effective (check
appropriate box):
registration statement number of the earlier effective registration
statement for the same offering is .
number of the earlier effective registration statement for
the same offering is .
number of the earlier effective registration statement for
the same offering is .
SUP-5
The following table provides information about our outstanding securities as of [ ], 2020:
Title of Class
|
|
Amount
Authorized
|
|
Amount
Held by the
Fund or for
its Account
|
|
Amount
Outstanding
|
|
Common Shares
|
|
|
Unlimited
|
|
|
|
0
|
|
|
|
|
|
|
MRPS-Series A
|
|
|
1,330,000
|
|
|
|
0
|
|
|
|
1,330,000
|
|
|
MRPS-Series B
|
|
|
1,330,000
|
|
|
|
0
|
|
|
|
1,330,000
|
|
|
MRPS-Series C
|
|
|
1,340,000
|
|
|
|
0
|
|
|
|
1,340,000
|
|
|
The following table sets forth information regarding the Fund's outstanding bank loans and MRP Shares as of the end of each of the Fund's last ten fiscal years, as applicable. The information in the table shown below comes from the Fund's financial statements for the fiscal year ended October 31, 2020, and each of the prior nine years then ended, all of which have been audited by [ ], the Fund's independent registered public accounting firm.
Fiscal Year Ended
|
|
Total Amount
Outstanding
|
|
Asset
Coverage(a)
|
|
Liquidating
Preference per
Preferred Share(c)
|
|
Average
Market
Value per
Preferred Share
|
|
Type of
Senior
Security
|
|
October 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
(a) Calculated by subtracting the Fund's total liabilities (not including notes payable and MRPS) from the Fund's total assets and dividing this by the amount of notes payable outstanding, and by multiplying the result by 1,000.
(b) Calculated by subtracting the Fund's total liabilities (not including MRPS) from the Fund's total assets and dividing this by the number of MRPS outstanding, and by multiplying the result by 25.
(c) "Liquidating Preference per Preferred Share" means the amount to which a holder of preferred shares would be entitled upon involuntary liquidation of the Fund in preference to common shareholders, expressed as a dollar amount per preferred share.
(d) The MRPS are not listed on any exchange or automated quotation system. The MRPS are considered debt of the issuer; and the liquidation preference approximates fair value.
USE OF PROCEEDS
Sales of our common shares, if any, under this prospectus supplement and the accompanying prospectus may be made in negotiated transactions or transactions that are deemed to be "at the market" as defined in Rule 415 under the 1933 Act, including sales made directly on Nasdaq or sales made to or through a market maker other than on an exchange. There is no guarantee that there will be any sales of our common shares pursuant to this prospectus supplement and the accompanying prospectus. Actual sales, if any, of our common shares under this prospectus supplement and the accompanying prospectus may be less than as set forth below in
SUP-6
this paragraph. In addition, the price per share of any such sale may be greater or less than the price set forth below in this paragraph, depending on the market price of our common shares at the time of any such sale. As a result, the actual net proceeds we receive may be more or less than the amount of net proceeds estimated in this prospectus supplement. Assuming the sale of the remaining [ ] common shares offered under this prospectus supplement and the accompanying prospectus at the last reported sale price of $[ ] per share for our common shares on Nasdaq as of [ ], we estimate that the net proceeds of this offering will be approximately $[ ] million after deducting the estimated sales load and our estimated offering expenses.
Unless otherwise specified in this prospectus supplement, we currently intend to use the net proceeds from the sale of our common shares in this offering primarily to invest in accordance with our investment objective and policies (as described under "Investment Objective and Principal Investment Strategies," beginning on page [ ] of the accompanying prospectus) within approximately three months of receipt of such proceeds. We may also use proceeds from the sale of our securities to (i) retire all or a portion of any short-term debt we incur in pursuit of our investment objective and policies; (ii) to redeem any outstanding senior securities; and (iii) for working capital purposes, including the payment of interest and operating expenses, although there is currently no intent to issue securities primarily for these purposes. Pending such use of proceeds, we anticipate that we will invest the proceeds in securities issued by the U.S. government or its agencies or instrumentalities or in high quality, short-term or long-term debt obligations. A delay in the anticipated use of proceeds could lower returns, reduce our distribution to common shareholders and reduce the amount of cash available to make dividend and interest payments on preferred shares and debt securities, respectively.
PLAN OF DISTRIBUTION
[To be updated at the time of the offering]
LEGAL MATTERS
[ ] "[ ]", is counsel to the Fund. [ ] will pass on the legality of the issuance of the common shares to be offered hereby. If certain legal matters in connection with an offering of securities are passed upon by counsel for the underwriters of such offering, such matters will be passed upon by counsel to be identified in a prospectus supplement. [ ] and counsel to the underwriters may rely on the opinion of [ ] with respect to certain matters of Delaware law.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the 1940 Act and are required to file reports, including annual and semi-annual reports, proxy statements and other information with the Commission. These documents are available on the Commission's website at www.sec.gov.
This prospectus supplement and the accompanying prospectus do not contain all of the information in our registration statement, including amendments, exhibits, and schedules. Statements in this prospectus supplement and the accompanying prospectus about the contents of any contract or other document are not necessarily complete and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by this reference.
Additional information about us can be found in our registration statement (including amendments, exhibits, and schedules) on Form N-2 filed with the Commission. The Commission maintains a website (http://www.sec.gov) that contains our registration statement, other documents incorporated by reference, and other information we have filed electronically with the Commission, including proxy statements and reports filed under the Exchange Act.
SUP-7
[ ] Common Shares
Calamos Global Total Return Fund
PROSPECTUS SUPPLEMENT
[Date], 2021
[Until [Date] (25 days after the date of this prospectus supplement), 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.]
SUBJECT TO COMPLETION, DATED [ ]
The information in this prospectus supplement, which relates to an effective Registration Statement under the Securities Act of 1933, is not complete and may be changed. We may not sell these securities until we deliver a final prospectus supplement. This prospectus supplement and the attached prospectus do not constitute an offer to sell these securities or a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Form of Prospectus Supplement
(To Prospectus dated [ ])
$
Calamos Global Total Return Fund
Preferred Shares
Shares, Series
Liquidation Preference $ per share
Calamos Global Total Return Fund (the "Fund," "we", "us" or "our") is a diversified, closed-end management investment company. Our investment objective is to provide total return through a combination of capital appreciation and current income.
We are offering an additional series ("Series ") of our series preferred shares (referred to as "Preferred Shares" or "Series Preferred Shares") in this prospectus supplement. This prospectus supplement is not complete and should be read in conjunction with our prospectus dated , 20 (the "prospectus"), which accompanies this prospectus supplement. This prospectus supplement does not include all information that you should consider before purchasing any Preferred Shares. You should read this prospectus supplement and our prospectus prior to purchasing any Preferred Shares.
The Series Preferred Shares offered in this prospectus supplement, together with the previously issued and currently outstanding Preferred Shares, are collectively referred to as "Preferred Shares." Individual series of Preferred Shares are referred to as a "series." Except as otherwise described in this prospectus supplement, the terms of this series and all other series are the same.
The Preferred Shares have a liquidation preference of $ per share, plus any accumulated, unpaid dividends. The Preferred Shares also have priority over the Fund's common shares as to distribution of assets as described in this prospectus supplement.
Investing in Preferred Shares involves certain risks, including the risks associated with the Fund's use of leverage. See "Risk Factors" beginning on page xx of the prospectus and beginning on page [ ] of this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically by calling [800.582.6959]. If you own these shares through a financial intermediary, you may contact your financial intermediary.
You may elect to receive all future reports in paper free of charge. You can inform the Fund that you wish to continue receiving paper copies of your shareholder reports by calling [800.582.6959]. If you own these shares
through a financial intermediary, you may contact your financial intermediary or follow instructions included with this disclosure to elect to continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with the fund complex or your financial intermediary.
|
|
Per Share
|
|
Total
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
Sales load
|
|
$
|
|
|
|
$
|
|
|
|
Proceeds to us (before expenses)(1)
|
|
$
|
|
|
|
$
|
|
|
|
(1) Does not include offering expenses payable to us estimated to be $ .
The underwriters expect to deliver the Series Preferred Shares in book-entry form, through the facilities of The Depository Trust Company, to broker-dealers on or about , 20 .
[UNDERWRITER(S)]
, 20
This prospectus supplement has been filed with the Securities and Exchange Commission (the "Commission"). Additional copies of this prospectus supplement, the prospectus, the statement of additional information dated , as supplemented from time to time, or the Fund's annual or semi-annual reports are available by calling (800) 582-6959 or by writing to the Fund, or you may obtain copies (and other information regarding us) from the SEC's web site (http://www.sec.gov). The Fund's annual and semi-annual reports are also available on the Fund's website at www.calamos.com, which provides a link to the Commission's website where the Fund's statement of additional information may be obtained.
This prospectus supplement, which describes the specific terms of this offering, also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference in the prospectus. The prospectus gives more general information, some of which may not apply to this offering.
If the description of this offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information contained in this prospectus supplement; provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date, the statement in the document having the later date modifies or supersedes the earlier statement.
The Preferred Shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
TABLE OF CONTENTS
Prospectus Supplement
|
|
Page
|
|
Prospectus Supplement Summary
|
|
|
PREF-1
|
|
|
Use of Proceeds
|
|
|
PREF-3
|
|
|
Capitalization
|
|
|
PREF-3
|
|
|
Asset Coverage Requirements
|
|
|
PREF-3
|
|
|
Description of Preferred Shares
|
|
|
PREF-4
|
|
|
Underwriting
|
|
|
PREF-6
|
|
|
Where You Can Find More Information
|
|
|
PREF-6
|
|
|
Legal Matters
|
|
|
PREF-7
|
|
|
[Unaudited] Financial Statements as of , 20
|
|
|
PREF-7
|
|
|
Prospectus
|
|
Prospectus Summary
|
|
|
1
|
|
|
Summary of Fund Expenses
|
|
|
24
|
|
|
Financial Highlights
|
|
|
26
|
|
|
Market and Net Asset Value Information
|
|
|
28
|
|
|
Use of Proceeds
|
|
|
28
|
|
|
The Fund
|
|
|
29
|
|
|
Investment Objective and Principal Investment Strategies
|
|
|
29
|
|
|
Leverage
|
|
|
38
|
|
|
Interest Rate Transactions
|
|
|
44
|
|
|
Forward Currency Exchange Transactions
|
|
|
45
|
|
|
Risk Factors
|
|
|
46
|
|
|
Management of the Fund
|
|
|
63
|
|
|
Closed-End Fund Structure
|
|
|
66
|
|
|
Certain Federal Income Tax Matters
|
|
|
67
|
|
|
Net Asset Value
|
|
|
75
|
|
|
Dividends and Distributions on Common Shares; Automatic Dividend Reinvestment Plan
|
|
|
77
|
|
|
Description of Securities
|
|
|
82
|
|
|
Rating Agency Guidelines
|
|
|
88
|
|
|
Certain Provisions of the Agreement and Declaration of Trust and By-Laws, Including Antitakeover
Provisions
|
|
|
89
|
|
|
Plan of Distribution
|
|
|
92
|
|
|
Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar
|
|
|
94
|
|
|
Legal Matters
|
|
|
95
|
|
|
Experts
|
|
|
95
|
|
|
Incorporation by Reference
|
|
|
95
|
|
|
You should rely only on the information contained in or incorporated by reference in this prospectus supplement. Neither we nor the underwriters have authorized anyone to provide you with different or inconsistent 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 Series Preferred Shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this prospectus supplement is accurate only as of the date of this prospectus supplement, and that our business, financial condition and prospects may have changed since this date. We will amend or supplement this prospectus supplement to reflect material changes to the information contained in this prospectus supplement to the extent required by applicable law.
i
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the statement of additional information contain "forward-looking statements." Forward-looking statements can be identified by the words "may," "will," "intend," "expect," "estimate," "continue," "plan," "anticipate," and similar terms and the negative of such terms. Such forward-looking statements may be contained in this prospectus supplement, as well as in the accompanying prospectus. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect our actual results are the performance of the portfolio of securities we hold, the conditions in the U.S. and international financial, petroleum and other markets, the price at which our shares will trade in the public markets and other factors discussed in our periodic filings with the Commission.
Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the "Risk Factors" section of the prospectus accompanying this prospectus supplement. All forward-looking statements contained or incorporated by reference in this prospectus supplement or the accompanying prospectus are made as of the date of this prospectus supplement or the accompanying prospectus, as the case may be. Except for our ongoing obligations under the federal securities laws, we do not intend, and we undertake no obligation, to update any forward-looking statement. The forward-looking statements contained in this prospectus supplement are excluded from the safe harbor protection provided by section 27A of the Securities Act of 1933, as amended.
Currently known risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors described in the "Risk Factors" section of the prospectus accompanying this prospectus supplement. We urge you to review carefully that section for a more detailed discussion of the risks of an investment in the Preferred Shares. The forward-looking statements contained in this prospectus supplement, the accompanying prospectus and the statement of additional information are excluded from the safe harbor protection provided by Section 27A of the 1933 Act.
ii
PROSPECTUS SUPPLEMENT SUMMARY
This summary contains basic information about us but does not contain all of the information that is important to your investment decision. You should read this summary together with the more detailed information contained elsewhere in this prospectus supplement and accompanying prospectus and in the statement of additional information, especially the information set forth under the heading "Risk Factors" beginning on page 31 of the accompanying prospectus and on page [ ] of this prospectus supplement.
The Fund
Calamos Global Total Return Fund is a diversified, closed-end management investment company. Throughout the prospectus, we refer to Calamos Global Total Return Fund as the "Fund" or as "we," "us," or "our." The Fund's common shares are traded on the NASDAQ Global Select Market ("Nasdaq") under the symbol "CGO." As of [ ], the Fund had [ ] common shares outstanding and net assets of $[ ]. The Fund's principal offices are located at 2020 Calamos Court, Naperville, Illinois 60563. We have a fiscal year ending October 31st.
Our investment objective is to provide total return through a combination of capital appreciation and current income.
There can be no assurance that we will achieve our investment objective. See "The Fund" in the accompanying prospectus.
We commenced operations in October 2005 following our initial public offering.
Investment Adviser
Calamos Advisors LLC ("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 [ ], Calamos managed approximately $xxx billion in assets of individuals and institutions. Calamos is a wholly owned subsidiary of Calamos Investments LLC ("CILLC") and an indirect subsidiary of Calamos Asset Management, Inc.
The Fund pays Calamos an annual management fee, payable monthly in arrears, for its investment management services equal to 1.00% of the Fund's average weekly managed assets. "Managed assets" means the total assets of the Fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). "Net assets" does not include any assets attributable to any leverage that may be outstanding, or other debt representing financial leverage. See "Management of the Fund" in the accompanying prospectus.
The principal business address of the Adviser is 2020 Calamos Court, Naperville, Illinois, 60563.
PREF-1
The Offering
Preferred Shares offered by the Fund
|
|
We are offering Series Preferred Shares, each at a purchase price of $ per share. The Series Preferred Shares are offered through .
|
|
Use of Proceeds
|
|
The Fund estimates the net proceeds of the offering of Preferred Shares, after payment of sales load and offering expenses, will be approximately $ .
|
|
|
|
The Fund will invest the net proceeds of any sales of securities in accordance with our investment objective and policies. Such investments may be delayed if suitable investments are unavailable at the time or for other reasons.
|
|
|
|
Pending such investment, we anticipate that we will invest the proceeds in securities issued by the U.S. government or its agencies or instrumentalities or in high quality, short-term or long-term debt obligations. We may also use proceeds from the sale of our securities to (i) retire all or a portion of any short-term debt we incur in pursuit of our investment objective and policies, (ii) redeem any outstanding senior securities, and (iii) for working capital purposes, including the payment of interest and operating expenses, although there is currently no intent to issue securities primarily for this purpose. A delay in the anticipated use of proceeds could lower returns, reduce our distribution to common shareholders and reduce the amount of cash available to make dividend and interest payments on preferred shares and debt securities, respectively. See "Investment Objective and Principal Investment Strategies" in the accompanying prospectus.
|
|
Risk Factors
|
|
See "Risk Factors" and other information included in the accompanying prospectus and in this prospectus supplement for a discussion of factors you should carefully consider before deciding to invest in the Preferred Shares.
|
|
PREF-2
USE OF PROCEEDS
The Fund estimates the net proceeds of the offering of Preferred Shares, after payment of sales load and offering expenses, will be approximately $ . Subject to the remainder of this section, we will invest the net proceeds of any sales of securities in accordance with our investment objective and policies. Such investments may be delayed if suitable investments are unavailable at the time or for other reasons. Pending such investment, we anticipate that we will invest the proceeds in securities issued by the U.S. government or its agencies or instrumentalities or in high quality, short-term or long-term debt obligations. We may also use proceeds from the sale of our securities to (i) retire all or a portion of any short-term debt we incur in pursuit of our investment objective and policies, (ii) redeem any outstanding senior securities, and (iii) for working capital purposes, including the payment of interest and operating expenses, although there is currently no intent to issue securities primarily for this purpose. A delay in the anticipated use of proceeds could lower returns, reduce our distribution to common shareholders and reduce the amount of cash available to make dividend and interest payments on preferred shares and debt securities, respectively. See "Investment Objective and Principal Investment Strategies" in the accompanying prospectus.
CAPITALIZATION
The following table sets forth the capitalization of the Fund as of , 20 , and as adjusted, to give effect to the issuance of all the Preferred Shares offered hereby (including estimated offering expenses and sales load of $ ). The sales load and offering expenses of the Preferred Shares will be effectively borne by common shareholders.
|
|
Actual
|
|
As Adjusted
Preferred Shares
|
|
Loan
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
Preferred Shares, no par value per share, $25,000 stated value per
share, at liquidation value; unlimited shares authorized (no shares
issued; and shares issued, respectively)*
|
|
|
|
|
|
|
|
|
|
Common shares, no par value per share, unlimited shares
authorized, shares outstanding*
|
|
|
|
|
|
|
|
|
|
Undistributed net investment income
|
|
|
|
|
|
|
|
|
|
Accumulated net realized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
Net Unrealized appreciation (depreciation) on investments
|
|
|
|
|
|
|
|
|
|
Net Assets
|
|
|
|
|
|
|
|
|
|
* None of these outstanding shares are held by or for the account of the Fund
ASSET COVERAGE REQUIREMENTS
The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more rating agencies that may issue ratings for the preferred shares or 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. The Fund may also be required to pledge its assets to the lenders in connection with certain types of borrowing. Calamos does not anticipate that these covenants or restrictions will adversely affect its ability to manage the Fund's portfolio in accordance with the Fund's investment objective and policies. Due to these covenants or restrictions, the Fund may be forced to liquidate investments at times and at prices that are not favorable to the Fund, or the Fund may be forced to forgo investments that Calamos otherwise views as favorable.
PREF-3
DESCRIPTION OF PREFERRED SHARES
The following is a brief description of the terms of the Preferred Shares. For the complete terms of the Preferred Shares, please refer to the detailed description of the Preferred Shares in the Statement of Preferences of Preferred Shares (the "Statement") attached as Appendix to the statement of additional information. Where appropriate, terms used in "Description of Preferred Shares" below will have the same meanings as those terms in the Statement.
General
The Fund's Agreement and Declaration of Trust authorizes the issuance of preferred shares, no par value per share, in one or more classes or series with rights as determined by the Board of Trustees without the approval of common shareholders. The Statement currently authorizes the issuance of Preferred Shares, Series . All Preferred Shares will have a liquidation preference of $ per share, plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared).
The Preferred Shares of each series will rank on parity with any other series of Preferred Shares and any other series of preferred shares of the Fund as to the payment of dividends and the distribution of assets upon liquidation. Each Preferred Share carries one vote on matters on which Preferred Shares can be voted. The Preferred Shares, when issued by the Fund and paid for pursuant to the terms of this prospectus supplement and the accompanying prospectus, will be fully paid and non-assessable and will have no preemptive, exchange or conversion rights. Any Preferred Shares repurchased or redeemed by the Fund will be classified as authorized and unissued Preferred Shares. The Board of Trustees may by resolution classify or reclassify any authorized and unissued Preferred Shares from time to time by setting or changing the preferences, rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares. The Preferred Shares will not be subject to any sinking fund, but will be subject to mandatory redemption under certain circumstances described below.
Dividends and Dividend Periods
The following is a general description of dividends and dividend periods for the Preferred Shares.
Dividend Periods. The dividend period for the Preferred Shares is and the dividend rate is % per annum.
Dividend Payment Dates. Dividends on the Preferred Shares will be payable, when, as and if declared by the Board of Trustees, out of legally available funds in accordance with the Agreement and Declaration of Trust, the Statement and applicable law.
Dividends on Preferred Shares will accumulate from the date of their original issue, which is , 20 .
Restrictions on Dividend, Redemption and Other Payments. Under the 1940 Act, the Fund may not (i) declare any dividend with respect to the Preferred Shares if, at the time of such declaration (and after giving effect thereto), asset coverage with respect to the Fund's senior securities representing indebtedness (as defined in the 1940 Act) would be less than 200% (or such other percentage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities representing indebtedness of a closed-end investment company as a condition of declaring dividends on its preferred shares) or (ii) declare any other distribution on the Preferred Shares or purchase or redeem Preferred Shares if at the time of the declaration (and after giving effect thereto), asset coverage with respect to the Fund's senior securities representing indebtedness would be less than 300% (or such other percentage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities representing indebtedness of a closed-end investment company as a condition of declaring distributions, purchases or redemptions of its shares of beneficial interest). "Senior securities representing indebtedness" generally means any bond, debenture, note or similar obligation or
PREF-4
instrument constituting a security (other than shares of beneficial interest) and evidencing indebtedness and could include the Fund's obligations under any Borrowings. The term "senior security" also does not include any promissory note or other evidence of indebtedness in any case where such a loan is for temporary purposes only and in an amount not exceeding 5% of the value of the total assets of the Fund at the time when the loan is made. A loan is presumed under the 1940 Act to be for temporary purposes if it is repaid within 60 days and is not extended or renewed; otherwise it is presumed not to be for temporary purposes. For purposes of determining whether the 200% and 300% asset coverage requirements described above apply in connection with dividends or distributions on or purchases or redemptions of Preferred Shares, such asset coverages may be calculated on the basis of values calculated as of a time within 48 hours (not including Sundays or holidays) next preceding the time of the applicable determination.
In addition, a declaration of a dividend or other distribution on, or purchase or redemption of, Preferred Shares may be prohibited (i) at any time when an event of default under any borrowings has occurred and is continuing; or (ii) if, after giving effect to such declaration, the Fund would not have eligible portfolio holdings with an aggregated discounted value at least equal to any asset coverage requirements associated with such borrowings; or (iii) the Fund has not redeemed the full amount of borrowings, if any, required to be redeemed by any provision for mandatory redemption.
Voting Rights
The Fund's common shares and Preferred Shares have equal voting rights of one vote per share and vote together as a single class. In elections of trustees, the holders of Preferred Shares, as a separate class, vote to elect two trustees. The Board of Trustees will determine to which class or classes the trustees elected by the holders of Preferred Shares will be assigned. The holders of the Preferred Shares shall only be entitled to elect the trustees so designated when their term shall have expired. Such trustees appointed by the holders of Preferred Shares will be allocated as evenly as possible among the classes of trustees.
So long as any of the Preferred Shares are outstanding, the Fund will not, without the affirmative vote of the holders of a majority of the outstanding Preferred Shares, take certain other actions as described in the Indenture.
The common shares and the Preferred Shares also will vote separately to the extent otherwise required under Delaware law or the 1940 Act as in effect from time to time. The class votes of holders of Preferred Shares described above will in each case be in addition to any separate vote of the requisite percentage of common shares and Preferred Shares, voting together as a single class, necessary to authorize the action in question.
For the purpose of any right of the holders of Preferred Shares to vote on any matter, whether the right is created by the Agreement and Declaration of Trust, by statute or otherwise, a holder of a Preferred Share is not entitled to vote and the Preferred Shares will not be deemed to be outstanding for the purpose of voting or determining the number of Preferred Shares required to constitute a quorum, if prior to or concurrently with a determination of the Preferred Shares entitled to vote or of Preferred Shares deemed outstanding for quorum purposes, as the case may be, a notice of redemption was given in respect of those Preferred Shares and sufficient deposit securities for the redemption of those Preferred Shares were deposited.
Redemption
Mandatory Redemption. Under certain circumstances, the Preferred Shares will be subject to mandatory redemption by the Fund out of funds legally available therefor in accordance with the Statement and applicable law.
Optional Redemption. Under certain circumstances, to the extent permitted under the 1940 Act and Delaware law, the Fund may have the option to redeem, in whole or in part, Preferred Shares.
PREF-5
Liquidation
Subject to the rights of holders of any series or class or classes of shares ranking on a parity with Preferred Shares with respect to the distribution of assets upon liquidation of the Fund, upon a liquidation, dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary, the holders of Preferred Shares then outstanding will be entitled to receive and to be paid out of the assets of the Fund available for distribution to its shareholders, after claims of creditors but before any payment or distribution is made on the common shares or any other shares of beneficial interest of the Fund ranking junior to the Preferred Shares, an amount equal to the liquidation preference with respect to such shares ($ per share), plus an amount equal to all unpaid dividends thereon. After the payment to the holders of Preferred Shares of the full preferential amounts provided for as described herein, the holders of Preferred Shares as such will have no right or claim to any of the remaining assets of the Fund.
If, upon any such liquidation, dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary, the assets of the Fund available for distribution among the holders of all outstanding Preferred Shares, including each series, shall be insufficient to permit the payment in full to such holders of the amounts to which they are entitled, then such available assets shall be distributed among the holders of all outstanding Preferred Shares, including each series, ratably in any such distribution of assets according to the respective amounts which would be payable on all such shares if all amounts thereon were paid in full. Unless and until payment in full has been made to the holders of all outstanding Preferred Shares, including each series, of the liquidation distributions to which they are entitled, no dividends or distributions will be made to holders of common shares or any shares of beneficial interest of the Fund ranking junior to the Preferred Shares as to liquidation.
UNDERWRITING
[To be provided at the time of an offering.]
WHERE YOU CAN FIND MORE INFORMATION
The Fund is subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act and is required to file reports, proxy statements and other information with the Securities and Exchange Commission. These documents are available on the Commission's website at www.sec.gov. Reports, proxy statements, and other information about the Fund can be inspected at the offices of the NASDAQ OMX Group Inc., 165 Broadway #4900, New York, NY 10006.
This prospectus supplement and the accompanying prospectus do not contain all of the information in the Fund's registration statement, including amendments, exhibits, and schedules. Statements in this prospectus supplement and the accompanying prospectus about the contents of any contract or other document are not necessarily complete and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by this reference.
Additional information about the Fund and Preferred Shares can be found in the Fund's registration statement (including amendments, exhibits, and schedules) on Form N-2 filed with the Commission. The Commission maintains a web site (http://www.sec.gov) that contains the Fund's registration statement, other documents incorporated by reference, and other information the Fund has filed electronically with the Commission, including proxy statements and reports filed under the Securities Exchange Act of 1934.
PREF-6
LEGAL MATTERS
, (" "), is counsel to the Fund. will pass on the legality of the securities to be offered hereby. If certain legal matters in connection with an offering of securities are passed upon by counsel for the underwriters of such offering, such matters will be passed upon by counsel to be identified in a prospectus supplement. and counsel to the underwriters may rely on the opinion of for certain matters of Delaware law.
[UNAUDITED] FINANCIAL STATEMENTS AS OF , 20
PREF-7
$
Calamos Global Total Return Fund
Preferred Shares
Shares, Series
PROSPECTUS SUPPLEMENT
, 20
[Underwriters]
SUBJECT TO COMPLETION, DATED [ ]
The information in this prospectus supplement, which relates to an effective Registration Statement under the Securities Act of 1933, is not complete and may be changed. We may not sell these securities until we deliver a final prospectus supplement. This prospectus supplement and the attached prospectus do not constitute an offer to sell these securities or a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Form of Prospectus Supplement
(To Prospectus dated [ ])
$
Calamos Global Total Return Fund
Notes ("Calamos Notes")
$ Series , Due , 20
$ Denominations
Calamos Global Total Return Fund (the "Fund," "we," "us" or "our") is a diversified, closed-end management investment company. Our investment objective is to provide total return through a combination of capital appreciation and current income.
We are offering an aggregate principal amount of $ Series Calamos Notes in this prospectus supplement. This prospectus supplement is not complete and should be read in conjunction with our prospectus dated , 20 (the "prospectus"), which accompanies this prospectus supplement. This prospectus supplement does not include all information that you should consider before purchasing any Calamos Notes. You should read this prospectus supplement and our prospectus prior to purchasing any Calamos Notes.
The notes offered in this prospectus supplement are referred to as "Calamos Notes." Individual series of Calamos Notes are referred to as a "series." Except as otherwise described in this prospectus supplement, the terms of this series and all other series are the same.
Investing in Calamos Notes involves certain risks, including the risks associated with the Fund's use of leverage. See "Risk Factors" beginning on page xx of the accompanying prospectus and on page [ ] of this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically by calling [800.582.6959]. If you own these shares through a financial intermediary, you may contact your financial intermediary.
You may elect to receive all future reports in paper free of charge. You can inform the Fund that you wish to continue receiving paper copies of your shareholder reports by calling [800.582.6959]. If you own these shares through a financial intermediary, you may contact your financial intermediary or follow instructions included with this disclosure to elect to continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with the fund complex or your financial intermediary.
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Per Share
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Total
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Public offering price
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$
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$
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Sales load
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$
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$
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Proceeds to us (before expenses)(1)
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$
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$
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(1) Does not include offering expenses payable to us estimated to be $ .
The underwriters expect to deliver the Calamos Notes in book-entry form, through the facilities of The Depository Trust Company, to broker-dealers on or about , 20 .
[UNDERWRITER(S)]
, 20
This prospectus supplement has been filed with the Securities and Exchange Commission (the "Commission"). Additional copies of this prospectus supplement, the prospectus, the statement of additional information dated , as supplemented from time to time, or the Fund's annual or semi-annual reports are available by calling (800) 582-6959 or by writing to the Fund, or you may obtain copies (and other information regarding us) from the Commission's web site (http://www.sec.gov). The Fund's annual and semi-annual reports are also available on the Fund's website at www.calamos.com, which provides a link to the Commission's website where the Fund's statement of additional information may be obtained.
This prospectus supplement, which describes the specific terms of this offering, also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference in the prospectus. The prospectus gives more general information, some of which may not apply to this offering.
If the description of this offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information contained in this prospectus supplement; provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date, the statement in the document having the later date modifies or supersedes the earlier statement.
The Calamos Notes do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
TABLE OF CONTENTS
Prospectus Supplement
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Page
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Prospectus Supplement Summary
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DEBT-1
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Use of Proceeds
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DEBT-3
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Capitalization
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DEBT-3
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Asset Coverage Requirements
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DEBT-3
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Description of Calamos Notes
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DEBT-4
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Underwriting
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DEBT-6
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Where You Can Find More Information
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DEBT-6
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Legal Matters
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DEBT-7
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[Unaudited] Financial Statements as of , 20
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DEBT-7
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Prospectus
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Prospectus Summary
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1
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Summary of Fund Expenses
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24
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Financial Highlights
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26
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Market and Net Asset Value Information
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28
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Use of Proceeds
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28
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The Fund
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29
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Investment Objective and Principal Investment Strategies
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29
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Leverage
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38
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Interest Rate Transactions
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44
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Forward Currency Exchange Transactions
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45
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Risk Factors
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46
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Management of the Fund
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63
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Closed-End Fund Structure
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66
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Certain Federal Income Tax Matters
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67
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Net Asset Value
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75
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Dividends and Distributions on Common Shares; Automatic Dividend Reinvestment Plan
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77
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Description of Securities
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82
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Rating Agency Guidelines
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88
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Certain Provisions of the Agreement and Declaration of Trust and By-Laws, Including Antitakeover
Provisions
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89
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Plan of Distribution
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92
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Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar
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94
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Legal Matters
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95
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Experts
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95
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Incorporation by Reference
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95
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You should rely on the information contained in or incorporated by reference in this prospectus supplement in making an investment decision. Neither we nor the underwriters have authorized anyone to provide you with different or inconsistent 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 notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this prospectus supplement is accurate only as of the date of this prospectus supplement, and that our business, financial condition and prospects may have changed since this date. We will amend or supplement this prospectus supplement to reflect material changes to the information contained in this prospectus supplement to the extent required by applicable law.
i
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the statement of additional information contain "forward-looking statements." Forward-looking statements can be identified by the words "may," "will," "intend," "expect," "estimate," "continue," "plan," "anticipate," and similar terms and the negative of such terms. Such forward-looking statements may be contained in this prospectus supplement, as well as in the accompanying prospectus. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect our actual results are the performance of the portfolio of securities we hold, the conditions in the U.S. and international financial, petroleum and other markets, the price at which our shares will trade in the public markets and other factors discussed in our periodic filings with the Commission.
Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the "Risk Factors" section of the prospectus accompanying this prospectus supplement. All forward-looking statements contained or incorporated by reference in this prospectus supplement or the accompanying prospectus are made as of the date of this prospectus supplement or the accompanying prospectus, as the case may be. Except for our ongoing obligations under the federal securities laws, we do not intend, and we undertake no obligation, to update any forward-looking statement. The forward-looking statements contained in this prospectus supplement are excluded from the safe harbor protection provided by section 27A of the Securities Act of 1933, as amended.
Currently known risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors described in the "Risk Factors" section of the prospectus accompanying this prospectus supplement. We urge you to review carefully this section for a more detailed discussion of the risks of an investment in the Calamos Notes. The forward-looking statements contained in this prospectus supplement, the accompanying prospectus and the statement of additional information are excluded from the safe harbor protection provided by Section 27A of the 1933 Act.
ii
PROSPECTUS SUPPLEMENT SUMMARY
This summary contains basic information about us but does not contain all of the information that is important to your investment decision. You should read this summary together with the more detailed information contained elsewhere in this prospectus supplement and accompanying prospectus and in the statement of additional information, especially the information set forth under the heading "Risk Factors" beginning on page 31 of the accompanying prospectus and on page [ ] of this prospectus summary.
The Fund
The Fund is a diversified, closed-end management investment company. Throughout the prospectus, we refer to Calamos Global Total Return Fund as the "Fund" or as "we," "us," or "our." See "The Fund." The Fund's common shares are traded on the NASDAQ Global Select Market ("Nasdaq") under the symbol "CGO." As of , the Fund had common shares outstanding and net assets of $ . The Fund's principal offices are located at 2020 Calamos Court, Naperville, Illinois 60563. We have a fiscal year ending October 31st.
Our investment objective is to provide total return through a combination of capital appreciation and current income. There can be no assurance that we will achieve our investment objective. See "The Fund" in the accompanying prospectus.
We commenced operations in October 2005 following our initial public offering.
Investment Adviser
Calamos Advisors LLC ("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 , Calamos managed approximately $ billion in assets of individuals and institutions. Calamos is a wholly owned subsidiary of Calamos Investments LLC ("CILLC") and an indirect subsidiary of Calamos Asset Management, Inc.
The Fund pays Calamos an annual management fee, payable monthly in arrears, for its investment management services equal to 1.00% of the Fund's average weekly managed assets. "Managed assets" means the total assets of the Fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). "Net assets" does not include any assets attributable to any leverage that may be outstanding, or other debt representing financial leverage. See "Management of the Fund" in the accompanying prospectus.
The principal business address of the Adviser is 2020 Calamos Court, Naperville, Illinois 60563.
The Offering
Calamos Notes offered by the Fund
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$ aggregate principal amount of Series Calamos Notes. Series Calamos Notes will be sold in denominations of $ and any integral multiple thereof. The Series Calamos Notes are being offered by and , as underwriters. See "Underwriting."
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Use of proceeds
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The Fund estimates the net proceeds of the offering of Series Calamos Notes, after payment of sales load and offering expenses, will be approximately $ .
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DEBT-1
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The Fund will invest the net proceeds of any sales of securities in accordance with our investment objective and policies. Such investments may be delayed if suitable investments are unavailable at the time or for other reasons. Pending such investment, we anticipate that we will invest the proceeds in securities issued by the U.S. government or its agencies or instrumentalities or in high quality, short-term or long-term debt obligations. We may also use proceeds from the sale of our securities to (i) retire all or a portion of any short-term debt we incur in pursuit of our investment objective and policies, (ii) redeem any outstanding senior securities, and (iii) for working capital purposes, including the payment of interest and operating expenses, although there is currently no intent to issue securities primarily for this purpose. A delay in the anticipated use of proceeds could lower returns, reduce our distribution to common shareholders and reduce the amount of cash available to make dividend and interest payments on preferred shares and debt securities, respectively. See "Investment Objective and Principal Investment Strategies" in the accompanying prospectus.
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Risk factors
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See "Risk Factors" and other information included in the accompanying prospectus and in this prospectus supplement, for a discussion of factors you should carefully consider before deciding to invest in the Calamos Notes.
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DEBT-2
USE OF PROCEEDS
The Fund estimates the net proceeds of the offering of Calamos Notes, after payment of sales load and offering expenses, will be approximately $ . The Fund will invest the net proceeds of any sales of securities in accordance with our investment objective and policies. Such investments may be delayed if suitable investments are unavailable at the time or for other reasons. Pending such investment, we anticipate that we will invest the proceeds in securities issued by the U.S. government or its agencies or instrumentalities or in high quality, short-term or long-term debt obligations. We may also use proceeds from the sale of our securities to (i) retire all or a portion of any short-term debt we incur in pursuit of our investment objective and policies, (ii) redeem any outstanding senior securities, and (iii) for working capital purposes, including the payment of interest and operating expenses, although there is currently no intent to issue securities primarily for this purpose. A delay in the anticipated use of proceeds could lower returns, reduce our distribution to common shareholders and reduce the amount of cash available to make dividend and interest payments on preferred shares and debt securities, respectively. See "Investment Objective and Principal Investment Strategies" in the accompanying prospectus.
CAPITALIZATION
The following table sets forth the capitalization of the Fund as of , 20 , and as adjusted, to give effect to the issuance of all the Calamos Notes offered hereby (including estimated offering expenses and sales load of $ ). The sales load and offering expenses of the Calamos Notes will be effectively borne by common shareholders.
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Actual
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As Adjusted
Calamos Notes
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Long-Term Debt
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Calamos Notes, denominations of $ or any multiple thereof
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Loan
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Shareholders Equity
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Preferred Shares, no par value per share, $25,000 stated value per share,
at liquidation value; unlimited shares authorized (no shares issued;
and shares issued, respectively)*
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Common shares, no par value per share, unlimited shares
authorized, shares outstanding*
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Undistributed net investment income
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Accumulated net realized gain (loss) on investments
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Net Unrealized appreciation (depreciation) on investments
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Net Assets
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* None of these outstanding shares are held by or for the account of the Fund
ASSET COVERAGE REQUIREMENTS
The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more rating agencies that may issue ratings for the preferred shares or 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. The Fund may also be required to pledge its assets to the lenders in connection with certain types of borrowing. Calamos does not anticipate that these covenants or restrictions will adversely affect its ability to manage the Fund's portfolio in accordance with the Fund's investment objective and policies. Due to these
DEBT-3
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.
DESCRIPTION OF CALAMOS NOTES
Calamos Notes of each series will rank on a parity with any other series of Calamos Notes as to the payment of interest and distribution of assets upon liquidation. All Calamos Notes rank senior to our common and preferred shares as to the payment of interest and distribution of assets upon liquidation. Under the 1940 Act, we may only issue one class of senior securities representing indebtedness other than promissory notes or other evidences of indebtedness not intended to be publicly distributed.
The Series Calamos Notes will be issued pursuant to the indenture between the Fund and the trustee dated as of , 20 , as it may be supplemented from time to time (referred to herein collectively as the "Indenture"). The following summary sets forth certain general terms and provisions of the Indenture under which the Calamos Notes may be issued. The summary is not complete and is qualified in its entirety by the provisions of the Indenture, a more detailed summary of which is contained in Appendix to the statement of additional information, which is on file with the Commission. Whenever defined terms are used, but not defined in this prospectus supplement, the terms have the meaning given to them in Appendix to the statement of additional information.
General
The Board of Trustees has authorized us to issue the Series Calamos Notes representing indebtedness pursuant to the terms of the Indenture. Currently, the Indenture provides for the issuance of up to $ aggregate principal amount of Series Calamos Notes. The principal amount of the Series Calamos Notes is due and payable on , 20 . The Series Calamos Notes, when issued and sold pursuant to the terms of the Indenture, will be issued in fully registered form without coupons and in denominations of $ and any integral multiple thereof, unless otherwise provided in the Indenture. The Series Calamos Notes will be unsecured obligations of ours and, upon our liquidation, dissolution or winding up, will rank: (1) senior to our outstanding common shares and any outstanding preferred shares; (2) on a parity with any of our unsecured creditors, including any other series of Calamos Notes; and (3) junior to any of our secured creditors. The Calamos Notes may be subject to optional and mandatory redemption and acceleration of maturity, as described in the Indenture and the accompanying prospectus under "Description of Securities Debt Securities Events of Default and Acceleration of Maturity of Debt Securities; Remedies."
The Calamos Notes have no voting rights, except to the extent required by law or as otherwise provided in the Indenture relating to the acceleration of maturity upon the occurrence and continuance of an event of default.
Unsecured Investment
The Calamos Notes represent an unsecured obligation of ours to pay interest and principal, when due. We cannot assure you that we will have sufficient funds or that we will be able to arrange for additional financing to pay interest on the Calamos Notes when due or to repay the Calamos Notes at the Stated Maturity. Our failure to pay interest on the Calamos Notes when due or to repay the Calamos Notes upon the Stated Maturity would, subject to the cure provisions under the Indenture, constitute an event of default under the Indenture and could cause a default under other agreements that we may enter into from time to time. There is no sinking fund with respect to the Calamos Notes, and at the Stated Maturity, the entire outstanding principal amount of the Calamos Notes will become due and payable.
DEBT-4
Securities Depository
The nominee of the Securities Depository is expected to be the sole record holder of the Calamos Notes. Accordingly, each purchaser of Calamos Notes must rely on (1) the procedures of the Securities Depository and, if such purchaser is not a member of the Securities Depository, such purchaser's Agent Member, to receive interest payments and notices and (2) the records of the Securities Depository and, if such purchaser is not a member of the Securities Depository, such purchaser's Agent Member, to evidence its ownership of the Calamos Notes.
Purchasers of Calamos Notes will not receive certificates representing their ownership interest in such securities. DTC initially will act as Securities Depository for the Agent Members with respect to the Calamos Notes.
Interest and Rate Periods
Calamos Notes will bear interest from the Original Issue Date at the Applicable Rate and shall be payable on each Interest Payment Date thereafter. Interest will be paid through the Securities Depository on each Interest Payment Date. Interest on the Calamos Notes shall be payable when due as described in this prospectus supplement. If we do not pay interest when due, it will trigger an event of default under the Indenture (subject to the cure provisions), and we will be restricted from declaring dividends and making other distributions with respect to our common shares and preferred shares.
Redemption
Optional Redemption. To the extent permitted under the 1940 Act, Delaware law and the Indenture, we may, at our option, redeem Calamos Notes, in whole or in part, out of funds legally available therefor, in accordance with the terms set forth in this prospectus supplement and the Indenture.
Mandatory Redemption. Under certain circumstances described in this prospectus supplement and the Indenture, the Calamos Notes will be subject to mandatory redemption out of funds legally available therefor. The redemption price per Calamos Note in the event of any mandatory redemption will be not less than the principal amount, plus an amount equal to accrued but unpaid interest to the date fixed for redemption.
Redemption Procedure. Pursuant to Rule 23c-2 under the 1940 Act, we will file a notice of our intention to redeem with the Commission so as to provide at least the minimum notice required by such Rule or any successor provision (notice currently must be filed with the Commission generally at least 30 days prior to the redemption date).
If less than all of the outstanding Calamos Notes of a series are redeemed on any date, the amount per holder to be redeemed on such date will be selected by us on a pro rata basis in proportion to the principal amount of Calamos Notes held by such holder, by lot or by such other method as is determined by us to be fair and equitable.
If Notice of Redemption has been given, then upon the deposit of funds with the Paying Agent sufficient to effect such redemption, interest on such Calamos Notes will cease to accrue and such Calamos Notes will no longer be deemed to be outstanding for any purpose and all rights of the holders of the Calamos Notes so called for redemption will cease and terminate, except the right of the holders of such Calamos Notes to receive the redemption price, but without any interest or additional amount.
So long as any Calamos Notes are held of record by the nominee of the Securities Depository, the redemption price for such Calamos Notes will be paid on the redemption date to the nominee of the Securities Depository. The Securities Depository's normal procedures provide for it to distribute the amount of the
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redemption price to Agent Members who, in turn, are expected to distribute such funds to the persons for whom they are acting as agent.
Notwithstanding the provisions for redemption described above, no Calamos Notes may be redeemed unless all interest in arrears on the outstanding Calamos Notes, and any of our indebtedness ranking on a parity with the Calamos Notes, have been or are being contemporaneously paid or set aside for payment, except in connection with our liquidation, in which case all Calamos Notes and all indebtedness ranking on a parity with the Calamos Notes must receive proportionate amounts. At any time we may purchase or acquire all the outstanding Calamos Notes pursuant to the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, holders of all outstanding Calamos Notes.
Payment of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to us or to our creditors, as such, or to our assets, or (b) our liquidation, dissolution or other winding up, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) our assignment for the benefit of creditors or any other marshalling of assets and liabilities, then (after any payments with respect to our secured creditor outstanding at such time) and in any such event the holders of Calamos Notes shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Calamos Notes (including any interest accruing thereon after the commencement of any such case or proceeding), or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of the Calamos Notes, before the holders of any of our common or preferred shares are entitled to receive any payment on account of any redemption proceeds, liquidation preference or dividends from such shares, and to that end the holders of Calamos Notes shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any of our other indebtedness being subordinated to the payment of the Calamos Notes, which may be payable or deliverable in respect of the Calamos Notes in any such case, proceeding, dissolution, liquidation or other winding up event.
Unsecured creditors of ours may include, without limitation, service providers including Calamos, the Fund's custodian, the Fund's administrator, broker-dealers and the trustee, pursuant to the terms of various contracts with us. Secured creditors of ours may include without limitation State Street Bank and Trust Company and other lenders to the Fund, parties entering into any interest rate swap, floor or cap transactions, or other similar transactions with us that create liens, pledges, charges, security interests, security agreements or other encumbrances on our assets.
UNDERWRITING
[To be provided at the time of an offering.]
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1940 Act and are required to file reports, including annual and semi-annual reports, proxy statements and other information with the Commission. We voluntarily file quarterly shareholder reports. Our most recent shareholder report filed with the Commission is for the period ended , 20 . These documents are available on the Commission's website at www.sec.gov.
This prospectus supplement and the accompanying prospectus do not contain all of the information in our registration statement, including amendments, exhibits, and schedules. Statements in this prospectus supplement
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and the accompanying prospectus about the contents of any contract or other document are not necessarily complete and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by this reference.
Additional information about us can be found in our Registration Statement (including amendments, exhibits, and schedules) on Form N-2 filed with the Commission. The Commission maintains a web site (http://www.sec.gov) that contains our Registration Statement, other documents incorporated by reference, and other information we have filed electronically with the Commission, including proxy statements and reports filed under the Exchange Act.
LEGAL MATTERS
, (" "), is counsel to the Fund. will pass on the legality of the securities to be offered hereby. If certain legal matters in connection with an offering of securities are passed upon by counsel for the underwriters of such offering, such matters will be passed upon by counsel to be identified in a prospectus supplement. and counsel to the underwriters may rely on the opinion of for certain matters of Delaware law.
[UNAUDITED] FINANCIAL STATEMENTS AS OF , 20
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$
Calamos Global Total Return Fund
Notes ("Calamos Notes")
$ Series Due , 20
PROSPECTUS SUPPLEMENT
, 20
[Underwriter]
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,
which is not a prospectus, is not an offer to sell these securities and it is not soliciting an offer to buy these securities
in any state or jurisdiction where the offer or sale is not permitted.
Subject
to Completion dated [ ], 2021
CALAMOS GLOBAL
TOTAL RETURN FUND
STATEMENT OF ADDITIONAL
INFORMATION
Calamos Global
Total Return Fund (the “Fund”) is a diversified, closed-end management investment company. This Statement of Additional
Information relates to the offering, on an immediate, continuous or delayed basis, of up to $30,000,000 aggregate initial offering
price of common shares, preferred shares, or debt securities in one or more offerings. This Statement of Additional Information
does not constitute a prospectus, but should be read in conjunction with the prospectus relating thereto dated the date hereof
and any related prospectus supplement. This Statement of Additional Information does not include all information that a prospective
investor should consider before purchasing any of the Fund’s securities, and investors should obtain and read the prospectus
and any related prospectus supplement prior to purchasing such securities. A copy of the prospectus and any related prospectus
supplement may be obtained without charge by calling 1-800-582-6959. You may also obtain a copy of the prospectus and any related
prospectus supplement on the Securities and Exchange Commission’s website (http://www.sec.gov). Capitalized terms used but
not defined in this Statement of Additional Information have the same meanings ascribed to them in the prospectus and any related
prospectus supplement.
TABLE OF CONTENTS FOR
STATEMENT OF ADDITIONAL INFORMATION
Use of Proceeds
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S-2
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Investment Objective and Policies
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S-2
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Investment Restrictions
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S-30
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Management of the Fund
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S-32
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Certain Shareholders
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S-50
|
Portfolio Transactions
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S-51
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Net Asset Value
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S-52
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Repurchase of Common Shares
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S-53
|
Certain Federal Income Tax Matters
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S-55
|
Custodian, Transfer Agent, Dividend Disbursing Agent
and Registrar
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S-69
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Independent Registered Public Accounting Firm
|
S-69
|
Additional Information
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S-69
|
Additional Information Concerning the Agreement and
Declaration of Trust
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S-69
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Financial Statements
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S-69
|
Incorporation by Reference
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S-70
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Appendix A — Summary of Certain Provisions of
the Indenture and Form of Supplemental Indenture
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A-1
|
Appendix B — Description of Ratings
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B-1
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This Statement of
Additional Information is dated [ ], 2021.
USE OF PROCEEDS
Unless otherwise
specified in a prospectus supplement, we currently intend to use the net proceeds from the sale of our securities primarily to
invest in accordance with our investment objective and policies within approximately three months of receipt of such proceeds.
We may also use proceeds from the sale of our securities to retire all or a portion of any short-term debt we incur in pursuit
of our investment objective and policies and for working capital purposes, including the payment of interest and operating expenses,
although there is currently no intent to issue securities primarily for these purposes. Pending such investments, 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, managed 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 invests primarily in a portfolio of common and preferred stocks, convertible securities 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 100% 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. Under normal circumstances, the
Fund will invest at least 40% of its managed assets in securities of foreign issuers. The Fund will invest in the securities of
issuers of several different countries throughout the world, in addition to the United States. “Managed assets” means
the total assets of the Fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued
liabilities (other than debt representing financial leverage). For this purpose, the liquidation preference on the preferred shares
will not constitute a liability.
Foreign Securities
The Fund
may invest up to 100% of its managed assets in securities of foreign issuers in developed and emerging markets, including debt
and equity securities of corporate issuers and debt securities of government issuers. Under normal circumstances, the Fund will
invest at least 40% of its managed assets in securities of foreign issuers. The Fund will invest in the securities of issuers
of several different countries throughout the world, in addition to the United States. A foreign issuer is a foreign government
or corporation organized under the laws of a foreign country. 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 issued by international banks 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; greater costs of buying, holding and selling securities, including
brokerage, tax and custodial costs; and sometimes less advantageous legal, operational and financial protections applicable to
foreign sub-custodial arrangements.
Although the
Fund intends primarily 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 may
invest in the securities of issuers located in emerging market countries. The securities markets of emerging countries are substantially
smaller, less developed, less liquid and more volatile than the securities markets of the U.S. and other more developed countries.
Disclosure and regulatory standards in many respects are less stringent than in the U.S. and other major markets. There also may
be a lower level of monitoring and regulation of emerging markets and the activities of investors in such markets, and enforcement
of existing regulations has been extremely limited. Economies in individual emerging markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments positions. Many emerging market countries have experienced high
rates of inflation for many years, which has had and may continue to have very negative effects on the economies and securities
markets of those countries.
Currency Exchange Transactions
Currency
exchange transactions may be conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or selling
currency prevailing in the foreign exchange market or through forward currency exchange contracts (“forward
contracts”). Forward contracts are contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the contract. Forward contracts are usually
entered into with banks, foreign exchange dealers and broker-dealers, are not exchange traded, and are usually for less than
one year, but may be renewed.
Forward
currency exchange transactions may involve currencies of the different countries in which the Fund may invest and serve as
hedges against possible variations in the exchange rate between these currencies and the U.S. dollar. 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, its custodian will segregate liquid assets of the Fund having a value equal to the Fund’s
commitment under such forward contract from day to day, except to the extent that the Fund’s forward contract obligation
is covered by liquid portfolio securities denominated in, or whose value is tied to, the currency underlying the 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
the Fund to purchase additional currency on the spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of currency the Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the currency. Conversely, it may be necessary to sell on the spot market some of the currency received upon the
sale of the portfolio security if its market value exceeds the amount of currency the Fund is obligated to deliver.
If the Fund
retains the portfolio security and engages in an offsetting currency transaction, it 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 currency transaction, it subsequently
may 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 the 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.
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). The
Fund may invest in preferred stocks and convertible securities of any rating, including below investment grade. Equity securities,
such as common stock, generally represent an ownership interest in that company. Therefore, the Fund participates in the financial
success or failure of any company in which it has an equity interest. 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.
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 federal income tax purposes while it is not receiving income from that stock. The
Fund must distribute, at least annually, all or substantially all of its net investment income, including income from such deferred
distributions, to shareholders to avoid federal income and excise taxes. See “Certain Federal Income Tax Matters.”
Therefore, if the Fund owns a preferred stock that is deferring its distributions, the Fund may have to dispose of portfolio securities
under disadvantageous circumstances to generate cash, or may have to leverage itself by borrowing the cash, to satisfy distribution
requirements. 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 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 in cases when dividends
are in arrears for a specified number of periods.
Equity securities
of small and medium-sized 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.
Debt Securities
In pursuing its
investment objective, the Fund may invest in convertible and non-convertible debt securities, including lower-rated securities
(i.e., securities rated BB or lower by Standard & Poor’s Corporation, a division of The McGraw-Hill Companies (“S&P”
or “Standard & Poor’s”), or Ba or lower by Moody’s Investor Services, Inc. (“Moody’s”))
and securities that are not rated but are considered by Calamos Advisors LLC (“Calamos”) to be of similar quality.
There are no restrictions as to the ratings of debt securities acquired by the Fund or the portion of the Fund’s assets that
may be invested in debt securities in a particular ratings category.
Securities
rated “BBB” or “Baa” are considered to be medium grade and to have speculative characteristics.
Lower-rated debt securities are predominantly speculative with respect to the issuer’s capacity to pay interest and
repay principal. Investment in medium- or lower-quality debt securities involves greater investment risk, including the
possibility of issuer default or bankruptcy. An economic downturn could severely disrupt the market for such securities and
adversely affect the value of such securities. In addition, lower-quality bonds are less sensitive to interest rate changes
than higher-quality instruments and generally are more sensitive to adverse economic changes or individual corporate
developments. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds
may experience difficulty in servicing their principal and interest payment obligations.
Achievement by
the Fund of its investment objective will be more dependent on Calamos’ credit analysis than would be the case if the Fund
were investing in higher-quality debt securities. Because the ratings of rating services (which evaluate the safety of principal
and interest payments, not market risks) are used only as preliminary indicators of investment quality, Calamos employs its own
credit research and analysis. These analyses may take into consideration such quantitative factors as an issuer’s present
and potential liquidity, profitability, internal capability to generate funds, debt/equity ratio and debt servicing capabilities,
and such qualitative factors as an assessment of management, industry characteristics, accounting methodology, and foreign business
exposure.
Medium- and lower-quality
debt securities may be less marketable than higher-quality debt securities because the market for them is less broad. The market
for unrated debt securities is even narrower. During periods of thin trading in these markets, the spread between bid and asked
prices is likely to increase significantly, and the Fund may have greater difficulty selling its portfolio securities. The market
value of these securities and their liquidity may be affected by adverse publicity and investor perceptions.
Zero Coupon and Payment-in-Kind
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, and payment-in-kind securities, which are debt obligations that pay “interest” in the form
of other debt obligations instead of cash. Investments in zero coupon and payment-in-kind securities are subject to certain risks,
including that market prices of zero coupon and payment-in-kind securities generally are more volatile than the prices of securities
that pay interest periodically and in cash, and are likely to respond to changes in interest rates to a greater degree than other
types of debt securities with similar maturities and credit quality. Because zero coupon securities bear no interest, their prices
are especially volatile. And because zero coupon bondholders do not receive interest payments, the prices of zero coupon securities
generally fall more dramatically than those of bonds that pay interest on a current basis when interest rates rise. However, when
interest rates fall, the prices of zero coupon securities generally rise more rapidly in value than those of similar interest paying
bonds. Under many market and other conditions, the market for the zero coupon and payment-in-kind securities may suffer decreased
liquidity making it difficult for the Fund to dispose of them or to determine their current value. In addition, as these securities
may not pay cash interest, the Fund’s investment exposure to these securities and their risks, including credit risk, will
increase during the time these securities are held in the Fund’s portfolio. Further, to maintain its qualification for treatment
as a regulated investment company and to avoid Fund-level U.S. federal income and/or excise taxes, the Fund is required to distribute
to its shareholders any income it is deemed to have received in respect of such investments, notwithstanding that cash has not
been received currently, and the value of paid-in-kind interest.
Consequently, the Fund may have to
dispose of portfolio securities under disadvantageous circumstances to generate the cash, or may have to leverage itself by borrowing
the cash to satisfy this distribution requirement. The required distributions, if any, would result in an increase in the Fund’s
exposure to these securities.
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.
Below investment grade non-convertible
debt securities or comparable unrated securities are susceptible to greater risk of default or decline in market value due to
adverse economic and business developments than higher rated debt securities. 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:
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•
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increased price sensitivity to changing interest rates and to a deteriorating economic environment;
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•
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greater risk of loss due to default or declining credit quality;
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•
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adverse company specific events are more likely to render the issuer unable to make interest and/or principal payments; and
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•
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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.
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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 “Ba1” from Moody’s means that the issue so rated can have speculative elements
and is subject to substantial credit risk. Standard & Poor’s assigns a rating of “BB+” to issues that
are less vulnerable to nonpayment than other speculative issues, but nonetheless subject to 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. 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 B to this Statement of Additional Information for a description of Moody’s and
Standard & Poor’s ratings.
Adverse changes
in economic conditions are more likely to lead to a weakened capacity of a high yield issuer to make principal payments and interest
payments than an investment grade issuer. The principal amount of high yield securities outstanding has proliferated in the past
decade as an increasing number of issuers have used high yield securities for corporate financing. An economic downturn could severely
affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. Similarly,
down-turns in profitability in specific industries could adversely affect the ability of high yield issuers in that industry to
meet their obligations. The market values of lower quality debt securities tend to reflect individual developments of the issuer
to a greater extent than do higher quality securities, which react primarily to fluctuations in the general level of interest rates.
Factors having an adverse impact on the market value of lower quality securities may have an adverse effect on the Fund’s
net asset value and the market value of its common shares. In addition, the Fund may incur additional expenses to the extent it
is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings. In certain circumstances,
the Fund may be required to foreclose on an issuer’s assets and take possession of its property or operations. In such circumstances,
the Fund would incur additional costs in disposing of such assets and potential liabilities from operating any business acquired.
The secondary
market for high yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which
may have an adverse effect on the Fund’s ability to dispose of a particular security when necessary to meet its liquidity
needs. There are fewer dealers in the market for high yield securities than investment grade obligations. The prices quoted by
different dealers may vary significantly and the spread between the bid and asked price is generally much larger than higher quality
instruments. Under adverse market or economic conditions, the secondary market for high yield securities could contract further,
independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become illiquid.
As a result, the Fund could find it more difficult to sell these securities or may be able to sell the securities only at prices
lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under
these circumstances, may be less than the prices used in calculating the Fund’s net asset value.
Because 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 managed 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 of loss. Distressed securities
frequently do not produce income while they are outstanding and may require the Fund to bear certain extraordinary expenses in
order to protect and recover its investment. Therefore, to the extent the Fund seeks capital appreciation through investment in
distressed securities, the Fund’s ability to achieve current income for its shareholders may be diminished. The Fund also
will be subject to significant uncertainty as to when and in what manner and for what value the obligations evidenced by the distressed
securities will eventually be satisfied (e.g., through a liquidation of the obligor’s assets, an exchange offer or plan of
reorganization involving the distressed securities or a payment of some amount in satisfaction of the obligation). In addition,
even if an exchange offer is made or a plan of reorganization is adopted with respect to distressed securities held by the Fund,
there can be no assurance that the securities or other assets received by the Fund in connection with such exchange offer or plan
of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.
Moreover, any securities received by the Fund upon completion of an exchange offer or plan of reorganization may be restricted
as to resale. As a result of the Fund’s participation in negotiations with respect to any exchange offer or plan of reorganization
with respect to an issuer of distressed securities, the Fund may be restricted from disposing of such securities.
Loans
The Fund
may invest up to 5% of its total assets in loan participations and other direct claims against a borrower. The corporate
loans in which the Fund may invest 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 such loans are not regulated by federal securities laws or the Securities and
Exchange Commission (“SEC” or the “Commission”).
As in the
case of other high yield investments, such corporate loans may be rated in the lower rating categories of the established
rating services (“Ba” or lower by Moody’s or “BB” or lower by Standard &
Poor’s), or may be unrated investments considered by Calamos to be of comparable quality. As in the case of other high
yield investments, such corporate loans can be expected to provide higher yields than lower yielding, higher rated fixed
income securities, but may be subject to greater risk of loss of principal and income. There are, however, some significant
differences between corporate loans and high yield bonds. Corporate loan obligations are frequently secured by pledges of
liens and security interests in the assets of the borrower, and the holders of corporate loans are frequently the
beneficiaries of debt service subordination provisions imposed on the borrower’s bondholders. These arrangements are
designed to give corporate loan investors preferential treatment over high yield investors in the event of a deterioration in
the credit quality of the issuer. Even when these arrangements exist, however, there can be no assurance that the borrowers
of the corporate loans will repay principal and/or pay interest in full. Corporate loans generally bear interest at rates set
at a margin above a generally recognized base lending rate that may fluctuate on a day-to-day basis, in the case of the prime
rate of a U.S. bank, or which may be adjusted on set dates, typically 30 days but generally not more than one year, in the
case of the London Interbank Offered Rate. Consequently, the value of corporate loans held by the Fund may be expected to
fluctuate significantly less than the value of other fixed rate high yield instruments as a result of changes in the interest
rate environment. On the other hand, the secondary dealer market for certain corporate loans may not be as well developed as
the secondary dealer market for high yield bonds, and therefore presents increased market risk relating to liquidity and
pricing concerns.
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. The Fund currently does not intend to invest a significant amount of its assets in
synthetic foreign money market positions.
Debt Obligations of Non-U.S. Governments
An
investment in debt obligations of non-U.S. governments and their political subdivisions (sovereign debt) involves special
risks that are not present in corporate debt obligations. The non-U.S. issuer of the sovereign debt or the non-U.S.
governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest
when due, and the Fund may have limited recourse in the event of a default. During periods of economic uncertainty, the
market prices of sovereign debt may be more volatile than prices of debt obligations of U.S. issuers. In the past, certain
non-U.S. countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and
interest and declared moratoria on the payment of principal and interest on their sovereign debt.
A sovereign debtor’s
willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of sufficient non-U.S. currency, the relative size
of the debt service burden, the sovereign debtor’s policy toward its principal international lenders and local political
constraints. Sovereign debtors may also be dependent on expected disbursements from non-U.S. governments, multilateral agencies
and other entities to reduce principal and interest arrearages on their debt. The failure of a sovereign debtor to implement economic
reforms, achieve specified levels of economic performance or repay principal or interest when due may result in the cancellation
of third-party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness
to service its debts.
Eurodollar Instruments and Samurai
and Yankee Bonds
The Fund
may invest in Eurodollar instruments and Samurai and Yankee bonds. Eurodollar instruments are bonds of corporate and
government issuers that pay interest and principal in U.S. dollars but are issued in markets outside the United States,
primarily in Europe. Samurai bonds are yen-denominated bonds sold in Japan by non-Japanese issuers. Yankee bonds are U.S.
dollar-denominated bonds typically issued in the U.S. by non-U.S. governments and their agencies and non-U.S. banks and
corporations. The Fund may also invest in Eurodollar Certificates of Deposit (“ECDs”), Eurodollar Time Deposits
(“ETDs”) and Yankee Certificates of Deposit (“Yankee CDs”). ECDs are U.S. dollar-denominated
certificates of deposit issued by non-U.S. branches of domestic banks; ETDs are U.S. dollar- denominated deposits in a
non-U.S. branch of a U.S. bank or in a non-U.S. bank; and Yankee CDs are U.S. dollar-denominated certificates of deposit
issued by a U.S. branch of a non-U.S. bank and held in the U.S. These investments involve risks that are different from
investments in securities issued by U.S. issuers, including potential unfavorable political and economic developments,
non-U.S. withholding or other taxes, seizure of non-U.S. deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or interest.
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 security were a non-convertible obligation.
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. A convertible security’s value viewed without regard to its conversion feature (i.e., strictly
on the basis of its yield) is sometimes referred to as its “investment value.” A convertible security’s investment
value 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, a convertible security’s conversion value is substantially below its investment
value, the convertible security’s price is governed principally by its investment value. If a convertible
security’s conversion value increases to a point that approximates or exceeds its investment value, the convertible
security’s value 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 issuer’s assets prior to the
common stockholders, but may be subordinated to holders of similar non-convertible securities of the same issuer.
Synthetic Convertible Instruments
Calamos may create
a “synthetic” convertible instrument by combining fixed income instruments with the right to acquire equity securities.
More flexibility is possible in the assembly of a synthetic convertible instrument than in the purchase of a convertible instrument.
Although synthetic convertible instruments may be selected where the two components are issued by a single issuer, thus making
the synthetic convertible instrument similar to the true convertible security, the character of a synthetic convertible instrument
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 instrument 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
instrument 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 instrument 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
instrument. 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 instrument includes the fixed-income
component as well, the holder of a synthetic convertible instrument 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 instruments manufactured by other parties, including convertible structured notes.
Convertible structured
notes are fixed income debentures linked to equity, and are typically issued by investment banks. Convertible structured notes
have the attributes of a convertible security; however, the investment bank that issued the convertible note assumes the credit
risk associated with the investment, rather than the issuer of the underlying common stock into which the note is convertible.
The Fund’s
holdings of synthetic convertible instruments are considered convertible securities for purposes of the Fund’s policy to
invest primarily in a portfolio of common and preferred stocks, convertible securities and income producing securities such as
investment grade and below investment grade (high yield/high risk) debt securities.
Lending of Portfolio Securities
The Fund has
authorized State Street Bank and Trust Company (“SSB”) as securities lending agent to lend portfolio securities to
broker-dealers and banks. Any such loan must be continuously secured by collateral received in cash under the terms of the Amended
and Restated Liquidity Agreement (“SSB Agreement”) between the Fund and SSB. Cash collateral held by SSB on behalf
of the Fund may be credited against the amounts borrowed under the SSB Agreement, such that the Fund will effectively bear lower
interest expense with respect to those borrowed amounts. Any amounts credited against the borrowings under SSB Agreement would
count against the Fund’s leverage limitations under the Investment Company Act of 1940, as amended (the “1940 Act”),
unless otherwise covered in accordance with SEC Release IC-10666.
Under the
terms of the SSB Agreement, SSB will return the value of the collateral to the borrower upon the return of the lent
securities, which will eliminate the credit against the borrowings under SSB Agreement and will increase the balance on which
the Fund will pay interest. The Fund is obligated to make payment to the entity in the event SSB is unable to return the
value of the collateral. 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
income earned on the collateral. The Fund may experience losses as a result of a diminution in value of its cash collateral
investments. 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 less than five
business days. The Fund would not have the right to vote the securities during the existence of the loan; however, the Fund
may attempt to call back the loan and vote the proxy if time permits prior to the record date. In the event of bankruptcy or
other default of the borrower, the Fund could experience both delays in liquidating the loaned collateral (or recovering the
loaned securities) or 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. The Fund may also
experience losses as a result of the diminution in value of its cash collateral investments. In an effort to reduce these
risks, the Fund’s securities lending agent will monitor, and report to Calamos on, the creditworthiness of the firms to
which the Fund lends securities.
Options on Securities, Indices
and Currencies
The Fund may
seek to generate income from option premiums by writing (selling) options (with an aggregate notional value of up to 33% of the
value of the Fund’s managed assets). The Fund may write (sell) call options (i) on a portion of the equity securities
(including equity securities obtainable by the Fund through the exercise of its rights with respect to convertible securities it
owns) in the Fund’s portfolio and (ii) on broad-based securities indices (such as the S&P 500 or MSCI EAFE) or certain
ETFs (exchange traded funds) that trade like common stocks but seek to replicate such market indices. The Fund may also write (sell)
both put and call options on certain of the equity securities (including equity securities obtainable by the Fund through the exercise
of its rights with respect to convertible securities it owns) in the Fund’s portfolio where the Fund will own an equity security
and simultaneously, write call options and write put options on that security. This strategy may produce a considerably higher
return than solely writing call options, but involves a higher degree of risk and potential volatility.
Calamos may
also utilize covered put option collars, in which the Fund purchases a put option and simultaneously sells a put option on
the same security at a different strike price. The put option collars in which the Fund will invest are sometimes referred to
as debit spreads and credit spreads (including strike spreads and time spreads). When the Fund engages in debit spreads the
Fund will pay a higher premium for the put option it purchases than it receives for the put option it writes. In so doing,
the Fund hopes to realize current gains from favorable market price movements in relation to the exercise price of the option
it holds. The Fund’s maximum potential profit would be equal to the difference between the two exercise prices, less
the net premium paid. When the Fund engages in credit spreads the Fund will receive more in premiums for the option it writes
than it will pay for the option it purchases. In so doing, the Fund hopes to realize current gains in the form of premiums.
The Fund’s maximum potential profit would be equal to the net premium received for the spread. The Fund’s maximum
potential loss would be limited to the difference between the two exercise prices, less the net premium received.
In addition,
to seek to offset some of the risk of a large potential decline in the event the overall stock market has a sizeable short-term
or intermediate-term decline, the Fund may also, to a limited extent purchase put options on broad-based securities indices (such
as the S&P 500 or MSCI EAFE) or certain ETFs (exchange traded funds) that trade like common stocks but seek to replicate such
market indices.
The Fund
may also purchase and sell (write) put options and call options on 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. The successful use of
options depends principally on the price movements of the underlying securities, indices or other reference assets or rates.
Investing in options can result in a greater potential for profit or loss than directly investing in the underlying assets.
The value of an option may change because of, including but not limited to, a change in the value of the underlying assets,
the passage of time, changes in the market’s perception as to the future price behavior of the underlying assets or
rates, or any combination of the foregoing.
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 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 the 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.
Certain options,
known as “American style” options, may be exercised at any time during the term of the option. Other options, known
as “European style” options, may be exercised only on the expiration date of the option. The Fund expects that substantially
all of the options written by the Fund will be American style options.
The
Fund is authorized to purchase and sell (write) 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 the Fund at
a formula price within seven days. The Fund generally is expected 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.
The Fund may
also purchase and sell options on securities indices and other financial indices, which may include purchasing and selling options
on stocks, indices, rates, credit spreads or currencies. 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 primarily on the price movements
in individual securities, as is the case with respect to options on securities.
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 the 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.
Prior to the
earlier of exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series
(type, exchange, underlying security or index, exercise price and expiration). There can be no assurance, however, that a closing
purchase or sale transaction can be effected when the Fund desires.
The Fund
will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received
from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale
transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the
Fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and
demand, interest rates, the current market price of the underlying security or index in relation to the exercise price of the
option, the volatility of the underlying security or index, and the time remaining until the expiration date.
A put or call
option purchased by the Fund is an asset of the Fund, valued initially at the premium paid for the option. The premium received
for an option written by the Fund is recorded as a deferred credit. The value of an option purchased or written is marked-to-market
daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price
is available, at the mean between the last bid and asked prices.
Risks Associated with Options
There are
several risks associated with transactions in options. For example, there are significant differences between the securities
markets, the currency markets and the options markets that could result in an imperfect correlation among these markets,
causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful because of market behavior or
unexpected events. The Fund’s ability to utilize options successfully will depend on Calamos’ ability to predict
pertinent market investments which cannot be assured.
The Fund’s
ability to close out its position as a purchaser or seller (writer) 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 any 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, Indices and Currencies”) fails to make or take delivery of the security, currency
or other instrument underlying an OTC option it has entered into with the Fund or fails to make a cash settlement payment due in
accordance with the terms of that option, the Fund will lose any premium it paid for the option as well as any anticipated benefit
of the transaction unless the Fund has collected sufficient collateral from the counterparty to cover its exposure. 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 (write) call options on securities indices and currencies. All call options 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 the Fund to hold a security or instrument which it might otherwise have sold. As described more fully
in the accompanying prospectus, this results in the potential for net asset value erosion. In addition, a loss on a call option
sold may be greater than the premium received. The Fund may purchase and sell (write) put options on securities indices and currencies.
In selling (writing) put options, there is a risk that the Fund may be required to buy the underlying security at a price above
the market price.
Futures Contracts and Options on
Futures Contracts
The
Fund may enter into interest rate futures contracts, index futures contracts, volatility index futures contracts and foreign currency
futures contracts. 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. An interest rate, index, volatility or
foreign currency futures contract provides for the future sale by one party and purchase by another party of a specified quantity
of a financial instrument or the cash value of an index at a specified price and time. A public market exists in futures contracts
covering a number of indices (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 (“NYSE”) 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,
indices 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 by the Fund depends on Calamos 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, Calamos
might have taken portfolio actions in anticipation of the same market movements with similar investment results, but, presumably,
at greater transaction costs. When the Fund makes a purchase or sale of a futures contract, the Fund is required to deposit with
its custodian (or broker, if legally permitted) a specified amount of cash or U.S. Government securities or other securities acceptable
to the broker (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract
is traded and may be modified during the term of the contract, although the Fund’s broker may require margin deposits in
excess of the minimum required by the exchange. The initial margin is in the nature of a performance bond or good faith deposit
on the futures contract, which is returned to the Fund upon termination of the contract, assuming all contractual obligations have
been satisfied. The Fund expects to earn interest income on its initial margin deposits. A futures contract held by the Fund is
valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called
“variation margin,” equal to the daily change in value of the futures contract. This process is known as “marking-to-market.”
Variation margin paid or received by the Fund does not represent a borrowing or loan by the Fund but is instead settlement between
the Fund and the broker of the amount one would owe the other if the futures contract had expired at the close of the previous
day. In computing daily net asset value, the Fund will mark-to-market its open futures positions.
The Fund is also
required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current
market value of the option and other futures positions held by the Fund.
Although some
futures contracts call for making or taking delivery of the underlying securities, usually these obligations are closed out prior
to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index, and delivery
month). If an offsetting purchase price is less than the original sale price, the Fund engaging in the transaction realizes a capital
gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase
price, the Fund engaging in the transaction realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction
costs must also be included in these calculations.
Risks Associated with Futures
There
are several risks associated with the use of futures contracts and futures options. A purchase or sale of a futures contract or
option may result in losses in excess of the amount invested in the futures contract or option. 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. Futures prices are highly volatile at times, and are influenced by many external economic, governmental and world events.
The low margin deposits normally required in futures trading permits an extremely high degree of leverage, which can result in
the Fund experiencing substantial gains or losses due to relatively small price movements or other factors. 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.
The
markets for futures positions may be thinly traded from time to time. In addition, futures positions may become illiquid due to
daily price limits taking effect or due to market disruptions. 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
options, futures contracts or futures options of types other than those described herein are traded in the future, the Fund may
also use those investment vehicles, provided the Board of Trustees determines that their use is consistent with the Fund’s
investment objective.
When purchasing
a futures contract or writing a put option on a futures contract, the Fund must maintain with its custodian (or futures commission
merchant (“FCM”), 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 (or FCM) 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 indices
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
use of options and futures contracts is subject to applicable regulations of the SEC, the several exchanges upon which they are
traded and the U.S. Commodity Futures Trading Commission (the “CFTC”). For
example, the CFTC and domestic futures exchanges have established (and continue to evaluate and monitor) speculative position
limits (“position limits”) on the maximum speculative position which any person, or group of persons acting
in concert, may hold or control in particular contracts. In addition, starting January 1, 2023 federal position limits will
apply to swaps that are economically equivalent to futures contracts that are subject to CFTC set speculative limits. All positions
owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of complying
with speculative limits. Thus, even if the Fund does not intend to exceed applicable position limits, it is possible that different
clients managed by the Adviser and its affiliates may be aggregated for this purpose. Therefore, the trading decisions of the
Adviser may have to be modified and positions held by the Fund liquidated in order to avoid exceeding such limits. The modification
of investment decisions or the elimination of open positions, if it occurs, may adversely affect the profitability of the Fund.
A violation of position limits could also lead to regulatory action materially adverse to the Fund’s investment strategy.
Pursuant
to CFTC Regulation 4.5, Calamos, the Fund’s investment adviser, is excluded from the definition of commodity pool operator
(“CPO”) under the Commodity Exchange Act (“CEA”) and is not subject to registration or regulation as such
under the CEA. The terms of the exclusion require the Fund, among other things, to adhere to certain limits on its investments
in “commodity interests.” Pursuant to the exemption, if the Fund uses commodity interests (such as futures contracts,
options on futures contracts and most swaps) the aggregate initial margin and premiums required to establish these positions (after
taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options that
are “in-the-money”1 at the time of purchase) may not exceed 5% of the Fund’s NAV, or alternatively,
the aggregate net notional value of those positions, as determined at the time the most recent position was established, may not
exceed 100% of the Fund’s NAV (after taking into account unrealized profits and unrealized losses on any such positions).
If, in the future, the Fund can no longer satisfy these requirements, Calamos would withdraw its exclusion from the definition
of CPO, and Calamos would be subject to registration and regulation as a CPO with respect to the Fund, in accordance with CFTC
rules that apply to CPOs of registered investment companies.
In
addition, the Fund’s ability to use options and futures contracts will be limited by tax considerations. See “Certain
Federal Income Tax Matters.”
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.
1 A call
option is “in-the-money” to the extent, if any, that the value of the futures contract that is the subject of the
option exceeds the exercise price. A put option is “in-the-money” if the exercise price exceeds the value of the futures
contract that is the subject of the option.
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 the 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 taxed at ordinary income tax rates for federal income tax purposes.
Short Sales
A short sale
may be effected when Calamos believes that the price of a security will decline or underperform the market, and involves the sale
of borrowed securities, in the hope of purchasing the same securities at a later date at a lower price. There can be no assurance
that the Fund will be able to close out a short position (i.e., purchase the same securities) at any particular time or at an acceptable
or advantageous price. To make delivery to the buyer, the Fund must borrow the securities from a broker-dealer through which the
short sale is executed, and the broker-dealer delivers the securities, on behalf of the Fund, to the buyer. The broker- dealer
may be entitled to retain the proceeds from the short sale until the Fund delivers to it the securities sold short or the Fund
may receive and invest the proceeds. In addition, the Fund is required to pay to the broker- dealer the amount of any dividends
or interest paid on the securities sold short.
To secure its
obligation to deliver to the broker-dealer the securities sold short, the Fund must segregate an amount of cash or liquid securities
that are marked to market daily with its custodian equal to any excess of the current market value of the securities sold short
over any cash or liquid securities deposited as collateral with the broker in connection with the short sale (not including the
proceeds of the short sale). As a result of that requirement, the Fund will not gain any leverage merely by selling short, except
to the extent that it earns interest or other income or gains on the segregated cash or liquid securities while also being subject
to the possibility of gain or loss from the securities sold short.
The Fund is said
to have a short position in the securities sold until it delivers to the broker-dealer the securities sold. 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.
The Fund will
realize a gain if the price of the securities declines between the date of the short sale and the date on which the Fund purchases
securities to replace the borrowed securities. On the other hand, the Fund will incur a loss if the price of the securities increases
between those dates. The amount of any gain will be decreased and the amount of any loss increased by any premium or interest that
the Fund may be required to pay in connection with the short sale. It should be noted that possible losses from short sales differ
from those that could arise from a cash investment in a security in that losses from a short sale may be limitless, while the losses
from a cash investment in a security cannot exceed the total amount of the investment in the security.
There is also
a risk that securities borrowed by the Fund and delivered to the buyer of the securities sold short will need to be returned to
the broker-dealer on short notice. If the request for the return of securities occurs at a time when other short sellers of the
security are receiving similar requests, a “short squeeze” can occur, meaning that the Fund might be compelled, at
the most disadvantageous time, to replace the borrowed securities with securities purchased on the open market, possibly at prices
significantly in excess of the proceeds received from the short sale.
It is possible
that the market value of the securities the Fund holds in long positions will decline at the same time that the market value of
the securities the Fund has sold short increases, thereby increasing the Fund’s potential volatility.
Rule 10a-1
under the Securities Exchange Act of 1934, as amended (“Exchange Act”) provides that exchange-traded securities can
be sold short only at a price that is higher than the last trade or the same as the last trade price if that price is higher than
the price of the previous reported trade. The requirements of Rule 10a-1 can delay, or in some cases prevent, execution of
short sales, resulting in opportunity costs and increased exposure to market action.
The Fund may
also make short sales “against the box,” meaning that at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or exchangeable, without payment of further consideration, for securities
of the same issue as, and in an amount equal to, the securities sold short. Short sales “against the box” result in
a “constructive sale” and require the Fund to recognize any taxable gain unless an exception to the constructive sale
rule applies.
The Fund will
not make a short sale of securities (other than a short sale “against the box”), if more than 20% of its net assets
would be deposited with brokers as collateral or allocated to segregated accounts in connection with all outstanding short sales
(other than short sales “against the box”).
Short
sales also may afford the Fund an opportunity to earn additional current income to the extent it is able to enter into arrangements
with broker-dealers through which the short sales are executed to receive income with respect to the proceeds of the short sales
during the period the Fund’s short positions remain open. Calamos believes that some broker-dealers may be willing to enter
into such arrangements, but there is no assurance that the Fund will be able to enter into such arrangements to the desired degree.
Further, the SEC and regulatory authorities in other jurisdictions may adopt (and in certain cases, have adopted) bans on short
sales of certain securities in response to market events.
Swaps, Caps, Floors and Collars
The
Fund may enter into interest rate, currency, index, credit default, total return and other swaps and the purchase or sale of related
caps, floors and collars. The Fund expects to enter into these transactions primarily as a hedge 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. A credit default swap is an agreement to transfer the credit exposure of fixed income
products between parties. 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 for the purchases.
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 swaps
and caps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary
portfolio security transactions. The Fund’s use of 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 caps could enhance the performance of the common shares by limiting certain leverage expenses. Buying 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 swaps or caps.
Swaps
and caps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss
with respect to swaps is limited to the net amount of 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
payments on the Fund’s leverage or offset certain losses in the portfolio. Depending on whether the Fund would be
entitled to receive net payments from the counterparty on the swap or cap, such a default could negatively impact the
performance of the common shares.
Although this
will not guarantee the counterparty does not default, the Fund will not enter into any swap, cap, floor or collar transaction unless,
at the time of entering into such transaction, the Fund believes that the counterparty has the financial resources to honor its
obligation under the transaction. Further, Calamos will continually monitor the financial stability of a counterparty to a swap
or cap transaction in an effort to proactively protect the Fund’s investments.
In addition,
at the time the 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.
If the Fund were
to issue preferred shares, the Fund may choose or be required to redeem some or all of the preferred shares or prepay any 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.
Such early termination of a swap could result in termination payment by or to the Fund.
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 certain other swaps.
In addition,
certain categories of interest rate and credit default swaps are, and more in the future will be, centrally cleared. Swaps that
are centrally-cleared are subject to the creditworthiness of the clearing organizations involved in the transaction. For example,
a swap investment by the Fund could lose margin payments deposited with the clearing organization, as well as the net amount of
gains not yet paid by the clearing organization, if the clearing organization breaches the swap agreement with the Fund or becomes
insolvent or goes into bankruptcy. Also, the Fund will be exposed to the credit risk of the FCM who acts as the Fund’s clearing
member on the clearinghouse for a centrally cleared swap. If the Fund’s futures commission merchant becomes bankrupt or insolvent,
or otherwise defaults on its obligations to the Fund, the Fund may not receive all amounts owed to it in respect of its trading,
even if the clearinghouse fully discharges all of its obligations. In the event of bankruptcy of the Fund’s FCM, the Fund
may be entitled to the net amount of gains the Fund is entitled to receive, plus the return of margin owed to it, only in proportion
to the amount received by the FCM’s other customers, potentially resulting in losses to the Fund.
Risks
Associated with Cleared Derivatives
The
CFTC requires that certain interest rate swaps and index credit default swaps be cleared through a central counterparty (“CCP”)
(unless an exception or exemption applies), and the CFTC may expand the types of swaps (e.g., certain foreign currency and commodity
swaps) subject to mandatory clearing. While the SEC has adopted rules establishing a framework for determining which security-based
swaps will be subject to mandatory clearing, no such clearing determination has been issued.
Where
the Fund enters into swaps subject to mandatory clearing, it may be required to clear such swaps at a CCP through a FCM acting
as clearing broker. The Fund will have to post initial margins to CCPs through FCMs or broker-dealers (in the U.S.) or other clearing
brokers (outside the U.S.), and for swaps cleared at CCPs that are U.S.-registered derivatives clearing organizations, such initial
margins will be held by such CCP and FCMs in segregated accounts under the CFTC rules. Such segregation is intended to protect
the initial margins of swap clearing customers from the claims of other creditors of a CCP or FCM. Furthermore, the CFTC rules implement the so-called “legally
segregated, operationally commingled” model for the segregation of swap clearing customer collateral on a customer-by-customer basis, which
is intended to protect each customer from the default of other customers of the FCM. Such segregation, however, will not protect
clearing customers like the Fund from any operational or fraud risk of a CCP or FCM with respect to the initial margin posted
to the CCP or FCM. In addition, the initial margins posted to a non-US CCP through a non-US clearing
broker may not even be segregated from the property of such CCP and/or clearing broker. The SEC has no final rules for the
treatment and protection of customer property, including initial margins, held by CCPs and broker-dealers.
In
addition, where the Fund enters into certain swaps subject to mandatory clearing, it may be required to execute such swaps on
a registered designated contract market or swap execution facility (“SEF”). The CFTC requires that certain interest
rate swaps and index credit default swaps be executed on a registered designated contract market or SEF, and registered designated
contract markets or SEFs may self-certify additional types of interest rate and index credit default swaps as subject to this
requirement. The SEC not yet adopted registration rules for security-based registered designated contract markets or SEFs
or a mandatory trade execution requirement for security-based swaps. In addition, certain foreign jurisdictions may impose clearing
and trade execution requirements that could apply to the Fund’s transactions with non-U.S. entities. While
the Fund may benefit from reduced counterparty credit and operations risk and pricing transparency resulting from these requirements,
it will incur additional costs in trading these swaps. In addition, while the Fund will attempt to execute, clear and settle these
swaps through entities Calamos believes to be sound, there can be no assurance that a failure by such an entity will not cause
a loss to the Fund.
Risks Associated
with Uncleared Derivatives
Where
the Fund enters into derivatives contracts that are not centrally cleared through a CCP, the Fund will become subject to the risk
that a counterparty will not perform its obligations under such contracts, either because of a dispute over the terms of the contract
(whether or not bona fide) or because of a credit or liquidity problem of the counterparty, thus causing the Fund to suffer a
loss. Such Where the Fund enters into derivatives contracts that are not centrally cleared through a CCP, the Fund will become
subject to the risk that a counterparty will not perform its obligations under such contracts, either because of a dispute over
the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem of the counterparty, thus causing
the Fund to suffer a loss. Such counterparty risk may be accentuated by the fact that the Fund may concentrate its transactions
with a single or small group of counterparties. In addition, in the case of a default, the Fund could become subject to adverse
market movements while seeking replacement transactions. The Fund is not restricted from dealing with any particular counterparty
or from concentrating any or all of its transactions with one counterparty. Certain of the swap counterparties may be entities
that are rated by recognized rating agencies. The Fund’s ability to transact business with any one or number of counterparties,
the possible lack of a meaningful and independent evaluation of such counterparties’ financial capabilities, and the absence
of a regulated market to facilitate settlement may increase the potential for losses by the Fund.
The
U.S. prudential regulators and the CFTC have adopted margin requirements for non-cleared swaps which apply to entities subject
to the jurisdiction of the prudential regulators and entities registered as swap dealers with the CFTC, respectively (in each
case, with respect to all non-cleared swaps entered into on or after March 1, 2017). While the Fund will not be directly
subject to these margin requirements, the Fund will be indirectly impacted by the margin requirements where its counterparty is
subject to such requirement. The Fund is required to exchange variation margin (in the form of cash, certain highly liquid securities
or gold) with its counterparties that are subject to the margin requirement (and, if contractually agreed, with any other counterparty)
to cover the cumulative daily mark-to-market change in value of the transaction since the last exchange of variation margin. The
amount of margin that must be posted and collected pursuant to these regulatory requirements may be determined on a net basis
(taking into account offsetting exposures) with respect to a portfolio of uncleared swaps and/or security-based swaps that are
governed by a master netting agreement that satisfies certain criteria. Mandatory initial margin requirements are also scheduled
to become effective, but such requirements apply only to swap dealers when trading with financial end users with “material
swaps exposure.” Given the anticipated volume of the Fund’s swap transactions, the Fund is not likely to have “material
swaps exposure” for purposes of these margin rules, and therefore does not expect to be subject to these initial margin
requirements. In addition, the U.S. prudential regulators’ margin rules apply to non-cleared security-based swaps entered
into by security-based swap dealers that are subject to their jurisdiction, and the SEC has proposed but not yet adopted final
margin rules for security-based swap dealers that are not subject to the jurisdiction of prudential regulators.
To
the extent that the Fund’s swap dealer counterparty collects margin from the Fund on its uncleared swaps and security-based
swaps, such margin is held in an account at the Fund’s custodian in which the swap dealer has a security interest. The custodian
may fail to segregate such assets or collateral properly. In either case, in the event of the bankruptcy or insolvency of any
custodian or counterparty, the Fund’s assets and collateral may be subject to the conflicting claims of the creditors of
the relevant custodian or counterparty, and the Fund may be exposed to the risk of a court treating the Fund as a general unsecured
creditor of such custodian or counterparty, rather than as the owner of such assets or collateral.
In
addition, uncleared OTC derivative instruments can generally be closed out only by negotiation with the counterparty, which may
expose the Fund to liquidity risk. There can be no assurance that a liquid secondary market will exist for any particular derivative
instrument at any particular time, including for those derivative instruments that were originally categorized as liquid at the
time they were acquired by the Fund. In volatile markets, the Fund may not be able to close out a position without incurring a
significant amount of loss. In addition, the Fund may not be able to convince its counterparty to consent to an early termination
of an OTC derivative contract or may not be able to enter into an offsetting transaction to effectively unwind the transaction.
Such OTC derivative contracts generally are not assignable except by agreement between the parties, and a counterparty typically
has no obligation to permit assignments. Even if the Fund’s counterparty agrees to early termination of OTC derivatives
at any time, doing so may subject the Fund to certain early termination charges.
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 term “structured products” as used herein
excludes synthetic convertibles and interest rate transactions. 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. 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 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 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 may be no active trading market for structured products.
As a result, certain structured products in which the Fund invests may be deemed illiquid. The Fund currently does not intend to
invest a significant amount of its assets in structured products.
“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. Reverse repurchase agreements involve the risk that the market value of securities
and/or other instruments purchased by the Fund with the proceeds received by the Fund in connection with such reverse repurchase
agreements may decline below the market value of the securities the Fund is obligated to repurchase under such reverse repurchase
agreements. They also involve the risk that the counterparty liquidates the securities delivered to it by the Fund under the reverse
repurchase agreement following the occurrence of an event of default under the applicable master repurchase agreement by the Fund.
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 securities (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 (i.e., any investment that the
Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale
or disposition significantly changing the market value of the investment). The Fund may invest without limit in Rule 144A
Securities determined to be liquid. Calamos, under the supervision of the Board of Trustees, will determine whether Rule 144A
Securities 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. 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.
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; cash; and repurchase agreements. If the Fund temporarily
uses a different investment strategy for defensive purposes, different factors could affect the Fund’s performance, and the
Fund may not achieve its investment objective.
Repurchase Agreements
As part of its
strategy for the temporary investment of cash, the Fund may enter into “repurchase agreements” with member banks of
the Federal Reserve System or primary dealers (as designated by the Federal Reserve Bank of New York) in such securities. A repurchase
agreement arises when the Fund purchases a security and simultaneously agrees to resell it to the vendor at an agreed upon future
date. The resale price is greater than the purchase price, reflecting an agreed upon market rate of return that is effective for
the period of time the Fund holds the security and that is not related to the coupon rate on the purchased security. Such agreements
generally have maturities of no more than seven days and could be used to permit the Fund to earn interest on assets awaiting long-term
investment. The Fund requires continuous maintenance by the custodian for the Fund’s account in the Federal Reserve/Treasury
Book Entry System of collateral in an amount equal to, or in excess of, the market value of the securities that are the subject
of a repurchase agreement. Repurchase agreements maturing in more than seven days are considered illiquid securities. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the
underlying security and losses, including: (a) possible decline in the value of the underlying security during the period
while the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during
this period; and (c) expenses of enforcing its rights.
Preferred Shares
The
Fund may invest in preferred shares. The preferred shares that the Fund will invest in will typically be convertible securities.
Preferred shares are equity securities, but they have many characteristics of fixed income securities, such as a fixed dividend
payment rate and/or a liquidity preference over the issuer’s common shares.
Real Estate Investment Trusts (“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 and gains distributed
to shareholders provided they comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”).
The Fund will indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in
addition to the expenses paid by the Fund. Debt securities issued by REITs are, for the most part, general and unsecured obligations
and are subject to risks associated with REITs.
Investing in
REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general.
An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected
by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent
upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings
and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying
assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated
with such industry.
REITs (especially
mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT’s investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT’s investment in
fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on
which are reset periodically, yields on a REIT’s investments in such loans will gradually align themselves to reflect changes
in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
REITs may have
limited financial resources, may utilize significant amounts of leverage, 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 (including
ETFs)
The Fund may
invest in the securities of other investment companies, including ETFs, to the extent that such investments are consistent with
the Fund’s investment objective and policies and permissible under the 1940 Act. Under the 1940 Act, the Fund generally 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, (iii) more than 5% of the
Fund’s total assets would be invested in any one investment company, or (iv) such purchase would result in more than
10% of the total outstanding voting securities of a registered closed-end investment company being held by the Fund and other investment
companies advised by Calamos. These limitations do not apply to the purchase of shares of money market funds or any investment
company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment
company, or to purchases of investment companies made in accordance with SEC exemptive relief or rule.
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.
Dodd-Frank Act and Other Derivatives
Regulations
The financial
crisis in both the U.S. and global economies over the past several years, including the European sovereign debt crisis, has resulted,
and may continue to result, in an unusually high degree of volatility in the financial markets and the economy at large. Both domestic
and international equity and fixed income markets have been experiencing heightened volatility and turmoil, with issuers that have
exposure to the real estate, mortgage and credit markets particularly affected. It is uncertain how long these conditions will
continue.
In addition to
the recent unprecedented turbulence in financial markets, the reduced liquidity in credit and fixed income markets may negatively
affect many issuers worldwide. Reduced liquidity in these markets may mean there is less money available to purchase raw materials,
goods and services, which may, in turn, bring down the prices of these economic staples. It may also result in some issuers having
more difficulty obtaining financing and ultimately may lead to a decline in their stock prices. The values of some sovereign debt
and of securities of issuers that hold that sovereign debt have fallen. These events and the potential for continuing market turbulence
may have an adverse effect on the Fund. In addition, global economies and financial markets are becoming increasingly interconnected,
which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country
or region.
Continuing uncertainty
as to the status of the Euro and the European Monetary Union (“EMU”) and the potential for certain countries to withdraw
from the institution has created significant volatility in currency and financial markets generally. Any partial or complete dissolution
of the EMU could have significant adverse effects on currency and financial markets, and on the values of the Fund’s portfolio
investments.
The U.S. federal
government and certain foreign central banks have acted to calm credit markets and increase confidence in the U.S. and world economies.
Certain of these entities have injected liquidity into the markets and taken other steps in an effort to stabilize the markets
and grow the economy. The ultimate effect of these efforts is, of course, not yet known. Changes in government policies may exacerbate
the market’s difficulties and the withdrawal of this support, or other policy changes by governments or central banks, could
negatively affect the value and liquidity of certain securities.
The
situation in the financial markets has led to calls for increased regulation, and the need of many financial institutions for
government help has given lawmakers and regulators new leverage. The Dodd-Frank Act initiated a dramatic revision of the U.S.
financial regulatory framework that is expected to continue to unfold over several years. The Dodd-Frank Act covers a broad range
of topics, including (among many others) a reorganization of federal financial regulators; a process intended to improve financial
systemic stability and the resolution of potentially insolvent financial firms; new rules for derivatives trading; the creation
of the Consumer Financial Protection Bureau; the registration and additional regulation of hedge and private equity fund managers;
and new federal requirements for residential mortgage loans. Instruments in which the Fund may invest, or the issuers of such
instruments, may be affected by the new legislation and regulation in ways that may be unforeseeable. Because these requirements
are relatively new and evolving (and some of the rules are not yet final), their ultimate impact remains unclear.
The
statutory provisions of the Dodd-Frank Act significantly change in several respects the ways in which investment products are
marketed, sold, settled or terminated. In particular, the Dodd-Frank Act mandates the elimination of references to credit
ratings in numerous securities laws, including the 1940 Act. Transactions in some types of swaps (including interest rate
swaps and credit default index swaps on North American and European indices) are required to be centrally cleared.
Clearinghouses and futures commission merchants have broad rights to increase margin requirements for existing cleared
transactions or to terminate cleared transactions at any time. Any increase in margin requirements or termination by the
clearing member or the clearinghouse may have an effect on the performance of the Fund.
Under
rules adopted under the Dodd-Frank Act, certain cleared derivatives contracts are required to be executed through swap execution
facilities (“SEFs”). A SEF is a trading platform where multiple market participants can execute derivatives by accepting
bids and offers made by multiple other participants in the platform. Such requirements may make it more difficult and costly for
investment funds, such as the Fund, to enter into highly tailored or customized transactions. Trading swaps on a SEF may offer
certain advantages over traditional bilateral over-the-counter trading, such as ease of execution, price transparency, increased
liquidity and/or favorable pricing. Execution through a SEF is not, however, without additional costs and risks, as parties are
required to comply with SEF and CFTC rules and regulations, including disclosure and recordkeeping obligations, and SEF rights
of inspection, among others. SEFs typically charge fees, and if the Fund executes derivatives on a SEF through a broker intermediary,
the intermediary may impose fees as well. The Fund also may be required to indemnify a SEF, or a broker intermediary who executes
swaps on a SEF on the Fund’s behalf, against any losses or costs that may be incurred as a result of the Fund’s transactions
on the SEF. In addition, the Fund may be subject to execution risk if it enters into a derivatives transaction that is required
to be cleared, and no clearing member is willing to clear the transaction on the Fund’s behalf. In that case, the transaction
might have to be terminated, and the Fund could lose some or all of the benefit of any increase in the value of the transaction
after the time of the trade.
The European
Union (and some other countries) are implementing similar requirements that will affect the Fund when it enters into derivatives
transactions with a counterparty organized in that country or otherwise subject to that country’s derivatives regulations.
The new requirements
may result in increased uncertainty about counterparty credit risk, and they may also limit the flexibility of the Fund to protect
its interests in the event of an insolvency of a derivatives counterparty. In the event of a counterparty’s (or its affiliate’s)
insolvency, the Fund’s ability to exercise remedies, such as the termination of transactions, netting of obligations and
realization on collateral, could be stayed or eliminated under new special resolution regimes adopted in the United States, the
European Union and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when
a financial institution is experiencing financial difficulty. In particular, with respect to counterparties who are subject to
such proceedings in the European Union, the liabilities of such counterparties to the Fund could be reduced, eliminated, or converted
to equity in such counterparties (sometimes referred to as a “bail in”).
Additionally,
U.S. regulators, the European Union and certain other jurisdictions have adopted minimum margin and capital requirements for uncleared
derivatives transactions. It is expected that these regulations will have a material impact on the Fund’s use of uncleared
derivatives. These rules will impose minimum margin requirements on derivatives transactions between the Fund and its swap
counterparties and may increase the amount of margin the Fund is required to provide. They will impose regulatory requirements
on the timing of transferring margin. The Fund is subject to variation margin requirements under such rules and the Fund
may become subject to initial margin requirements.
The
CFTC and U.S. futures exchanges have established limits, referred to as “position limits,” on the maximum net long
or net short positions which any person may own or control in certain futures and options contracts. In addition, starting January 1,
2023 federal position limits will apply to swaps that are economically equivalent to futures contracts that are subject to CFTC
set speculative limits. All positions owned or controlled by the same person or entity, even if in different accounts, must be
aggregated for purposes of determining whether the applicable position limits have been exceeded. Thus, even if the Fund does
not intend to exceed applicable position limits, it is possible that different clients managed by the Adviser may be aggregated
for this purpose. Any modifications of trading decisions or elimination of open positions that may be required to avoid exceeding
such limits may adversely affect the performance of the Fund.
In
October 2020, the SEC adopted Rule 18f-4 under the 1940 Act, which, once effective, will apply to the Fund’s use
of derivative investments and certain financing transactions (e.g., reverse repurchase agreements). Among other things, Rule 18f-4
will require funds that invest in derivative instruments beyond a specified limited amount to apply a value-at-risk based limit
to their use of certain derivative instruments and financing transactions and to adopt and implement a derivatives risk management
program. A fund that uses derivative instruments (beyond certain currency and interest rate hedging transactions) in a limited
amount will not be subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, funds
will no longer be required to comply with the asset segregation framework arising from prior SEC guidance for covering certain
derivative instruments and related transactions. Compliance with Rule 18f-4 will not be required until August 2022.
As the Fund comes into compliance, the approach to asset segregation and coverage requirements described in this SAI will be impacted.
These
and other new rules and regulations could, among other things, further restrict the Fund’s ability to engage in, or
increase the cost to the Fund of, derivatives transactions, for example, by making some types of derivatives no longer available
to the Fund or otherwise limiting liquidity. This may result in changes to the Fund’s principal investment strategies and
could adversely affect the Fund’s performance and its ability to achieve its investment objective.
Because the situation
in the markets is widespread and largely unprecedented, it may be unusually difficult to identify both risks and opportunities
using past models of the interplay of market forces, or to predict the duration of these market conditions.
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). As long as preferred shares are outstanding, the investment restrictions
cannot be changed without the approval of a majority of the outstanding common and preferred shares, voting together as a class,
and the approval of a majority of the outstanding preferred shares, voting separately by class.
The Fund may not:
|
(1)
|
Issue senior securities, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder.
|
|
(2)
|
Borrow money, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder.
|
|
(3)
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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.
|
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(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 plus any senior securities representing indebtedness. Currently under the 1940 Act, the Fund
is not permitted to issue senior securities representing 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 generally 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, except
that dividends may be declared upon any preferred shares if such indebtedness has an asset coverage of at least 200% at the time
of declaration thereof after deducting the amount of the dividend. This limitation does not apply to certain privately placed debt.
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
interpretive positions of the SEC, the Fund may not have on loan at any 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.
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 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, (3) more than 5% of the Fund’s total assets would be invested in any one investment
company, or (4) such purchase would result in more than 10% of the total outstanding voting securities of a registered
closed-end investment company being held by the Fund and any other registered investment companies advised by Calamos. These
limitations do not apply, however, to the purchase of shares of money market funds or of any investment company in connection
with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company, or
to purchases of investment companies made in accordance with SEC exemptive relief or rule. 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 “Certain Federal Income Tax Matters.”
As a non-fundamental
policy, the Fund may not issue preferred shares, borrow money and/or issue debt securities with an aggregate liquidation preference
and aggregate principal amount exceeding 38% of the Fund’s managed assets measured at the time of borrowing or issuance of
the new securities. Investments of short sale proceeds and economic leverage through derivatives are not considered borrowings.
The Fund presently
utilizes leverage through its outstanding borrowings pursuant to the SSB Agreement, and its issuance of mandatory redeemable preferred
shares. See the prospectus (under the caption “Leverage”) for more information about the Fund’s present activities
related to the issuance of senior securities and the borrowing of money.
MANAGEMENT OF THE FUND
Trustees and Officers
The Fund’s
Board of Trustees provides broad oversight 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 year of birth, positions held with the
Fund, term of office and length of service and principal occupations during the past five years. Asterisks indicate 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 (26 U.S. registered investment portfolios) for which Calamos serves as investment adviser (collectively,
the “Calamos Funds”). The address for all Independent and Interested Trustees and all officers of the Fund is 2020
Calamos Court, Naperville, Illinois 60563.
Trustees Who Are Interested Persons
of the Fund:
NAME AND
YEAR OF BIRTH
|
POSITION(S) AND
LENGTH
OF
TIME
WITH FUND
|
|
PORTFOLIOS IN
FUND COMPLEX^
OVERSEEN
|
|
PRINCIPAL
OCCUPATION(S)
DURING
THE PAST 5 YEARS
AND
OTHER DIRECTORSHIPS
|
John P. Calamos, Sr. (1940)*
|
Chairman, Trustee and President (since 2004) Term Expires 2023 Co-Portfolio Manager (since
inception)
|
|
26
|
|
Founder, Chairman, and Global Chief Investment Officer, Calamos Asset Management, Inc.
(“CAM”), Calamos Investments LLC (“CILLC”), Calamos Advisors LLC and its predecessor (“Calamos
Advisors”) and Calamos Wealth Management LLC (“CWM”); Director, CAM; and previously Chief Executive Officer,
Calamos Financial Services LLC and its predecessor (“CFS”), CAM, CILLC, Calamos Advisors and CWM
|
|
|
|
|
|
|
Trustees Who Are Not Interested Persons of the Fund:
|
|
|
|
|
|
|
|
|
|
John E. Neal (1950)
|
Trustee (since 2004); Lead Independent Trustee (since July 2019) Term Expires 2021
|
|
26
|
|
Retired; private investor; Director, Equity Residential Trust (publicly-owned REIT); Director, Creation Investments
(private international microfinance company); Director, Centrust Bank (Northbrook, Illinois community bank); Director,
Neuro-ID (private company providing prescriptive analytics for the risk industry); Partner, Linden LLC (health care private
equity) (until 2018)
|
NAME AND
YEAR OF BIRTH
|
POSITION(S) AND
LENGTH OF
TIME WITH FUND
|
|
PORTFOLIOS IN
FUND COMPLEX^
OVERSEEN
|
|
PRINCIPAL
OCCUPATION(S)
DURING THE PAST 5 YEARS
AND OTHER DIRECTORSHIPS
|
William R. Rybak (1951)
|
Trustee (since 2004) Term Expires 2023
|
|
26
|
|
Private investor; Chairman (since 2016) and Director (since 2010), Christian Brothers
Investment Services Inc.; Trustee, JNL Series Trust, JNL Investors Series Trust and JNL Variable Fund LLC (since
2007); and Jackson Variable Series Trust (since 2018), JNL Strategic Income Fund LLC (2007-2018) (open-end mutual funds)
**; Trustee, Lewis University (since 2012); formerly Director, Private Bancorp (2003-2017); Executive Vice President and Chief
Financial Officer, Van Kampen Investments, Inc. and subsidiaries (investment manager) (until 2000)
|
|
|
|
|
|
|
Virginia G. Breen (1964)
|
Trustee (since 2015)
Term Expires 2022
|
|
26
|
|
Private investor; Director, Paylocity Holding Corporation (since 2018); Trustee, Neuberger
Berman Private Equity Registered Funds (registered private equity funds) (since 2015)***; Trustee, Jones Lang LaSalle Income
Property Trust, Inc. (REIT) (since 2004); Director, UBS A&Q Fund Complex (closed-end funds) (since 2008)****
|
|
|
|
|
|
|
Lloyd A. Wennlund (1957)
|
Trustee (since 2018)
Term Expires 2022
|
|
26
|
|
Trustee and Chairman, Datum One
Series Trust (since 2020); Expert Affiliate, Bates Group, LLC (financial services consulting and expert testimony
firm) (since 2018); Executive Vice President, The Northern Trust Company (1989-2017); President and Business Unit Head
of Northern Funds and Northern Institutional Funds (1994-2017); Director, Northern Trust Investments (1998-2017); Governor
(2004-2017) and Executive Committee member (2011-2017), Investment Company Institute Board of Governors; Member,
Securities Industry Financial Markets Association (SIFMA) Advisory Council, Private Client Services Committee and Private
Client Steering Group (2006-2017); Board Member, Chicago Advisory Board of the Salvation Army (2011-2019)
|
NAME AND
YEAR OF BIRTH
|
POSITION(S) AND
LENGTH OF TIME WITH FUND
|
|
PORTFOLIOS IN FUND
COMPLEX^
OVERSEEN
|
|
PRINCIPAL
OCCUPATION(S)
DURING
THE PAST 5 YEARS
AND OTHER DIRECTORSHIPS
|
Karen L. Stuckey (1953)
|
Trustee (since December 2019) Term Expires 2021
|
|
26
|
|
Member (since 2015) of Desert Mountain Community
Foundation Advisory Board (non-profit organization); Partner (1990-2012) of PricewaterhouseCoopers LLP (professional services
firm) (held various positions 1975-1990); member of Executive, Nominating and Audit Committees and Chair of Finance Committee
(1992-2006), and Emeritus Trustee (since 2007) of Lehigh University; Member, Women’s Investment Management Forum
(professional organization)(since inception); formerly, Trustee, Denver Board of OppenheimerFunds (open-end mutual funds)
(2012-2019)
|
|
|
|
|
|
|
Christopher M. Toub (1959)
|
Trustee (since December 2019) Term Expires 2023
|
|
26
|
|
Private investor; formerly Director of Equities,
AllianceBernstein LP (until 2012)
|
*
|
Mr. Calamos, Sr. is an “interested person” of the Fund as defined in
the 1940 Act because he is an officer of the Fund and an affiliate of Calamos and CFS.
|
**
|
Overseeing 131 portfolios in fund complex.
|
***
|
Overseeing eighteen portfolios in fund
complex.
|
****
|
Overseeing four portfolios in fund complex.
|
^
|
The Fund Complex consists of Calamos Investment Trust,
Calamos Advisors Trust, Calamos Convertible Opportunities and Income Fund, Calamos Convertible and High Income Fund, Calamos Strategic
Total Return Fund, Calamos Global Total Return Fund, Calamos Global Dynamic Income Fund, Calamos Dynamic Convertible and Income
Fund, and Calamos Long/Short Equity & Dynamic Income Trust.
|
Officers.
The preceding table gives information about Mr. John P. Calamos, Sr., who is Chairman, Trustee and President of the Fund.
The following table sets forth each other officer’s name and year of birth, position with the Fund and date first appointed
to that position, and principal occupation(s) during the past five years.
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.
NAME
AND YEAR OF BIRTH
|
|
POSITION(S) WITH
FUND
|
|
PRINCIPAL
OCCUPATION(S) DURING PAST 5 YEARS
|
|
|
|
|
|
Robert F. Behan
(1964)
|
|
Vice President
(since 2013)
|
|
Executive Vice President and Chief
Distribution Officer (since February 2021), CAM, CILLC, Calamos Advisors and CFS; prior thereto, President (2015- February
2021); Head of Global Distribution (2013-February 2021); Executive Vice President (2013-2015); Senior Vice President (2009-2013);
Head of US Intermediary Distribution (2010-2013)
|
|
|
|
|
|
Thomas E. Herman
(1961)
|
|
Vice President
(since 2016) and Chief Financial Officer (2016-2017 and since August 2019)
|
|
Executive Vice
President (since February 2021) and Chief Financial Officer, CAM, CILLC, Calamos Advisors and CWM (since 2016); Chief
Financial Officer and Treasurer, Harris Associates (2010-2016)
|
|
|
|
|
|
John S. Koudounis
(1966)
|
|
Vice President
(since 2016)
|
|
President (since February 2021)
and Chief Executive Officer, CAM, CILLC, Calamos, CWM, and CFS (since 2016); Director, CAM (since 2016); President and
Chief Executive Officer (2010-2016), Mizuho Securities USA Inc.
|
|
|
|
|
|
J. Christopher
Jackson (1951)
|
|
Vice President
and Secretary (since 2010)
|
|
Senior Vice President, General Counsel
and Secretary, CAM, CILLC, Calamos, CWM and CFS (since 2010); Director, Calamos Global Funds plc (since 2011)
|
|
|
|
|
|
Mark J. Mickey
(1951)
|
|
Chief Compliance
Officer (since 2005)
|
|
Chief Compliance
Officer, Calamos Funds (since 2005)
|
|
|
|
|
|
Stephen Atkins
(1965)
|
|
Treasurer (since
March 2020)
|
|
Senior Vice President, Head of Fund
Administration, Calamos Advisors (since February 2020); prior thereto, Consultant, Fund Accounting and Administration,
Vx Capital Partners (March 2019-February 2020); Chief Financial Officer and Treasurer of SEC Registered Funds, and
Senior Vice President, Head of European Special Purpose Vehicles Accounting and Administration, Avenue Capital Group (2010-2018)
|
The
Fund’s Board of Trustees consists of seven members. In accordance with the Fund’s Agreement and Declaration of Trust,
the Board of Trustees is divided into three classes of approximately equal size. The terms of the trustees of the different classes
are staggered. The terms of John E. Neal and Karen L. Stuckey will expire at the annual meeting of shareholders in 2021. The terms
of Virginia G. Breen and Lloyd A. Wennlund will expire at the annual meeting of shareholders in 2022. The terms of John P. Calamos, Sr.,
William R. Rybak and Christopher M. Toub will expire at the annual meeting of shareholders in 2023. Such classification of the
Trustees may prevent the replacement of a majority of the Trustees for up to a two year period. Each of the Fund’s officers
serves until his or her successor is chosen and qualified or until his or her resignation or removal by the Board of Trustees.
In connection with the issuance of the MRP Shares, Mr. Rybak and Ms. Breen were designated as the Trustees who represent
the holders of preferred shares of the Fund.
Committees of the Board of Trustees.
The Fund’s Board of Trustees currently has five standing committees:
Executive
Committee. Messrs. John P. Calamos, Sr. and John E. Neal 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. William R. Rybak (Chair), John E. Neal, Christopher M. Toub and Lloyd A. Wennlund and Mses. Virginia
G. Breen and Karen L. Stuckey, each a non-interested Trustee, serve on the Audit Committee. The Audit Committee operates under
a written charter adopted and approved by the Board, a copy of which is available on the Fund’s website, www.calamos.com.
The Audit Committee selects independent auditors, 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. Mses. Virginia G. Breen (Chair) and Karen L. Stuckey and Messrs. John E. Neal, William R. Rybak, Christopher
M. Toub and Lloyd A. Wennlund, each a non-interested Trustee, serve on the Governance Committee. The Governance Committee operates
under a written charter adopted by the Board, a copy of which is available on the Fund’s website, www.calamos.com.
The Governance Committee oversees the independence and effective functioning of the Board of Trustees and endeavors to be informed
about good practices for investment company 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 consider shareholder recommendations
regarding potential candidates for nomination as Trustees properly submitted to the Governance Committee for its consideration.
A Fund shareholder who wishes to nominate a candidate to the Fund’s Board of Trustees must submit any such recommendation
in writing via regular mail to the attention of the Fund’s Secretary, at the address of the Fund’s principal executive
offices. The shareholder recommendation must include:
|
•
|
the number and class of all Fund shares owned beneficially and of record by the nominating shareholder at the time the recommendation
is submitted and the dates on which such shares were acquired, specifying the number of shares owned beneficially;
|
|
•
|
a full listing of the proposed candidate’s education, experience (including knowledge of the investment company industry,
experience as a director or senior officer of public or private companies, and directorships on other boards of other registered
investment companies), current employment, date of birth, business and residence address, and the names and addresses of at least
three professional references;
|
|
•
|
information as to whether the candidate is, has been or may be an “interested person” (as such term is defined
in the 1940 Act) of the Fund, Calamos or any of its affiliates, and, if believed not to be or have been an “interested person,”
information regarding the candidate that will be sufficient for the Committee to make such determination;
|
|
•
|
the written and signed consent of the candidate to be named as a nominee and to serve as a Trustee of the Fund, if elected;
|
|
•
|
a description of all arrangements or understandings between the nominating shareholder, the candidate and/or any other person
or persons (including their names) pursuant to which the shareholder recommendation is being made, and if none, so specify;
|
|
•
|
the class or series and number of all shares of the Fund owned of record or beneficially by the candidate, as reported by the
candidate; and
|
|
•
|
such other information that would be helpful to the Governance Committee in evaluating the candidate.
|
The Governance
Committee may require the nominating shareholder to furnish other information it may reasonably require or deem necessary to verify
any information furnished pursuant to the procedures delineated above or to determine the qualifications and eligibility of the
candidate proposed by the nominating shareholder to serve as a Trustee. If the nominating shareholder fails to provide such additional
information in writing within seven days of receipt of a written request from the Governance Committee, the recommendation of such
candidate as a nominee will be deemed not properly submitted for consideration, and the Governance Committee is not required to
consider such candidate.
Unless
otherwise specified by the Governance Committee’s chairman or by legal counsel to the non-interested Trustees, the
Trust’s Secretary will promptly forward all shareholder recommendations to the Governance Committee’s chairman
and the legal counsel to the non-interested Trustees, indicating whether the shareholder recommendation has been properly
submitted pursuant to the procedures adopted by the Governance Committee for the consideration of trustee candidates
nominated by shareholders.
Recommendations
for candidates as trustees will be evaluated, among other things, in light of whether the number of Trustees is expected to change
and whether the Trustees expect any vacancies. During periods when the Governance Committee is not actively recruiting new Trustees,
shareholder recommendations will be kept on file until active recruitment is under way. After consideration of a shareholder recommendation,
the Governance Committee may dispose of the shareholder recommendation.
Except
to the extent that such requirements are waived by a majority of the Continuing Trustees (as defined in the Agreement and Declaration
of Trust) then in office at the time of nomination of such trustee, only persons satisfying the following qualification requirements
may be nominated, elected, appointed, qualified or seated (“nominated or seated”) to serve as trustee:
(A) An
individual nominated or seated as a trustee shall be at least twenty-one years of age and not older than the mandatory retirement
age determined from time to time by the trustees or a committee of the trustees, in each case at the time the individual is nominated
or seated.
(B) An
individual nominated or seated as a trustee shall, at the time the individual is nominated or seated, serve as a trustee or director
of no more than 5 investment companies (including the Fund) having securities registered under the Exchange Act (investment companies
or individual series thereof having the same investment adviser or investment advisers affiliated through a control relationship
shall all be counted as a single company for this purpose).
(C) An
individual nominated or seated as a trustee shall not serve or have served within the past 3 years as a trustee of any closed-end
investment company which, while such individual was serving as a trustee or within one year after the end of such service, ceased
to be a closed-end investment company registered under the 1940 Act, unless such individual was initially nominated for election
as a trustee by the board of trustees of such closed-end investment company or had served as a trustee since the inception of
such closed-end investment company.
(D) Except
as set forth in Section 4.6 of the By-Laws of the Fund, an individual nominated or seated as a trustee shall not be an employee,
officer, partner, member, trustee, director or 5% or greater shareholder in any investment adviser (other than the Fund’s
investment adviser or any investment adviser affiliated with the Fund’s investment adviser), collective investment vehicle
primarily engaged in the business of investing in “investment securities” (as defined in the 1940 Act) (an “investment
company”) or entity controlling or controlled by any investment adviser (other than the Fund’s investment adviser
or any investment adviser affiliated with the Fund’s investment adviser) or investment company.
(E) An
individual nominated or seated as a trustee shall not be and shall not have been subject to any censure, order, consent decree
(including consent decrees in which the respondent has neither admitted nor denied the findings) or adverse final action of any
federal, state or foreign governmental or regulatory authority (including self-regulatory organizations), barring or suspending
such individual from participation in or association with any investment-related business or restricting such individual’s
activities with respect to any investment-related business, nor shall an individual nominated or seated as a trustee be the subject
of any investigation or proceeding that could reasonably be expected to result in an individual nominated or seated as a trustee
failing to satisfy the requirements of this paragraph, nor shall any individual nominated or seated as a trustee be or have engaged
in any conduct that has resulted in, or could have reasonably been expected or would reasonably be expected to result in, the
Commission censuring, placing limitations on the activities, functions, or operations of, suspending, or revoking the registration
of any investment adviser under Section 203(e) or (f) of the Investment Advisers Act of 1940, as amended.
(F) An
individual nominated or seated as a trustee shall not have been charged (unless such charges were dismissed or the individual
was otherwise exonerated) with a criminal offense involving moral turpitude, dishonesty or breach of trust, or have been convicted
or have pled guilty or nolo contendere with respect to a felony under the laws of the United States or any state thereof.
(G) An
individual nominated or seated as a trustee shall not be and shall not have been the subject of any of the ineligibility provisions
contained in Section 9(b) of the 1940 Act that would permit, or could reasonably have been expected or would reasonably
be expected to permit, the Commission by order to prohibit, conditionally or unconditionally, either permanently or for a period
of time, such individual from serving or acting as an employee, officer, trustee, director, member of an advisory board, investment
adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person (as defined in Section 2(a)(3) of
the 1940 Act) of such investment adviser, depositor, or principal underwriter.
Dividend
Committee. Mr. John P. Calamos, Sr. serves as the sole member of the dividend committee and Mr. Rybak serves
as the liaison to the Dividend Committee for the non-interested Trustees. The Dividend Committee is authorized, subject to Board
review, to declare distributions on the Fund’s shares in accordance with the Fund’s distribution policies, including,
but not limited to, regular dividends, special dividends and short- and long-term capital gains distributions.
Valuation
Committee. Messrs. Lloyd A. Wennlund (Chair), John E. Neal, William R. Rybak and Christopher M. Toub and Mses. Virginia
G. Breen and Karen L. Stuckey, each a non-interested Trustee, serve on the Valuation Committee. The Valuation Committee is responsible
for overseeing the implementation of the valuation procedures adopted by the Board of Trustees. The members of the Valuation Committee
make recommendations to the Board of Trustees regarding valuation matters relating to the Fund.
In addition to
the above committees, there is a Board of Trustees directed pricing committee comprised of officers of the Fund and employees of
Calamos.
The
following table identifies the number of meetings the Board of Trustees and each standing committee held during the fiscal year
ended October 31, 2020.
|
|
Number of
Meetings During Fiscal
Year Ended October 31, 2020
|
|
Board of Trustees
|
|
12
|
|
Executive Committee
|
|
0
|
|
Audit Committee
|
|
4
|
|
Governance Committee
|
|
2
|
|
Dividend Committee(1)
|
|
0
|
|
Valuation Committee
|
|
4
|
|
(1) Although
the Dividend Committee held no meetings, it acted by written consent on 12 occasions.
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.
Leadership
Structure and Qualifications of the Board of Trustees. The Board of Trustees is responsible for oversight of the Fund. The
Fund has engaged Calamos to manage the Fund on a day-to-day basis. The Board of Trustees oversees Calamos and certain other principal
service providers in the operations of the Fund. The Board of Trustees is currently composed of seven members, six of whom are
non- interested trustees. The Board of Trustees meets in-person at regularly scheduled meetings four times throughout the year.
In addition, the Board may meet in-person or by telephone at special meetings or on an informal basis at other times. As described
above, the Board of Trustees has established five standing committees — Audit, Dividend, Executive, Governance and Valuation
— and may establish ad hoc committees or working groups from time to time, to assist the Board of Trustees in fulfilling
its oversight responsibilities. The non- interested trustees also have engaged independent legal counsel to assist them in fulfilling
their responsibilities. Such independent legal counsel also serves as counsel to the Fund.
The chairman
of the Board of Trustees is an “interested person” of the Fund (as such term is defined in the 1940 Act). The non-
interested trustees have appointed a lead independent trustee. The lead independent trustee serves as a liaison between Calamos
and the non-interested trustees and leads the non-interested trustees in all aspects of their oversight of the Fund. Among other
things, the lead independent trustee reviews and approves, with the chairman, the agenda for each board and committee meeting and
facilitates communication among the Fund’s non-interested trustees. The Trustees believe that the Board’s leadership
structure is appropriate given the characteristics and circumstances of the Fund. The Trustees also believe that this structure
facilitates the exercise of the Board’s independent judgment in fulfilling its oversight function and efficiently allocates
responsibility among committees.
The Board of
Trustees has concluded that, based on each Trustee’s experience, qualifications, attributes or skills on an individual basis
and in combination with those of the other Trustees, each Trustee should serve as a member of the Board. In making this determination,
the Board has taken into account the actual service of the Trustees during their tenure in concluding that each should continue
to serve. The Board also has considered each Trustee’s background and experience. Set forth below is a brief discussion of
the specific experience qualifications, attributes or skills of each Trustee that led the Board to conclude that he should serve
as a Trustee.
Each of Messrs. Calamos,
Neal and Rybak has served for more than ten years as a Trustee of the Fund. In addition, each of Mses. Breen and Stuckey and Messrs. Calamos,
Neal, Rybak, Toub and Wennlund has more than 25 years of experience in the financial services industry. Each of Mses. Breen and
Stuckey and Messrs. Calamos, Neal, Rybak and Wennlund has experience serving on boards of other entities, including other
investment companies. Each of Ms. Breen and Messrs. Calamos, Neal, Rybak and Toub has earned a Masters of Business Administration
degree.
Risk Oversight.
The operation of a registered investment company, including its investment activities, generally involves a variety of risks.
As part of its oversight of the Fund, the Board of Trustees oversees risk through various regular board and committee activities.
The Board of Trustees, directly or through its committees, reviews reports from, among others, Calamos, the Fund’s Compliance
Officer, the Fund’s independent registered public accounting firm, independent outside legal counsel, and internal auditors
of Calamos or its affiliates, as appropriate, regarding risks faced by the Fund and the risk management programs of Calamos and
certain service providers. The actual day-to-day risk management with respect to the Fund resides with Calamos and other service
providers to the Fund. Although the risk management policies of Calamos and the service providers are designed to be effective,
there is no guarantee that they will anticipate or mitigate all risks. Not all risks that may affect the Fund can be identified,
eliminated or mitigated and some risks simply may not be anticipated or may be beyond the control of the Board of Trustees or Calamos,
its affiliates or other service providers.
Compensation
of Officers and Trustees. John P. Calamos, Sr., the trustee who is an “interested person” of the Fund, does
not receive compensation from the Fund. Non-interested trustees are compensated by the Fund, but do not receive any pension or
retirement benefits from the Fund. Mr. Mickey is the only Fund officer who receives compensation from the Fund. The following
table sets forth the total compensation (including any amounts deferred, as described below) paid by the Fund during the fiscal
year ended October 31, 2020 to each of the current non-interested trustees and the one officer compensated by the Fund.
|
|
|
|
Name of Trustee
|
|
Aggregate
Compensation From
Fund
|
|
|
Total
Compensation From
Calamos Fund Complex(1)*
|
|
John P. Calamos, Sr
|
|
$
|
0
|
|
|
$
|
0
|
|
Virginia G. Breen
|
|
$
|
2,510
|
|
|
$
|
177,917
|
|
John E. Neal(1)
|
|
$
|
2,940
|
|
|
$
|
207,917
|
|
William R. Rybak
|
|
$
|
2,654
|
|
|
$
|
187,917
|
|
Karen L. Stuckey(2)
|
|
$
|
2,367
|
|
|
$
|
167,917
|
|
Christopher M. Toub(2)
|
|
$
|
2,367
|
|
|
$
|
167,917
|
|
Lloyd A. Wennlund
|
|
$
|
2,510
|
|
|
$
|
177,917
|
|
Mark J. Mickey
|
|
$
|
2,162
|
|
|
$
|
150,000
|
|
(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 portfolios of the Calamos Investment Trust as selected by the Trustee.
As of October 31, 2020, the value of the deferred compensation account of Mr. Neal
was $2,260,776.
|
(2)
|
Ms. Stuckey and Mr. Toub were elected to the Board effective December 16, 2019.
|
*
|
The Calamos Fund Complex consists of nine investment companies and each applicable series thereunder including the Fund, Calamos
Investment Trust, Calamos Advisors Trust, Calamos Convertible and High Income Fund, Calamos Convertible Opportunities and Income
Fund, Calamos Strategic Total Return Fund, Calamos Global Dynamic Income Fund, Calamos Dynamic Convertible and Income Fund and
Calamos Long/Short Equity & Dynamic Income Trust.
|
The
compensation paid to the non-interested trustees of the Calamos Funds for their services as such consists of an annual retainer
fee in the amount of $100,000, with annual supplemental retainers of $40,000 to the lead independent trustee, $20,000 to the chair
of the audit committee and $10,000 to the chair of any other standing committee. Each non-interested trustee also receives a meeting
attendance fee of $7,000 for any regular or special board meeting attended in person, $3,500 for any regular or special board
meeting attended by telephone, and $3,000 for any committee meeting attended in person or by telephone, and $1,500 per ad-hoc
committee meeting to the ad-hoc committee chair. Compensation paid to the non-interested trustees is allocated among the series
of the Calamos Funds in accordance with a procedure determined from time to time by the Board.
The
Fund has adopted a deferred compensation plan for non-interested trustees (the “Plan”). Under the Plan, a trustee
who is not an “interested person” of Calamos and has elected to participate in the Plan (“a participating trustee”)
may defer receipt of all or a portion of his or her compensation from the Fund in order to defer payment of income taxes or for
other reasons. The deferred compensation payable to the participating trustee is credited to the trustee’s deferred compensation
account as of the business day such compensation otherwise would have been paid to the trustee. The value of a trustee’s
deferred compensation account at any time is equal to what the value would be if the amounts credited to the account had instead
been invested in Class I shares of one or more of the funds 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 annual 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. Each Calamos Fund’s obligation to make payments under the Plan is a general obligation of that Fund. No Fund
is liable for any other Fund’s obligations to make payments under the Plan.
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, 2020. The value of the shares held, are stated
in ranges in accordance with the requirements of the SEC. 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.
Name
of Trustee
|
|
|
Dollar
Range of Equity
Securities in the Fund
|
|
|
|
Aggregate
Dollar Range of Equity
Securities in all Registered
Investment Companies Overseen
by Trustee in the Calamos Funds
|
|
John P. Calamos, Sr.(1)(2)
|
|
|
Over
$100,000
|
|
|
|
Over
$100,000
|
|
|
|
|
|
|
|
|
|
|
Virginia G. Breen
|
|
|
None
|
|
|
|
Over
$100,000
|
|
|
|
|
|
|
|
|
|
|
John E. Neal
|
|
|
Over
$100,000
|
|
|
|
Over
$100,000
|
|
|
|
|
|
|
|
|
|
|
William R. Rybak
|
|
|
None
|
|
|
|
Over
$100,000
|
|
|
|
|
|
|
|
|
|
|
Karen L. Stuckey
|
|
|
None
|
|
|
|
Over
$100,000
|
|
|
|
|
|
|
|
|
|
|
Christopher M. Toub
|
|
|
None
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
Lloyd A. Wennlund
|
|
|
None
|
|
|
|
Over
$100,000
|
|
(1)
|
Pursuant to Rule 16a-1(a)(2) of the Exchange Act, John P. Calamos, Sr. may be deemed to have indirect beneficial
ownership of Fund shares held by Calamos Investments LLC, its subsidiaries, and its parent companies (Calamos Asset Management, Inc.
and Calamos Partners LLC, and its parent company Calamos Family Partners, Inc.) due to his direct or indirect ownership interest
in those entities. As a result, these amounts reflect any holdings of those entities in addition to the individual, personal accounts
of John P. Calamos, Sr.
|
(2)
|
Indicates an “interested person” of the Trust, as defined in the 1940 Act.
|
Code
of Ethics. The Fund and Calamos have adopted a code of ethics under Rule 17j-1 under 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. Text only versions of the code of ethics can be viewed online or downloaded from the EDGAR Database
on the SEC’s internet website at www.sec.gov.
Proxy
Voting Procedures. The Fund has delegated proxy voting responsibilities to Calamos, subject to the board of trustees’
general oversight. The Fund expects Calamos to vote proxies related to the Fund’s portfolio securities for which
the Fund has voting authority consistent with the Fund’s best interests. Calamos has adopted its own Proxy Voting
Policies and Procedures (the “Policies”). The Policies address, among other things, conflicts of interest that may
arise between the Fund’s interests, and the interests of Calamos and its affiliates.
The
following is a summary of the Policies used by Calamos in voting proxies.
To
assist it in voting proxies, Calamos has established a Proxy Review Committee (“committee”) comprised of
members of its Portfolio Management (which may include portfolio managers and/or research analysts), Operations, Legal and Compliance
Departments. The committee and/or its members will vote proxies using the following guidelines.
In
general, if Calamos believes that a company’s management and board have interests sufficiently aligned with the
Fund’s interest, Calamos will vote in favor of proposals recommended by the company’s board. More specifically,
Calamos seeks to ensure that the board of directors of a company is sufficiently aligned with security holders’
interests and provides proper oversight of the company’s management. In many cases this may be best accomplished by having
a majority of independent board members. Calamos generally prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors.
Because
of the enormous variety and complexity of transactions that are presented to shareholders, such as mergers, acquisitions, reincorporations,
adoptions of anti-takeover measures (including adoption of a shareholder rights plan, requiring supermajority voting on particular
issues, adoption of fair price provisions, issuance of blank check preferred stocks and the creation of a separate class of stock
with unequal voting rights), changes to capital structures (including authorizing additional shares, repurchasing stock or approving
a stock split), executive compensation and option plans, that occur in a variety of industries, companies and market cycles, it
is extremely difficult to foresee exactly what would be in the best interests of a Fund in all circumstances. Moreover, voting
on such proposals involves considerations unique to each transaction. Accordingly, Calamos will vote on a case-by-case
basis on proposals presenting these transactions.
Calamos has assigned its administrative duties with respect to the proxy analysis and voting decisions to the “Proxy Group”
(the Investment team – research analysts and portfolio management), and administrative processing to its Corporate Actions
Group within the Operations Department. To assist it in analyzing the proxy proposals, Calamos subscribes to Glass Lewis, an unaffiliated
third-party corporate governance research service that provides in-depth analyses of shareholder meeting agendas and voting recommendations.
Glass Lewis facilitates the voting of each proxy by applying Calamos’ custom proxy voting rules (“proxy voting
policy”) to the proposal(s). Any proxy proposal that is not covered by the proxy voting policy is reviewed and considered
by the Proxy Group and voted in accordance with that review.
Finally,
Calamos has established procedures to identify potential conflicts of interests that might arise when voting proxies
for the Fund. Calamos will generally apply its proxy voting policy to proxy proposals regardless if a conflict has been identified.
However, in these situations, the Proxy Group will refer the proxy proposal, along with the recommended course of action, if any,
to the Proxy Review Committee (“committee”) for evaluation. The committee will independently review the proposals
and determine the appropriate action to be taken. The committee will then memorialize the conflict and the procedures used to
address the conflict.
The
Fund is required to file with the SEC its complete proxy voting record for the 12-month period ending June 30, by no
later than August 31 of each year. The Fund’s proxy voting record for the most recent 12-month period ending
June 30 is available by August 31 of each year (1) on the SEC’s website at www.sec.gov, and
(2) without charge, upon request, by calling 800-582-6959.
You
may obtain a copy of Calamos’ Policies by calling 800.582.6959, by visiting Calamos’ website at www.calamos.com,
by writing Calamos at: Calamos Investments, Attn: Client Services, 2020 Calamos Court, Naperville,
IL 60563, and on the SEC’s website at www.sec.gov.
Investment Adviser and Investment
Management Agreement
Subject to the
overall supervision and review of the Board of Trustees, Calamos provides the Fund with investment research, advice and supervision
and furnishes continuously an investment program for the Fund, consistent with the investment objective and policies of 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 Fund’s business and affairs 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 SEC and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy materials, registration statements on Form N-2
and amendments thereto, and reports on Form N-CEN 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 returns 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 computed weekly and payable
monthly in arrears. The fee paid by the Fund is set at the annual rate of 1.00% of the Fund’s average weekly managed assets.
Because the management fees paid to Calamos are based upon a percentage of the Fund’s managed assets, the amount of management
fees paid to Calamos when the Fund uses leverage will be higher than if the Fund did not use leverage. Therefore, Calamos has a
financial incentive to use leverage, which creates a conflict of interest between Calamos and the Fund’s common shareholders.
Subject to the oversight of the Board, Calamos intends to use leverage only when it believes it will serve the best interests of
the Fund’s common shareholders.
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 Calamos’ overhead or employee costs); (b) fees
payable to Calamos; legal expenses; (d) auditing and accounting expenses; (e) maintenance of books and records that
are required to be maintained by the Fund’s custodian or other agents of the Fund; (f) telephone, telex, facsimile,
postage and other communications expenses; (g) taxes and governmental fees; (h) fees, dues and expenses incurred by
the Fund in connection with membership in investment company trade organizations and the expense of attendance at professional
meetings of such organizations; (i) fees and expenses of accounting agents, custodians, subcustodians, transfer agents, dividend
disbursing agents and registrars; (j) payment for portfolio pricing or valuation services to pricing agents, accountants,
bankers and other specialists, if any; (k) expenses of preparing share certificates; (l) expenses in connection with
the issuance, offering, distribution, sale, redemption or repurchase of securities issued by the Fund; (m) expenses relating
to investor and public relations provided by parties other than Calamos; (n) expenses and fees of registering or qualifying
shares of beneficial interest of the Fund for sale; (o) interest charges, bond premiums and other insurance expenses; (p) freight,
insurance and other charges in connection with the shipment of the Fund’s portfolio securities; (q) the compensation
and all expenses (specifically including travel expenses relating to Fund business) of Trustees, officers and employees of the
Fund who are not affiliated persons of Calamos; (r) brokerage commissions or other costs of acquiring or disposing of any
portfolio securities of the Fund; (s) expenses of printing and distributing reports, notices and dividends to shareholders;
(t) expenses of preparing and setting in type, printing and mailing prospectuses and statements of additional information
of the Fund and supplements thereto; (u) costs of stationery; (v) any litigation expenses; (w) indemnification
of Trustees and officers of the Fund; (x) costs of shareholders’ and other meetings; (y) interest on borrowed
money, if any; and (z) the fees and other expenses of listing the Fund’s shares on Nasdaq or any other national stock
exchange.
For
the fiscal years ended October 31, 2018, October 31, 2019 and October 31, 2020 the Fund incurred $1,663,513, $1,512,752
and $1,469,437 respectively, in advisory fees.
The investment
management agreement had an initial term ending August 1, 2006 and continues in effect from year to year thereafter so long
as such continuation is approved at least annually by (1) the Board of Trustees or the vote of a majority of the outstanding
voting securities (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.
Calamos
is a wholly owned subsidiary of Calamos Investments LLC (“CILLC”). Calamos Asset Management, Inc. (“CAM”)
is the sole manager of CILLC and a wholly owned subsidiary of Calamos Partners LLC (“CPL”). As of January 31,
2021, approximately 22% of the outstanding equity interest of CILLC is owned by CAM and the remaining approximately 78% of CILLC
is owned by CPL and John P. Calamos, Sr. CPL is owned by Calamos Family Partners, Inc. (“CFP”), John P.
Calamos, Sr., and John S. Koudounis. CFP is owned by members of the Calamos family, including John P. Calamos, Sr. In
addition, Mr. Koudounis has the option to purchase a controlling interest in CPL upon the death or permanent disability of
John P. Calamos, Sr., provided Mr. Koudounis is then serving as Chief Executive Officer of CAM and CILLC. John P. Calamos, Sr.
is an affiliated person of the Fund and Calamos by virtue of his position as Chairman, Trustee and President of the Fund and Chairman
and Global Chief Investment Officer (“Global CIO”) of Calamos. John S. Koudounis, Robert F. Behan, Thomas E. Herman,
J. Christopher Jackson and Stephen Atkins are affiliated persons of the Fund and Calamos by virtue of their positions as Vice
President; Vice President; Vice President and Chief Financial Officer; Vice President and Secretary; and Treasurer of the Fund,
respectively, and as President and Chief Executive Officer; Executive Vice President and Chief Distribution Officer; Executive
Vice President and Chief Financial Officer; Senior Vice President, General Counsel and Secretary; and Head of Fund Administration
of Calamos, respectively.
A
discussion regarding the basis for the Board of Trustees’ decision to approve the renewal of the Investment Management Agreement
is available in the Fund’s Annual Report to shareholders for the fiscal year ended October 31, 2020.
The use of the
name “Calamos” in the name of the Fund is pursuant to licenses granted by CILLC, and the Fund has agreed to change
its name to remove that reference if Calamos ceases to act as investment adviser to the Fund.
Portfolio Managers
John
P. Calamos, Sr. John P. Calamos, Sr. has been President, Trustee and Co-Portfolio Manager of the Fund since
inception and for Calamos: Founder, Chairman and Global CIO since August 2016; Chairman and Global CIO from
April to August 2016; Chairman, Chief Executive Officer and Global Co-CIO between April 2013 and
April 2016; Chief Executive Officer and Global Co- CIO between August 2012 and April 2013; and Chief Executive
Officer and Co-CIO prior thereto.
Dennis
Cogan. Dennis Cogan joined Calamos in March 2005 and since February 2021 has been a Senior Co-Portfolio Manager. From
March 2013 to February 2021, he was Co-Portfolio Manager, and from March 2005 to March 2013, he was a senior strategy analyst.
R. Matthew
Freund. R. Matthew Freund joined Calamos in November 2016 as a Co-CIO, Head of Fixed Income Strategies, as well as a Senior
Co-Portfolio Manager. Previously, he was SVP of Investment Portfolio Management and Chief Investment Officer at USAA Investments
since 2010.
John
Hillenbrand. John Hillenbrand joined Calamos in 2002 and since September 2015 has been a Co-CIO, Head of Multi-Asset
Strategies and Co-Head of Convertible Strategies, as well as a Senior Co-Portfolio Manager. From March 2013 to
September 2015 he was a Co-Portfolio Manager. Between August 2002 and March 2013 he was a senior strategy
analyst.
Nick Niziolek.
Nick Niziolek joined Calamos in March 2005 and has been a Co-CIO, Head of Global Strategies, as well as a Senior Co-Portfolio
Manager, since September 2015. Between August 2013 and September 2015 he was a Co-Portfolio Manager, Co-Head of
Research. Between March 2013 and August 2013 he was a Co-Portfolio Manager. Between March 2005 and March 2013
he was a senior strategy analyst.
Eli Pars.
Eli Pars joined Calamos in May 2013 and has been a Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies,
as well as a Senior Co-Portfolio Manager, since September 2015. Between May 2013 and September 2015, he was a Co-Portfolio
Manager. Previously, he was a Portfolio Manager at Chicago Fundamental Investment Partners from February 2009 until November 2012.
Jon Vacko.
Jon Vacko joined Calamos in June 2000 and has been a Senior Co-Portfolio Manager since September 2015. Previously
he was a Co-Portfolio Manager from August 2013 to September 2015; prior thereto he was a Co-Head of Research and Investments
from July 2010 to August 2013.
Joe
Wysocki. Joe Wysocki joined Calamos in October 2003 and since February 2021 has been a Senior Co-Portfolio Manager.
Previously, Mr. Wysocki was a Co-Portfolio Manager from March 2015 to January 2021; sector head from March 2014
to March 2015; a Co-Portfolio Manager from March 2013 to March 2014; and a senior strategy analyst from February 2007
to March 2013.
Calamos employs
a “team of teams” approach to portfolio management, led by the Global CIO and our CIO team consisting of 5 Co-CIOs
with specialized areas of investment expertise. The Global CIO and Co-CIO team are responsible for oversight of investment team
resources, investment processes, performance and risk. As heads of investment verticals, Co-CIOs manage investment team members
and, along with Co-Portfolio Managers, have day-to-day portfolio oversight and construction responsibilities of their respective
investment strategies.
While investment research professionals
within each Co-CIO’s team are assigned specific strategy responsibilities, they also provide support to other investment
team verticals, creating deeper insights across a wider range of investment strategies. The combination of specialized investment
teams with cross team collaboration results in what we call our team of teams approach.
This team of
teams approach is further reflected in the composition of Calamos’ Investment Committee, made up of the Global CIO, the Co-CIO
team, the Head of Global Trading and the Chief of IT and Operations. Other members of the investment team participate in Investment
Committee meetings in connection with specific investment related issues or topics as deemed appropriate.
The structure and composition of the
Investment Committee results in a number of benefits, as it:
|
•
|
Leads to broader perspective on investment decisions: multiple viewpoints and areas of expertise feed into consensus;
|
|
•
|
Promotes collaboration between teams; and
|
|
•
|
Functions as a think tank with the goal of identifying ways to outperform the market on a risk-adjusted basis.
|
The objectives of the Investment Committee
are to:
|
•
|
Form the firm’s top-down macro view, market direction, asset allocation, and sector/country positioning.
|
|
•
|
Establish firm-wide secular and cyclical themes for review.
|
|
•
|
Review firm-wide and portfolio risk metrics, recommending changes where appropriate.
|
|
•
|
Review firm-wide, portfolio and individual security liquidity constraints.
|
|
•
|
Evaluate firm-wide and portfolio investment performance.
|
|
•
|
Evaluate firm-wide and portfolio hedging policies and execution.
|
|
•
|
Evaluate enhancements to the overall investment process.
|
John P. Calamos, Sr.,
Founder, Chairman and Global CIO, is responsible for the day-to-day management of the team, bottom-up research efforts and strategy
implementation. R. Matthew Freund, John Hillenbrand, Nick Niziolek, Eli Pars, Dennis Cogan, Jon Vacko and Joe Wysocki are each
Sr. Co-Portfolio Managers.
For over 20 years,
the Calamos portfolio 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.
The Global
CIO and Sr. Co-Portfolio Managers also have responsibility for the day-to-day management of accounts other than the Fund.
Information regarding these other accounts as of October 31, 2020 is set forth below:
Other Accounts Managed and Assets
by Account Type as of October 31, 2020:
|
|
|
Registered
Investment
Companies
|
|
|
|
Other
Pooled
Investment
Vehicles
|
|
|
|
Other
Accounts
|
|
|
|
Accounts
|
|
|
|
Assets
|
|
|
|
Accounts
|
|
|
|
Assets
|
|
|
|
Accounts
|
|
|
|
Assets
|
|
John P. Calamos Sr.
|
|
|
23
|
|
|
|
24,298,542,870
|
|
|
|
5
|
|
|
|
779,395,779
|
|
|
|
3,898
|
|
|
|
2,785,648,129
|
|
R. Matthew Freund
|
|
|
16
|
|
|
|
13,197,112,036
|
|
|
|
1
|
|
|
|
385,576,284
|
|
|
|
3,687
|
|
|
|
2,656,793,327
|
|
John Hillenbrand
|
|
|
18
|
|
|
|
11,799,182,233
|
|
|
|
5
|
|
|
|
779,395,779
|
|
|
|
3,042
|
|
|
|
2,270,044,756
|
|
Nick Niziolek
|
|
|
10
|
|
|
|
7,456,407,651
|
|
|
|
4
|
|
|
|
393,819,495
|
|
|
|
2,620
|
|
|
|
1,207,310,422
|
|
Eli Pars
|
|
|
18
|
|
|
|
22,378,323,990
|
|
|
|
5
|
|
|
|
779,395,779
|
|
|
|
2,996
|
|
|
|
2,187,323,086
|
|
Jon Vacko
|
|
|
19
|
|
|
|
12,210,855,267
|
|
|
|
5
|
|
|
|
779,395,779
|
|
|
|
3,015
|
|
|
|
2,216,739,321
|
|
Joe Wysocki
|
|
|
12
|
|
|
|
11,471,636,258
|
|
|
|
4
|
|
|
|
777,032,976
|
|
|
|
2,588
|
|
|
|
1,464,245,772
|
|
Dennis Cogan
|
|
|
10
|
|
|
|
7,456,407,651
|
|
|
|
4
|
|
|
|
393,819,495
|
|
|
|
2,620
|
|
|
|
1,207,310,422
|
|
Number of Accounts and Assets for
which Advisory Fee is Performance Based as of October 31, 2020:
|
|
|
Registered
Investment
Companies
|
|
|
|
Other
Pooled
Investment
Vehicles
|
|
|
|
Other
Accounts
|
|
|
|
|
Accounts
|
|
|
|
Assets
|
|
|
|
Accounts
|
|
|
|
Assets
|
|
|
|
Accounts
|
|
|
|
Assets
|
|
John P. Calamos Sr.
|
|
|
2
|
|
|
|
315,830,459
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
R. Matthew Freund
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
John Hillenbrand
|
|
|
2
|
|
|
|
315,830,459
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
Nick Niziolek
|
|
|
2
|
|
|
|
315,830,459
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
Eli Pars
|
|
|
2
|
|
|
|
315,830,459
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
Jon Vacko
|
|
|
2
|
|
|
|
315,830,459
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
Joe Wysocki
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
Dennis Cogan
|
|
|
2
|
|
|
|
315,830,459
|
|
|
|
0
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
Each Co-Portfolio
Manager may invest for his own benefit in securities held in brokerage and mutual fund accounts. The information shown in the table
does not include information about those accounts where the Co-Portfolio Manager or members of his family have a beneficial or
pecuniary interest because no advisory relationship exists with Calamos or any of its affiliates.
The Fund’s
Co-Portfolio Managers are responsible for managing both the Fund and other accounts, including separate accounts and funds not
required to be registered under the 1940 Act.
Other than potential
conflicts between investment strategies, the side-by-side management of both the Fund and other accounts may raise potential conflicts
of interest due to the interest held by Calamos in an account and certain trading practices used by the portfolio managers (e.g.,
cross-trades between the Fund and another account and allocation of aggregated trades). Calamos has developed policies and procedures
reasonably designed to mitigate those conflicts. For example, Calamos will place cross-trades in securities held by the Fund only
in accordance with the rules promulgated under the 1940 Act and has adopted policies designed to ensure the fair allocation
of securities purchased on an aggregated basis.
The allocation
methodology employed by Calamos varies depending on the type of securities sought to be bought or sold and the type of client or
group of clients. Generally, however, orders are placed first for those clients that have given Calamos brokerage discretion (including
the ability to step out a portion of trades), and then to clients that have directed Calamos to execute trades through a specific
broker. However, if the directed broker allows Calamos to execute with other brokerage firms, which then book the transaction directly
with the directed broker, the order will be placed as if the client had given Calamos full brokerage discretion. Calamos and its
affiliates frequently use a “rotational” method of placing and aggregating client orders and will build and fill a
position for a designated client or group of clients before placing orders for other clients. A client account may not receive
an allocation of an order if: (a) the client would receive an unmarketable amount of securities based on account size; (b) the
client has precluded Calamos from using a particular broker; (c) the cash balance in the client account will be insufficient
to pay for the securities allocated to it at settlement; (d) current portfolio attributes make an allocation inappropriate;
and (e) account specific guidelines, objectives and other account specific factors make an allocation inappropriate. Allocation
methodology may be modified when strict adherence to the usual allocation is impractical or leads to inefficient or undesirable
results. Calamos’ head trader must approve each instance that the usual allocation methodology is not followed and provide
a reasonable basis for such instances and all modifications must be reported in writing to Calamos’ Chief Compliance Officer
on a monthly basis.
Investment opportunities
for which there is limited availability generally are allocated among participating client accounts pursuant to an objective methodology
(i.e., either on a pro rata basis or using a rotational method, as described above). However, in some instances, Calamos may consider
subjective elements in attempting to allocate a trade, in which case the Fund may not participate, or may participate to a lesser
degree than other clients, in the allocation of an investment opportunity. In considering subjective criteria when allocating trades,
Calamos is bound by its fiduciary duty to its clients to treat all client accounts fairly and equitably.
The Co-Portfolio
Managers advise certain accounts under a performance fee arrangement. A performance fee arrangement may create an incentive for
a Co-Portfolio Manager to make investments that are riskier or more speculative than would be the case in the absence of performance
fees. A performance fee arrangement may result in increased compensation to the Co-Portfolio Managers from such accounts due to
unrealized appreciation as well as realized gains in the client’s account.
As of October 31,
2020, John P. Calamos, Sr., our Global CIO, aside from distributions arising from his ownership from various entities, receives
all of his compensation from Calamos. He has entered into an employment agreement that provides for compensation in the form of
an annual base salary and an annual bonus, both components payable in cash. Similarly, Mr. Calamos, Sr., is eligible
for a Long-Term Incentive (“LTI”). The LTI program at Calamos currently consists of deferred bonus payments, which
fluctuate in value over time based upon either (1) the performance of certain managed investment products for investment
professionals (“Mutual Fund Incentive Awards”); or (2) the overall value of the firm for non-investment professionals
(“Company Incentive Awards”).
As of October 31,
2020, R. Matthew Freund, John Hillenbrand, Nick Niziolek, Eli Pars, Jon Vacko, Dennis Cogan, and Joe Wysocki receive all of their
compensation from Calamos. These individuals each receive compensation in the form of an annual base salary, a discretionary bonus
(payable in cash) and are eligible for discretionary Mutual Fund Incentive Awards. Additionally, Messrs. Hillenbrand, Niziolek,
and Pars received additional compensation awards in prior years.
The amounts paid
to all Co-Portfolio Managers, together with the criteria utilized to determine such amounts, are benchmarked against industry specific
data provided by third party analytical agencies. The Co-Portfolio Managers’ compensation structure considers annually the
performance of the various strategies managed by the Co-Portfolio Managers, among other factors, including, without limitation,
the overall performance of the firm.
At October 31,
2020, each portfolio manager beneficially owned (as determined pursuant to Rule 16a-1(a)(2) under the Exchange Act)
shares of the Fund having value within the indicated dollar ranges.
Portfolio Manager
|
|
Fund
|
John P. Calamos, Sr.(1)
|
|
Over $1,000,000
|
Nick Niziolek
|
|
None
|
Dennis Cogan
|
|
None
|
John Hillenbrand
|
|
None
|
Jon Vacko
|
|
None
|
Joe Wysocki
|
|
None
|
Eli Pars
|
|
None
|
R. Matthew Freund
|
|
None
|
|
(1)
|
Pursuant to Rule 16a-1(a)(2) of the Exchange Act, John P. Calamos, Sr. may be deemed to have indirect beneficial
ownership of Fund shares held by Calamos Investments LLC, its subsidiaries, and its parent companies (Calamos Asset Management, Inc.
and Calamos Partners LLC, and its parent company Calamos Family Partners, Inc.) due to his direct or indirect ownership interest
in those entities. As a result, these amounts reflect any holdings of those entities in addition to the individual, personal accounts
of John P. Calamos, Sr.
|
Fund Accountant and Administration
Arrangements
The Fund
has entered into an agreement with Ernst & Young LLP (“EY”) located at 155 N. Wacker Drive, Chicago, IL
60606 to provide certain tax services to the Fund. The tax services include the following: calculating, tracking and reporting
tax adjustments on all assets of the Fund, including but not limited to contingent debt and preferred trust obligations; preparing
excise tax and fiscal year distribution schedules; preparing tax information required for financial statement footnotes; preparing
state and federal income tax returns; preparing specialized calculations of amortization on convertible securities; preparing
year-end dividend disclosure information providing treaty-based foreign withholding tax reclaim services; providing certain global
compliance and reporting services; providing a match service and analysis of the “passive foreign investment company”
status of foreign corporate entities; and providing services related to corporate actions that may or may not have a tax impact
on the Fund’s holdings. For the fiscal years ended October 31, 2020, October 31, 2019, and October 31, 2018,
the Fund paid EY $10,451, $6,659, and $0, respectively, for tax services.
Under the
arrangements with State Street Bank and Trust Company (“State Street”) located at One Iron Street, Boston, MA 02111
to provide fund accounting services, State Street provides certain administrative and accounting services including providing
daily reconciliation of cash, trades and positions; maintaining general ledger and capital stock accounts; preparing daily trial
balance; calculating net asset value; providing selected general ledger reports; preferred share compliance; calculating total
returns; and providing monthly distribution analysis to the Fund. For the fiscal years ended October 31, 2020, October 31,
2019, and October 31, 2018, the Fund paid State Street $28,172, $24,718, and $24,679, respectively, for fund accounting services.
The Fund has also entered into an agreement with State Street pursuant to which State Street provides certain administration treasury
services to the Fund. These services include: monitoring the calculation of expense accrual amounts for the Fund and making any
necessary modifications; managing the Fund’s expenses and expense payment processing; coordinating any expense reimbursement
calculations and payment; calculating net investment income dividends and capital gain distributions; coordinating the audits
for the Fund; preparing financial reporting statements for the Fund; preparing certain regulatory filings; and calculating asset
coverage tests for certain Calamos Funds. For the fiscal years ended October 31, 2020, October 31, 2019, and October 31,
2018, the Fund paid State Street $11,679, $13,541, and $0, respectively, for administration services. Under a prior agreement
for administration services, the Fund paid the previous service provider $0 and $19,193 for the fiscal years ended October 31,
2019 and October 31, 2018, respectively.
CERTAIN SHAREHOLDERS
At January 31,
2021, the following persons were known to own beneficially or of record more than 5% of the outstanding securities of the Fund:
Class of Shares
|
|
Name and Address
of Beneficial Owner
|
|
Number of
Shares owned
|
|
|
Percent
of Class
|
|
Common
|
|
National
Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310
|
|
|
1,222,148
|
|
|
|
13.7
|
%
|
|
|
TD Ameritrade 200 S. 108th Ave Omaha, NE 68154
|
|
|
991,685
|
|
|
|
11.1
|
%
|
|
|
Morgan
Stanley Smith Barney LLC 1300 Thames Street 6th Floor Baltimore, MD 21231
|
|
|
840,643
|
|
|
|
9.4
|
%
|
|
|
Charles Schwab & Co., Inc.
2423 E. Lincoln Drive Phoenix, AZ 85016-1215
|
|
|
696,832
|
|
|
|
7.8
|
%
|
|
|
Merrill
Lynch Pierce Fenner & Smith 4804 Deer Lake Dr. E. Jacksonville, FL 32246
|
|
|
693,144
|
|
|
|
7.8
|
%
|
|
|
UBS Financial Services Inc. 1000
Harbor Blvd Weehawken, NJ 07086
|
|
|
549,770
|
|
|
|
6.2
|
%
|
|
|
Wells
Fargo Clearing Services LLC 2801 Market Street H0006-09B St. Louis, MO 63103
|
|
|
508,885
|
|
|
|
5.7
|
%
|
|
|
LPL Financial Co. 1055 LPL Way Fort
Mill, SC 29715
|
|
|
490,236
|
|
|
|
5.5
|
%
|
|
|
Bank of New York Mellon 525 William
Penn Place Pittsburgh, PA 15259
|
|
|
463,568
|
|
|
|
5.2
|
%
|
|
|
Pershing LLC One Pershing Plaza
Jersey City, NJ 07399
|
|
|
457,346
|
|
|
|
5.1
|
%
|
Series A
Mandatory Redeemable Preferred Shares
|
|
Massachusetts
Mutual Life Insurance Company c/o Barings LLC 1500 Main Street, Suite 2200 PO Box 15189 Springfield, MA 01115-5189
|
|
|
160,000
|
|
|
|
100
|
%
|
Series B
Mandatory Redeemable Preferred Shares
|
|
Massachusetts
Mutual Life Insurance Company c/o Barings LLC 1500 Main Street, Suite 2200 PO Box 15189 Springfield, MA 01115-5189
|
|
|
160,000
|
|
|
|
100
|
%
|
Series C
Mandatory Redeemable Preferred Shares
|
|
Massachusetts
Mutual Life Insurance Company c/o Barings LLC 1500 Main Street, Suite 2200 PO Box 15189 Springfield, MA 01115-5189
|
|
|
160,000
|
|
|
|
100
|
%
|
At
January 31, 2021, the trustees and officers as a group owned 3.5% of the Fund’s outstanding common shares.
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 seeks to obtain for the Fund the most favorable combination of price and execution available. In
seeking the most favorable combination of price and execution, Calamos considers all factors it deems relevant, including price,
the size of the transaction, the nature of the market for the security, the amount of commission, the timing of the transaction
taking into account market prices and trends, the execution capability of the broker-dealer and the quality of service rendered
by the broker- dealer in other transactions.
The Trustees
have determined that portfolio transactions for the Fund may be executed through CFS, an affiliate of Calamos, if, in the judgment
of Calamos, the use of CFS is likely to result in prices and execution at least as favorable to the Fund as those available from
other qualified brokers and if, in such transactions, CFS charges the Fund commission rates consistent with those charged by CFS
to comparable unaffiliated customers in similar transactions. 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.
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.
Calamos does
not guarantee any broker the placement of a predetermined amount of securities transactions in return for the research or brokerage
services it provides. Calamos has adopted internal procedures which it believes are reasonably designed to allocate transactions
in a manner consistent with its execution policies to brokers that it has identified as providing research, research-related products
or services, or execution-related services of a particular benefit to its clients. Calamos has entered into client commission agreements
(“CCAs”) with certain broker-dealers under which the broker-dealers may use a portion of their commissions to pay third
parties or other broker-dealers that provide Calamos with research or brokerage services, as permitted under Section 28(e) of
the Exchange Act. CCAs allow Calamos to direct broker-dealers to pool commissions that are generated from orders executed at that
broker-dealer, and then periodically direct the broker-dealer to pay third parties or other broker-dealers for research or brokerage
services. All uses of CCAs by Calamos are subject to applicable law and its best execution obligations. Brokerage and research
products and services furnished by brokers may be used in servicing any or all of the clients of Calamos and such research may
not necessarily be used by Calamos in connection with the accounts which paid commissions to the broker providing such brokerage
and research products and services.
As permitted
by Section 28(e) of the Exchange Act, Calamos may cause the Fund to 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.
The Fund
paid $0, $0 and $0 in aggregate brokerage commissions for the fiscal years ended October 31, 2018, October 31, 2019,
and October 31, 2020 including $0, $0, and $0 to CFS, which represented 0%, 0% and 0% of the Fund’s aggregate brokerage
fees paid for the respective fiscal year, and 0%, 0% and 0% of the Fund’s aggregate dollar amount of transactions involving
brokerage commissions for the respective fiscal year.
Portfolio Turnover
Our annual
portfolio turnover rate may vary greatly from year to year. Although we cannot accurately predict our annual portfolio turnover
rate, it is not expected to exceed 100% annually under normal circumstances. For the fiscal years ended October 31, 2019
and October 31, 2020, the portfolio turnover rate was 81% and 153%, respectively. However, portfolio turnover rate is not
considered a limiting factor in the execution of investment decisions for the Fund, and it is possible that the Fund may exceed
this level of turnover in any given year. A higher turnover rate results in correspondingly greater brokerage commissions and
other transactional expenses that are borne by the Fund. High portfolio turnover also may 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 taxed at ordinary income tax rates for U.S. federal income tax purposes. See “Certain Federal Income Tax Matters.”
NET ASSET VALUE
Net
asset value per share is determined no less frequently than the close of regular session trading on the NYSE (usually 4:00 p.m.,
Eastern time), on the last business day in each week, or such other time as the Fund may determine. The NYSE is regularly closed
on New Year’s Day, the third Mondays in January and February, Good Friday, the last Monday in May, Independence Day, Labor
Day, Thanksgiving and Christmas. If the NYSE is closed due to weather or other extenuating circumstances on a day it would
typically be open for business, the Fund reserves the right to treat such day as a Business Day and calculate the Fund’s
NAV as of the normally scheduled close of regular trading on the NYSE or such other time that the Fund may determine, in accordance
with applicable law. The Fund reserves the right to close if the primary trading markets of the Fund’s portfolio instruments
are closed. On any business day when the Securities Industry and Financial Markets Association (“SIFMA”) recommends
that the securities markets close trading early or when the NYSE closes earlier than scheduled, the Fund may (i) close trading
early (as such, the time as of which the NAV is calculated would be advanced) or (ii) calculate its NAV as of, the normally scheduled
close of regular trading on the NYSE for that day.
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. Information that becomes known to the Fund after the time as of which NAV has been calculated
on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that
day. If regular trading on the NYSE closes earlier than scheduled, the Fund reserves the right to either (i) calculate its NAV
as of the earlier closing time or (ii) calculate its NAV as of the normally scheduled close of regular trading on the NYSE for
that day. The Fund generally does not calculate its NAV on days during which the NYSE is closed. However, if the NYSE is closed
on a day it would normally be open for business, the Fund reserves the right to calculate its NAV as of the normally scheduled
close of regular trading on the NYSE for that day or such other time that the Fund may determine. Because
the Fund may invest in securities that are primarily listed on foreign exchanges and trade on days when the Fund does not price
its shares, the Fund’s underlying assets may change in value on days when the NAV is not calculated.
The valuation
of the Fund’s portfolio securities is in accordance with policies and procedures adopted by and under the ultimate supervision
of the Board of Trustees. Securities for which market quotations are readily available will be valued using the market value of
those securities. Securities for which market quotations are not readily available will be fair valued in accordance with policies
and procedures adopted by and under the ultimate supervision of the Board of Trustees. The method by which a security may be fair
valued will depend on the type of security and the circumstances under which the security is being fair valued.
Portfolio securities
that are traded on U.S. securities exchanges, except option securities, are valued at the last current reported sales price at
the time the Fund determines its NAV. Securities traded in the over-the-counter market and quoted on The Nasdaq Stock Market are
valued at the Nasdaq Official Closing Price, as determined by Nasdaq, or lacking a Nasdaq Official Closing Price, the last current
reported sale price on Nasdaq at the time the Fund determines its NAV.
When a last sale
or closing price is not available, equity securities, other than option securities, that are traded on a U.S. securities exchange
and other equity securities traded in the over-the-counter market are valued at the mean between the most recent bid and asked
quotations in accordance with guidelines adopted by the Board of Trustees. Each option security traded on a U.S. securities exchange
is valued at the mid-point of the consolidated bid/ask quote for the option security, also in accordance with guidelines adopted
by the Board of Trustees. Each over-the-counter option that is not traded through the Options Clearing Corporation is valued based
on a quotation provided by the counterparty to such option under the ultimate supervision of the Board of Trustees.
Fixed income
securities are generally traded in the over-the-counter market and are valued based on evaluations provided by independent pricing
services or by dealers who make markets in such securities. Valuations of fixed income securities consider yield or price of bonds
of comparable quality, coupon rate, maturity, type of issue, trading characteristics and other market data and do not rely exclusively
upon exchange or over-the-counter prices.
Trading on European
and Far Eastern exchanges and over-the-counter markets is typically completed at various times before the close of business on
each day on which the NYSE is open. Each security trading on these exchanges or over-the-counter markets may be valued utilizing
a systematic fair valuation model provided by an independent pricing service approved by the Board of Trustees. The valuation of
each security that meets certain criteria in relation to the valuation model is systematically adjusted to reflect the impact of
movement in the U.S. market after the foreign markets close. Securities that do not meet the criteria, or that are principally
traded in other foreign markets, are valued as of the last reported sale price at the time the Fund determines its NAV, or when
reliable market prices or quotations are not readily available, at the mean between the most recent bid and asked quotations as
of the close of the appropriate exchange or other designated time. Trading of foreign securities may not take place on every NYSE
business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the NYSE is not
open and on which the Fund’s NAV is not calculated.
If the pricing
committee determines that the valuation of a security in accordance with the methods described above is not reflective of a market
value for such security, the security is valued at a fair value by the pricing committee, under the ultimate supervision of the
Board of Trustees, following the guidelines and/or procedures adopted by the Board of Trustees.
The Fund also
may use fair value pricing, pursuant to guidelines adopted by the Board of Trustees and under the ultimate supervision of the Board
of Trustees, if trading in the security is halted or if the value of a security it holds is materially affected by events occurring
before the Fund’s pricing time but after the close of the primary market or exchange on which the security is listed. Those
procedures may utilize valuations furnished by pricing services approved by the Board of Trustees, which may be based on market
transactions for comparable securities and various relationships between securities that are generally recognized by institutional
traders, a computerized matrix system, or appraisals derived from information concerning the securities or similar securities received
from recognized dealers in those securities.
When fair value
pricing of securities is employed, the prices of securities used by the Fund to calculate its NAV may differ from market quotations
or official closing prices. In light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned
to a particular security is accurate.
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 trade in the open market at a price that is a function of several factors, including dividend levels
(which are in turn affected by expenses), net asset value, call protection, dividend stability, relative demand for and supply
of such shares in the market, general market and economic conditions and other factors. Because shares of a closed-end investment
company may frequently trade at prices lower than net asset value, the Fund’s Board of Trustees may consider action that
might be taken to reduce or eliminate any material discount from net asset value in respect of common shares, which may include
the repurchase of such shares in the open market or in private transactions, the making of a tender offer for such shares, or the
conversion of the Fund to an open-end investment company. The Board of Trustees may decide not to take any of these actions. In
addition, there can be no assurance that share repurchases or tender offers, if undertaken, will reduce market discount.
Notwithstanding
the foregoing, at any time when the Fund’s preferred shares are outstanding, the Fund may not purchase, redeem or otherwise
acquire any of its common shares unless (1) all accumulated preferred shares dividends have been paid and (2) at the
time of such purchase, redemption or acquisition, the net asset value of the Fund’s portfolio (determined after deducting
the acquisition price of the common shares) is at least 200% of the liquidation value of the outstanding preferred shares (expected
to equal the original purchase price per share plus any accrued and unpaid dividends thereon). Any service fees incurred in connection
with any tender offer made by the Fund will be borne by the Fund and will not reduce the stated consideration to be paid to tendering
shareholders.
Subject to its
investment restrictions, the Fund may borrow to finance the repurchase of shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by the Fund in anticipation of share repurchases or tenders
will reduce the Fund’s net income. Any share repurchase, tender offer or borrowing that might be approved by the Fund’s
Board of Trustees would have to comply with the Exchange Act, the 1940 Act and the rules and regulations thereunder.
Although
the decision to take action in response to a discount from net asset value will be made by the Board of Trustees at the time
it considers such issue, it is not currently anticipated that the Board of Trustees would authorize repurchases of common
shares or a tender offer for such shares if: (1) such transactions, if consummated, would (a) result in the
delisting of the common shares from Nasdaq, 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 Nasdaq, (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.
CERTAIN 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 or a
noteholder (as the case may be) that acquires, holds and/or disposes of the Fund’s securities. This discussion only
addresses certain U.S. federal income tax consequences to U.S. shareholders and noteholders (as the case may be) who hold
their Fund securities as capital assets and does not address all of the U.S. federal income tax consequences that may be
relevant to particular shareholders and noteholders (as the case may be) in light of their individual circumstances. This
discussion also does not address all U.S. federal, state, local and foreign tax concerns affecting the Fund and its
shareholders and noteholders (including shareholders and noteholders subject to special tax rules and shareholders
owning large positions in the Fund), and the discussion set forth herein does not constitute tax advice. The discussion
reflects applicable tax laws of the United States as of the date of this Statement of Additional Information, which tax laws
may be changed or subject to new interpretations by the courts or the Internal Revenue Service (“IRS”)
retroactively or prospectively. No assurance can be given that the IRS would not assert, or that a court would not sustain, a
position different from any of the tax aspects set forth below. The specific terms of preferred shares and debt securities
may result in different tax consequences to holders than those described herein. No attempt is made to present a detailed
explanation of all U.S. federal income tax concerns affecting the Fund and its shareholders and noteholders, and the
discussion set forth herein does not constitute tax advice. Investors are urged to consult their own tax advisers to
determine the specific tax consequences to them of investing in the Fund, including the applicable federal, state, local and
foreign tax consequences to them and the effect of possible changes in tax laws.
Federal Income Taxation of the
Fund
The Fund
has elected to be treated, and intends to qualify and to be eligible to be treated each year, as a “regulated investment
company” under Subchapter M of the Code, so that it will not pay U.S. federal income tax on investment company taxable income
and capital gains timely 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, taking into account certain capital loss carryforwards, and certain net foreign currency exchange
gains, less 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 gain over the sum of net short-term
capital loss and certain capital loss carryforwards), it will be subject to U.S. federal income tax at regular corporate rates
on the amount retained. The Fund intends to distribute at least annually, all or substantially all of its investment company taxable
income, net tax-exempt interest, if any, and net capital gain.
In determining
its net capital gain, its taxable income, and its earnings and profits, a regulated investment company generally may elect to treat
part or all of any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the
taxable year after October 31 or, if there is no such loss, the net long- term capital loss or net short-term capital loss
attributable to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of (i) net ordinary loss,
if any, from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year
after October 31, and its (ii) other net ordinary loss, if any, attributable to the portion of the taxable year, if any,
after December 31) as if incurred in the succeeding taxable year.
Capital losses
in excess of capital gains (“net capital losses”) are not permitted to be deducted against the Fund’s net investment
income. Instead, potentially subject to certain limitations, the Fund may carry net capital losses from any taxable year forward
to subsequent taxable years without expiration to offset capital gains, if any, realized during such subsequent taxable years.
Capital loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether the Fund retains
or distributes such gains. The Fund must apply such carryforwards first against gains of the same character.
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
in the same manner as a regular 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 and accumulated earnings and profits, would generally constitute ordinary dividends, which would
generally be eligible for the dividends received deduction available to corporate shareholders under Section 243 of the Code,
and noncorporate shareholders of the Fund would generally be able to treat such distributions as “qualified dividend income”
eligible for reduced rates of federal income taxation under Section 1(h)(11) of the Code, as described below, provided holding
period and other requirements are met. The Fund could be required to recognize unrealized gains, pay substantial taxes and interest
and make substantial distributions before re-qualifying as a regulated investment company that is accorded special tax treatment.
If the Fund failed to qualify for a period greater than two taxable years, it would also be required to elect to recognize and
pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have
been realized if the Fund had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for
a period of five years.
Under the Code,
the Fund will be subject to a nondeductible 4% federal excise tax on its undistributed ordinary income for a calendar year and
its undistributed capital gains for the one-year period generally ending on October 31 of such calendar year if it fails to
meet certain distribution requirements with respect to that year. Generally the excise tax applies to the extent the Fund fails
to distribute by the end of any calendar year at least the sum of (i) 98% of its ordinary income (not taking into account
any capital gain or loss) for the calendar year and (ii) 98.2% of its capital gains in excess of its capital losses (adjusted
for certain ordinary losses). In addition, the minimum amounts that must be distributed in any year to avoid the excise tax will
be increased or decreased to reflect the total amount of any under-distribution or over-distribution, as the case may be, from
the previous year. For purposes of the required excise tax distribution, a regulated investment company’s ordinary gains
and losses from the sale, exchange, or other taxable disposition of property that would otherwise be taken into account after October 31
generally are treated as arising on January 1 of the following calendar year. Also, for purposes of the excise tax, the Fund
will be treated as having distributed any amount on which it is subject to corporate income tax for the taxable year ending within
the calendar year. The Fund intends to generally make distributions in a timely manner and in an amount sufficient to avoid such
tax and accordingly does not expect to be subject to this excise tax.
In order to
qualify as a regulated investment company under Subchapter M of the Code, the Fund must, among other things, derive at least
90% of its gross income for each taxable year from (i) 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 and (ii) net income derived from interests in certain publicly traded partnerships that derive less than 90%
of their gross income from the items described in (i) above (each, a “Qualified Publicly Traded
Partnership”) (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 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 certain such
entities.
In addition to
the 90% income test, the Fund must also diversify its holdings (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
market value of its total assets is invested, including through corporations in which the Fund owns a 20% or more voting stock
interest, in the securities (other than U.S. government securities or securities of other regulated investment companies) of any
one issuer or of two or more issuers controlled by the Fund and engaged in the same, similar or related trades or businesses or
in the securities of one or more Qualified Publicly Traded Partnerships.
Foreign exchange
gains and losses realized by the Fund in connection with certain transactions involving foreign currency-denominated debt securities,
certain options and futures contracts relating to foreign currency, foreign currency forward contracts, foreign currencies, or
payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such
gains and losses to be treated as ordinary income and losses and may affect the amount, timing and character of distributions to
shareholders.
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 held for the
production of 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 equity interests in such companies, even if all income or gain actually received by the Fund is timely distributed to its
shareholders. These investments could also result in the treatment as ordinary income of associated gains on a sale of the investment.
The Fund would not be able to pass through to its shareholders any credit or deduction for such tax. Tax elections 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 (which would be subject to the distribution requirements described above) without the concurrent receipt of cash.
The Fund may limit and/or manage its holdings in passive foreign investment companies to limit its U.S. federal income tax liability
or maximize its return from these investments.
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 (“OID”) (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 investment company taxable
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.
The Fund may
acquire market discount bonds. A market discount bond is a security acquired in the secondary market at a price below its stated
redemption price at maturity (or its adjusted issue price if it is also an OID bond). If the Fund invests in a market discount
bond, it will be required to treat any gain recognized on the disposition of such market discount bond as ordinary income (instead
of capital gain) to the extent of the accrued market discount, unless the Fund elects to include the market discount in income
as it accrues as discussed above. Such market discount will not constitute qualified dividend income.
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. The U.S. federal income tax laws are not entirely clear about issues such as when the
Fund may cease to accrue interest, OID 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 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.
Very
generally, where the Fund purchases a bond at a price that exceeds the stated redemption price at maturity — that is,
at a premium — the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if the
Fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS,
the Fund reduces the current taxable income from the bond by the amortized premium and reduces its tax basis in the bond by
the amount of such offset; upon the disposition or maturity of such bonds, the Fund is permitted to deduct any remaining
premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require the Fund to reduce its tax
basis by the amount of amortized premium.
The interest
on municipal bonds is generally exempt from U.S. federal income tax. The Fund does not expect to invest 50% or more of its assets
in municipal bonds on which the interest is exempt from U.S. federal income tax, or in interests in other regulated investment
companies. As a result, it does not expect to be eligible to pay “exempt-interest dividends” to its shareholders under
the applicable tax rules. As a result, interest on municipal bonds is taxable to shareholders of the Fund when received as a distribution
from the Fund. In addition, gains realized by the Fund on the sale or exchange of municipal bonds are taxable to shareholders of
the Fund when distributed to them.
Certain of the
Fund’s other investments may cause the Fund to recognize income without the corresponding receipt of cash, which could result
in the Fund being required to dispose of its portfolio securities under disadvantageous circumstances to generate cash or leverage
itself by borrowing cash to satisfy distribution requirements and to avoid entity-level tax.
The Fund
may engage in various transactions in options, futures contracts, forward contracts, hedging instruments, straddles, swaps
and other similar transactions. In addition to the special rules described below, 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, affect the holding period of the Fund’s
securities, affect whether distributions will be eligible for the dividends received deduction or be treated as qualified
dividend income 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. Because these and other tax rules applicable to these types of transactions are in some cases
uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which
determination or guidance could be retroactive) may affect whether the Fund has made sufficient distributions, and otherwise
satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a Fund-level
tax. The Fund will monitor its transactions and will make the appropriate entries in its books and records when it acquires
an option, futures contract, forward contract, hedge instrument, swap or other similar investment, and if the Fund deems it
advisable, will make appropriate elections 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 of the
Fund’s investments in derivative instruments and foreign currency denominated instruments, and any of the Fund’s transactions
in foreign currencies and hedging activities, are likely to produce a difference between its book income and the sum of its taxable
income (including realized capital gains) and net tax-exempt income (if any). If such a difference arises and the Fund’s
book income is less than the sum of its taxable income (including realized capital gains) and net tax-exempt income (if any), the
Fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded
special tax treatment and to avoid a Fund-level tax. If the Fund’s book income exceeds the sum of its taxable income (including
realized capital gains) and net tax-exempt income (if any), the distribution (if any) of such excess generally will be treated
as (i) a dividend to the extent of the Fund’s remaining current and accumulated earnings and profits (including earnings
and profits arising from tax-exempt income), if any, (ii) thereafter, as a return of capital to the extent of the recipient’s
adjusted tax basis in its shares and (iii) thereafter, as gain from the sale or exchange of a capital asset.
In general,
option premiums received by the Fund are not immediately included in the income of the Fund. Instead, the premiums are
recognized when the option contract expires, the option is exercised by the holder, or the Fund transfers or otherwise
terminates the option (e.g., through a closing transaction). If a call option written by the Fund is exercised and the Fund
sells or delivers the underlying stock, the Fund generally will recognize capital gain or loss equal to (a) the sum of
the strike price and the option premium received by the Fund minus (b) the Fund’s basis in the stock. Such gain or
loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are
purchased by the Fund pursuant to the exercise of a put option written by it, the Fund generally will subtract the premium
received for purposes of computing its cost basis in the securities purchased. The termination of the Fund’s obligation
under an option other than through the exercise of the option will result in gain or loss, depending on whether the premium
income received by the Fund is greater or less than the amount paid by the Fund (if any) in terminating the transaction.
Subject to certain exceptions, some of which are described below, such gain or loss generally will be short-term. Thus, for
example, if an option written by the Fund expires unexercised, the Fund generally will recognize short-term gain equal to the
premium received.
The Fund’s
options activities may include transactions constituting straddles for U.S. federal income tax purposes, that is, that trigger
the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. Such straddles include, for
example, positions in a particular security, or an index of securities, and one or more options that offset the former position,
including options that are “covered” by the Fund’s long position in the subject security. Very generally, where
applicable, Section 1092 requires (i) that losses be deferred on positions deemed to be offsetting positions with respect
to “substantially similar or related property,” to the extent of unrealized gain in the latter, and (ii) that
the holding period of such a straddle position that has not already been held for the long-term holding period be terminated and
begin anew once the position is no longer part of a straddle. Options on single stocks that are not “deep in the money”
may constitute qualified covered calls, which generally are not subject to the straddle rules; the holding period on stock underlying
qualified covered calls that are “in the money” although not “deep in the money” will be suspended during
the period that such calls are outstanding. These straddle rules and the rules governing qualified covered calls could
cause gains that would otherwise constitute long-term capital gains to be treated as short-term capital gains, and distributions
that would otherwise constitute “qualified dividend income” or qualify for the dividends received deduction to fail
to satisfy the holding period requirements and therefore to be taxed as ordinary income or to fail to qualify for the dividends
received deduction, as the case may be.
The Fund’s
transactions in certain investments (including broad based equity index options and certain other futures contracts) are generally
considered “Section 1256 contracts” for federal income tax purposes. Any unrealized gains or losses on such Section 1256
contracts are treated as though they were realized at the end of each taxable year. The resulting gain or loss is treated as sixty
percent long-term capital gain or loss and forty percent short-term capital gain or loss, although certain foreign currency gains
and losses from such contracts may be treated as ordinary in character. Gain or loss recognized on actual sales of Section 1256
contracts is treated in the same manner. As noted below, distributions of net short-term capital gain are taxable to shareholders
as ordinary income while distributions of net long-term capital gain that are properly reported as capital gain dividends are
taxable to shareholders as long-term capital gain, regardless of how long the shareholder has held shares of the Fund.
The Fund’s
entry into a short sale transaction, an option or certain other contracts could be treated as the constructive sale of an appreciated
financial position, causing the Fund to realize gain, but not loss, on the position.
Any investment
by the Fund in equity securities of REITs may result in the Fund’s receipt of cash in excess of the REIT’s earnings;
if the Fund distributes these amounts, these distributions could constitute a return of capital to Fund shareholders for U.S. federal
income tax purposes. Dividends received by the Fund from a REIT will not qualify for the corporate dividends-received deduction
and generally will not constitute qualified dividend income. The Fund may invest in REITs that hold residual interests in real
estate mortgage investment conduits (“REMICs”). Under a notice issued by the IRS, 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 U.S. federal income tax in all events. This notice also provides 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 (“UBTI”)
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 federal income 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 federal income 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, special tax consequences apply to charitable remainder trusts (“CRTs”) that invest in regulated investment
companies that invest directly or indirectly in residual interests in REMICs. Under legislation enacted in December 2006,
a CRT, as defined in Section 664 of the Code, that realizes any UBTI for a taxable year, must pay an excise tax annually of
an amount equal to such UBTI. Under IRS guidance issued in 2006, a CRT will not recognize UBTI solely as a result of investing
in a regulated investment company that recognizes “excess inclusion income.” Rather, if at any time during any taxable
year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an
agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a regulated investment company
that recognizes “excess inclusion income,” then the regulated investment company will be subject to a tax on that portion
of its “excess inclusion income” for the taxable year that is allocable to such shareholders at the highest federal
corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation
is unclear. To the extent permitted under the 1940 Act, the Fund may elect to specially allocate any such tax to the applicable
CRT, or other shareholder, and thus reduce such shareholder’s distributions for the year by the amount of the tax that relates
to such shareholder’s interest in the Fund. The Fund has not yet determined whether such an election will be made. CRTs and
other tax-exempt shareholders are urged to consult their tax advisers concerning the consequences of investing in the Fund. 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.
If more than 50% of the value of the Fund’s assets at the close of the taxable year consists of stock or securities of foreign
corporations, the Fund may make an election under the Code to pass through such taxes to shareholders of the Fund. If the Fund
is eligible to and makes such an election, shareholders will generally be able (subject to applicable limitations under the Code)
to claim a credit or deduction (but not both) on their federal income tax return for, and will be required to treat as part of
the amounts distributed to them, their pro rata portion of the income taxes paid by the Fund to foreign countries. If the Fund
makes such an election, it will provide relevant information to its shareholders. If such an election is not made, shareholders
will not be required to include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such
taxes on their own federal income tax returns. Each prospective investor is urged to consult its tax adviser regarding taxation
of foreign securities in the Fund’s portfolio and any available foreign tax credits with respect to the prospective investor’s
own situation.
Common Shares and Preferred Shares
Common Share
Distributions. Unless a shareholder is ineligible to participate or elects otherwise, all distributions on common shares will
be automatically reinvested in additional common shares of the Fund pursuant to the Automatic Dividend Reinvestment Plan (the “Dividend
Reinvestment Plan”). For U.S. federal income tax purposes, dividends are generally taxable whether a shareholder takes them
in cash or they are reinvested pursuant to the Dividend Reinvestment Plan in additional shares of the Fund.
Distributions
of investment company taxable income (determined without regard to the deduction for dividends paid), which includes dividends,
taxable interest, net short-term capital gain in excess of net long-term capital loss, taking into account certain capital loss
carryforwards and certain net foreign currency exchange gains, are, except as discussed below, taxable as ordinary income to the
extent of the Fund’s current and accumulated earnings and profits. A portion of such dividends may qualify for the dividends
received deduction available to corporations under Section 243 of the Code and the reduced rate of taxation under Section 1(h)(11)
of the Code that applies to qualified dividend income received by noncorporate shareholders. In general, dividends of net investment
income received by corporate shareholders of the Fund qualify for the dividends received deduction generally available to corporations
only to the extent of the amount of eligible dividends received by the Fund from domestic corporations (other than REITs) for
the taxable year. Qualified dividend income received by noncorporate shareholders is taxed at rates equivalent to long-term capital
gain tax rates. Qualified dividend income generally includes dividends from domestic corporations and dividends from foreign corporations
that meet certain specified criteria, although dividends paid by REITs will not generally be eligible for treatment as qualified
dividend income. The Fund generally can pass the tax treatment of dividends eligible for the dividends received deduction and
qualified dividend income it receives through to Fund shareholders. For the Fund to receive tax-advantaged dividend income, the
Fund must meet certain holding period requirements with respect to the stock on which the dividend is paid. In addition, the Fund
cannot be obligated to make payments (pursuant to a short sale or otherwise) with respect to substantially similar or related
property. Similar provisions, including holding period requirements, apply to each shareholder’s investment in the Fund.
Moreover, the dividends received deduction may otherwise be disallowed or reduced by application of various provisions of the
Code (for instance, the dividends received deduction is reduced in the case of a dividend received on debt-financed portfolio
stock (generally, stock acquired with borrowed funds)).
Distributions
of net capital gain, if any, that are properly reported as capital gain dividends are generally taxable as long-term capital gains
for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the Fund. The IRS
and the Department of the Treasury have issued regulations that impose special rules in respect of capital gain dividends
received through partnership interests constituting “applicable partnership interests” under Section 1061 of
the Code. 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. Such distributions represent a return of the investor’s capital to the extent of his or her basis
in the 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 reported to the shareholders annually.
Distributions
by the Fund to its shareholders that the Fund properly reports as “section 199A dividends,” as defined and subject
to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders. Non-corporate
shareholders are permitted a federal income tax deduction equal to 20% of qualified REIT dividends received by them, subject to
certain limitations. Very generally, a “section 199A dividend” is any dividend or portion thereof that is attributable
to certain dividends received by a regulated investment company from REITs, to the extent such dividends are properly reported
as such by the regulated investment company in a written notice to its shareholders. A section 199A dividend is treated as a qualified
REIT dividend only if the shareholder receiving such dividend holds the dividend-paying regulated investment company shares for
at least 46 days of the 91-day period beginning 45 days before the shares become ex-dividend, and is not under an obligation to
make related payments with respect to a position in substantially similar or related property. The Fund is permitted to report
such part of its dividends as section 199A dividends as are eligible, but is not required to do so.
If the Fund
retains any net capital gain, the Fund may report the retained amount as undistributed capital gains 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 federal income 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 the Fund makes this designation, 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 federal income tax deemed paid by the
shareholder.
If a shareholder’s
distributions are automatically reinvested pursuant to the Dividend Reinvestment 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 Dividend Reinvestment Plan and the plan agent invests the distribution in newly issued shares of the Fund, the shareholder
will generally be treated as receiving a taxable distribution equal to the fair market value of the shares the shareholder receives.
At the time of
an investor’s purchase of the Fund’s shares, a portion of the purchase price may be attributable to 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.
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.
Preferred
Share Distributions. Under present law and based in part on the fact that there is and will be no express or implied agreement
between or among a broker-dealer or any other party, and the Fund or any owners of preferred shares, that the broker-dealer or
any other party will guarantee or otherwise arrange to ensure that an owner of preferred shares will be able to sell his or her
shares, the Fund has treated, and intends to continue to treat, the preferred shares as equity for federal income tax purposes.
As such, distributions with respect to the preferred shares (other than distributions in redemption of the preferred shares subject
to Section 302(b) of the Code) will generally constitute dividends to the extent of the Fund’s current and accumulated
earnings and profits, as calculated for U.S. federal income tax purposes. Except in the case of net capital gain distributions,
such dividends generally will be taxable at ordinary income tax rates to holders of preferred shares but may qualify for the dividends
received deduction available to corporate shareholders under Section 243 of the Code and the reduced rates of federal income
taxation that apply to qualified dividend income received by noncorporate shareholders under Section 1(h)(11) of the Code.
Distributions reported by the Fund as net capital gain distributions will be taxable as long-term capital gain regardless of the
length of time a shareholder has held shares of the Fund. Please see the discussion above on qualified dividend income, dividends
received deductions and net capital gain.
The character
of the Fund’s income will not affect the amount of dividends which the holders of preferred shares are entitled to receive.
If the preferred shares are auction rate securities, holders of preferred shares are entitled to receive only the amount of dividends
as determined by periodic auctions. For U.S. federal income tax purposes, the IRS requires that a regulated investment company
that has two or more classes of shares allocate to each such class proportionate amounts of each type of its income (such as ordinary
income and net capital gain) for each tax year. Accordingly, the Fund intends to report distributions made with respect to the
common shares and preferred shares as consisting of particular types of income (e.g., net capital gain and ordinary income), in
accordance with each class’s proportionate share of the total dividends paid to both classes. Thus, each year the Fund will
report 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 preferred shares and common shares in proportion to the total
dividends made to each class with respect to such taxable year, or otherwise as required by applicable law. In addition, solely
for the purpose of satisfying the 90% distribution requirement and the distribution requirement for avoiding income taxes, certain
distributions made after the close of a taxable year of the Fund may be “spilled back” and treated as paid during such
taxable year. In such case, shareholders will be treated as having received such dividends in the taxable year in which the distribution
was actually made. The Fund intends to treat any dividends that are paid following the close of a taxable year as “paid”
in the prior year for purposes of determining a class’s proportionate share of a particular type of income.
The IRS has ruled privately that dividends
paid following the close of the taxable year that are treated for federal income tax purposes as derived from income from the prior
year will be treated as dividends “paid” in the prior year for purposes of determining the proportionate share of a
particular type of income for each class. The private ruling is not binding on the IRS, and there can be no assurance that the
IRS will respect such treatment. Each shareholder will be notified of the allocation within 60 days after the end of the year.
Although the
Fund is required to distribute annually at least 90% of its investment company taxable income (determined without regard to the
deduction for dividends paid), the Fund is not required to distribute net capital gains to the shareholders. The Fund may retain
and reinvest such gains and pay federal income taxes on such gains (the “net undistributed capital gain”). Please see
the discussion above on undistributed capital gains. The Fund intends to distribute its net capital gain for any year during which
it has preferred shares outstanding.
Although dividends
generally will be treated as distributed when paid, dividends declared in October, November or December with a record
date in such a month, and paid in January of the following year, will be treated as having been distributed by the Fund and
received by the shareholders on December 31 of the year in which the dividend was declared.
Earnings and
profits are generally treated, for federal income tax purposes, as first being used to pay distributions on preferred shares, and
then to the extent remaining, if any, to pay distributions on the common shares. Distributions in excess of current and accumulated
earnings and profits of the Fund are treated first as return of capital to the extent of the shareholder’s basis in the shares
and, after the adjusted basis is reduced to zero, will be treated as capital gain to a shareholder who holds such shares as a capital
asset.
If the Fund utilizes
leverage through borrowings, or otherwise, asset coverage limitations imposed by the 1940 Act as well as additional restrictions
that may be imposed by certain lenders on the payment of dividends or distributions potentially could limit or eliminate the Fund’s
ability to make distributions on its common shares and/or preferred 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 as a regulated investment company and/or might subject the Fund to a
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 preferred shares 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.
Sales of Fund
Shares. Sales and other dispositions of the Fund’s shares, including a repurchase by the Fund of its shares, generally
are taxable events for shareholders that are subject to federal income tax. Selling shareholders will generally recognize gain
or loss in an amount equal to the difference between the amount received for such shares and their adjusted tax basis in the shares
sold. If such shares are held as a capital asset at the time of sale, the gain or loss will generally be a long-term capital gain
or loss if the shares have been held for more than one year and, if not held for such period, a short-term capital gain or loss.
Similarly, a repurchase by the Fund, including as a result of a tender offer by the Fund, if any, of all of the shares (common
and preferred) actually and constructively held by a shareholder generally will give rise to capital gain or loss under Section 302
(b) of the Code if the shareholder does not own (and is not regarded under certain federal income tax law rules of constructive
ownership as owning) any other common or preferred shares of the Fund and provided that the proceeds from the purchase do not represent
declared but unpaid dividends. If the Fund repurchases fewer than all of a shareholder’s common shares or a shareholder continues
to hold (directly or by attribution) other Fund shares (including preferred shares if then outstanding) subsequent to a Fund repurchase,
in certain circumstances such shareholder may be treated as having received a distribution under Section 301 of the Code (“Section 301
distribution”) unless the repurchase is treated as being either (i) “substantially disproportionate” with
respect to such shareholder or (ii) otherwise “not essentially equivalent to a dividend” under the relevant rules of
the Code.
A Section 301 distribution is
not treated as a sale or exchange giving rise to capital gain or loss, but rather is treated as a dividend to the extent supported
by the Fund’s current and accumulated earnings and profits, with the excess treated as a return of capital reducing the shareholder’s
tax basis in its Fund shares, and thereafter as capital gain. Where a selling shareholder is treated as receiving a dividend, there
is a risk that non-selling shareholders whose percentage interests in the Fund increase as a result of such repurchase will be
treated as having received a taxable distribution from the Fund. The extent of such risk will vary depending upon the particular
circumstances of the repurchase, in particular whether such repurchase is a single and isolated event or is part of a plan for
periodically repurchasing the common shares of the Fund; if isolated, any such risk is likely remote.
Gain or loss
will generally be long-term capital gain or loss if the shares disposed of were held for more than one year and will be short-term
capital gain or loss if the shares disposed of were held for one year or less. Net long-term capital gain recognized by a noncorporate
U.S. shareholder generally will be subject to federal income tax at a lower rate than net short-term capital gain or ordinary income.
For corporate holders, capital gain is generally taxed for federal income tax purposes at the same rate as ordinary income. A holder’s
ability to deduct capital losses may be limited.
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, or is treated as acquiring, substantially identical stock or securities (including Fund shares acquired pursuant to the
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 income tax basis
of the shares acquired. Shareholders should consult their own tax advisers regarding their individual circumstances to determine
whether any particular transaction in the Fund’s shares is properly treated as a sale for U.S. federal income tax purposes
and the tax treatment of any gains or losses recognized in such transactions.
Upon the dissolution
of the Fund, shareholders generally will realize capital gain or loss in an amount equal to the difference between the amount of
cash or other property received by the shareholder (including any property deemed received by reason of its being placed in a liquidating
trust) and the shareholder’s adjusted tax basis in shares of the Fund for U.S. federal income tax purposes. Any such gain
or loss will be long-term if the shareholder is treated as having a holding period in Fund shares of greater than one year, and
otherwise will be short-term.
Federal Income
Tax Withholding. Federal law requires that the Fund withhold, as “backup withholding,” a percentage of reportable
payments, including dividends, capital gain distributions and the proceeds of sales or other dispositions of the Fund’s shares
paid to shareholders who have not complied with IRS regulations. In order to avoid this withholding requirement, shareholders must
certify on their account applications, or on a separate IRS Form W-9, that the social security number or other taxpayer identification
number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt
from backup withholding. The Fund may nevertheless be required to backup withhold if it receives notice from the IRS or a broker
that the number provided is incorrect or backup withholding is applicable. 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.
Other
Matters. Treasury regulations provide that 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 in which the transaction is entered
into and the five succeeding taxable years) for a shareholder who is an individual, S corporation or trust or $10 million or
more for a corporate shareholder in any single taxable year (or $20 million or more in any combination of taxable years in
which the transaction is entered into and the five succeeding taxable years), the shareholder must file with the IRS a
disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases 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 advisers to determine the applicability of these regulations
in light of their individual circumstances.
Special tax rules apply to
investments through defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisers
to determine the suitability of shares of the Fund as an investment through such plans and the precise effect of an
investment on their particular tax situation.
Taxation
of Non-U.S. Shareholders. 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 resident aliens or U.S. corporations,
partnerships, trusts or estates who are subject to U.S. federal income tax on a net income basis). Investors other than U.S.
persons, including non-resident alien individuals, may be subject to different U.S. federal income tax treatment. With
respect to such persons, the Fund must generally withhold U.S. federal withholding tax at the rate of 30% (or, if the Fund
receives certain certifications from such non-U.S. shareholder, such lower rate as prescribed by an applicable tax treaty) on
amounts treated as ordinary dividends from the Fund. However, the Fund is not required to withhold tax on any amounts paid to
a non-U.S. person with respect to capital gain dividends (that is, distributions of net capital gain that are properly
reported by the Fund as capital gain dividends), dividends attributable to “qualified short-term gain” (i.e., the
excess of net short-term capital gain over net long-term capital loss) reported as such by the Fund and dividends
attributable to certain U.S. source interest income of types similar to those not subject to federal withholding tax if
earned directly by a non-U.S. person, provided such amounts are properly reported by the Fund. Shareholders should consult
their own tax advisers 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.
Debt Securities
Under present
law, the Fund intends to treat the debt securities as indebtedness for federal income tax purposes, which treatment the discussion
below assumes. We intend to treat all payments made with respect to the debt securities consistent with this characterization.
The following discussion assumes that all interest on the debt securities will be qualified stated interest (which is generally
interest that is unconditionally payable at least annually at a fixed or qualified floating rate), and that the debt securities
will have a fixed maturity date of more than one year from the date of issuance.
Taxation of
Interest. Payments or accruals of interest on debt securities generally will be taxable to holders as ordinary interest income
at the time such interest is received (actually or constructively) or accrued, in accordance with the holder’s regular method
of accounting for federal income tax purposes.
Purchase,
Sale and Redemption of Debt Securities. Initially, a holder’s tax basis in debt securities acquired generally will be
equal to the cost to acquire such debt securities. This basis will be increased by the amounts, if any, that the holder includes
in income under the rules governing OID (taking into account any acquisition premium that offsets such OID) and market discount,
and will be decreased by the amount of any amortized premium on such debt securities, as discussed below, and any payments on such
debt securities other than stated interest. When the holder sells, exchanges or redeems any of its debt securities, or otherwise
disposes of its debt securities in a taxable transaction, the holder generally will recognize gain or loss equal to the difference
between the amount realized on the transaction (less any accrued and unpaid interest (including any OID), which will be subject
to federal income tax as interest in the manner described above) and the tax basis in the debt securities relinquished.
Except as discussed
below with respect to market discount, the gain or loss recognized on the sale, exchange, redemption or other taxable disposition
of any debt securities generally will be capital gain or loss. Such gain or loss will generally be long-term capital gain or loss
if the disposed debt securities were held for more than one year and will be short-term capital gain or loss if the disposed debt
securities were held for one year or less. Net long-term capital gain recognized by a noncorporate U.S. holder generally will be
subject to federal income tax at a lower rate than net short-term capital gain or ordinary income. For corporate holders, capital
gain is generally taxed for federal income tax purposes at the same rate as ordinary income. A holder’s ability to deduct
capital losses may be limited.
Amortizable
Premium. If a holder purchases debt securities at a cost greater than their stated redemption price at maturity, plus accrued
interest, the holder will be considered to have purchased the debt securities at a premium, and generally may elect to amortize
this premium as an offset to interest income, using a constant yield method, over the remaining term of the debt securities. If
the holder makes the election to amortize the premium, it generally will apply to all debt instruments held at the beginning of
the first taxable year to which the election applies, as well as any debt instruments that were subsequently acquired. In addition,
the holder may not revoke the election without the consent of the IRS. If the holder elects to amortize the premium, it will be
required to reduce its tax basis in the debt securities by the amount of the premium amortized during its holding period. If the
holder does not elect to amortize premium, the amount of premium will be included in the holder’s tax basis in the debt securities.
Therefore, if the holder does not elect to amortize the premium and holds the debt securities to maturity, the holder generally
will be required to treat the premium as a capital loss when the debt securities are redeemed.
Original
Issue Discount. If the stated redemption price at maturity of the debt securities exceeds their issue price by at least
the statutory de minimis amount, the debt securities will be treated as being issued with OID for U.S. federal income
tax purposes. The stated redemption price at maturity includes all payments on the debt securities other than qualified
stated interest, which is generally interest that is unconditionally payable at least annually at a fixed or qualified
floating rate. If the debt securities are issued with OID, you will be required to include such OID in gross income (as
ordinary income) as it accrues over the term of the debt securities on a constant-yield basis, in advance of the receipt of
cash attributable to that income and regardless of your regular method of accounting for U.S. federal income tax
purposes.
Acquisition
Premium. If a holder purchases debt securities that were issued with OID at a cost greater than their issue price and less
than or equal to their stated redemption price at maturity, the holder will be considered to have purchased the debt securities
with acquisition premium. Such holder will generally be permitted to reduce the daily portions of OID required to be included in
income by a fraction, the numerator of which is the excess of the holder’s initial basis in the debt securities over the
debt securities’ issue price, and the denominator of which is the excess of the redemption price at maturity of the debt
securities over their issue price.
Market Discount.
If the holder purchases debt securities in the secondary market at a price that reflects a “market discount,” any
principal payments on, or any gain that the holder realized on the disposition of, the debt securities generally will be treated
as ordinary interest income to the extent of the market discount that accrued on the debt securities during the time such debt
securities were held. “Market discount” is defined under the Code as, in general, the excess (subject to a statutory
de minimis amount) of the stated redemption price at maturity (or in the case of an obligation issued with OID, its “revised
issue price”) over the purchase price of the debt security. In addition, the holder may be required to defer the deduction
of all or a portion of any interest paid on any indebtedness incurred or continued to purchase or carry the debt securities that
were acquired at a market discount.
The holder
may elect to include market discount in gross income currently as it accrues (on either a ratable or constant yield basis),
in lieu of treating a portion of any gain realized on a sale of the debt securities as ordinary income. If the holder elects
to include market discount on a current basis, the interest deduction deferral rule described above will not apply and
the holder will increase its basis in the debt security by the amount of market discount included in gross income. If the
holder does make such an election, it will apply to all market discount debt instruments acquired on or after the first day
of the first taxable year to which the election applies. This election may not be revoked without the consent of the IRS.
Information
Reporting and Backup Withholding. In general, information reporting requirements will apply to payments of principal, interest,
and premium, if any, paid on debt securities and to the proceeds of the sale of debt securities paid to U.S. holders other than
certain exempt recipients (such as certain corporations) provided they establish such exemption. Information reporting generally
will apply to payments of interest on the debt securities to non-U.S. Holders (as defined below) and the amount of tax, if any,
withheld with respect to such payments. Copies of the information returns reporting such interest payments and any withholding
may also be made available to the tax authorities in the country in which the non-U.S. Holder resides under the provisions of an
applicable income tax treaty. In addition, for non-U.S. Holders, information reporting will apply to the proceeds of the sale of
debt securities within the United States or conducted through United States-related financial intermediaries unless the certification
requirements described below have been complied with and the statement described below in “Taxation of Non-U.S. Holders”
has been received (and the payor does not have actual knowledge or reason to know that the holder is a United States person) or
the holder otherwise establishes an exemption.
We may be required
to withhold, for U.S. federal income tax purposes, a portion of all payments (including redemption proceeds) payable to holders
of debt securities who fail to provide us with their correct taxpayer identification number, who fail to make required certifications
or who have been notified by the IRS that they are subject to backup withholding (or if we have been so notified). Certain corporate
and other shareholders specified in the Code and the regulations thereunder are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the holder’s U.S. federal income tax liability, provided
the appropriate information is furnished to the IRS.
A holder
who is a non-U.S. Holder may have to comply with certification procedures to establish its non-U.S. status in order to avoid
backup withholding tax requirements. The certification procedures required to claim the exemption from withholding tax on
interest income described below with respect to non-U.S. Holders will satisfy these requirements.
Taxation
of Non-U.S. Holders. If a holder is a non-resident alien individual or a foreign corporation (a “non-U.S.
Holder”), the payment of interest on the debt securities generally will be considered “portfolio interest”
and thus generally will be exempt from U.S. federal withholding tax. This exemption will apply to the holder provided that
(1) interest paid on the debt securities is not effectively connected with the holder’s conduct of a trade or
business in the United States, (2) the holder is not a bank whose receipt of interest on the debt securities is
described in Section 881(c)(3)(A) of the Code, (3) the holder does not actually or constructively own 10
percent or more of the combined voting power of all classes of our stock entitled to vote, (4) the holder is not a
controlled foreign corporation that is related, directly or indirectly, to us through stock ownership, and (5) the
holder satisfies the certification requirements described below.
To satisfy the
certification requirements, either (1) the holder of any debt securities must certify, under penalties of perjury, that such
holder is a non-U.S. person and must provide such owner’s name, address and taxpayer identification number, if any, on IRS
Form W-8BEN or W-8BEN-E, or (2) a securities clearing organization, bank or other financial institution that holds customer
securities in the ordinary course of its trade or business and holds the debt securities on behalf of the holder thereof must certify,
under penalties of perjury, that it has received a valid and properly executed IRS Form W-8BEN or W-8BEN-E from the beneficial
holder and comply with certain other requirements. Special certification rules apply for debt securities held by a foreign
partnership and other intermediaries.
Interest
on debt securities received by a non-U.S. Holder that is not excluded from U.S. federal withholding tax under the portfolio interest
exemption as described above generally will be subject to withholding at a 30% rate, except where (1) the interest is effectively
connected with the conduct of a U.S. trade or business, in which case the interest will be subject to U.S. income tax on a net
basis at graduated rates as applicable to U.S. holders generally (and, in the case of corporate non-U.S. Holders, may be subject
to an additional 30% branch profits tax) or (2) a non-U.S. Holder can claim the benefits of an applicable income tax treaty
to reduce or eliminate such withholding tax. To claim the benefit of an income tax treaty or to claim an exemption from withholding
because the interest is effectively connected with a U.S. trade or business, a non-U.S. Holder must timely provide the appropriate,
properly executed IRS forms. These forms may be required to be periodically updated. Also, a non-U.S. Holder who is claiming the
benefits of an income tax treaty may be required to obtain a U.S. taxpayer identification number and to provide certain documentary
evidence issued by foreign governmental authorities to prove residence in the foreign country.
Any capital
gain that a non-U.S. Holder realizes on a sale, exchange or other disposition of debt securities generally will be exempt from
U.S. federal income tax, including withholding tax. This exemption will not apply to a holder whose gain is effectively connected
with the conduct of a trade or business in the U.S. or who is an individual holder and is present in the U.S. for a period or
periods aggregating 183 days or more in the taxable year of the disposition and, in each case, certain other conditions are met.
See “Information
Reporting and Backup Withholding” above for a general discussion of information reporting and backup withholding requirements
applicable to non-U.S. Holders.
Other Tax Matters
Medicare Tax
on Certain Investment Income. Certain noncorporate taxpayers are subject to an additional tax of 3.8% with respect to the lesser
of (1) their “net investment income” (or undistributed “net investment income” in the case of an estate
or trust) or (2) the excess of their “modified adjusted gross income” over a threshold amount ($250,000 for married
persons filing jointly and $200,000 for single taxpayers). For this purpose, “net investment income” includes interest,
dividends (including dividends paid with respect to shares), annuities, royalties, rent, net gain attributable to the disposition
of property not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of shares)
and certain other income, but will be reduced by any deductions properly allocable to such income or net gain.
Other Reporting
and Withholding Requirements. Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively,
“FATCA”) generally require the Fund to obtain information sufficient to identify the status of each of its shareholders
and holders of its debt securities under FATCA or under an applicable intergovernmental agreement (an “IGA”) between
the United States and a foreign government. If a shareholder or holder of debt securities fails to provide the required information
or otherwise fails to comply with FATCA or an IGA, the Fund may be required to withhold under FATCA at a rate of 30% with respect
to that holder on ordinary dividends and interest payments. The IRS and the Department of Treasury have issued proposed regulations
providing that these withholding rules will not be applicable to the gross proceeds of share redemptions or capital gains
dividends that the Fund pays. If a payment by the Fund is subject to FATCA withholding, the Fund is required to withhold even if
such payment would otherwise be exempt from withholding under the rules applicable to non-U.S. persons. Each prospective investor
is urged to consult its tax adviser regarding the applicability of FATCA and any other reporting requirements with respect to the
prospective investor’s own situation, including investments through an intermediary.
Shareholders
that are U.S. persons and own, directly or indirectly, more than 50% of the Fund could be required to report annually their “financial
interest” in the Fund’s “foreign financial accounts,” if any, on FinCEN Form 114, Report of Foreign
Bank and Financial Accounts (FBAR). Shareholders should consult a tax adviser regarding the applicability to them of this reporting
requirement.
Alternative Minimum Tax
Investors may
be subject to the federal alternative minimum tax on their income (including taxable income from the Fund), depending on their
individual circumstances.
CUSTODIAN, TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR
The Fund’s
securities and cash are held under a custodian agreement with State Street Bank and Trust Company, 100 Lincoln Street, Boston,
Massachusetts 02111. The transfer agent, dividend disbursing agent and registrar for the Fund’s shares is Computershare Investor
Services P.O. Box 505000, Louisville, KY 40233-5000.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte
& Touche LLP, 111 S. Wacker Drive, Chicago, IL 60606, serves as our independent registered public accounting
firm.
Deloitte
& Touche LLP provides audit and audit-related services and consultation in connection with the review of our filing with
the SEC.
ADDITIONAL INFORMATION
A Registration
Statement on Form N-2, including amendments thereto, relating to the securities offered hereby, has been filed by the Fund
with the SEC, Washington, D.C. The prospectus, any prospectus supplement 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 securities offered hereby, reference is made to the Registration Statement. Statements contained
in the prospectus, prospectus supplement 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 reviewed on the SEC’s website at http://www.sec.gov.
ADDITIONAL INFORMATION
CONCERNING THE AGREEMENT AND DECLARATION OF TRUST
The Fund’s
Agreement and Declaration of Trust provides that the Fund’s Trustees shall have the power to cause each shareholder to pay
directly, in advance or arrears, for charges of the Fund’s custodian or transfer, shareholder servicing or similar agent,
an amount fixed from time to time by the Trustees, by setting off such charges due from such shareholder from declared but unpaid
dividends owed such shareholder and/or by reducing the number of shares in the account of such shareholder by that number of full
and/or fractional shares which represents the outstanding amount of such charges due from such shareholder. The Fund has no present
intention of relying on this provision of the Agreement and Declaration of Trust and would only do so if consistent with the 1940
Act or the rules and regulations or interpretations of the SEC thereunder.
Financial
Statements
The
Fund’s financial statements appearing in the Fund’s annual shareholder report for the year ended October 31,
2020 are incorporated by reference in this Statement of Additional Information and have been so incorporated in reliance upon
the reports of Deloitte & Touche LLP, independent registered public accounting firm for the Fund,
which report is included in such annual shareholder reports and is incorporated by reference herein.
The
annual shareholder report is available without charge on its website at www.calamos.com or by request in writing to the
Fund at 2020 Calamos Court, Naperville, IL 60564.
Incorporation
by Reference
This Statement of Additional
Information is part of a registration statement filed with the Commission. Pursuant to the final rule and form amendments
adopted by the Commission on April 8, 2020 to implement certain provisions of the Economic Growth, Regulatory Relief, and
Consumer Protection Act, the Fund is permitted to “incorporate by reference” the information filed with the Commission,
which means that the Fund can disclose important information to you by referring you to those documents. The information incorporated
by reference is considered to be part of this Statement of Additional Information, and later information that the Fund files with
the SEC will automatically update and supersede this information.
The documents listed
below, and any reports and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the 1940
Act and Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering will be incorporated
by reference into this Statement of Additional Information and deemed to be part of this Statement of Additional Information from
the date of the filing of such reports and documents:
· The
Fund’s prospectus, dated [ ], filed with this Statement of Additional Information;
· The
Fund’s Annual Report on Form N-CSR, filed on December 30, 2020;
· The
Fund’s description of Common Shares on Form 8-A, filed on June 28, 2012; and
· The
Fund’s Form 8-K, filed on January 12, 2021.
You may obtain copies
of any information incorporated by reference into this Statement of Additional Information, at no charge, by calling toll-free
800.582.6959 or by writing to the Fund at 2020 Calamos Court, Naperville, IL 50463. The Fund’s periodic reports filed
pursuant to Section 30(b)(2) of the 1940 Act and Sections 13 and 15(d) of the Exchange Act, as well as the prospectus
and this Statement of Additional Information, are available on the Fund’s website http://www.calamos.com. In addition, the
Commission maintains a website at www.sec.gov, free of charge, that contains these reports, the Fund’s proxy statement and
information statements, and other information relating to the Fund.
APPENDIX A —
SUMMARY OF CERTAIN PROVISIONS OF THE
INDENTURE AND FORM OF SUPPLEMENTAL INDENTURE
The following is a summary of certain
provisions of the indenture (the “Original Indenture”) and the supplemental indenture (“Supplemental Indenture”)
that the Fund expects to enter into in connection with the issuance of debt securities. This summary does not purport to be complete
and is qualified in its entirety by reference to the indenture, a copy of which will be filed with the Commission in connection
with an offering of debt securities by the Fund.
DEFINITIONS
“‘AA’ Composite
Commercial Paper Rate” on any date means (i) the interest equivalent of (1) the 7-day rate, in the case of a Rate
Period which is 7 days or shorter, (2) the 30-day rate, in the case of a Rate Period which is a Standard Rate Period greater
than 7 days but fewer than or equal to 31 days, or (3) the 180-day rate, in the case of all other Rate Periods, on financial
commercial paper on behalf of issuers whose corporate bonds are rated “AA” by S&P, or the equivalent of such rating
by another nationally recognized rating agency, as announced by the Federal Reserve Bank of New York for the close of business
on the Business Day immediately preceding such date; or (ii) if the Federal Reserve Bank of New York does not make available
such a rate, then the arithmetic average of the interest equivalent of such rates on financial commercial paper placed on behalf
of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Auction Agent for the close
of business on the Business Day immediately preceding such date (rounded to the next highest .001 of 1%). If any Commercial Paper
Dealer does not quote a rate required to determine the “AA” Composite Commercial Paper Rate, such rate shall be determined
on the basis of the quotations (or quotation) furnished by the remaining Commercial Paper Dealers (or Dealer), if any, or, if there
are no such Commercial Paper Dealers, a nationally recognized dealer in commercial paper of such issues then making such quotations
selected by the Issuer. For purposes of this definition, (A) “Commercial Paper Dealers” shall mean (1) and
; (2) in lieu of any thereof, its respective Affiliate or successor; and (3) in the event that any of the foregoing shall
cease to quote rates for financial commercial paper of issuers of the sort described above, in substitution therefor, a nationally
recognized dealer in financial commercial paper of such issuers then making such quotations selected by the Issuer, and (B) “interest
equivalent” of a rate stated on a discount basis for financial commercial paper of a given number of days’ maturity
shall mean a number equal to the quotient (rounded upward to the next higher one-thousandth of 1%) of (1) such rate expressed
as a decimal, divided by (2) the difference between (x) 1.00 and (y) a fraction, the numerator of which shall be
the product of such rate expressed as a decimal, multiplied by the number of days in which such commercial paper shall mature and
the denominator of which shall be 360.
“Affiliate” means any
person controlled by, in control of or under common control with the Issuer; provided that no Broker-Dealer controlled by, in control
of or under common control with the Issuer shall be deemed to be an Affiliate nor shall any corporation or any person controlled
by, in control of or under common control with such corporation one of the directors or executive officers of which is also a Director
of the Issuer be deemed to be an Affiliate solely because such director or executive officer is also a Director of the Issuer.
“Agent Member” means a
member of or participant in the Securities Depository that will act on behalf of a Bidder.
“All Hold Rate” means
80% of the “AA” Composite Commercial Paper Rate.
“Applicable Rate” means
the rate determined in accordance with the procedures in Section 2.02(c)(i) of this Supplemental Indenture.
“Auction” means each periodic
implementation of the Auction Procedures.
“Auction
Agent” means [ ] unless and until another commercial bank, trust company, or other financial
institution appointed by a resolution of the Board of Directors enters into an agreement with the Issuer to follow the Auction
Procedures for the purpose of determining the Applicable Rate.
“Auction Agreement” means
the agreement between the Auction Agent and the Issuer pursuant to which the Auction Agent agrees to follow the procedures specified
in Appendix A-I to this Supplemental Indenture, as such agreement may from time to time be amended or supplemented.
“Auction Date” means the
first Business Day next preceding the first day of a Rate Period for each series of [ ] Notes.
“Auction Desk” means the
business unit of a Broker-Dealer that fulfills the responsibilities of the Broker-Dealer under a Broker-Dealer Agreement, including
soliciting Bids for the Notes, and units of the Broker- Dealer which are not separated by information
controls appropriate to control, limit and monitor the inappropriate dissemination of information about Bids.
“Auction Period” means
with respect to the Notes, either a Standard Auction Period or a Special Auction Period, as applicable.
“Auction Procedures” means
the procedures for conducting Auctions set forth in Appendix A-I hereto.
“Auction Rate” means for
each series of Notes for each Auction Period, (i) if Sufficient
Clearing Bids exist, the Winning Bid Rate, provided, however, if all of the Notes are the subject
of Submitted Hold Orders, the All Hold Rate for such series of Notes
and (ii) if Sufficient Clearing Bids do not exist, the Maximum Rate for such series of Notes.
“Authorized Denomination”
means $25,000 and any integral multiple thereof.
“Available Notes”
means for each series of Notes on each Auction Date, the number of Units of Notes of such series
that are not the subject of Submitted Hold Orders.
“Beneficial Owner,” with
respect to each series of Notes, means a customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of such series of Notes.
“Bid” shall have the meaning
specified in Appendix A-I hereto.
“Bidder” means each Beneficial
Owner, Potential Beneficial Owner and Broker Dealer who places an Order.
“Board of Directors” or
“Board” means the Board of Directors of the Issuer or any duly authorized committee thereof as permitted by applicable
law.
“Broker-Dealer” means
any broker-dealer or broker-dealers, or other entity permitted by law to perform the function required of a Broker-Dealer by the
Auction Procedures, that has been selected by the Issuer and that is a party to a Broker-Dealer Agreement with the Auction Agent.
“Broker-Dealer Agreement”
means an agreement between the Auction Agent and a Broker-Dealer, pursuant to which such Broker-Dealer agrees to follow the Auction
Procedures.
“Broker-Dealer Deadline” means, with respect
to an Order, the internal deadline established by the Broker- Dealer through which the Order was placed after which it will
not accept Orders or any change in any Order previously placed with such Broker-Dealer; provided, however, that nothing shall
prevent the Broker-Dealer from correcting Clerical Errors by the Broker-Dealer with respect to Orders from Bidders after the
Broker-Dealer Deadline pursuant to the provisions herein. Any Broker-Dealer may change the time or times of its Broker-
Dealer Deadline as it relates to such Broker-Dealer by giving notice not less than two Business Days prior to the date such
change is to take effect to Bidders who place Orders through such Broker-Dealer.
“Business Day” means a
day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in
the City of New York, New York are authorized or obligated by law to close, days on which the Federal Reserve Bank of New York
is not open for business, days on which banking institutions or trust companies located in the state in which the operations of
the Auction Agent are conducted are authorized or required to be closed by law, regulation or executive order of the state in which
the Auction Agent conducts operations with respect to the Notes.
“Clerical Error” means
a clerical error in the processing of an Order, and includes, but is not limited to, the following: (i) a transmission error,
including but not limited to, an Order sent to the wrong address or number, failure to transmit certain pages or illegible
transmission, (ii) failure to transmit an Order received from one or more Existing Holders or Potential Beneficial Owners
(including Orders from the Broker-Dealer which were not originated by the Auction Desk) prior to the Broker-Dealer Deadline or
generated by the Broker-Dealer’s Auction Desk for its own account prior to the Submission Deadline or (iii) a typographical
error. Determining whether an error is a “Clerical Error” is within the reasonable judgment of the Broker-Dealer, provided
that the Broker-Dealer has a record of the correct Order that shows it was so received or so generated prior to the Broker- Dealer
Deadline or the Submission Deadline, as applicable.
“Code” means the Internal
Revenue Code of 1986, as amended.
“Commercial Paper Dealers”
has the meaning set forth in the definition of AA Composite Commercial Paper Rate.
“Commission” means the
Securities and Exchange Commission.
“Default Rate” means the Reference Rate multiplied by three (3).
“Deposit Securities” means
cash and any obligations or securities, including short term money market instruments that are Eligible Assets, rated at least , or by ,
except that, such obligations or securities shall be considered “Deposit Securities” only if they are also rated at
least P-2 by Moody’s.
“Discount
Factor” means the Moody’s Discount Factor (if Moody’s is then rating the Notes), Discount Factor (if is
then rating the Notes) or an Other Rating Agency Discount Factor, whichever is applicable.
“Discounted Value” means
the quotient of the Market Value of an Eligible Asset divided by the applicable Discount Factor, provided that with respect to
an Eligible Asset that is currently callable, Discounted Value will be equal to the quotient as calculated above or the call price,
whichever is lower, and that with respect to an Eligible Asset that is prepayable, Discounted Value will be equal to the quotient
as calculated above or the par value, whichever is lower.
“Eligible Assets” means
Moody’s Eligible Assets or ’s Eligible Assets (if Moody’s or are
then rating the Notes) and/or Other Rating Agency Eligible Assets, whichever is applicable.
“Error Correction Deadline”
means one hour after the Auction Agent completes the dissemination of the results of the Auction to Broker-Dealers without regard
to the time of receipt of such results by any Broker-Dealer; provided, however, in no event shall the Error Correction Deadline
extend past 4:00 p.m., New York City time unless the Auction Agent experiences technological failure or force majeure in disseminating
the Auction results which causes a delay in dissemination past 3:00 p.m., New York City time.
“Existing
Holder,” with respect to Notes of a series, shall mean a Broker-Dealer (or any such
other Person as may be permitted by the Issuer) that is listed on the records of the Auction Agent as a holder of Notes of
such series.
“ ”
means Ratings and its successors at law.
“ Discount
Factor” means the discount factors set forth in the Guidelines for use in calculating the
Discounted Value of the Issuer’s assets in connection with ’s
ratings of Notes.
“ Eligible
Asset” means assets of the Issuer set forth in the Guidelines as eligible for inclusion
in calculating the Discounted Value of the Issuer’s assets in connection with ’s ratings
of
Notes.
“ Guidelines”
mean the guidelines provided by , as may be amended from time to time, in connection with ’s
ratings of Notes.
“Hold Order” shall have
the meaning specified in Appendix A-I hereto or an Order deemed to have been submitted as provided in paragraph (c) of Section 1
of Appendix A-I hereto.
“Holder” means, with respect
to Notes, the registered holder of notes of each series of Notes
as the same appears on the books or records of the Issuer.
“Index” means on any Auction
Date with respect to Notes in any Auction Period of 35 days
or less the applicable LIBOR rate. The Index with respect to Notes in any Auction Period of more
than 35 days shall be the rate on United States Treasury Securities having a maturity which most closely approximates the length
of the Auction Period as last published in The Wall Street Journal or such other source as may be mutually agreed upon by the Trustee
and the Broker-Dealers. If either rate is unavailable, the Index shall be an index or rate agreed to by all Broker-Dealers and
consented to by the Issuer. For the purpose of this definition an Auction Period of 35 days or less means a 35-day Auction Period
or shorter Auction Period, i.e., a 35-day Auction Period which is extended because of a holiday would still be considered an Auction
Period of 35 days or less.
“Interest Payment Date”
when used with respect to any Notes, means the date on which an installment of interest on such Notes
shall be due and payable which generally shall be the day next following an Auction Date.
“LIBOR”
means, for purposes of determining the Reference Rate, (i) the rate for deposits in U.S. dollars for the designated Rate
Period, which appears on display page 3750 of Moneyline’s Telerate Service (“Telerate Page 3750”)
(or such other page as may replace that page on that service, or such other service as may be selected by Lehman
Brothers Inc. or its successors) as of 11:00 a.m., London time, on the day that is the Business Day on the Auction Date or,
if the Auction Date is not a Business Day, the Business Day preceding the Auction Date (the “LIBOR Determination
Date”), or (ii) if such rate does not appear on Telerate Page 3750 or such other page as may replace
such Telerate Page 3750,
(A) shall determine the arithmetic
mean of the offered quotations of the reference banks to leading banks in the London interbank market for deposits in U.S.
dollars for the designated Rate Period in an amount determined
by by reference to requests
for quotations as of approximately 11:00 a.m. (London time) on such date made
by to the
reference banks, (B) if at least two of the reference banks provide such quotations, LIBOR shall equal such arithmetic
mean of such quotations, (C) if only one or none of the reference banks provide such quotations, LIBOR shall be deemed
to be the arithmetic mean of the offered quotations that leading banks in The City of New York, New York selected by (after
obtaining the Issuer’s approval) are quoting on the relevant LIBOR Determination Date for deposits in U.S. dollars for
the designated Rate Period in an amount determined
by (after obtaining the Issuer’s
approval) that is representative of a single transaction in such market at such time by reference to the principal London
office of leading banks in the London interbank market; provided, however, that if is not a
Broker-Dealer or does not quote a rate required to determine LIBOR, LIBOR will be determined on the basis of the quotation or
quotations furnished by any other Broker-Dealer selected by the Issuer to provide such rate or rates not being supplied
by ; provided further, that
if and/or a substitute Broker- Dealer are required but
unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be the most recently
determinable LIBOR. If the number of Rate Period days shall be (i) 7 or more but fewer than 21 days, such rate shall be
the seven-day LIBOR rate; (ii) more than 21 but fewer than 49 days, such rate shall be one-month LIBOR rate;
(iii) 49 or more but fewer than 77 days, such rate shall be the two-month LIBOR rate; (iv) 77 or more but fewer
than 112 days, such rate shall be the three-month LIBOR rate; (v) 112 or more but fewer than 140 days, such rate shall
be the four-month LIBOR rate; (vi) 140 or more but fewer than 168 days, such rate shall be the five-month LIBOR rate;
(vii) 168 or more but fewer 189 days, such rate shall be the six-month LIBOR rate; (viii) 189 or more but fewer
than 217 days, such rate shall be the seven- month LIBOR rate; (ix) 217 or more but fewer than 252 days, such rate shall
be the eight-month LIBOR rate; (x) 252 or more but fewer than 287 days, such rate shall be the nine-month LIBOR rate;
(xi) 287 or more but fewer than 315 days, such rate shall be the ten-month LIBOR rate; (xii) 315 or more but fewer
than 343 days, such rate shall be the eleven-month LIBOR rate; and (xiii) 343 or more days but fewer than 365 days, such
rate shall be the twelve-month LIBOR rate.
“Market Value” means the
market value of an asset of the Issuer determined as follows: For equity securities, the value obtained from readily available
market quotations. If an equity security is not traded on an exchange or not available from a Board-approved pricing service, the
value obtained from written broker-dealer quotations. For fixed-income securities, the value obtained from readily available market
quotations based on the last sale price of a security on the day the Issuer values its assets or the market value obtained from
a pricing service or the value obtained from a direct written broker-dealer quotation from a dealer who has made a market in the
security. “Market Value” for other securities will mean the value obtained pursuant to the Issuer’s valuation
procedures. If the market value of a security cannot be obtained, or the Issuer’s investment adviser determines that the
value of a security as so obtained does not represent the fair value of a security, fair value for that security shall be determined
pursuant to the valuation procedures adopted by the Board of Directors.
“Maximum Rate” means,
on any date on which the Applicable Rate is determined, the rate equal to the applicable percentage of the Reference Rate, subject
to upward but not downward adjustment in the discretion of the Board of Directors after consultation with the Broker-Dealers, provided
that immediately following any such increase the Issuer would be in compliance with the Notes
Basic Maintenance Amount.
“Minimum Rate” means,
on any Auction Date with respect to a Rate Period of days or fewer, 70% of the AA Composite Commercial
Paper Rate at the close of business on the Business Day next preceding such Auction Date. There shall be no Minimum Rate on any
Auction Date with respect to a Rate Period of more than the Standard Rate Period.
“Moody’s” means
Moody’s Investors Service, Inc., a Delaware corporation, and its successors at law.
“Moody’s Discount Factor”
means the discount factors set forth in the Moody’s Guidelines for use in calculating the Discounted Value of the Issuer’s
assets in connection with Moody’s ratings of Notes.
“Moody’s Eligible Assets”
means assets of the Issuer set forth in the Moody’s Guidelines as eligible for inclusion in calculating the Discounted Value
of the Issuer’s assets in connection with Moody’s ratings of Notes.
“Moody’s Guidelines”
mean the guidelines provided by Moody’s, as may be amended from time to time, in connection with Moody’s ratings of Notes.
“1940
Act Notes Asset Coverage” means
asset coverage, as determined in accordance with Section 18(h) of the Investment Company Act, of at least 300% with
respect to all outstanding senior securities representing indebtedness of the Issuer, including all
Outstanding Notes (or such other asset coverage as may in the future be specified in or
under the Investment Company Act as the minimum asset coverage for senior securities representing indebtedness of a
closed-end investment company as a condition of declaring dividends on its common stock), determined on the basis of values
calculated as of a time within 48 hours next preceding the time of such determination.
“Notes” means Securities
of the Issuer ranking on a parity with the Notes that may be issued from time to time pursuant
to the Indenture.
“Order” means a Hold Order,
Bid or Sell Order.
“Original Issue Date”
means, with respect to the Notes, .
“Other Rating Agency”
means each rating agency, if any, other than Moody’s or then providing a rating for the
Notes pursuant to the request of the Issuer.
“Other Rating Agency Discount
Factor” means the discount factors set forth in the Other Rating Agency Guidelines of each Other Rating Agency for use in
calculating the Discounted Value of the Issuer’s assets in connection with the Other Rating Agency’s rating of Notes.
“Other Rating Agency Eligible
Assets” means assets of the Issuer set forth in the Other Rating Agency Guidelines of each Other Rating Agency as eligible
for inclusion in calculating the Discounted Value of the Issuer’s assets in connection with the Other Rating Agency’s
rating of Notes.
“Other Rating Agency Guidelines”
mean the guidelines provided by each Other Rating Agency, as may be amended from time to time, in connection with the Other Rating
Agency’s rating of Notes.
“Outstanding”
or “outstanding” means, as of any
date, Notes theretofore issued by
the Issuer except, without duplication,
(i) any Notes theretofore
canceled, redeemed or repurchased by the Issuer, or delivered to the Trustee for cancellation or with respect to which the
Issuer has given notice of redemption and irrevocably deposited with the Paying Agent sufficient funds to redeem
such Notes and
(ii) any Notes represented by any certificate in lieu of which a new certificate has been executed and delivered by the
Issuer. Notwithstanding the foregoing, (A) in connection with any Auction, any series
of Notes as to which the
Issuer or any person known to the Auction Agent to be an Affiliate of the Issuer shall be the Existing Holder thereof shall
be disregarded and deemed not to be Outstanding; and (B) for purposes of determining
the Notes Basic Maintenance
Amount, Notes held by the
Issuer shall be disregarded and not deemed Outstanding
but Notes held by any Affiliate of the
Issuer shall be deemed Outstanding.
“Paying Agent” means unless
and until another entity appointed by a resolution of the Board of Directors enters into an agreement with the Issuer to serve
as paying agent, transfer agent, registrar, and redemption agent with respect to the Notes, which
Paying Agent may be the same as the Trustee or the Auction Agent.
“Person” or “person”
means and includes an individual, a partnership, a trust, a company, an unincorporated association, a joint venture or other entity
or a government or any agency or political subdivision thereof.
“Potential
Beneficial Owner,” with respect to a series
of Notes,
shall mean a customer of a Broker- Dealer that is not a Beneficial Owner
of Notes of such series but that
wishes to purchase Notes of such series,
or that is a Beneficial Owner
of Notes of such series that
wishes to purchase additional Notes of such series;
provided, however, that for purposes of conducting an Auction, the Auction Agent may consider a Broker-Dealer acting on
behalf of its customer as a Potential Beneficial Owner.
“Potential
Holder,” with respect to Notes
of such series, shall mean a Broker-Dealer (or any such other person as may be permitted by the Issuer) that is not an
Existing Holder of Notes of such
series or that is an Existing Holder
of Notes of such series that wishes to
become the Existing Holder of additional Notes of such series; provided, however, that for
purposes of conducting an Auction, the Auction Agent may consider a Broker-Dealer acting on behalf of its customer as a
Potential Holder.
“Rate Period” means, with
respect to a series of Notes, the period commencing on the Original Issue Date thereof and ending
on the date specified for such series on the Original Issue Date thereof and thereafter, as to such series, the period commencing
on the day following each Rate Period for such series and ending on the day established for such series by the Issuer.
“Rating Agency” means
each of (if is then rating Notes),
Moody’s (if Moody’s is then rating Notes) and any Other Rating Agency.
“Rating
Agency Guidelines” mean Guidelines
(if is then
rating Notes), Moody’s Guidelines (if Moody’s is
then rating Notes) and any Other
Rating Agency Guidelines.
“Redemption Date,” when
used with respect to any Note to be redeemed, means the date fixed for such redemption by or pursuant
to the Indenture.
“Redemption Price,” when
used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant
to the Indenture.
“Reference
Rate” means, with respect to the determination of the Maximum Rate and Default Rate, the greater of
(i) the applicable AA Composite Commercial Paper Rate
(for a Rate Period of fewer than 184 days) or the applicable Treasury Index Rate (for a Rate Period of 184 days or more), or
(ii) the applicable LIBOR Rate.
“Securities Act” means
the Securities Act of 1933, as amended from time to time.
“Securities
Depository” means The Depository Trust Company and its successors and assigns or any successor securities depository selected
by the Issuer that agrees to follow the procedures required to be followed by such securities depository in connection with the Notes
Series .
“Sell Order” shall have
the meaning specified in Appendix A-I hereto.
“Special Auction Period”
means an Auction Period that is not a Standard Auction Period.
“Special Rate Period” means a Rate Period that is not
a Standard Rate Period.
“Specific Redemption Provisions”
means, with respect to any Special Rate Period of more than one year, either, or any combination of a period (a “Non-Call
Period”) determined by the Board of Directors after consultation with the Broker-Dealers, during which the Notes
subject to such Special Rate Period are not subject to redemption at the option of the Issuer consisting of a number of whole years
as determined by the Board of Directors after consultation with the Broker-Dealers, during each year of which the Notes
subject to such Special Rate Period shall be redeemable at the Issuer’s option and/or in connection with any mandatory redemption
at a price equal to the principal amount plus accrued but unpaid interest plus a premium expressed as a percentage or percentages
of $25,000 or expressed as a formula using specified variables as determined by the Board of Directors after consultation with
the Broker-Dealers.
“Standard Auction Period”
means an Auction Period of days.
“Standard
Rate Period” means a Rate Period of days.
“Stated Maturity” with
respect to Notes Series , shall mean .
“Submission Deadline”
means 1:00 P.M., New York City time, on any Auction Date or such other time on such date as shall be specified by the Auction Agent
from time to time pursuant to the Auction Agreement as the time by which the Broker-Dealers are required to submit Orders to the
Auction Agent. Notwithstanding the foregoing, the Auction Agent will follow the Securities Industry and Financial Markets Association’s
Early Market Close Recommendations for shortened trading days for the bond markets (the “SIFMA Recommendation”) unless
the Auction Agent is instructed otherwise in writing by the Issuer. In the event of a SIFMA Recommendation with respect to an Auction
Date, the Submission Deadline will be 11:30 A.M., instead of 1:00 P.M., New York City time.
“Submitted Bid” shall
have the meaning specified in Appendix A-I hereto.
“Submitted Hold Order” shall have the meaning specified in Appendix
A-I hereto.
“Submitted Order” shall have the meaning specified in Appendix A-I hereto.
“Submitted Sell Order”
shall have the meaning specified in Appendix A-I hereto.
“Sufficient Clearing Bids”
means for each series of Notes, an Auction for which the number of Units of Notes of such series
that are the subject of Submitted Bids by Potential Beneficial Owners specifying one or more rates not higher than the Maximum
Rate is not less than the number of Units of Notes of such series that are the subject of Submitted
Sell Orders and of Submitted Bids by Existing Holders specifying rates higher than the Maximum Rate.
“Notes Basic Maintenance Amount”
as of any Valuation Date has the meaning set forth in the Rating Agency Guidelines.
“Notes Series” means the Series Notes or any other Notes hereinafter designated as
Series of the Notes.
“Treasury Index Rate”
means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities having the same
number of 30-day periods to maturity as the length of the applicable Rate Period, determined, to the extent necessary, by linear
interpolation based upon the yield for such securities having the next shorter and next longer number of 30-day periods to maturity
treating all Rate Periods with a length greater than the longest maturity for such securities as having a length equal to such
longest maturity, in all cases based upon data set forth in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15(519)); provided, however, if the most recent such statistical release
shall not have been published during the 15 days preceding the date of computation, the foregoing computations shall be based upon
the average of comparable data as quoted to the Issuer by at least three recognized dealers in U.S. Government securities selected
by the Issuer.
“Trustee” means or
such other person who is named as a trustee pursuant to the terms of the Indenture.
“Unit” means, with respect
to each series of Notes, the principal amount of the minimum Authorized Denomination of the Notes.
“Valuation
Date” means every Friday, or, if such day is not a Business Day, the next preceding Business Day; provided, however,
that the first Valuation Date may occur on any other date established by the Issuer; provided, further, however, that such
first Valuation Date shall be not more than one week from the date on which Notes
Series initially are issued.
“Winning Bid Rate” means
for each series of Notes, the lowest rate specified in any Submitted Bid of such series of Notes
which if selected by the Auction Agent as the Applicable Rate would cause the number of Units of Notes
of such series that are the subject of Submitted Bids specifying a rate not greater than such rate to be not less than the number
of Units of Available Notes of such series.
NOTE DETAILS, FORM OF NOTES AND
REDEMPTION OF NOTES
Interest
(a) The Holders of
any series of Notes shall be
entitled to receive interest payments on their Notes at the Applicable Rate, determined as set forth in paragraph (c) of
this Section 2.02, and no more, payable on the respective dates determined as set forth in paragraph (b) of this
Section 2.02. Interest on the
Outstanding Notes
of any series issued on the Original Issue Date shall accumulate from the Original Issue Date.
(b)
(i) Interest shall be payable, subject to subparagraph (b)(ii) of this Section 2.02, on each series of Notes,
with respect to any Rate Period on the first Business Day following the last day of such Rate Period; provided, however, if
the Rate Period is greater than 30 days then on a monthly basis on the first Business Day of each month within such Rate
Period, not including the initial Rate Period, and on the Business Day following the last day of such Rate Period.
(ii)
If a day for payment of interest resulting from the application of subparagraph (b)(i) above is not a Business Day, then
the Interest Payment Date shall be the first Business Day following such day for payment of interest in the case of a series
of Notes designated as “Series .”
(iii)
The Issuer shall pay to the Paying Agent not later than 3:00 p.m., New York City time, on the Business Day next preceding
each Interest Payment Date for each series of Notes, an aggregate
amount of funds available on the next Business Day in the City of New York, New York, equal to the interest to be paid to all
Holders of such Notes on such Interest Payment Date. The Issuer shall not be required to
establish any reserves for the payment of interest.
(iv)
All moneys paid to the Paying Agent for the payment of interest shall be held in trust for the payment of such interest by
the Paying Agent for the benefit of the Holders specified in subparagraph (b)(v) of this Section 2.02. Any moneys
paid to the Paying Agent in accordance with the foregoing but not applied by the Paying Agent to the payment of interest,
including interest earned on such moneys, will, to the extent permitted by law, be repaid to the Issuer at the end of 90 days
from the date on which such moneys were to have been so applied.
(v)
Each interest payment on a series of Notes shall
be paid on the Interest Payment Date therefor to the Holders of that series as their names appear on the security ledger or
security records of the Issuer on the Business Day next preceding such Interest Payment Date. Interest in arrears for any
past Rate Period may be declared and paid at any time, without reference to any regular Interest Payment Date, to the Holders
as their names appear on the books or records of the Issuer on such date, not exceeding 15 days preceding the payment date
thereof, as may be fixed by the Board of Directors. No interest will be payable in respect of any Interest Payment or
payments which may be in arrears.
(c)
(i) The interest rate on
Outstanding Notes of each series
during the period from and after the Original Issue Date to and including the last day of the initial Rate Period therefor
shall be equal to %. For each subsequent Rate Period with respect
to the Notes Outstanding thereafter, the interest rate shall be
equal to the rate per annum that results from an Auction; provided, however, that if an Auction for any subsequent Rate
Period of a series of Notes is not held for any reason or if
Sufficient Clearing Bids have not been made in an Auction (other than as a result of all series
of Notes being the subject of
Submitted Hold Orders), then the interest rate on a series
of Notes for any such Rate Period shall be the Maximum Rate
(except during a Default Period (as defined below) when the interest rate shall be the Default Rate, as set forth in
Section 2.02(c)(ii) below). The All Hold Rate will apply automatically following an Auction in which all of the
Outstanding series of Notes are subject (or are deemed to be
subject) to Hold Orders. The rate per annum at which interest is payable on a series
of Notes as determined pursuant to this
Section 2(c)(i) shall be the “Applicable Rate.” For Standard Rate Periods or shorter periods only, the
Applicable Rate resulting from an Auction will not be less than the Minimum Rate.
(ii)
Subject to the cure provisions below, a “Default Period” with respect to a particular series will commence on any
date the Issuer fails to deposit irrevocably in trust in same-day funds, with the Paying Agent by 12:00 noon, New York City
time, (A) the full amount of any redemption price (the “Redemption Price”) payable on the date fixed for
redemption (the “Redemption Date”) (a “Redemption Default,” which shall constitute an Event of
Default pursuant to Section 5.1(7) of the Original Indenture) or (B) the full amount of any accrued interest
on that series payable on the Interest Payment Date (an “Interest Default” and together with a Redemption
Default, hereinafter referred to as “Default”). Subject to the cure provisions of
Section 2(c)(iii) below, a Default Period with respect to an Interest Default or a Redemption Default shall end on
the Business Day on which, by 12:00 noon, New York City time, all unpaid interest and any unpaid Redemption Price shall have
been deposited irrevocably in trust in same-day funds with the Paying Agent. In the case of an Interest Default, the
Applicable Rate for each Rate Period commencing during a Default Period will be equal to the Default Rate, and each
subsequent Rate Period commencing after the beginning of a Default Period shall be a Standard Rate Period; provided, however,
that the commencement of a Default Period will not by itself cause the commencement of a new Rate Period. No Auction shall be
held during a Default Period with respect to an Interest Default applicable to that series
of Notes.
(iii)
No Default Period with respect to an Interest Default or Redemption Default shall be deemed to commence if the amount of any
interest or any Redemption Price due (if such default is not solely due to the willful failure of the Issuer) is deposited
irrevocably in trust, in same-day funds with the Paying Agent by 12:00 noon, New York City time within three Business Days
after the applicable Interest Payment Date or Redemption Date, together with an amount equal to the Default Rate applied to
the amount of such non-payment based on the actual number of days comprising such period divided by 360 for each series. The
Default Rate shall be equal to the Reference Rate multiplied by three (3).
(iv)
The amount of interest per Unit
of Notes payable on each
Interest Payment Date of each Rate Period of less than one (1) year (or in respect of interest on another date in
connection with a redemption during such Rate Period) shall be computed by multiplying the Applicable Rate (or the Default
Rate) for such Rate Period (or a portion thereof) by a fraction, the numerator of which will be the number of days in such
Rate Period (or portion thereof) that such Notes were outstanding and for which the
Applicable Rate or the Default Rate was applicable and the denominator of which will be 360, multiplying the amount so
obtained by $25,000, and rounding the amount so obtained to the nearest cent. During any Rate Period of one (1) year or
more, the amount of interest per Unit of Notes payable on
any Interest Payment Date (or in respect of interest on another date in connection with a redemption during such Rate Period)
shall be computed as described in the preceding sentence.
(d)
Any Interest Payment made on any series of Notes shall first be credited against the
earliest accrued but unpaid interest due with respect to such series.
Redemption
(a)
(i) After the initial Rate Period, subject to the provisions of this Section 2.03 and to the extent permitted under
the Investment Company Act, the Issuer may, at its option, redeem in whole or in part out of funds legally available therefor
a series of Notes herein designated as (A) having a Rate
Period of one year or less, on the Business Day after the last day of such Rate Period by delivering a notice of redemption
not less than 15 days and not more than 40 days prior to the date fixed for such redemption, at a redemption price equal to
the aggregate principal amount, plus an amount equal to accrued but unpaid interest thereon (whether or not earned) to the
date fixed for redemption (“Redemption Price”), or (B) having a Rate Period of more than one year, on any
Business Day prior to the end of the relevant Rate Period by delivering a notice of redemption not less than 15 days and not
more than 40 days prior to the date fixed for such redemption, at the Redemption Price, plus a redemption premium, if any,
determined by the Board of Directors after consultation with the Broker-Dealers and set forth in any applicable Specific
Redemption Provisions at the time of the designation of such Rate Period as set forth in Section 2.04 hereof; provided,
however, that during a Rate Period of more than one year no series
of Notes will be subject to optional redemption except in
accordance with any Specific Redemption Provisions approved by the Board of Directors after consultation with the
Broker-Dealers at the time of the designation of such Rate Period. Notwithstanding the foregoing, the Issuer shall not give a
notice of or effect any redemption pursuant to this Section 2.03(a)(i) unless, on the date on which the Issuer
intends to give such notice and on the date of redemption (a) the Issuer has available certain Deposit Securities with
maturity or tender dates not later than the day preceding the applicable redemption date and having a value not less than the
amount (including any applicable premium) due to Holders of a series
of Notes by reason of the redemption of such
Notes on such date fixed for the redemption and (b) the
Issuer would have Eligible Assets with an aggregate Discounted Value at least equal
the Notes Basic Maintenance Amount immediately subsequent to such
redemption, if such redemption were to occur on such date, it being understood that the provisions of paragraph (d) of
this Section 2.03 shall be applicable in such circumstances in the event the Issuer makes the deposit and takes the
other action required thereby.
(ii)
If the Issuer fails to maintain, as of any Valuation Date, Eligible Assets with an aggregate Discounted Value at least equal
to the Notes Basic Maintenance Amount or, as of the last Business
Day of any month, the 1940 Act Notes Asset Coverage, and such
failure is not cured within ten Business Days following such Valuation Date in the case of a failure to maintain
the Notes Basic Maintenance Amount or on the last Business Day of
the following month in the case of a failure to maintain the 1940
Act Notes Asset Coverage as of such last Business Day (each an
“Asset Coverage Cure Date”), the Notes will be subject
to mandatory redemption out of funds legally available therefor. The aggregate principal amount
of Notes to be redeemed in such circumstances will be equal to the
lesser of (A) the minimum principal amount of Notes the
redemption of which, if deemed to have occurred immediately prior to the opening of business on the relevant Asset Coverage
Cure Date, would result in the Issuer having Eligible Assets with an aggregate Discounted Value at least equal to
the Notes Basic Maintenance Amount, or sufficient to satisfy 1940
Act Notes Asset Coverage, as the case may be, in either case as of
the relevant Asset Coverage Cure Date (provided that, if there is no such minimum principal amount
of Notes the redemption of which would have such result,
all Notes then Outstanding will be redeemed), and (B) the
maximum principal amount of Notes that can be redeemed out of
funds expected to be available therefor on the Mandatory Redemption Date at the Mandatory Redemption Price set forth in
subparagraph (a)(iii) of this Section 2.03.
(iii) In determining
the Notes required to be redeemed in accordance with the foregoing Section 2.03(a)(ii), the
Issuer shall allocate the aggregate principal amount of Notes
required to be redeemed to satisfy the Notes Basic Maintenance
Amount or the 1940 Act Notes Asset Coverage, as the case may be,
pro rata among the Holders of Notes in proportion to the aggregate
principal amount of Notes they hold, by lot or by such other
method as the Issuer shall deem equitable, subject to the further provisions of this subparagraph (iii). The Issuer shall
effect any required mandatory redemption pursuant to subparagraph (a)(ii) of this Section 2.03 no later than 40
days after the Asset Coverage Cure Date (the “Mandatory Redemption Date”), except that if the Issuer does not
have funds legally available for the redemption of, or is not otherwise legally permitted to redeem, the aggregate principal
amount of Notes which would be required to be redeemed by the
Issuer under clause (A) of subparagraph (a)(ii) of this Section 2.03 if sufficient funds were available, or
the Issuer otherwise is unable to effect such redemption on or prior to such Mandatory Redemption Date, the Issuer shall
redeem those Notes, and other Notes, on the earliest practicable date on which the Issuer will have such funds available,
upon notice pursuant to Section 2.03(b) to record owners of
the Notes to be redeemed and the Paying Agent. The Issuer will
deposit with the Paying Agent funds sufficient to redeem the specified aggregate principal amount
of Notes with respect to a redemption required under subparagraph
(a)(ii) of this Section 2.03, by 1:00 p.m., New York City time, of the Business Day immediately preceding the
Mandatory Redemption Date. If fewer than all of the
Outstanding Notes are to be redeemed pursuant to this
Section 2.03(a)(iii), the aggregate principal amount of Notes
to be redeemed shall be redeemed pro rata from the Holders of
such Notes in proportion to the aggregate principal amount of
such Notes held by such Holders, by lot or by such other method as
the Issuer shall deem fair and equitable, subject, however, to the terms of any applicable Specific Redemption Provisions.
“Mandatory Redemption Price” means the Redemption Price plus (in the case of a Rate Period of one year or more
only) a redemption premium, if any, determined by the Board of Directors after consultation with the Broker-Dealers and set
forth in any applicable Specific Redemption Provisions.
(b)
In the event of a redemption pursuant to Section 2.03(a), the Issuer will file a notice of its intention to redeem with
the Commission so as to provide at least the minimum notice required under Rule 23c-2 under the Investment Company Act
or any successor provision. In addition, the Issuer shall deliver a notice of redemption to the Auction Agent and the Trustee
(the “Notice of Redemption”) containing the information set forth below (i) in the case of an optional redemption
pursuant to subparagraph (a)(i) above, at least three Business Days prior to the giving of notice to the Holders and
(ii) in the case of a mandatory redemption pursuant to subparagraph (a)(ii) above, on or prior to the 30th day
preceding the Mandatory Redemption Date. The Trustee will use its reasonable efforts to provide notice to each Holder
of Notes called for redemption by electronic or other reasonable
means not later than the close of business on the Business Day immediately following the day on which the Trustee determines
the Notes to be redeemed (or, during a Default Period with respect
to such Notes, not later than the close of business on the Business Day immediately
following the day on which the Trustee receives Notice of Redemption from the Issuer). The Trustee shall confirm such notice
in writing not later than the close of business on the third Business Day preceding the date fixed for redemption by
providing the Notice of Redemption to each Holder of Notes called for
redemption, the Paying Agent (if different from the Trustee) and the Securities Depository. Notice of Redemption will be
addressed to the registered owners of each series of Notes at
their addresses appearing on the books or records of the Issuer. Such Notice of Redemption will set forth (i) the date
fixed for redemption, (ii) the principal amount and identity
of Notes to be redeemed, (iii) the redemption price
(specifying the amount of accrued interest to be included therein
and any redemption premium, if any), (iv) that interest on
the Notes to be redeemed will cease to accrue on such date fixed
for redemption, (v) applicable cusip number(s) and (vi) the provision under which redemption shall be made. No
defect in the Notice of Redemption or in the transmittal or mailing thereof will affect the validity of the redemption
proceedings, except as required by applicable law. If fewer than
all Notes held by any Holder are to be redeemed, the Notice of
Redemption mailed to such Holder shall also specify the principal amount
of Notes to be redeemed from such Holder.
(c)
Notwithstanding the provisions of paragraph (a) of this Section 2.03,
no Notes may be redeemed unless all interest on the
Outstanding Notes and all Notes of the Issuer ranking on a parity
with the Notes, have been or are being contemporaneously paid or
set aside for payment; provided, however, that the foregoing shall not prevent the purchase or acquisition of all
Outstanding Notes pursuant to the successful completion of an
otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, Holders of all
Outstanding Notes.
(d)
Upon the deposit of funds sufficient to redeem any Notes with the
Paying Agent and the giving of the Notice of Redemption to the Trustee under paragraph (b) of this Section 2.03,
interest on such Notes shall cease to accrue and such Notes shall
no longer be deemed to be Outstanding for any purpose (including, without limitation, for purposes of calculating whether the
Issuer has maintained the requisite Notes Basic Maintenance Amount or the 1940
Act Notes Asset Coverage), and all rights of the Holder of
the Notes so called for redemption shall cease and terminate,
except the right of such Holder to receive the redemption price specified herein, but without any interest or other
additional amount. Such redemption price shall be paid by the Paying Agent to the nominee of the Securities Depository. The
Issuer shall be entitled to receive from the Paying Agent, promptly after the date fixed for redemption, any cash deposited
with the Paying Agent in excess of (i) the aggregate redemption price of
the Notes called for redemption on such date and (ii) such
other amounts, if any, to which Holders of the Notes called for
redemption may be entitled. Any funds so deposited that are unclaimed at the end of two years from such redemption date
shall, to the extent permitted by law, be paid to the Issuer, after which time the Holders
of Notes so called for redemption may look only to the Issuer for payment of
the redemption price and all other amounts, if any, to which they may be entitled. The Issuer shall be entitled to receive,
from time to time after the date fixed for redemption, any interest earned on the funds so deposited.
(e)
To the extent that any redemption for which Notice of Redemption has been given is not made by reason of the absence of
legally available funds therefor, or is otherwise prohibited, such redemption shall be made as soon as practicable to the
extent such funds become legally available or such redemption is no longer otherwise prohibited. Failure to redeem any series
of Notes shall be deemed to exist at any time after the date
specified for redemption in a Notice of Redemption when the Issuer shall have failed, for any reason whatsoever, to deposit
in trust with the Paying Agent the redemption price with respect to
any Notes for which such Notice of Redemption has been given.
Notwithstanding the fact that the Issuer may not have redeemed any
Notes for which a Notice of Redemption has been given, interest
may be paid on a series of Notes and shall include those Notes for
which Notice of Redemption has been given but for which deposit of funds has not been made.
(f)
All moneys paid to the Paying Agent for payment of the redemption price of
any Notes called for redemption shall be held in trust by the
Paying Agent for the benefit of Holders of Notes to be
redeemed.
(g)
So long as any Notes are held of record by the nominee of the
Securities Depository, the redemption price for
such Notes will be paid on the date
fixed for redemption to the nominee of the Securities Depository for distribution to Agent Members for distribution to the
persons for whom they are acting as agent.
(h)
Except for the provisions described above, nothing contained herein limits any right of the Issuer to purchase or otherwise
acquire any Notes outside of an Auction at any price, whether
higher or lower than the price that would be paid in connection with an optional or mandatory redemption, so long as, at the
time of any such purchase, there is no arrearage in the payment of interest on, or the mandatory or optional redemption price
with respect to, any series of Notes for which Notice of
Redemption has been given and the Issuer is in compliance with the 1940
Act Notes Asset Coverage and has
Eligible Assets with an aggregate Discounted Value at least equal to
the Notes Basic Maintenance Amount
after giving effect to such purchase or acquisition on the date thereof. If fewer than all the
Outstanding Notes of any series are redeemed or otherwise acquired
by the Issuer, the Issuer shall give notice of such transaction to the Trustee, in accordance with the procedures agreed upon
by the Board of Directors.
(i)
The Board of Directors may, without further consent of the holders of
the Notes or the holders of shares of capital stock of the Issuer,
authorize, create or issue any class or series of Notes, including other series
of Notes, ranking prior to or on a parity with
the Notes to the extent permitted by the Investment Company Act,
if, upon issuance, either (A) the net proceeds from the sale of such Notes (or such portion thereof needed to redeem or
repurchase the Outstanding Notes)
are deposited with the Trustee in accordance with Section 2.03(d), Notice of Redemption as contemplated by
Section 2.03(b) has been delivered prior thereto or is sent promptly thereafter, and such proceeds are used to
redeem all Outstanding Notes or (B) the Issuer would meet the
1940 Act Notes Asset Coverage,
the Notes Basic Maintenance Amount and the requirements of
Section 2.08 hereof.
(j)
If any Notes are to be redeemed and
such Notes are held by the Securities Depository, the Issuer shall
include in the notice of redemption delivered to the Securities Depository: (i) under an item entitled
“Publication Date for Securities Depository Purposes”, the Interest Payment Date prior to the Redemption Date,
and (ii) an instruction to the Securities Depository to (x) determine on such Publication Date after the Auction
held on the immediately preceding Auction Date has settled, the Depository participants whose Securities Depository positions
will be redeemed and the principal amount of such Notes to be redeemed from each such position
(the “Securities Depository Redemption Information”), and (y) notify the Auction Agent immediately after
such determination of (A) the positions of the Depository Participants in such Notes
immediately prior to such Auction settlement, (B) the positions of the Depository Participants in such Notes immediately
following such Auction settlement and (C) the Securities Depository Redemption Information. “Publication
Date” shall mean three Business Days after the Auction Date next preceding such Redemption Date.
Designation of Rate Period
The
initial Rate Period for each series
of Notes is as set forth
under “Designation” in Section 2.01(a) above. The Issuer will designate the duration of subsequent Rate
Periods of each series
of Notes; provided,
however, that no such designation is necessary for a Standard Rate Period and, provided further, that any designation of a
Special Rate Period shall be effective only if (i) notice thereof shall have been given as provided herein,
(ii) any failure to pay in a timely manner to the Trustee the full amount of any interest on, or the redemption price
of, Notes shall have
been cured as provided above, (iii) Sufficient Clearing Bids shall have existed in an Auction held on the Auction Date
immediately preceding the first day of such proposed Special Rate Period, (iv) if the Issuer shall have mailed a Notice
of Redemption with respect to any Notes, the redemption price with respect to
such Notes
shall have been deposited with the Paying Agent, and (v) in the case of the designation of a Special Rate Period, the
Issuer has confirmed that as of the Auction Date next preceding the first day of such Special Rate Period, it has Eligible
Assets with an aggregate Discounted Value at least equal to
the Notes Basic
Maintenance Amount, and the Issuer has consulted with the Broker-Dealers and has provided notice of such designation and
otherwise complied with the Rating Agency Guidelines.
If
the Issuer proposes to designate any Special Rate Period, not fewer than 7 (or two Business Days in the event the duration of
the Rate Period prior to such Special Rate Period is fewer than 8 days) nor more than 30 Business Days prior to the first day
of such Special Rate Period, notice shall be (i) made by press release and (ii) communicated by the Issuer by telephonic
or other means to the Trustee and confirmed in writing promptly thereafter. Each such notice shall state (A) that the
Issuer proposes to exercise its option to designate a succeeding Special Rate Period, specifying the first and last days
thereof and (B) that the Issuer will by 3:00 p.m., New York City time, on the second Business Day next preceding the
first day of such Special Rate Period, notify the Auction Agent and the Trustee, who will promptly notify the Broker-Dealers,
of either (x) its determination, subject to certain conditions, to proceed with such Special Rate Period, subject to the
terms of any Specific Redemption Provisions, or (y) its determination not to proceed with such Special Rate Period, in
which latter event the succeeding Rate Period shall be a Standard Rate Period.
No later than 3:00 p.m., New York
City time, on the second Business Day next preceding the first day of any proposed Special Rate Period, the Issuer shall deliver
to the Auction Agent and Trustee, who will promptly deliver to the Broker-Dealers and Existing Holders, either:
(i)
a notice stating (A) that the Issuer has determined to designate the next succeeding Rate Period as a Special Rate
Period, specifying the first and last days thereof and (B) the terms of any Specific Redemption Provisions; or
(ii) a notice stating that the Issuer has determined not to exercise its option to designate a Special Rate Period.
If the Issuer fails to deliver
either such notice with respect to any designation of any proposed Special Rate Period to the Auction Agent or is unable to
make the confirmation provided in clause (v) of Paragraph (a) of this Section 2.04 by 3:00 p.m., New York City
time, on the second Business Day next preceding the first day of such proposed Special Rate Period, the Issuer shall be
deemed to have delivered a notice to the Auction Agent with respect to such Rate Period to the effect set forth in clause
(ii) above, thereby resulting in a Standard Rate Period.
Restrictions on Transfer
Notes may be transferred
only (a) pursuant to an order placed in an Auction, (b) to or through a Broker- Dealer or (c) to the Issuer or any
Affiliate. Notwithstanding the foregoing, a transfer other than pursuant to an Auction will not be effective unless the selling
Existing Holder or the Agent Member of such Existing Holder, in the case of an Existing Holder whose Notes
are listed in its own name on the books of the Auction Agent, or the Broker-Dealer or Agent Member of such Broker-Dealer, in the
case of a transfer between persons holding Notes through different Broker-Dealers, advises the
Auction Agent of such transfer. The certificates representing the Notes issued to the Securities
Depository will bear legends with respect to the restrictions described above and stop-transfer instructions will be issued to
the Transfer Agent and/or Registrar.
1940 Act Notes
Asset Coverage
The
Issuer shall maintain, as of the last Business Day of each month in which
any Notes are
Outstanding, asset coverage with respect to
the Notes which is equal
to or greater than the 1940 Act Notes Asset Coverage; provided, however, that
Section 2.03(a)(ii) shall be the sole remedy in the event the Issuer fails to do so.
Notes Basic Maintenance Amount
So long as the Notes
are Outstanding and any Rating Agency is then rating the Notes, the Issuer shall maintain, as
of each Valuation Date, Eligible Assets having an aggregate Discounted Value equal to or greater than the Notes Basic Maintenance
Amount; provided, however, that Section 2.03(a)(ii) shall be the sole remedy in the event the Issuer fails to do so.
Certain Other Restrictions
For so long as any Notes
are Outstanding and any Rating Agency is then rating the Notes, the Issuer will not engage in
certain proscribed transactions set forth in the Rating Agency Guidelines, unless it has received written confirmation from each
such Rating Agency that proscribes the applicable transaction in its Rating Agency Guidelines that any such action would not impair
the rating then assigned by such Rating Agency to a series of Notes.
For
so long as any Notes are Outstanding, the Issuer will not declare, pay or set apart for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, common
shares or other shares of capital stock of the Issuer) upon any class of shares of capital stock of the Issuer, unless, in every
such case, immediately after such transaction, the 1940 Act Notes Asset Coverage would be achieved
after deducting the amount of such dividend, distribution, or purchase price, as the case may be; provided, however, that dividends
may be declared upon any preferred shares of capital stock of the Issuer if the Notes and any
other senior securities representing indebtedness of the Issuer have an asset coverage of at least 200% at the time of declaration
thereof, after deducting the amount of such dividend.
A declaration of a dividend or other
distribution on or purchase or redemption of any common or preferred shares of capital stock of the Issuer is prohibited (i) at
any time that an Event of Default under the Indenture has occurred and is continuing, (ii) if after giving effect to such
declaration, the Issuer would not have Eligible Assets with an aggregate Discounted Value at least equal to the Notes
Basic Maintenance Amount or the 1940 Act Notes Asset Coverage, or (iii) the Issuer has not redeemed the full amount of Notes
required to be redeemed by any provisions for mandatory redemption contained herein.
Compliance Procedures for Asset Maintenance
Tests
For so long as any Notes
are Outstanding and any Rating Agency is then rating such Notes:
(a) As of each Valuation
Date, the Issuer shall determine in accordance with the procedures specified herein(i) the Market Value of each Eligible
Asset owned by the Issuer on that date, (ii) the Discounted Value of each such Eligible Asset using the Discount Factors,
(iii) whether the Notes
Basic Maintenance Amount is met as of that date, (iv) the value of the total assets of the Issuer, less all liabilities,
and (v) whether the 1940 Act Notes
Asset Coverage is met as of that date.
(b) Upon any failure
to maintain the required Notes Basic Maintenance Amount or 1940 Act Notes Asset Coverage
on any Valuation Date, the Issuer may use reasonable commercial efforts (including, without limitation, altering the
composition of its portfolio,
purchasing Notes outside
of an Auction or in the event of a failure to file a Rating Agency Certificate (as defined below) on a timely basis,
submitting the requisite Rating Agency Certificate) to re-attain (or certify in the case of a failure to file on a timely
basis, as the case may
be) the required Notes
Basic Maintenance Amount or 1940 Act Notes Asset Coverage on or prior to the Asset Coverage Cure Date.
(c)
Compliance with the Notes Basic Maintenance Amount and 1940
Act Notes Asset Coverage tests shall be determined with reference to
those Notes which are deemed to be Outstanding hereunder.
(d)
The Issuer shall deliver to each Rating Agency which is then rating Notes and any other
party specified in the Rating Agency Guidelines all certificates that are set forth in the respective Rating Agency
Guidelines regarding 1940 Act Notes Asset Coverage, Notes Basic Maintenance Amount and/or
related calculations at such times and containing such information as set forth in the respective Rating Agency Guidelines
(each, a “Rating Agency Certificate”).
(e)
In the event that any Rating Agency Certificate is not delivered within the time periods set forth in the Rating Agency Guidelines,
the Issuer shall be deemed to have failed to maintain the Notes
Basic Maintenance Amount or the 1940 Act Notes
Asset Coverage, as the case may be, on such Valuation Date for purposes of Section 2.09(b). In the event that any Rating
Agency Certificate with respect to an applicable Asset Coverage Cure Date is not delivered within the time periods set forth in
the Rating Agency Guidelines, the Issuer shall be deemed to have failed to have Eligible Assets with an aggregate Discounted Value
at least equal to the Notes Basic Maintenance Amount or to meet the 1940 Notes
Asset Coverage, as the case may be, as of the related Valuation Date, and such failure shall be deemed not to have been cured
as of such Asset Coverage Cure Date for purposes of the mandatory redemption provisions.
Delivery of Notes
Upon the execution and delivery of
this Supplemental Indenture, the Issuer shall execute and deliver to the Trustee and the Trustee shall authenticate the Notes and
deliver them to The Depository Trust Company and as hereinafter in this Section provided.
Prior to the delivery by the Trustee
of any of the Notes, there shall have been filed with or delivered to the Trustee the following:
(a)
A resolution duly adopted by the Issuer, certified by the Secretary or other Authorized Officer thereof, authorizing the
execution and delivery of this Supplemental Indenture and the issuance of the Notes.
(b) Duly executed copies of this Supplemental Indenture and a copy of the Indenture.
(c) Rating letters from each Rating Agency rating the Notes.
(d) An Opinion of Counsel and an Officers’ Certificate pursuant to Sections 3.3 and 9.3 of the Original Indenture.
Trustee’s Authentication Certificate
The Trustee’s authentication
certificate upon the Notes shall be substantially in the forms provided in Appendix hereto.
No Note shall be secured hereby or entitled to the benefit hereof,
or shall be valid or obligatory for any purpose, unless a certificate of authentication, substantially in such form, has been duly
executed by the Trustee; and such certificate of the Trustee upon any Note shall be conclusive
evidence and the only competent evidence that such Bond has been authenticated and delivered hereunder. The Trustee’s certificate
of authentication shall be deemed to have been duly executed by it if manually signed by an authorized officer of the Trustee,
but it shall not be necessary that the same person sign the certificate of authentication on all of the Notes
issued hereunder.
EVENTS OF DEFAULT; REMEDIES
Events of Default
An “Event of Default”
means any one of the following events set forth below (whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a)
default in the payment of any interest upon a series of Notes when it becomes due and
payable and the continuance of such default for thirty (30) days; or
(b)
default in the payment of the principal of, or any premium on, a series of Notes at its
Stated Maturity; or
(c)
default in the performance, or breach, of any covenant or warranty of the Company in the Indenture, and continuance of such
default or breach for a period of ninety (90) days after there has been given, by registered or certified mail, to the
Company by the Trustee a written notice specifying such default or breach and requiring it to be remedied and stating that
such notice is a “Notice of Default;” or
(d)
the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any
applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
(e)
the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent,
or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in furtherance of any such action; or
(f) if, pursuant to
Section 18(a)(1)(c)(ii) of the 1940 Act on the last business day of each of twenty-four (24) consecutive calendar
months, the 1940 Act Notes Asset Coverage is less than 100%; or
(g)
any other Event of Default provided with respect to a series
of Notes, including a
default in the payment of any Redemption Price payable on the date fixed for redemption.
Unless otherwise noted, an Event of
Default that relates only to one series of Notes will not affect any other series.
Acceleration of Maturity; Rescission
and Annulment
If an Event of Default with respect
to Notes of a series at the time Outstanding occurs and is continuing, then in every such case
the Trustee or the holders of not less than a majority in principal amount of the Outstanding Notes
of that series may declare the principal amount of all the Notes of that series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee if given by holders), and upon any such declaration
such principal amount (or specified amount) shall become immediately due and payable. If an Event of Default specified in paragraphs
(d) and (e) above with respect to Notes of any series at the time Outstanding occurs,
the principal amount of all the Notes of that series shall automatically, and without any declaration
or other action on the part of the Trustee or any holder, become immediately due and payable.
At any time after such a declaration
of acceleration with respect to Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained by the Trustee, the holders of a majority in principal amount of the Outstanding Notes
of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to pay
(i) all overdue interest on all Notes of that series,
(ii)
the principal of (and premium, if any, on) any Notes of that series which have become due
otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in
such Notes,
(iii)
to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed
therefor in such Notes,
(iv)
all sums paid or advanced by the Trustee and the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(b)
all Events of Default with respect
to Notes of that series,
other than the non-payment of the principal of Notes of that series which have become due solely by such declaration of
acceleration, have been cured or waived.
No such rescission shall affect any
subsequent default or impair any right consequent thereon.
Collection of Indebtedness and Suits for Enforcement by Trustee
The Company covenants that if:
(a) default
is made in the payment of any interest on any Notes when such interest becomes due and payable and such default continues for a
period of 90 days, or
(b) default is made in the
payment of the principal of (or premium, if any, on) any Notes at
the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the holders of
such Notes, the whole amount then due and payable on such Notes
for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in
such Notes, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If an Event of Default with respect
to Notes of any series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the holders of Notes of such series by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in the Indenture or in aid of the exercise of any power granted in the Indenture, or to
enforce any other proper remedy.
Application of Money Collected
Any money collected by the Trustee
pursuant to the provisions of the Indenture relating to an Event of Default shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest,
upon presentation of the Notes and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts
due the Trustee under the Indenture;
and
SECOND: To the payment of the amounts
then due and unpaid for principal of and any premium and interest on the Notes in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on
such Notes for principal and any premium and interest, respectively.
Limitation On Suits
No holder of any Notes
of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such
holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Notes of that series;
(b) the
holders of not less than a majority in principal amount of the Outstanding Notes of that series
shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such
holder or holders have offered to the Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities
to be incurred in compliance with such request;
(d) the
Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding;
and
(e) no
direction inconsistent with such written request has been given to the Trustee during such 60-day period by the holders of a majority
in principal amount of the Outstanding Notes of that series;
it being understood and intended that
no one or more of such holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of the
Indenture to affect, disturb or prejudice the rights of any other of such holders, or to obtain or to seek to obtain priority or
preference over any other of such holders or to enforce any right under the Indenture, except in the manner provided and for the
equal and ratable benefit of all of such holders.
Unconditional Right of Holders to
Receive Principal, Premium and Interest
Notwithstanding any other provision
in the Indenture, the holder of any Notes shall have the right, which is absolute and unconditional, to receive payment of the
principal of and any premium and (subject to the provisions of any supplemental indenture) interest on such Notes on the respective
Stated Maturities expressed in such Notes (or, in the case of redemption, on the Redemption Date), and to institute suit for the
enforcement of any such payment and such rights shall not be impaired without the consent of such holder.
Restoration of Rights and Remedies
If the Trustee or any holder has instituted
any proceeding to enforce any right or remedy under the Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such holder, then and in every such case, subject to any determination
in such proceeding, the Company, the Trustee and the holders shall be restored severally and respectively to their former positions
and thereafter all rights and remedies of the Trustee and the holders shall continue as though no such proceeding had been instituted.
Rights and Remedies Cumulative
Except as otherwise provided with
respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes, no right or remedy conferred upon or reserved
to the Trustee or to the holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right and remedy given or now or hereafter existing at
law or in equity or otherwise.
The assertion or employment of any
right or remedy, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Control By Holders
The holders of not less than a majority
in principal amount of the Outstanding Notes of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee, with respect to the Notes of such series, provided
that
(1) such direction shall not be in conflict with any rule of law or with the Indenture, and
(2) the
Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.
Waiver of Past Defaults
The holders of
not less than a majority in principal amount of the Outstanding Notes of any series may on behalf
of the holders of all the Notes of such series waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on any Notes of such series, or
(2) in
respect of a covenant or provision which cannot be modified or amended without the consent of the holder of each Outstanding Notes
of such series affected.
Upon any such waiver, such default
shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Indenture;
but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture shall upon request of
the Company cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of any Notes
expressly provided for herein or in the terms of such security), and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of the Indenture, when
(a) Either:
(i)
all Notes theretofore authenticated and delivered (other than (1) securities which have
been destroyed, lost or stolen and which have been replaced or paid as provided in the Indenture; and
(2) Notes
for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid
to the Company or discharged from such trust, as provided in the Indenture) have been delivered to the Trustee for cancellation;
or
(ii) all
such Notes not theretofore delivered to the Trustee for
cancellation have become due and payable, or will become due and payable at their Stated Maturity within one year, or are to
be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of this subsection
(ii) has deposited or caused to be deposited with the Trustee as trust funds in trust money in an amount sufficient to
pay and discharge the entire indebtedness on such securities not theretofore delivered to the Trustee for cancellation, for
principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable hereunder by the Trust; and
(c) the
Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of the Indenture have been complied with.
Notwithstanding the satisfaction and
discharge of the Indenture, the obligations of the Company to the Trustee under the Indenture and, if money shall have been deposited
with the Trustee pursuant to subparagraph (ii) of paragraph (a) above, the obligations of the Trustee under certain provisions
of the Indenture shall survive.
THE TRUSTEE
Certain Duties and Responsibilities
(1) Except during the continuance of an Event of Default,
(A) the
Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Indenture and as required by
the Trust Indenture Act, and no implied covenants or obligations shall be read into the Indenture against the Trustee; and
(B) in
the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of
the Indenture; but in the case of any such certificates or opinions which by any provision of the Indenture are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform
to the requirements of the Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts
stated therein).
(2) In
case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it
by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs.
(3) In
no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever
(including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such
loss or damage and regardless of the form of action.
(4) In
no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations arising out
of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents,
acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss
or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee
shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon
as practicable under the circumstances.
(5) No
provision of the Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(A) this Subsection shall not be construed to limit the effect of Subsection (1)(A) of this Section;
(B) the
Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(C) the
Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of a majority in principal amount of the Outstanding securities of any series, determined as provided
in the Indenture, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under the Indenture with respect to the Securities of such series;
and
(D) no
provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties, or in the exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
Notice of Defaults
If a default occurs hereunder
with respect to Notes of any series, the Trustee shall give the
Holders of Notes of such series notice of such default as and to
the extent provided by the Trust Indenture Act; provided, however, that in the case of any default with respect
to Notes of such series, no such notice to Holders shall be given
until at least 90 days after the occurrence thereof. For the purpose hereof, the term “default” means any event
which is, or after notice or lapse of time or both would become, an Event of Default with respect
to Notes of such series.
Certain Rights of Trustee
Subject to the provisions under “Certain
Duties and Responsibilities” above:
(a) the
Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any
request or direction of the Company shall be sufficiently evidenced by a Company Request or Company Order, and any resolution of
the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(c) whenever
in the administration of the Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee may, in the absence of bad faith on its part, rely upon an Officers’
Certificate;
(d) the
Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith and in reliance
thereon;
(e) the
Trustee shall be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction
of any of the holders pursuant to the Indenture, unless such holders shall have offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or
direction;
(f) the
Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company, personally or by agent or attorney;
(g) the
Trustee may execute any of the trusts or powers or perform any duties hereunder either directly or by or through agents or attorneys
and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(h) the
Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and reasonably believed by
it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture;
(i) the
Trustee shall not be deemed to have notice of any default or Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate
Trust Office of the Trustee, and such notice references the Notes and the Indenture;
(j) the
rights, privileges, protections, immunities and benefits given to the Trustee, including its rights to be indemnified, are extended
to, and shall be enforceable by, the Trustee in each of its capacities hereunder; and
(k) the
Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles
of officers authorized at such time to take specified actions pursuant to the Indenture, which Officers’ Certificate may
be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superceded.
Compensation and Reimbursement
The
Company agrees:
(a) to
pay to the Trustee from time to time such compensation as shall be agreed in writing between the parties for all services rendered
by it (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express
trust);
(b) except
as otherwise expressly provided, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of the Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith; and
(c) to
indemnify each of the Trustee or any predecessor Trustee for, and to hold it harmless against, any and all losses, liabilities,
damages, claims or expenses including taxes (other than taxes imposed on the income of the Trustee) incurred without negligence
or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim (whether asserted by the Company, a holder or any other
Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or
renders services in connection with an Event of Default, the expenses (including the reasonable charges and expenses of its counsel)
and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State
bankruptcy, insolvency or other similar law.
The provisions hereof shall survive
the termination of the Indenture.
Conflicting Interests
If the Trustee has or shall acquire
a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign,
to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and the Indenture. To the
extent not prohibited by the Trust Indenture Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being
a trustee under the Indenture with respect to Notes of more than one series.
Resignation and Removal; Appointment
of Successor
No resignation or removal of the Trustee
and no appointment of a successor Trustee shall become effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements.
The Trustee may resign at any time
with respect to the Notes of one or more series by giving written notice thereof to the Company.
If the instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 60 days after the giving
of such notice of resignation, the resigning Trustee may petition, at the expense of the Company, any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the Notes of such series.
The Trustee may be removed at any
time with respect to the Notes of any series by Act of the holders
of a majority in principal amount of the Outstanding Notes of such series, delivered to the Trustee
and to the Company. If the instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within
30 days after the giving of a notice of removal pursuant to this paragraph, the Trustee being removed may petition, at the expense
of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Notes
of such series.
If at any time:
(a) the
Trustee shall fail to comply after written request therefor by the Company or by any holder who has been a bona fide holder of Notes
for at least six months, or
(b) the
Trustee shall cease to be eligible and shall fail to resign after written request therefor by the Company or by any such holder,
or
(c) the
Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Notes, or (ii) any holder who has been a bona fide holder of Notes
for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Notes and the appointment of a successor Trustee
or Trustees.
If the Trustee shall resign, be
removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to
the Notes of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Notes of that or those series (it
being understood that any such successor Trustee may be appointed with respect to
the Notes of one or more or all of such series and that at any
time there shall be only one Trustee with respect to the Notes of any particular series) and
shall comply with the applicable requirements. If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to
the Notes of any series shall be appointed by Act of the
holders of a majority in principal amount of the Outstanding Notes of such series delivered
to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements, become the successor Trustee with respect to
the Notes of such series and to that extent supersede the successor Trustee appointed by the
Company.
If no successor Trustee with respect
to the Notes of any series shall have been so appointed by the Company or the holders and accepted
appointment in the manner required, any holder who has been a bona fide holder of Notes
of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the Notes of such series.
The Company shall give notice of
each resignation and each removal of the Trustee with respect to the Notes of any series and each appointment of a successor
Trustee with respect to the Notes of any series to all holders
of Notes of such series in the manner provided. Each notice shall include the name of the
successor Trustee with respect to the Notes of such series and the address of its Corporate
Trust Office.
Acceptance of Appointment by Successor
In case of the appointment hereunder
of a successor Trustee with respect to all Notes, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
In case of the appointment
hereunder of a successor Trustee with respect to the Notes of one
or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Notes of one
or more series shall execute and deliver a supplemental indenture wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to,
and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to
the Notes of that or those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect to all Notes, shall
contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Notes of that or those series as to which the
retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any
of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing in the Indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the Notes of that
or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held
by such retiring Trustee hereunder with respect to the Notes of that or those series to
which the appointment of such successor Trustee relates.
Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor
Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be.
No successor Trustee shall accept
its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible.
Merger, Conversion, Consolidation
or Succession to Business
Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all
the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall
be otherwise qualified and eligible, without the execution or filing of any paper or any further act on the part of any of
the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver
the Notes so authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes.
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Company May Consolidate, Etc.,
Only On Certain Terms
The Company shall
not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company, unless:
(a) in
case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or
the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially
as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of any
domestic or foreign jurisdiction and shall expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and
interest on all the Notes and the performance or observance of every covenant of the Indenture on the part of the Company to
be performed or observed;
(b) immediately
after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any subsidiary
as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event
of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and
be continuing;
(c) the
Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental
indenture comply and that all conditions precedent in the Indenture provided for relating to such transaction have been complied
with.
Successor Substituted
Upon any consolidation of the Company
with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the
Company substantially as an entirety, the successor Person formed by such consolidation or into which the Company is merged or
to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture with the same effect as if such successor Person had been named as the Company in the
Indenture, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants
under the Indenture and the Notes.
DEFEASANCE AND COVENANT DEFEASANCE
Defeasance and Discharge
Upon the Company’s exercise
of its option (if any) to have the provisions of the Indenture relating to Defeasance applied to any Notes or any series of Notes,
as the case may be, the Company shall be deemed to have been discharged from its obligations, with respect to such Notes
as provided in the Indenture on and after the date the conditions set forth are satisfied (hereinafter called “Defeasance”).
For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented
by such Notes and to have satisfied all its other obligations under such Notes
and the Indenture insofar as such Notes are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which
shall survive until otherwise terminated or discharged hereunder: (1) the rights of holders of such Notes
to receive, solely from the trust fund, payments in respect of the principal of and any premium and interest on such Notes
when payments are due, (2) the Company’s obligations with respect to such Notes, (3) the
rights, powers, trusts, duties and immunities of the Trustee.
Covenant Defeasance
Upon the Company’s
exercise of its option (if any) to have provisions of the Indenture relating to Covenant Defeasance applied to
any Notes or any series of Notes, as the case may be,
(1) the Company shall be released from its obligations under certain provisions of the Indenture for the benefit of the
holders of such Notes and (2) the occurrence of any event specified in the Indenture,
and any such covenants provided pursuant to certain provisions of the Indenture shall be deemed not to be or result in an
Event of Default, in each case with respect to such Notes
as provided in the Indenture on and after the date the conditions are satisfied (hereinafter called “Covenant
Defeasance”). For this purpose, such Covenant Defeasance means that, with respect to
such Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in any such specified section of the Indenture,
whether directly or indirectly by reason of any reference elsewhere in the Indenture, or by reason of any reference in any
such section or article of the Indenture to any other provision in the Indenture or in any other document, but the remainder
of the Indenture and such Notes shall be unaffected thereby.
Conditions to Defeasance or Covenant
Defeasance
(a) The Company shall
irrevocably have deposited or caused to be deposited with the Trustee (or another trustee which satisfies the requirements
and agrees to comply with the provisions of the relevant Article of the Indenture applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the
benefits of the holders of such Notes, (i) money in an
amount, or (ii) U.S. Government Obligations which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an
amount, or (iii) such other obligations or arrangements as may be specified with respect to
such Notes, or (iv) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such
other qualifying trustee) to pay and discharge, the principal of and any premium and interest on
such Notes on the respective Stated Maturities, in accordance with
the terms of the Indenture and such Notes. As used in the
Indenture, “U.S. Government Obligation” means (x) any security which is (i) a direct obligation of the
United States of America for the payment of which the full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the Company
thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Notes Act) as
custodian with respect to any U.S. Government Obligation which is specified in Clause (x) above and held by such bank
for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest
on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
(b) In the event of an election
to have Defeasance and Discharge apply to any Notes or any series
of Notes, as the case may be, the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of this instrument, there has been a change in the
applicable Federal income tax law, in either case (i) or (ii) to the effect that, and based thereon such opinion
shall confirm that, the holders of such Notes will not
recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected
with respect to such Notes and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur.
(c) In the event of an election
to have Covenant Defeasance apply to any Notes or any series of Notes, as the case may
be, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the holders of
such Notes will not recognize gain or loss for Federal income tax purposes as a result of
the deposit and Covenant Defeasance to be effected with respect to such Notes and will be
subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such
deposit and Covenant Defeasance were not to occur.
(d) The Company
shall have delivered to the Trustee an Officers’ Certificate to the effect that neither
such Notes nor any other Notes of the same series, if then
listed on any Notes exchange, will be delisted as a result of such deposit.
(e) No
event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Notes
or any other Notes shall have occurred and be continuing at the time of such deposit or, with
regard to any such event specified, at any time on or prior to the 90th day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after such 90th day).
(f) Such
Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming all Notes are in default within the meaning of such Act).
(g) Such
Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company is a party or by which it is bound.
(h) Such
Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act unless such trust shall be registered under the Investment Company Act or exempt from
registration thereunder.
(i) No
event or condition shall exist that would prevent the Company from making payments of the principal of (and any premium) or interest
on the Notes of such series on the date of such deposit or at any time on or prior to the 90th
day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 90th
day).
(j) The
Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been complied with.
(k) The
Company shall have delivered to the Trustee an Opinion of Counsel substantially to the effect that (i) the trust funds deposited
pursuant hereto will not be subject to any rights of any holders of indebtedness or equity of the Company, and (ii) after
the 90th day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors’ rights generally, except that if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Company, no opinion is given as to the effect of such laws on
the trust funds except the following: (A) assuming such trust funds remained in the possession of the trustee with whom such
funds were deposited prior to such court ruling to the extent not paid to holders of such Notes,
such trustee would hold, for the benefit of such holders, a valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise and (B) such holders would be entitled to receive adequate protection of their interests
in such trust funds if such trust funds were used.
APPENDIX B — DESCRIPTION
OF RATINGS1
A rating of a rating service represents
the service’s opinion as to the credit quality of the security being rated. However, the ratings are general and are not
absolute standards of quality or guarantees as to the creditworthiness of an issuer. Consequently, Calamos believes that the quality
of debt securities in which the Fund invests should be continuously reviewed. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or suitability for a particular investor. When a security
has received a rating from more than one service, each rating should be evaluated independently. Ratings are based on current information
furnished by the issuer or obtained by the ratings services from other sources that they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such information, or for other reasons.
The following is a description of
the characteristics of ratings used by Moody’s Investors Service (“Moody’s”) and Standard & Poor’s
Corporation, a division of The McGraw-Hill Companies (“S&P”).
Moody’s Global Short-Term Rating
Scale
P-1: Issuers (or supporting institutions)
rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2: Issuers (or supporting institutions) rated Prime-2
have a strong ability to repay short-term debt obligations.
P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability to repay short-term obligations.
NP: Issuers (or supporting institutions) rated Not Prime do not fall within any of the
Prime rating categories.
Moody’s Global Long-Term Rating
Scale
Aaa: Obligations rated Aaa are judged
to be of the highest quality, subject to the lowest level of credit risk.
Aa: Obligations rated Aa are judged to be of high quality
and are subject to very low credit risk.
A: Obligations rated A are judged
to be upper-medium grade and are subject to low credit risk.
Baa: Obligations rated Baa are judged
to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba: Obligations rated Ba are judged
to be speculative and are subject to substantial credit risk.
B: Obligations rated B are considered speculative and are subject
to high credit risk.
Caa: Obligations rated Caa are judged
to be speculative of poor standing and are subject to very high credit risk.
Ca: Obligations rated Ca are highly
speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C: Obligations rated C are the lowest
rated and are typically in default, with little prospect for recovery of principal or interest.
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.
Note: Moody’s appends numerical
modifiers 1, 2, and 3 to 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. Additionally, a “(hyb)” indicator is appended to all ratings
of hybrid securities issued by banks, insurers, finance companies, and securities firms.*
S&P Short-Term Issue Credit Ratings
A-1: A short-term obligation rated
‘A-1’ is rated in the highest category by S&P Global Ratings. The obligor’s capacity to meet its financial
commitments 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 weaken an obligor’s capacity to meet its financial commitments on the obligation.
B: A short-term obligation rated ‘B’
is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial
commitments; however, it faces major ongoing uncertainties that could lead to the obligor’s inadequate capacity to meet its
financial commitments.
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 default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used
when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be
made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business
days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and
where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation
is lowered to ‘D’ if it is subject to a distressed exchange offer.
S&P Long-Term Issue Credit Ratings*
Issue credit ratings are based, in
varying degrees, on S&P Global Ratings’ analysis of the following considerations:
|
•
|
The likelihood of payment – the capacity and willingness of the obligor to meet its financial commitments on an obligation
in accordance with the terms of the obligation;
|
|
•
|
The nature and provisions of the financial obligation, and the promise we impute; and
|
|
•
|
The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization,
or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.
|
*
By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments,
which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually
allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation
rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.
An issue rating is an assessment of
default risk but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations
are typically rated lower than senior obligations, to reflect lower priority in bankruptcy, as noted above. (Such differentiation
may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company
and holding company obligations.)
AAA: An obligation rated ‘AAA’
has the highest rating assigned by S&P Global Ratings. The obligor’s capacity to meet its financial commitments on the
obligation is extremely strong.
AA: An obligation rated ‘AA’
differs from the highest rated obligations only to a small degree. The obligor’s capacity to meet its financial commitments
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 commitments 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 weaken
an obligor’s capacity to meet its financial commitments on the obligation.
BB, B, CCC, CC and C: 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 exposure 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 that could lead to the obligor’s inadequate capacity to meet its financial commitments
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 commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s
capacity or willingness to meet its financial commitments 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 commitments 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 commitments on the obligation.
CC: An obligation rated ‘CC’
is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred, but S&P
Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
C: An obligation rated ‘C’
is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate
recovery compared with obligations that are rated higher.
D: An obligation rated ‘D’
is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used
when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be
made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar
days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and
where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating
is lowered to ‘D’ if it is subject to a distressed exchange offer.
*Ratings from ‘AA’ to
‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.
NR indicates that a rating has not
been assigned or is no longer assigned.
Local Currency and Foreign Currency
Ratings
S&P Global Ratings’ issuer
credit ratings make a distinction between foreign currency ratings and local currency ratings. A foreign currency rating on an
issuer will differ from the local currency rating on it when the obligor has a different capacity to meet its obligations denominated
in its local currency versus obligations denominated in a foreign currency.
PART C — OTHER
INFORMATION
|
ITEM 25:
|
FINANCIAL STATEMENTS AND EXHIBITS
|
1. Financial
Statements:
Included in Part A:
Financial highlights for the fiscal years October 31,
2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, and 2011.
Incorporated into Part B by reference to Registrant’s
most recent Certified Shareholder Report on Form N-CSR, filed
December 30, 2020 (File No. 811-21547):
Schedule of Investments as of October 31, 2020
Statement of Assets and Liabilities as of October 31,
2020
Statement of Operations for the year ended October 31,
2020
Statements of Changes in Net Assets for the year ended
October 31, 2020 and the year ended October 31, 2019
Notes to Financial Statements
Statement of Cash Flows for the fiscal year ended
October 31, 2020
Report of Independent Registered Public Accounting
Firm dated December 18, 2020
2. Exhibits:
i.
|
None.
|
|
|
j.1
|
Custody Agreement. (7)
|
|
|
j.2
|
Amendment to Appendix A to Custody Agreement. (8)
|
|
|
k.1.i
|
Stock Transfer Agency Agreement. (8)
|
|
|
k.1.ii
|
Amendment, dated July 1, 2012, to Stock Transfer Agency Agreement. (12)
|
|
|
k.1.iii
|
Amendment, dated March 20, 2015, to Stock Transfer Agency Agreement. (12)
|
|
|
k.1.iv
|
Amendment, dated September 6, 2017, to Stock Transfer Agency Agreement. (12)
|
|
|
k.1.v
|
Amendment, dated October 18, 2017, to Stock Transfer Agency Agreement.(12)
|
|
|
k.2
|
Master Services Agreement. (4)
|
|
|
k.3
|
Amendment to Appendix A to Master Services Agreement. (8)
|
|
|
k.4
|
Administration Agreement. (15)
|
|
|
k.5
|
Services Agreement. (15)
|
|
|
k.6
|
Form of Auction Agency Agreement relating to Preferred Shares. (6)
|
|
|
k.7
|
Form of Broker-Dealer Agreement relating to Preferred Shares. (6)
|
|
|
k.8
|
Form of Auction Agency Agreement relating to Notes. (2)
|
|
|
k.9
|
Form of Broker-Dealer Agreement relating to Notes. (2)
|
|
|
k.10
|
Form of DTC Representations Letter relating to Preferred Shares and Notes. (4)
|
|
|
l.1
|
Opinion of Morris, Nichols, Arsht and Tunnell LLP regarding registration statement.(9)
|
|
|
l.2
|
Opinion of K&L Gates LLP regarding Common Shares.(10)
|
|
|
l.3
|
Opinion of Morris, Nichols, Arsht and Tunnell LLP regarding Common Shares. (10)
|
|
|
l.4
|
Opinion
of Richards, Layton & Finger, P.A. regarding Common Shares. (15)
|
|
|
l.5
|
Opinion of Richards, Layton & Finger P.A. regarding Common Shares.
(filed herewith).
|
|
|
m.
|
None.
|
|
|
n.
|
Consent of Auditors. (filed herewith)
|
|
|
o.
|
Not applicable.
|
|
|
p.
|
Subscription Agreement.(3)
|
|
|
q.
|
None.
|
|
|
r.1
|
Code of Ethics. (filed herewith).
|
|
|
s.1
|
Powers of Attorney for John E. Neal and William R. Rybak. (11)
|
|
|
s.2
|
Power of Attorney for Virginia G. Breen. (12)
|
|
|
s.3
|
Power of Attorney for Lloyd A. Wennlund. (15)
|
|
|
s.4
|
Power of Attorney for Karen L. Stuckey and Christopher M. Toub (17).
|
(1)
|
Incorporated
by reference to Registrant’s initial Registration Statement on Form N-2 (1933 Act File No. 333-114111) as
filed with the Commission on March 31, 2004.
|
|
|
(2)
|
To be filed by post-effective amendment.
|
|
|
(3)
|
Incorporated by reference to Pre-Effective Amendment
No. 4 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-114111) as filed with
the Commission on October 26, 2005.
|
|
|
(4)
|
Incorporated
by reference to Pre-Effective Amendment No. 2 to Registrant’s Registration Statement on Form N-2 (1933 Act
File No. 333-146944) as filed with the Commission on February 22, 2008.
|
(5)
|
Incorporated
by reference to Pre-Effective Amendment No. 3 Registrant’s Registration Statement on Form N-2 (1933 Act File
No. 333-11411) as filed with the Commission on October 24, 2005.
|
|
|
(6)
|
Incorporated by reference to Pre-Effective Amendment
No. 1 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-129102) as filed with
the Commission on December 22, 2005.
|
|
|
(7)
|
Incorporated by reference to Post-Effective Amendment
No. 4 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-146944) as filed with
the Commission on March 5, 2010.
|
|
|
(8)
|
Incorporated by reference to Registrant’s initial
Registration Statement on Form N-2 (1933 Act File No. 333-174431) as filed with the Commission on May 23,
2011.
|
|
|
(9)
|
Incorporated by reference to Pre-Effective Amendment
No. 1 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-175076) as filed with
the Commission on August 25, 2011.
|
|
|
(10)
|
Incorporated
by reference to Post-Effective Amendment No. 1 to Registrant’s Registration Statement on Form N-2 (1933 Act
File No. 333-175076) as filed with the Commission on September 30, 2011.
|
|
|
(11)
|
Incorporated
by reference to Post-Effective Amendment No. 3 to Registrant’s Registration Statement on Form N-2 (1933 Act
File No. 333-175076) as filed with the Commission on February 20, 2013.
|
|
(12)
|
Incorporated by reference to Registrant’s initial Registration Statement on Form N-2 (1933 Act File No. 333-224205)
as filed with the Commission on April 9, 2018.
|
(13)
|
Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-224205) as filed with the Commission on June 22, 2018.
|
|
|
(14)
|
Incorporated by reference to Post-Effective Amendment No. 1 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-224205) as filed with the Commission on July 3, 2018.
|
|
|
(15)
|
Incorporated by reference to Post-Effective Amendment No. 2 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-224205) as filed with the Commission on February 22, 2019.
|
|
|
(16)
|
Incorporated by reference to Post-Effective Amendment
No. 4 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-224205) as filed with
the Commission on March 13, 2019.
|
|
|
(17)
|
Incorporated by reference to Post-Effective Amendment
No. 5 to Registrant’s Registration Statement on Form N-2 (1933 Act File No. 333-224205) as filed with
the Commission on February 21, 2020.
|
|
ITEM 26:
|
MARKETING ARRANGEMENTS
|
Not applicable.
|
ITEM 27:
|
OTHER OFFERING EXPENSES AND DISTRIBUTION
|
The following table sets
forth the estimated expenses to be incurred in connection with all offerings described in this Registration Statement:
Registration fees
|
|
$
|
3,275
|
|
Printing (other than certificates)
|
|
|
30,000
|
|
FINRA fees
|
|
|
5,000
|
|
Accounting fees and expenses
|
|
|
5,000
|
|
Legal fees and expenses
|
|
|
92,000
|
|
Miscellaneous
|
|
|
6,725
|
|
Total
|
|
$
|
142,000
|
|
|
ITEM 28.
|
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
|
None.
|
ITEM 29.
|
NUMBER OF HOLDERS OF SECURITIES
|
As of January 31, 2021,
the number of record holders of each class of securities of the Registrant was
TITLE OF CLASS
|
|
NUMBER OF RECORD
HOLDERS
|
|
Common shares (no par value)
|
|
|
6
|
|
Series A Mandatory Redeemable Preferred Shares
|
|
|
1
|
|
Series B Mandatory Redeemable Preferred Shares
|
|
|
1
|
|
Series C Mandatory Redeemable Preferred Shares
|
|
|
1
|
|
The Registrant’s Second
Amended and Restated Agreement and Declaration of Trust (the “Declaration”), dated January 12, 2021, 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 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 Registrant to be held harmless from and indemnified against all loss and expense
arising from such liability. The Registrant 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.
The Registrant, its Trustees
and officers, its investment adviser, the other investment companies advised by the adviser and certain persons affiliated with
them are insured, within the limits and subject to the limitations of the insurance, against certain expenses in connection with
the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits
or proceedings. The insurance expressly excludes coverage for any Trustee or officer whose personal dishonesty, fraudulent breach
of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully
fails to act prudently.
Section 8 of the Distribution
Agreement and Section 5 of the Sub-Placement Agent Agreement, previously filed as Exhibit h.9 and Exhibit h.11 to
this Registration Statement, respectively, provide for each of the parties thereto, including the Registrant and/or the underwriters,
to indemnify the other parties, their officers, trustees, directors and persons who control them against certain liabilities in
connection with the offering described herein, including liabilities under the federal securities laws.
Insofar as indemnification
for liability arising under the Securities Act of 1933, as amended (the “1933 Act”), may be available to Trustees,
officers, controlling persons of the Registrant and underwriter, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission 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, controlling person or underwriter 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 31.
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BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
|
The information in the Statement
of Additional Information under the caption “Management of the Fund — Trustees and Officers” is incorporated
by reference.
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ITEM 32.
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LOCATION OF ACCOUNTS AND RECORDS
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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 Advisors LLC 2020 Calamos Court, Naperville, Illinois 60563, at the offices of the Custodian and Accounting Agent,
200 Clarendon Street, P.O. Box 9130, Boston, Massachusetts 02117-9130. or at the offices of the Transfer Agent, P.O. Box
358016, Pittsburgh, PA 15252-8016.
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ITEM 33.
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MANAGEMENT SERVICES
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Not applicable.
1. Not
applicable.
2. Not
applicable.
3. The Registrant undertakes:
(a) to file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration Statement:
(1) to include any prospectus
required by Section 10(a)(3) of the Securities Act;
(2) to reflect in the
prospectus any facts or events after the effective date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration
Statement; and
(3) to include any material
information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
Provided, however, that paragraphs a(1), a(2),
and a(3) of this section do not apply to the extent the information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by reference into the registration statement, or is contained
in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(b) that, for the purpose of determining any
liability under the Securities Act, each post-effective amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof;
(c) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
(d) that, for the purpose of determining liability
under the Securities Act to any purchaser:
(1) if the Registrant is subject to Rule 430B:
|
(A)
|
Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration
statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
|
|
(B)
|
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement
in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) under the Securities
Act for the purpose of providing the information required by Section 10 (a) of the Securities Act shall be deemed to
be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which
that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made
in any such document immediately prior to such effective date; or
|
(2) if the Registrant is subject to Rule 430C:
each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to
an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule,
shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use.
(e) that for the purpose of determining liability
of the Registrant under the Securities Act to any purchaser in the initial distribution of securities:
The undersigned Registrant undertakes that in a primary
offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities
to the purchaser:
|
(1)
|
any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant
to Rule 424 under the Securities Act;
|
|
(2)
|
free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred
to by the undersigned Registrant;
|
|
(3)
|
the portion of any other free writing prospectus or advertisement pursuant to Rule 482 under the Securities Act relating
to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of
the undersigned Registrant; and
|
|
(4)
|
any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
|
4. The Registrant undertakes that:
(a) For purposes of determining any liability
under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant under Rule 424(b)(1) under the Securities
Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
(b) For the purpose of determining any liability
under the Securities 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.
5. The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference into the registration
statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
6. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
7. The Registrant undertakes to send by first class
mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request,
any prospectus or Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended (“1933 Act”) and the Investment Company Act of 1940, as amended, the Registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Naperville,
and State of Illinois, on the 19th day of February, 2021.
|
CALAMOS GLOBAL TOTAL RETURN FUND
|
|
|
|
By:
|
/s/ John P. Calamos, Sr.
|
|
John P. Calamos, Sr.
|
|
Trustee and President
|
Pursuant to the requirements of the 1933 Act,
this registration statement has been signed by the following persons in the capacities and on the date(s) indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ John P.
Calamos, Sr.
|
|
Trustee and President (principal
|
)
|
February 19, 2021
|
John P. Calamos, Sr.
|
|
executive officer)
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ John E.
Neal*
|
|
Trustee
|
)
|
|
John E. Neal
|
|
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ William
Rybak*
|
|
Trustee
|
)
|
|
William Rybak
|
|
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ Virginia
G. Breen*
|
|
Trustee
|
)
|
|
Virginia G. Breen
|
|
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ Lloyd A.
Wennlund*
|
|
Trustee
|
)
|
|
Lloyd A. Wennlund
|
|
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ Karen L.
Stuckey*
|
|
Trustee
|
)
|
|
Karen L. Stuckey
|
|
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ Christopher
M. Toub*
|
|
Trustee
|
)
|
|
Christopher M. Toub
|
|
|
)
|
|
|
|
|
)
|
|
|
|
|
|
|
/s/ Thomas
E. Herman
|
|
Vice President and Chief Financial Officer
|
)
|
February 19, 2021
|
Thomas E. Herman
|
|
|
)
|
|
|
|
|
)
|
|
* John P. Calamos, Sr. signs this document
pursuant to powers of attorney filed in Post-Effective Amendment No. 2 to Registrant’s Registration Statement (1933
Act File No. 333-175076) as filed with the Commission on February 20, 2013; Registrant’s initial Registration Statement
on Form N-2 (1933 Act File No. 333-224205) as filed with the Commission on April 9, 2018; Post-Effective Amendment
No. 2 to Registrant’s Registration Statement (1933 Act File No. 333-224205) as filed with the Commission on February 22,
2019 and Post-Effective Amendment No. 5 to Registrant’s Registration Statement (1933 Act File No. 333-224205) as
filed with the Commission on February 21, 2020.
|
By:
|
/s/ John P. Calamos, Sr.
|
|
John P. Calamos, Sr.
|
|
Attorney-In-Fact
|
|
February 19, 2021
|
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